<PAGE>
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SCHEDULE 14A INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /x/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
INTERNATIONAL SPECIALTY PRODUCTS INC.
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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(NAME OF PERSON(S) FILING PROXY STATEMENT IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
INTERNATIONAL SPECIALTY PRODUCTS
1361 ALPS ROAD
WAYNE, NEW JERSEY 07470
SAMUEL J. HEYMAN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
April 26, 1999
FELLOW STOCKHOLDERS:
You are cordially invited to attend the International Specialty Products
Inc. Annual Meeting of Stockholders to be held at the offices of Weil, Gotshal &
Manges LLP, 767 Fifth Avenue, 25th Floor, New York, New York, on Monday,
May 24, 1999, at 10:00 a.m., local time.
The enclosed notice and proxy statement will provide you with complete
information concerning the business to come before the meeting. The Company's
1998 Annual Report to Stockholders is also enclosed.
I look forward to personally greeting you at the meeting as well as
reviewing for you at that time the significant developments at the Company
during the past year.
Sincerely,
/s/ SAMUEL J. HEYMAN
<PAGE>
[LOGO]
INTERNATIONAL SPECIALTY PRODUCTS INC.
------------------------
NOTICE OF ANNUAL MEETING
TO BE HELD MAY 24, 1999
------------------------
The Annual Meeting of Stockholders of International Specialty Products Inc.
(the "Company") will be held at 10:00 a.m., local time, on Monday, May 24, 1999,
at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, 25th Floor, New
York, New York, for the following purposes:
1. To elect seven directors of the Company; and
2. To transact such other business as may properly come before the meeting.
The Board of Directors has fixed the close of business on April 5, 1999 as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the meeting.
A list of stockholders entitled to vote at the meeting will be open to the
examination of any stockholder, for any purpose germane to the meeting, at the
office of The Bank of New York, 101 Barclay Street, New York, New York, during
ordinary business hours for ten days prior to the meeting.
The accompanying proxy statement forms a part of this notice.
By Order of the Board of Directors,
/s/ RICHARD A. WEINBERG
--------------------------
RICHARD A. WEINBERG
Secretary
Wayne, New Jersey
April 26, 1999
Return of your signed proxy is the only way your shares can be counted
unless you personally cast a ballot at the meeting.
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, PLEASE COMPLETE THE
ENCLOSED PROXY CARD AND SIGN, DATE AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
PROXY STATEMENT
INTERNATIONAL SPECIALTY PRODUCTS INC.
300 DELAWARE AVENUE
SUITE 303
WILMINGTON, DELAWARE 19801
------------------------
ANNUAL MEETING OF STOCKHOLDERS
------------------------
This proxy statement is furnished to stockholders of International
Specialty Products Inc. ("ISP" or the "Company") in connection with the
solicitation of proxies by the Board of Directors of the Company for use at the
Annual Meeting of Stockholders to be held at 10:00 a.m., local time, on Monday,
May 24, 1999, at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue,
25th Floor, New York, New York, and at any adjournment or postponement thereof.
The Board of Directors has set the close of business on April 5, 1999 (the
"Record Date") as the record date for the determination of stockholders entitled
to notice of, and to vote at, the meeting. As of the close of business on the
Record Date, there were outstanding 68,489,406 shares of the Company's common
stock, $.01 par value ("Common Stock"). Holders of record of shares of Common
Stock are entitled to one vote for each share held by them as of the Record Date
on any matter which may properly come before the meeting.
Shares represented by a valid unrevoked proxy will be voted at the meeting,
or any adjournment or postponement thereof, as specified therein by the person
giving the proxy. If no specification is made, the shares represented by such
proxy will be voted (1) FOR the election of the Board of Directors' nominees as
directors and (2) in the discretion of the persons named as proxies in the
enclosed proxy card on such other matters as may properly come before the
meeting. Any person giving a proxy may revoke it at any time before its exercise
by executing a later dated proxy, by delivery to and receipt by the Company's
Secretary of written notice of such revocation, or by attending the meeting and
voting in person.
Stockholders of record holding a majority of the issued and outstanding
shares of Common Stock entitled to vote at the meeting, present in person or
represented by proxy, constitute a quorum for the transaction of business at the
meeting. Proxies submitted with votes withheld for the election of directors and
broker non-votes are included in determining whether or not a quorum is present.
Directors will be elected by a plurality of the votes properly cast at the
meeting. Any shares not voted (by abstention, broker non-vote or otherwise) will
not be counted as votes cast. Broker non-votes are treated as shares as to which
the beneficial holders have withheld voting power and, therefore, are not
considered as shares entitled to vote on any proposal to which they relate.
Samuel J. Heyman, Chairman of the Board and Chief Executive Officer of ISP,
beneficially owns (as defined in Rule 13d-3 of the Securities Exchange Act of
1934) and has the power to vote approximately 76% of the Company's issued and
outstanding Common Stock. See "Security Ownership of Certain Beneficial Owners
and Management." Mr. Heyman has indicated to ISP that he intends to vote such
shares FOR the election of the Board of Directors' nominees as directors.
Accordingly, the election of the nominees is assured.
On July 15, 1998, International Specialty Products Inc. ("Old ISP") merged
with and into the Company (then known as ISP Holdings Inc. ("ISP Holdings")). In
connection with the merger, ISP Holdings changed its name to International
Specialty Products Inc. As used in this proxy statement, "ISP" or the "Company"
refers to both Old ISP prior to the merger and the Company subsequent to the
merger, unless the context otherwise requires.
This proxy statement and the proxies solicited hereby are being first sent
or delivered to stockholders on or about April 28, 1999.
<PAGE>
ELECTION OF DIRECTORS
Seven directors are to be elected to serve until the next Annual Meeting of
Stockholders and until their successors are elected and have qualified. The
persons designated in the enclosed proxy card will vote shares represented by a
valid unrevoked proxy FOR the election of each of the nominees named below
unless instructions to the contrary are indicated in the proxy. If any such
nominees should be unable to serve for any reason, which the Company does not
anticipate, it is intended that proxies will be voted for the election of such
other persons as shall be designated by the Board of Directors.
NOMINEES
The following persons, all of whom are currently directors of ISP, have
been nominated for election as directors. Under ISP's By-laws, each director
continues in office until the next Annual Meeting of Stockholders and until his
successor is elected and qualified. No family relationship exists between any of
the directors or executive officers of the Company. The information presented
below with respect to each nominee has been furnished by the nominee.
