Fill and Sign the 403 to Approve an Outside Directors Retainer Fee Plan under Which Outside Directors Are Paid Form

§14.403 PROXY STATEMENTS: STRATEGY & FORMS © 1997 Jefren Publishing Company, Inc. 14-175B §14.403 To approve an Outside Directors Retainer Fee Plan under which outside directors are paid annual retainer fees for service on the Board entirely in shares of common stock in li eu of cash ( with a copy of the Outside Directors Retainer Fee Plan ) PROPOSAL TO APPROVE THE DRAVO CORPORATION NON-EMPLOYEE DIRECTORS' RETAINER FEE PLAN Background In January of 1996, the Board resolved to recommend to shareholders at the Annual Meeting that annual retainer fees to non-employee directors for service on the Board be paid entirely in shares of the Corporation's Common Stock, in lieu of cash. This proposed change is intended to further align the economic interests of non-employee directors with those of shareholders. The change will also assist the Corporation in maintaining a competit ive director compensation package that will allow it to attract, motivate and retain highly qualified individuals to serve as directors. The proposed change will replace the Corporation's current retainer of $14,400 with an annual grant of 1,000 shares of Common Stock. Directors who are newly appointed to the Board between annual meetings of the shareholders will receive a proportionately smaller number of shares upon their appointment. The proposed change will result in all annual director compensation consisting of equity in the Corporation, other than cash paid for meeting fees and for serving as a chairperson of a Board Committee. On the date of the annual meet ing of shareholders non-employee directors are also granted options to purchase 1,500 shares of the Corporation's Common Stock at fair market value on that date. The Corporation's Common Stock closed at $12 1/8 on March 18, 1996, as reported on the New York Stock Exchange composite tape. At that price, the value of 1,000 shares to eac h of the Corporation's non-employee directors would be $12,125. In order to implement the proposed change to replace the cash annual retainer fee wi th a grant of 1,000 shares of Common Stock, the Board adopted the Dravo Corporation Non- Employee Directors' Retainer Fee Plan (the "Directors' Fee Plan") and is submitting t he plan to the shareholders for approval. The Directors' Fee Plan is being submitted to the shareholders in order to ensure that the award of Common Stock to non-employee directors will not result i n short-swing liability under Section 16 of the Securities Exchange Act of 1934 (the "Exchange Act"). Summary of the Non-Employee Directors' Retainer Fee Plan The following description is of the principal features of the Directors' Fee Plan and i s qualified in its entirety by the complete text of the Directors' Fee Plan whic h appears as Appendix A hereto. Purpose. The purpose of the Directors' Fee Plan is to assist the Corporation in attracting, retaining and motivating highly qualified non-employee directors and to further align such directors' interests with those of the shareholders. Administration. The Directors' Fee Plan shall be administered by a committee of the Board appointed by the Board to administer the Directors' Fee Plan (the "Committee") whi ch shall be the Compensation Committee unless otherwise determined by the Board. The Committ ee is authorized to interpret and construe the Directors' Fee Plan and to make all de terminations and DIRECTORS§14.403 March 1997 14-175C take such actions as are necessary or advisable for the administration of the Directors' Fee Plan. Common Stock Subject to the Plan. The maximum number of shares of Common Stock that may be issued pursuant to the Directors' Fee Plan is 30,000. In the event of any stock dividend, stock split, subdivision, reclassification, recapitalization or similar corporate transa ction or event affecting the Corporation's Common Stock, the number of shares available for issuance pursuant to the Directors' Fee Plan shall be automatically adjusted in order to preserve t he full benefit of the Directors' Fee Plan. Payment of Shares. Each non-employee director shall automatically receive 1,000 shares of Common Stock in lieu of an annual cash retainer. Such Common Stock shall be paid to each Director on the date of the annual meeting of the shareholders of the Corporation. Directors who are newly appointed to the Board between annual meetings of the shareholders will rec eive a proportionately smaller number of shares upon their appointment. Amendment or Termination. The Board may from time to time amend the Directors' Fee Plan in any respect or terminate or suspend the Directors' Fee Plan at any time in whol e or in part, provided that, if shareholder approval of an amendment is required for continued compliance with the requirements of Rule 16b-3 of the Exchange Act, such amendment shal l be subject to obtaining the required shareholder approval. Governing Law. The validity, construction and effect of the Directors' Fee Plan and any action taken or relating to the Directors' Fee Plan shall be determined in ac cordance with the laws of the Commonwealth of Pennsylvania and applicable federal law. Vote Required The affirmative vote of the holders of a majority of the shares voting at the Annual Me eting is required to approve the Directors' Fee Plan. The Board of Directors recommends a vote FOR approval of the Non-Employee Directors' Retainer Fee Plan. The proxyholders will vote all proxies received FO R approval of the Plan unless Instructed otherwise. AP PENDIX A Dravo Corporation Non-Employee Directors' Retainer Fee Plan ARTICLE I General Provisions Section 1.1 Establishment and Purpose. There is hereby established the Dravo Corporation Non-Employee Directors' Retainer Fee Plan (the "Plan") pursuant to which each director of Dravo Corporation (the "Company") who is not an employee of the Company or any of its subsidiaries (a "Non-Employee Director") shall automatically receive one thousand (1,000) shares of the Company's Common Stock, par value $1.00 (the "Common Stock"), as an annual retainer fee for services as a director, in lieu of cash compensation. The purpose of the Plan is to assist the Company in attracting, retaining and motivating