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CHARLES M. DIKER AGE 64
Mr. Diker has been a director of ISP since February 1992. He has been a
non-managing principal of Weiss, Peck & Greer, an investment management firm,
since 1975. He also has been Chairman of the Board of Cantel Industries Inc., a
manufacturer of medical diagnostic and infection control products, since 1986.
Mr. Diker is a director of BeautiControl Cosmetics, a cosmetics company; Data
Broadcasting Corporation, a financial data broadcasting company; Chyron
Corporation, a designer and manufacturer of digital equipment, software and
systems; and AMF Bowling, Inc., an owner and operator of, and manufacturer of
equipment for, commercial bowling centers.
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CARL R. ECKARDT AGE 68
Mr. Eckardt has been a director of ISP since its formation and Executive Vice
President, Corporate Development, of ISP since November 1996, which position he
also held from ISP's formation to January 1994. From January 1994 to November
1996, Mr. Eckardt was President and Chief Operating Officer of ISP. Mr. Eckardt
was Vice Chairman of GAF Corporation ("GAF"), an affiliate of the Company, from
November 1996 to January 1999 and a director of GAF for more than five years
until January 1999. He was Executive Vice President of GAF for more than five
years until November 1996.
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HARRISON J. GOLDIN AGE 63
Mr. Goldin has been a director of ISP since its formation. He has been the
senior managing director of Goldin Associates, L.L.C., a consulting firm, since
January 1990. Mr. Goldin was the Comptroller of the City of New York from 1974
to 1989 and a New York State Senator from 1966 to 1973.
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2
<PAGE>
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PETER R. HEINZE AGE 56
Dr. Heinze has been a director, President and Chief Operating Officer of ISP
since November 1996. He was Senior Vice President, Chemicals of PPG Industries,
Inc., a glass products, coatings and resins, and chemicals manufacturer, from
April 1993 to November 1996.
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SAMUEL J. HEYMAN AGE 60
Mr. Heyman has been a director, Chairman and Chief Executive Officer of ISP
since its formation. Mr. Heyman also has been a director, Chairman and Chief
Executive Officer of GAF and certain of its subsidiaries for more than five
years. Mr. Heyman has been a director and Chairman of Building Materials
Corporation of America ("BMCA"), an indirect 97%-owned subsidiary of GAF, since
its formation, and was Chief Executive Officer of BMCA from June 1996 to January
1999. He is also the Chief Executive Officer, Manager and General Partner of a
number of closely held real estate development companies and partnerships whose
investments include commercial real estate and a portfolio of publicly traded
securities.
- --------------------------------------------------------------------------------
SANFORD KAPLAN AGE 82
Mr. Kaplan has been a director of ISP since November 1992. He has been a private
investor and consultant since 1977 when he retired from Xerox Corporation, where
he was a Senior Vice President and a director. He is also a director emeritus of
Intel Corp., a computer hardware and component manufacturer.
- --------------------------------------------------------------------------------
BURT MANNING AGE 67
Mr. Manning has been a director of ISP since November 1992. He was Chairman of
J. Walter Thompson Company, a multinational advertising company, from July 1987
to December 1997 and was Chief Executive Officer of such company from July 1987
to December 1996. He has served as Chairman Emeritus of such company since
January 1998. Mr. Manning is a director of Friendly's Ice Cream Corp.
- --------------------------------------------------------------------------------
MEETINGS, COMMITTEES AND DIRECTORS' FEES
The Board of Directors met seven times in 1998.
The Board of Directors has delegated certain of its functions and
responsibilities to committees of the Board of Directors.
The Audit Committee reviews the integrity of the Company's financial
statements, internal controls, the internal audit function, the function and
fees of the independent public accountants, and other matters relating to
financial and accounting functions. Messrs. Diker, Kaplan and Manning presently
comprise the Audit Committee. The Audit Committee met two times in 1998.
The Compensation and Pension Committee (the "Compensation Committee") is
responsible for the review and administration of the Company's compensation
practices, policies and plans. Messrs. Diker, Goldin and Manning presently
comprise the Compensation Committee. The Compensation Committee met three times
during 1998.
3
<PAGE>
The Board of Directors does not have a nominating committee. Mr. Kaplan
attended five Board of Directors meetings and one Audit Committee meeting in
1998.
No directors who are employees of ISP or its affiliates receive
compensation for their services as directors. Outside directors receive an
annual fee of $18,000 and a fee of $750 per meeting of the Board of Directors.
Outside directors are compensated $250 per committee meeting held in connection
with a Board of Directors meeting and $750 per committee meeting held
independently. An additional fee of $3,000 per year is paid to outside directors
who chair a committee. If an outside director chairs more than one committee, no
additional compensation is paid. Under the Company's 1991 Incentive Plan for Key
Employees and Directors, as amended (the "Incentive Plan"), each outside
director is granted a non-qualified stock option to purchase 5,000 shares of
Common Stock (the "Initial Option") on the date such person becomes a director
and an additional non-qualified option to purchase 2,500 shares of Common Stock
(an "Additional Option") on each anniversary of the date of grant of the Initial
Option. Effective January 1, 1999, the Incentive Plan was amended to increase
the number of shares of Common Stock underlying each Additional Option to be
granted after such date from 2,500 shares to 3,000 shares. The term of each
option granted is nine years. Initial Options are subject to a three-year
vesting period, commencing on the first anniversary of the date of grant, and
Additional Options are subject to a one-year vesting period, becoming
exercisable in full on the first anniversary of the date of grant. The exercise
price of the options is equal to the fair market value of the underlying shares
on the date of grant. The Company currently has four non-employee directors,
Messrs. Diker, Goldin, Kaplan and Manning, each of whom was granted an
Additional Option to purchase 2,500 shares of Common Stock during 1998.
In connection with their service on a special committee of the Board of
Directors of Old ISP created to consider the merger of Old ISP into ISP
Holdings, Messrs. Diker and Manning entered into a Compensation and
Indemnification Agreement with Old ISP. Pursuant to this agreement, each of
Messrs. Diker and Manning received $88,000 (which amount consisted of a $50,000
fee for serving on the special committee, plus $2,000 per special committee
meeting), plus reimbursement of out-of-pocket expenses, in addition to the
regular compensation paid to members of the Board of Directors. Pursuant to this
agreement, ISP agreed to indemnify and hold harmless Messrs. Diker and Manning
with respect to their service on, and any matter or transaction considered by,
the special committee to the full extent permitted by law and by the
indemnification provisions of ISP's Certificate of Incorporation.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of April 5, 1999, the Common Stock of the Company was beneficially owned
by the Company's directors, the executive officers named in the Summary
Compensation Table below, directors and executive officers of the Company as a
group, and each person or group known by the Company to be the beneficial owner
of more than 5% of the Common Stock as follows:
<TABLE>
<CAPTION>
NUMBER OF
SHARES
NAME BENEFICIALLY OWNED %
- ---- ------------------ --
<S> <C> <C>
Samuel J. Heyman..................................................... 52,448,040(1)(2) 76.4%(1)(2)
Carl R. Eckardt...................................................... 1,041,681(2) 1.5 (2)
Peter R. Heinze...................................................... 51,250(2) *
Charles M. Diker..................................................... 48,500(2)(3) *
Harrison J. Goldin................................................... 17,500(2) *
Sanford Kaplan....................................................... 22,500(2) *
Burt Manning......................................................... 24,500(2) *
James P. Rogers...................................................... 476,545(2) *
Richard A. Weinberg.................................................. 104,914(2) *
All directors and executive officers as a group (11 persons)......... 54,281,796(2) 78.2%(2)
</TABLE>
4
<PAGE>
(Footnotes from previous page)
- ------------------
* Less than 1%.
(1) The business address of Mr. Heyman is 1361 Alps Road, Wayne, New Jersey
07470. Mr. Heyman may be deemed to beneficially own (as defined in Rule
13d-3 of the Securities Exchange Act of 1934), and has sole voting and
investment power in respect of, 52,328,040 shares through a general
partnership, a limited partnership and a limited liability company.
Mr. Heyman disclaims a pecuniary interest in these shares in excess of his
partnership interests in such entities.
(2) Includes with respect to Mr. Heyman, 120,000 shares; Mr. Eckardt, 120,200
shares; Dr. Heinze, 51,250 shares; Mr. Diker, 17,500 shares; Mr. Goldin,
17,500 shares; Mr. Kaplan, 17,500 shares; Mr. Manning, 17,500 shares;
Mr. Rogers, 440,007 shares; Mr. Weinberg, 103,914 shares; and all directors
and executive officers as a group 945,557 shares subject to options granted
under the Incentive Plan which are currently exercisable or will become
exercisable within the next 60 days. Also includes with respect to
Mr. Rogers 8,538 shares and for all directors and executive officers as a
group 12,288 shares, which were held in the Capital Accumulation Plan for
Employees of GAFMC and ISP as of December 31, 1998. Includes with respect to
Mr. Rogers 25,000 shares held jointly with his spouse and with respect to
Mr. Manning 7,000 shares held jointly with his spouse.
(3) Includes 4,050 shares held by trusts for the benefit of Mr. Diker's
children, of which Mr. Diker is trustee; 5,950 shares held by Mr. Diker's
spouse, as to which Mr. Diker disclaims beneficial ownership; and 4,000
shares over which Mr. Diker shares investment power, as to which Mr. Diker
disclaims beneficial ownership.
COMPENSATION OF EXECUTIVE OFFICERS OF THE COMPANY
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors establishes the
compensation policies of the Company, evaluates and determines the specific
compensation levels for the Company's executive officers and other employees and
administers the Company's compensation plans. The Compensation Committee is
composed of three independent, non-employee directors who have no interlocking
relationships as defined by the rules promulgated by the Securities and Exchange
Commission.
Philosophy
The objectives of the Company's executive compensation program are to
support the Company's strategic goals, to provide compensation that will
attract, retain and motivate highly qualified executives and to align
executives' long-term interests with those of the Company's stockholders. The
Compensation Committee's philosophy is to compensate the Company's executive
officers based primarily on their performance and level of responsibility.
Generally, the Company seeks to maintain a competitive position in the executive
marketplace with companies identified by the Company, using external surveys, as
being of similar size and engaged in similar businesses, by establishing total
compensation levels for executive officers competitive with the median total
compensation earned by executives with comparable responsibilities in such
comparison group. These companies are not necessarily the same as those
comprising the peer group index in the performance graph included elsewhere in
this proxy statement.
Executive Compensation
The principal components of the Company's executive compensation program
are base salary, annual incentive compensation and long-term incentive
compensation primarily in the form of stock options.
Executive salary levels generally are adjusted annually based on an
evaluation of each executive's performance (such as individual managerial
accomplishments and current responsibilities of such executive officer) and the
Company's budgetary considerations.
Annual incentive compensation for executive officers is awarded under the
Company's Executive Incentive Compensation Program ("EIC") and is based on both
corporate and individual performance. In any year, the
5
<PAGE>
aggregate EIC pool, if any, for all awards is based principally on the Company's
operating income as a percentage of the Company's budgeted operating income
established at the beginning of such year. The EIC pool for any year may vary in
size depending upon unusual factors affecting the Company's operating results.
Individual award targets for each participant in the EIC (including executive
officers) are computed as a percentage of base salary based on such
participant's grade level. Individual EIC awards may vary from the applicable
percentage based on corporate performance as described above or an executive
officer's individual performance as described below.
Specific performance-related targets and objectives for an executive
officer are established at the beginning of each year. These individual goals
relate to specific business, departmental or managerial objectives that support
the Company's overall business plan and other specific corporate goals and
strategic objectives established for the year. After considering the evaluations
and recommendations of the executive officer's supervisor and a senior
management committee comprised of the Company's Chief Executive Officer,
President or Chief Operating Officer and Senior Vice President, Human Resources,
the Compensation Committee determines an executive officer's individual EIC
award based on the Company's financial performance, such officer's achievement
of these pre-established targets and goals and such officer's contribution to
the Company's overall performance. It also exercises discretion in view of the
Company's compensation objectives and policies described above to determine
total annual compensation. Based upon the foregoing criteria, the Compensation
Committee determined that an aggregate of $1,047,224 in EIC awards should be
paid to the Company's executive officers for the year ended December 31, 1998.