highly qualified Non-Employe e Directors and to promote identification of, and align Non-Employee Directors' interest more closely with, the interest of shareholders of the Company. §14.403 PROXY STATEMENTS: STRATEGY & FORMS © 1997 Jefren Publishing Company, Inc. 14-175D Section 1.2Definitions. In addition to the terms previously or hereafter defined herein, the following terms when used herein shall have the meanings set forth below: "Board" shall mean the Board of Directors of the Company. "Committee" shall mean the committee of the Board appointed by the Board to administer the Plan. Unless otherwise determined by the Board, the Committee shal l be the Compensation Committee of the Board. "Retainer Fee" shall mean the annual retainer fee paid to a Non-Employee Director for service as such. Section 1.3 Administration. The Plan shall be administered by the Committee. The Committee shall serve at the pleasure of the Board of Directors. A majority of the Committee shall constitute a quorum and the acts of a majority of the members of the Commi ttee present at any meeting at which a quorum is present or acts approved in writing by a majority of the members of the Committee, shall be deemed the acts of the Committee. The Committee is authorized to interpret and construe the Plan, to make all determinations and t ake all other actions necessary or advisable for the administration of the Plan, and to delegate to employees of the Company or any subsidiary the authority to perform administrative functions under the Plan. Section 1.4 Eligibility. A Non-Employee Director who is either elected to the Board at the annual meeting of shareholders, who continues as a Non-Employee Director following such annual meeting or who is appointed to the Board between annual meetings of the sharehol ders shall be eligible to participate in the Plan. Section 1.5 Common Stock Subject to the Plan. The maximum number of shares of Common Stock that may be issued pursuant to the Plan is 30,000. Common Stock to be issue d under the Plan may be either authorized and unissued shares of Common Stock or shares of Common Stock held in the treasury by the Company. ARTICLE II Common Stock Issuances Section 2.1 Common Stock in Lieu of Cash Compensation. Each Non-Employee Director shall receive 1,000 shares of Common Stock under this Plan as payment of the Ret ainer Fee in lieu of cash otherwise payable to such Non-Employee Director; provided, however, that i n the event that a new Non-Employee Director is appointed to the Board following the da te of the annual meeting of shareholders, then the number of shares to be granted to such Non-Employee Director shall be equal to the product of eighty-three (83) multiplied by the number of full months remaining prior to the first anniversary of such annual meeting of shareholders (in ea ch case, the "Common Stock Grant"). Section 2.2 Payment and Calculation of Common Stock Grant. The Common Stock Grant shall be made on the date of the annual meeting of shareholders of the Company or i n the case of a new Non-Employee Director, on such date that the new Non-Employee Director's t erm on the Board commences (the "Grant Date"). ARTICLE III Miscellaneous Provisions Section 3.1 Amendment and Discontinuance. The Board of Directors may alter, amend, DIRECTORS§14.403 March 1997 14-175E suspend or discontinue the Plan, provided that no such action shall deprive any person without such person's consent of any rights theretofore granted pursuant hereto. The Board of Directors may, in its discretion, submit any proposed amendment to the Plan to the shareholders of the Company for approval and shall submit proposed amendments to the Plan to the shareholders of the Company for approval if such approval is required in order for the Plan to comply with Rule 16b-3 of the Exchange Act (or any successor rule). Section 3.2 Common Stock Adjustments. If the Company shall at any time increase or decrease the number of its outstanding shares of Common Stock or change in any way the rights and privileges of such shares by means of the payment of a stock dividend or any other distribution upon such shares payable in Common Stock, or through a stock split, subdivision, consolidation, combination, reclassification or recapitalization involving the Comm on Stock, then in relation to the Common Stock that is affected by one or more of the above events, the numbers, rights and privileges of the shares of Common Stock which may be granted under the Plan shall be appropriately adjusted in order to preserve the full benefit of the Plan. Section 3.3 Compliance with Governmental Regulations . Notwithstanding any provisions of the Plan or the terms of any agreement entered into pursuant to the Plan, the C ompany shall not be required to issue any shares hereunder prior to registration of the shares subject to the Plan under the Securities Act of 1933 or the Exchange Act, if such registration shall be necessa ry, or before compliance by the Company or any participant with any other provisions of either of those acts or of regulations or rulings of the Securities and Exchange Commission thereunder, or before compliance with other federal and state laws and regulations and rulings there under, including the rules of the New York Stock Exchange, Inc. The Company shall use its best effort s to effect such registrations and to comply with such laws, regulations and rulings forthwith upon advice by its counsel that any such registration or compliance is necessary. Section 3.4 Compliance with Section 16. Transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 (or its successor rule). To the extent that any provision of the Plan or any action by the Board of Directors or the Committee fails to so comply, it shall be deemed null and void to the extent permitted by law and t o the extent deemed advisable by the Committee. Section 3.5 Governing Law. The Plan shall be governed by and construed and interpreted in accordance with the internal laws of the Commonwealth of Pennsylvania. Section 3.6 Effective Date of the Plan. The Plan shall become effective upon approval and adoption of the Plan by the holders of a majority of the shares present and entitled to vote at the 1996 annual meeting of shareholders. Dravo Corporation 3/26/96