The Compensation Committee believes that stock ownership by management
encourages management to enhance stockholder value. Accordingly, options to
purchase shares of Common Stock are an important component of the Company's
performance-based compensation philosophy and provide a vehicle by which
executive officers can obtain a stake in the Company, thus motivating them to
increase the Company's profitability. The Compensation Committee generally has
granted options to executive officers under the Incentive Plan on a regular,
periodic basis based upon the executive's individual performance, respective
grade level and the Company's stock price at the time of grant. The Compensation
Committee also may grant from time to time options to executives based on
individual merit, taking into account, among other things, an evaluation of the
executive's past or potential contribution to the Company, its parents or
subsidiaries and recommendations by the Company's management, including the
Chief Executive Officer. In 1998, such special option grants included options
granted under the ISP Future Leadership Program, which was adopted by the Board
of Directors in December 1995 as part of the Incentive Plan. During 1998,
non-qualified stock options for an aggregate of 200,650 shares of Common Stock
were granted to the Company's executive officers, including options for 7,500
shares granted under the ISP Future Leadership Program.
The Compensation Committee also determines from time to time that awards of
other incentive compensation to executive officers are appropriate, on a
selective basis, for competitive or other business reasons, including for
retention purposes or to align further the interests of executive officers with
those of the Company's stockholders. Based on a review of the above-referenced
competitive market data, the Compensation Committee approved two restricted
stock grants of 50,000 performance shares each to the Company's President and
Chief Operating Officer, effective January 2, 1998 and December 31, 1998,
respectively. Subject to the President's continued employment through the
vesting date(s), these restricted performance shares will vest (and the
restrictions will lapse) incrementally upon the Common Stock achieving or
exceeding certain market price thresholds and in any event with respect to all
performance shares at the end of the respective ten-year performance periods.
In addition to the foregoing awards, in accordance with the Agreement and
Plan of Merger, dated as of March 30, 1998, between Old ISP and ISP Holdings,
certain executive officers of the Company who held options to purchase shares of
cumulative redeemable preferred stock of ISP Holdings or stock appreciation
rights relating to ISP Holdings common stock were granted, in consideration of
the termination of those options or rights in the merger, non-qualified stock
options to purchase an aggregate of 1,042,091 shares of Common Stock under the
Incentive Plan and the right to receive cash payments in the aggregate amount of
$9,723,767, subject in each case to satisfaction of certain vesting requirements
and the continued employment of the executive officer through the vesting dates.
6
<PAGE>
On December 7, 1998, the Compensation Committee determined, in view of the
decline in the Company's stock price and its desire to continue the Incentive
Plan as a meaningful incentive, to offer employees who were granted stock
options in June 1998 the opportunity to exchange their June 1998 options for new
options with an exercise price of $14.563 per share, the fair market value of
Common Stock on December 7, 1998 as determined under the terms of the Incentive
Plan. The new options were granted on a one-for-one ratio with the options
exchanged and were made subject to a new three-year vesting period. Three
executive officers were granted options in June 1998 and elected to exchange
their June 1998 options for new options. A total of 797,700 stock options were
exchanged by the Company's employees.
Compensation of the Chief Executive Officer
The Compensation Committee reviews and evaluates the Chief Executive
Officer's total compensation package annually. Although the Compensation
Committee's bases for determining the Chief Executive Officer's compensation are
substantially the same as discussed above with respect to the Company's other
executive officers, the Compensation Committee relies more heavily on the
Company's financial performance, overall financial condition and achievement of
annual and strategic corporate objectives in determining the total annual and
long-term compensation for Mr. Heyman. Among the criteria used in determining
Mr. Heyman's compensation are (i) the Company's financial performance compared
to its performance in the prior year, including the Company's operating income,
revenues, net income per share and overall financial condition, and (ii) the
Company's actual financial performance compared to its annual business plan.
During 1998, the Compensation Committee maintained Mr. Heyman's annual base
salary of $581,500.
Mr. Heyman also is eligible to participate in the EIC to the same extent as
other executive officers of the Company. Based on the Compensation Committee's
evaluation of both corporate and individual achievement of performance-related
goals as described above, Mr. Heyman was entitled to receive an EIC award of up
to $614,100 for 1998. Mr. Heyman elected not to receive any award so that the
aggregate EIC pool for 1998 could be awarded in its entirety to the other
executives of the Company. The Compensation Committee also considers
Mr. Heyman's total compensation package relative to that of other chief
executive officers in the comparison group of companies of similar size and in
similar businesses to the Company described above. The Company believes that
Mr. Heyman's compensation is below the average of that paid to chief executive
officers of such comparable companies.
Members of the Compensation Committee:
Charles M. Diker
Harrison J. Goldin
Burt Manning
7
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and noncash compensation for each
of the last three fiscal years awarded to or earned by the Chief Executive
Officer of ISP and the four other most highly compensated executive officers of
ISP who were employed by ISP or its subsidiaries as of December 31, 1998.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------
ANNUAL COMPENSATION SECURITIES
------------------------------------------------ RESTRICTED UNDERLYING
NAME AND PRINCIPAL OTHER ANNUAL STOCK OPTIONS/ ALL OTHER
POSITION YEAR SALARY BONUS(1) COMPENSATION AWARD(S) SARS(2) COMPENSATION
- ------------------------ ---- -------- -------- ------------ ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Samuel J. Heyman ....... 1998 $581,500 $ 0 $ 0 0 $ 21,352(3)
Chairman of the Board 1997 579,125 0 0 0 20,579(3)
of Directors and Chief 1996 572,000 200,000 0 89,200 14,739(3)
Executive Officer
Peter R. Heinze ........ 1998 $392,775 $285,000 $ 0 $1,421,875(4) 153,850 $ 21,231(4)
President and Chief 1997 379,725 349,271 31,774(4) 18,750 24,291(4)
Operating Officer 1996 46,875(4) 40,000(4) 0 156,250(4) 0(4)
Carl R. Eckardt ........ 1998 $340,704 $140,000 $ 0 0 $ 8,649(5)
Executive Vice 1997 340,704 156,277 0 0 8,500(5)
President, Corporate 1996 339,612 164,901 0 49,600 17,756(5)
Development
James P. Rogers ........ 1998 $285,025 $235,000 $ 0 557,670(6) $3,263,780(6)
Executive Vice 1997 275,125 250,000 0 7,500 18,459(6)
President, Finance 1996 263,467 225,000 0 39,210(6)(8) 13,810(6)
Richard A. Weinberg .... 1998 $260,875 $235,000 $ 0 378,056(7) $ 360,705(7)
Executive Vice 1997 252,475 250,000 0 0 15,118(7)
President, General 1996 130,833(7) 125,014(7) 0 37,410(7)(8) 2,960(7)
Counsel and Secretary
</TABLE>
- ------------------
(1) Bonus amounts are payable pursuant to ISP's Executive Incentive Compensation
Program, except that in respect of the bonus amounts paid to certain
executive officers in 1997, ISP was reimbursed under a management agreement
for a portion of the bonus amounts earned by such executive officers. See
"Certain Transactions--Management Agreement."
(2) The options are for shares of Common Stock. See Notes 6 and 7 below and
"--Options and Stock Appreciation Rights."
(3) Included in "All Other Compensation" for Mr. Heyman are: $18,889, $18,116
and $12,989 for the premiums paid by the Company for a life insurance policy
in 1998, 1997 and 1996, respectively; and $1,963, $1,963 and $1,250 for the
premiums paid by the Company for a long-term disability policy in 1998, 1997
and 1996, respectively.
(4) Included in "Other Annual Compensation" for Dr. Heinze are $25,043 in
payment of moving related expenses and a "tax gross-up" of $6,731 in 1997.
Included in "All Other Compensation" for Dr. Heinze are $11,700 and $10,792,
representing the Company's contribution under the Capital Accumulation Plan
for Employees of GAFMC and ISP in 1998 and 1997, respectively; $7,568 and
$11,536 for the premiums paid by the Company for a life insurance policy in
1998 and 1997, respectively; and $1,963 for the premiums paid by the Company
for a long-term disability policy in each of 1998 and 1997. Dr. Heinze
commenced employment with ISP in November 1996. The restricted stock award
represents two grants of 50,000 performance shares each, effective
January 2, 1998 and December 31, 1998, with a value on the date of grant
of $743,750 and $678,125, respectively. The aggregate value of such
performance shares at December 31, 1998 was $1,356,250. None of the
performance shares have vested. Subject to Dr. Heinze's continued employment
through the vesting date(s), these restricted performance shares will vest
(and the restrictions will lapse) incrementally upon the Common Stock
achieving or exceeding certain market price thresholds
(Footnotes continued on next page)
8
<PAGE>
(Footnotes continued from previous page)
and in any event with respect to all performance shares at the end of
the respective ten-year performance periods.
(5) Included in "All Other Compensation" for Mr. Eckardt are: $6,686, $6,537 and
$16,506 for the premiums paid by the Company for a life insurance policy in
1998, 1997 and 1996, respectively; and $1,963, $1,963 and $1,250 for the
premiums paid by the Company for a long-term disability policy in 1998, 1997
and 1996, respectively.
(6) Included in "All Other Compensation" for Mr. Rogers are: $11,450, $11,450
and $10,750, representing the Company's contribution under the Capital
Accumulation Plan for Employees of GAFMC and ISP in 1998, 1997 and 1996,
respectively; $3,316, $5,046 and $1,810 for the premiums paid by the Company
for a life insurance policy in 1998, 1997 and 1996, respectively; and
$1,963, $1,963 and $1,250 for the premiums paid by the Company for a
long-term disability policy in 1998, 1997 and 1996, respectively. Excluded
are options to purchase shares of redeemable convertible preferred stock of
ISP Holdings ("ISP Holdings Options") granted to Mr. Rogers in 1996 and
stock appreciation rights relating to the common stock of ISP Holdings
issued to Mr. Rogers. In connection with the merger of Old ISP into ISP
Holdings, the ISP Holdings Options and stock appreciation rights relating to
ISP Holdings common stock, including the ISP Holdings Options and stock
appreciation rights held by Mr. Rogers, were terminated. In consideration of
the termination of the ISP Holdings Options and rights held by Mr. Rogers,
Mr. Rogers received, subject to his continued employment through each
vesting date (the last of which will occur in December 2003), options to
purchase 550,170 shares of Common Stock under the Incentive Plan (which
options are included in "Securities Underlying Options/SARs" for 1998) and
the right to receive cash payments of $5,315,843 in the aggregate.
Mr. Rogers received $3,247,051 of these cash payments in 1998, which amount
is included in "All Other Compensation" for Mr. Rogers for 1998.
(7) Included in "All Other Compensation" for Mr. Weinberg are: $11,300, $11,300
and $2,158, representing the Company's contribution under the Capital
Accumulation Plan for Employees of GAFMC and ISP in 1998, 1997 and 1996,
respectively; $1,264, $1,914 and $277 for the premiums paid by the Company
for a life insurance policy in 1998, 1997 and 1996, respectively; and
$1,963, $1,904 and $525 for the premiums paid by the Company for a long-term
disability policy in 1998, 1997 and 1996, respectively. Mr. Weinberg
commenced service with the Company in May 1996. Prior to that time, he was
Vice President and General Counsel of BMCA. Excluded are amounts paid to
Mr. Weinberg by BMCA prior to May 15, 1996. Excluded are ISP Holdings
Options granted to Mr. Weinberg in 1996. In connection with the merger of
Old ISP into ISP Holdings, the ISP Holdings Options, including the ISP
Holdings Options held by Mr. Weinberg, were terminated. In consideration of
the termination of the ISP Holdings Options held by Mr. Weinberg,
Mr. Weinberg received, subject to his continued employment through each
vesting date (the last of which will occur in December 2003), options to
purchase 378,056 shares of Common Stock under the Incentive Plan (which
options are included in "Securities Underlying Options/SARs" for 1998) and
the right to receive cash payments of $3,238,358 in the aggregate.
Mr. Weinberg received $346,178 of these cash payments in 1998, which amount
is included in "All Other Compensation" for Mr. Weinberg for 1998.
(8) Excluded are the stock appreciation rights relating to shares of GAF common
stock referred to in Note (2) under the second table under "--Options and
Stock Appreciation Rights."
9
<PAGE>
OPTIONS AND STOCK APPRECIATION RIGHTS
The following two tables summarize options to acquire Common Stock granted
during 1998 to the executive officers named in the Summary Compensation Table
above, the potential realizable value of such options and the value of the
unexercised options held by such persons at December 31, 1998. No options were
exercised by such persons during 1998.
ISP COMMON STOCK OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
% OF TOTAL POTENTIAL REALIZABLE VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK PRICE
SECURITIES GRANTED TO EXERCISE/ MARKET APPRECIATION FOR
UNDERLYING EMPLOYEES BASE PRICE OPTION TERM
OPTIONS IN FISCAL PRICE ON DATE EXPIRATION --------------------------------------
NAME GRANTED(1) 1998 ($/SHARE) OF GRANT DATE 0% 5% 10%
- ------------------------ ---------- ---------- ---------- -------- ---------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Samuel J. Heyman ....... -- -- -- -- -- -- -- --
Peter R. Heinze......... 100,000(2) 3.2% $ 16.125 $ 17.625 03/30/07 $150,000 $ 1,121,716 $ 2,543,383
35,100(3) 1.1% $ 14.563 $ 14.563 12/7/07 -- 281,808 694,106
18,750(4) 0.6% $ 8.563 $ 13.563 12/31/04 93,750 180,235 289,956
Carl R. Eckardt......... -- -- -- -- -- -- -- --
James P. Rogers......... 285,979(5) 9.2% $ 16.125 $ 17.625 03/30/07 $428,969 $ 3,207,872 $ 7,273,541
264,191(5) 8.5% $ 16.125 $ 17.625 03/30/07 396,287 2,963,473 6,719,388
7,500(4) 0.2% $ 8.563 $ 13.563 12/31/04 37,500 72,094 115,982
Richard A. Weinberg..... 378,056(5) 12.1% $ 16.125 $ 17.625 03/30/07 $567,084 $ 4,240,715 $ 9,615,411
All stockholders(6)..... N/A N/A N/A N/A N/A -- $617,852,345 $1,521,799,793
</TABLE>
- ------------------
(1) All stock options represent options to purchase shares of Common Stock and
were granted under the Incentive Plan. The Incentive Plan provides that the
vesting of options will be accelerated automatically if at any time
following a "Change of Control" (as defined), the optionee's employment is
terminated as a result of his death or permanent disability or the optionee
terminates his employment for "good reason" (as defined).
(2) These options vest over a five-year period at the rate of 20% per year on
each anniversary of the date of grant, and, to the extent vested, are
exercisable for nine years from the date of grant.
(3) These options will become fully vested three years after the date of grant,
and, to the extent vested, are exercisable for nine years from the date of
grant. These options were granted in exchange for an equal number of options
granted in June 1998. See "--Ten-Year Option/SAR Repricings" and
accompanying text below.
(4) These options will become fully vested 2 1/2 years after the date of grant,
and, to the extent vested, are exercisable for six years from the date of
grant.
(5) These options were granted in accordance with the Agreement and Plan of
Merger, dated as of March 30, 1998, between Old ISP and ISP Holdings in
partial consideration of the termination upon the merger of ISP Holdings
Options held by Messrs. Rogers and Weinberg and, in the case of the grant to
Mr. Rogers of options for 285,979 shares, outstanding stock appreciation
rights relating to ISP Holdings common stock. These options vest in
accordance with the vesting schedule of the ISP Holdings Options and stock
appreciation rights to which they relate. Accordingly, the option granted to
Mr. Rogers for 285,979 shares is fully vested, and the options granted to
Messrs. Rogers and Weinberg for 264,191 and 378,056 shares, respectively,
vest in varying increments over a five-year period.
(6) For comparative purposes, shown is the increase in total stockholder value
that could be realized over a nine-year period based on 69,498,392 shares of
Common Stock outstanding on July 15, 1998 (the date of the merger of Old ISP
into ISP Holdings) and using $16.125 as the base price.
10
<PAGE>
VALUE OF ISP COMMON STOCK OPTIONS AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY ISP OPTIONS
ISP OPTIONS AT 12/31/98 AT 12/31/98(1)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---------------------------------------------------------------- ------------------------- -------------------------
<S> <C> <C>
Samuel J. Heyman................................................ 90,000/149,200 $590,625/$544,275
Peter R. Heinze................................................. 0/328,850 $ 0/$679,297
Carl R. Eckardt................................................. 111,152/ 75,288 $466,673/$227,500
James P. Rogers(2).............................................. 370,959/331,721 $382,714/$236,934
Richard A. Weinberg(2).......................................... 34,066/381,400 $ 10,150/$ 54,729
</TABLE>
- ------------------
(1) Options for 239,200, 193,750, 186,440, 152,510 and 37,410 shares of Common
Stock were in-the-money for Messrs. Heyman, Heinze, Eckardt, Rogers and
Weinberg, respectively, at December 31, 1998.
(2) Excluded are stock appreciation rights ("SARs") relating to shares of GAF
common stock held be Messrs. Rogers and Weinberg. These SARs represent the
right to receive a cash payment based upon the appreciation in value of the
specified number of shares of GAF common stock over the sum of the
determined initial Book Value (as defined) per share of GAF common stock,
plus interest on such Book Value at a specified rate. The GAF SARs vest over
a five-year period, subject to earlier vesting under certain circumstances,
including in connection with a change of control, and have no expiration
date. Of the 17,928 GAF SARs held by Mr. Rogers, 9,319 were exercisable as
of December 31, 1998. Of the 12,320 GAF SARs held by Mr. Weinberg, 1,484
were exercisable as of December 31, 1998. None of the GAF SARs were
in-the-money at December 31, 1998.
On December 7, 1998, the Company offered all holders of options granted on
June 30, 1998 the opportunity to exchange their June options for new options
under the Incentive Plan with a lower exercise price of $14.5625 per share, the
closing price of the Common Stock on the New York Stock Exchange on December 7,
1998. The new options were granted on a one-for-one ratio with the options
exchanged and were made subject to a new three-year vesting period. For a
discussion of the reasons for offering the exchange, see "Compensation of
Executive Officers of the Company--Report of the Compensation Committee of the
Board of Directors."
The following table sets forth the information regarding options exchanged
by the executive officers of the Company:
TEN-YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING
OPTIONS/ MARKET PRICE EXERCISE LENGTH OF
SARS OF STOCK PRICE AT ORIGINAL OPTION
REPRICED AT TIME OF TIME OF NEW TERM REMAINING AT
NAME AND PRINCIPAL OR REPRICING OR REPRICING OR EXERCISE DATE OF REPRICING
POSITION DATE AMENDED AMENDMENT($) AMENDMENT($) PRICE($) OR AMENDMENT
- -------------------------- ------- ---------- ------------ ------------ -------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Peter R. Heinze .......... 12/7/98 35,100 $14.5625 $18.6250 $14.5625 8 years, 7 months
President and Chief
Operating Officer
Andrew G. Mueller ........ 12/7/98 25,000 $14.5625 $18.6250 $14.5625 8 years, 7 months
Executive Vice
President, Operations
Randall R. Lay ........... 12/7/98 14,300 $14.5625 $18.6250 $14.5625 8 years, 7 months
Senior Vice President
and Chief Financial
Officer
</TABLE>
PENSION PLANS
Non-Qualified Retirement Plan. The Company has a non-qualified retirement
plan for the benefit of certain key employees (the "Retirement Plan"). The
benefit payable under the Retirement Plan, which vests in
11
<PAGE>
accordance with a 10-year schedule, consists of an annual payment commencing at
age 65 equal to 25% of a covered employee's last full year's base salary. The
benefit continues for the longer of 15 years or the joint lifetimes of the
employee or his or her spouse. If a covered employee dies while employed by the
Company or a subsidiary, a death benefit of 36% of the employee's base salary at
the date of death is payable for a term of 15 years to the employee's
beneficiary.
No new participants have been admitted to the Retirement Plan since January
1989 and it is not anticipated that any new participants will be admitted
hereafter. Of the executive officers named in the Summary Compensation Table,
only Messrs. Heyman and Eckardt participate in the Retirement Plan.
The following table shows, for the salary levels and years of service
indicated, the annual pension benefit, payable commencing at age 65 to
participants in the Retirement Plan.
NON-QUALIFIED RETIREMENT PLAN
ANNUAL PAYMENTS AT AGE 65
<TABLE>
<CAPTION>
YEARS OF SERVICE
-------------------------------------------------------------------------------------
SALARY 5 10 15 20 25 30 35
- -------- ------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$250,000 $31,250 $ 62,500 $ 62,500 $ 62,500 $ 62,500 $ 62,500 $ 62,500
300,000 37,500 75,000 75,000 75,000 75,000 75,000 75,000
350,000 43,750 87,500 87,500 87,500 87,500 87,500 87,500
400,000 50,000 100,000 100,000 100,000 100,000 100,000 100,000
450,000 56,250 112,500 112,500 112,500 112,500 112,500 112,500
500,000 62,500 125,000 125,000 125,000 125,000 125,000 125,000
550,000 68,750 137,500 137,500 137,500 137,500 137,500 137,500
600,000 75,000 150,000 150,000 150,000 150,000 150,000 150,000
650,000 81,250 162,500 162,500 162,500 162,500 162,500 162,500
700,000 87,500 175,000 175,000 175,000 175,000 175,000 175,000
</TABLE>
The years of service covered by the Retirement Plan are thirteen years for
each of Mr. Heyman and Mr. Eckardt. Current salaries covered by the Retirement
Plan are the amounts set forth under the "salary" column of the Summary
Compensation Table for the above-named executive officers. The annual pension
benefit is not subject to reduction for Social Security and other benefits and
is computed on a straight-life annuity basis.
Additional Arrangements. ISP agreed to provide Mr. Eckardt, at age 67, a
$200,000 annuity comprising two pieces: (i) the benefits payable under the
Retirement Plan described above, and (ii) a supplemental retirement benefit
representing the difference between $200,000 per year and the benefit payable
under the Retirement Plan. The supplemental retirement benefit has fully vested.
In the event Mr. Eckardt should die without a surviving spouse, no supplemental
retirement benefit will be payable. In the event Mr. Eckardt should die prior to
the termination of his employment, leaving a surviving spouse, his spouse will
be entitled to receive for her life an annual payment of the supplemental
retirement benefit. If Mr. Eckardt's employment is terminated involuntarily
other than for cause (as defined), or in the event Mr. Eckardt becomes totally
and permanently disabled, he will be entitled to receive payment of the
supplemental retirement benefit. If Mr. Eckardt's employment is terminated for
cause, the Company in its sole discretion may declare all or any portion
(whether vested or unvested) of the supplemental retirement benefits forfeited.
Other Agreements. In connection with his becoming President and Chief
Operating Officer of ISP in November 1996, Dr. Heinze and ISP entered into a
letter agreement that provides, among other things, that Dr. Heinze will receive
an initial base salary of $375,000 per year, certain stock options and other
benefits. In accordance with the letter agreement, on December 9, 1996,
Dr. Heinze was granted under the Incentive Plan 125,000 options to purchase
shares of Common Stock at an exercise price of $11.25 per share, which options
vest in full on December 9, 1999 and expire nine years from the date of grant,
and 31,250 options at an exercise price of $6.25 per share, which options vest
in full on June 9, 1999 and expire six years from the date of grant, in each
case subject to earlier vesting in the event of a "Change of Control" (as
defined in the Incentive Plan). He is also eligible to participate in ISP's
Executive Incentive Compensation Program and the Incentive Plan. The letter
agreement also provides that if Dr. Heinze's employment is terminated by ISP
other than for cause, ISP will continue to pay Dr. Heinze his then base salary
for a severance period of up to 18 months depending upon when such termination
occurs. In addition, in the event of a Change of Control of ISP and either
(i) the termination of Dr. Heinze's employment by ISP (or its successor) other
than for cause within twelve months after such Change
12
<PAGE>
in Control or (ii) the termination of employment by Dr. Heinze under certain
circumstances, Dr. Heinze will continue to receive his base salary in lieu of
any other severance for 24 months following such termination.
For information with respect to certain other arrangements relating to
certain executive officers, see also Notes 6 and 7 under "--Summary Compensation
Table."
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's executive officers and directors, and persons who
beneficially own more than 10% of the Common Stock, to file initial statements
of beneficial ownership (Form 3), and statements of changes in beneficial
ownership (Form 4 or 5), of securities of the Company with the Securities and
Exchange Commission and the New York Stock Exchange. Executive officers,
directors and greater than 10% stockholders also are required to furnish the
Company with copies of all forms that they file pursuant to Section 16(a).
To the Company's knowledge, based solely on its review of the copies of
such forms received by it, or written representations from certain reporting
persons that no additional forms were required for those persons, the Company
believes that its executive officers, directors and greater than 10% beneficial
owners complied with the Section 16(a) filing requirements applicable to them
during 1998.
PERFORMANCE GRAPH
The following graph compares the performance of the Common Stock with the
performance of the Standard & Poor's 500 Index and the Standard & Poor's
Specialty Chemicals Index for the period from January 1, 1994 through the end of
1998. The graph assumes that the value of the investment in the Common Stock and
in each index was $100 on December 31, 1993 and that all dividends were
reinvested.
STOCK PRICE PERFORMANCE
TOTAL RETURN ON $100 INVESTMENT
(DIVIDENDS REINVESTED)
International S&P Specialty
S&P 500 Index Specialty Products Inc. Chemicals Index
------------- ----------------------- ---------------
Dec-93 100 100 100
Dec-94 101 106 87
Dec-95 139 162 115
Dec-96 171 183 118
Dec-97 229 223 146
Dec-98 294 202 124
The foregoing graph is not incorporated in any prior or future filings of
the Company under the Securities Act of 1933 or the Securities Exchange Act of
1934, directly or by reference to the incorporation of proxy statements of the
Company, unless the Company specifically incorporates the graph by reference,
and the graph shall not otherwise be deemed filed under such Acts.
13
<PAGE>
CERTAIN TRANSACTIONS
MANAGEMENT AGREEMENT
Pursuant to a management agreement (the "Management Agreement"), which
expires at the end of 1999, the Company provides certain general management,
administrative, legal, telecommunications, information and facilities services
to certain of its affiliates, including GAF, BMCA, G-I Holdings Inc. and GAF
Fiberglass Corporation. Charges by the Company for providing such services
aggregated $5.1 million for 1998. Such charges consist of management fees and
other reimbursable expenses attributable to, or incurred by the Company for the
benefit of, the respective parties, which are based on an estimate of the costs
the Company incurs to provide such services. Effective January 1, 1999, the term
of the Management Agreement was extended through the end of 1999, and the
management fees payable by BMCA under the agreement were increased. The Company
and BMCA also allocate a portion of the management fees payable by BMCA under
the Management Agreement to separate lease payments for the use of BMCA's
headquarters. Based on the services provided by the Company in 1998 under the
Management Agreement, the aggregate amount payable to the Company under the
Management Agreement for 1999 is expected to be approximately $6.1 million.
Although, due to the unique nature of the services provided under the Management
Agreement, comparisons with third party arrangements are difficult, the Company
believes that the terms of the Management Agreement, taken as a whole, are no
less favorable to the Company than could be obtained from an unaffiliated third
party. Certain of the executive officers of the Company perform services for
affiliates of the Company pursuant to the Management Agreement, and the Company
is indirectly reimbursed therefor by virtue of the management fees and other
reimbursable expenses payable under the Management Agreement.
TAX SHARING AGREEMENT
The Company was a party to tax sharing agreements with members of the GAF
consolidated tax group (the "GAF Group"). As a result of a series of
transactions (the "Separation Transactions") involving GAF and its subsidiaries
on January 1, 1997 that resulted in, among other things, the capital stock of
ISP Holdings being distributed to the stockholders of GAF, the Company is no
longer included in the consolidated Federal income tax returns of GAF, and
therefore, such tax sharing agreements are no longer applicable with respect to
the tax liabilities of the Company for periods subsequent to the Separation
Transactions. The Company remains obligated, however, with respect to tax
liabilities imposed or that may be imposed for periods prior to the Separation
Transactions. Among other things, those tax sharing agreements provide for the
sharing of the GAF Group's consolidated tax liability based on each member's
share of the tax as if such member filed on a separate basis. Accordingly, a
payment of tax would be made to GAF equal to the Company's allocable share of
the GAF Group's consolidated tax liability. Alternatively, the Company would be
entitled to refunds if losses or other attributes reduce the GAF Group's
consolidated tax liability. Moreover, foreign tax credits generated by the
Company not utilized by GAF will be refunded by GAF or its subsidiary to the
Company, if such credits expire unutilized upon termination of the statute of
limitations for the year of expiration. Furthermore, those tax sharing
agreements provide for an indemnification to the Company for any tax liability
attributable to another member of the GAF Group.
SALES TO AFFILIATES
BMCA, an indirect subsidiary of GAF and an affiliate of the Company, and
its subsidiaries purchase from the Company all of their colored roofing granules
requirements (except for the requirements of their California and Oregon roofing
plants and a portion of the requirements of their Indiana roofing plant, which
are supplied by a third party) under a requirements contract. Effective January
1, 1999, this contract was amended to cover, among other things, purchases of
colored roofing granules by BMCA's subsidiaries and was renewed for 1999. This
contract is subject to annual renewal unless terminated by either party to the
agreement. In 1998, BMCA and its subsidiaries purchased a total of
$62.6 million of mineral products from the Company, representing 7.6% of the
Company's total net sales and 66.2% of the Company's net sales of mineral
products. The Company's supply arrangements with BMCA and its subsidiaries are
at prices and on terms which the Company believes are no less favorable to it
than could be obtained from an unaffiliated third party.
CERTAIN OTHER TRANSACTIONS
For a discussion of certain arrangements with executive officers of the
Company, see "Compensation of Executive Officers of the Company--Other
Agreements" and "--Pension Plans--Additional Arrangements."
The Company invests primarily in international and domestic arbitrage and
securities of companies involved in acquisition or reorganization transactions,
including, at times, common stock short positions which are offsets
14
<PAGE>
against long positions in securities which are expected, under certain
circumstances, to be exchanged or converted into the short positions. The latter
category of investments is administered, at no cost or charge to the Company, by
certain investment partnerships controlled by Mr. Heyman and his family, and,
when purchased or sold on the same day as investments purchased or sold by
members of the GAF group of companies, and certain Heyman family enterprises,
are effected at the same price as the investments of such other entities.
INDEPENDENT PUBLIC ACCOUNTANTS
No accounting firm has been selected to date to audit the accounts of the
Company for 1999. No such selection shall be made without the recommendation and
approval of ISP's Audit Committee.
Arthur Andersen LLP performed the audit of the Company's accounts in 1998.
A representative of Arthur Andersen is expected to be present at the meeting to
answer appropriate questions and will have an opportunity to make a statement.
2000 STOCKHOLDERS' PROPOSALS
Proposals of security holders intended for possible action at the 2000
Annual Meeting of Stockholders must be received by the Company at its principal
executive offices prior to December 27, 1999. All proposals received will be
subject to the applicable rules of the Securities and Exchange Commission. A
duly executed proxy given in connection with the 2000 Annual Meeting of
Stockholders will confer discretionary authority on the persons named as proxies
in such proxy, or any of them, to vote at such meeting on any matter of which
the Company does not have written notice on or before March 15, 2000, without
advice in the Company's proxy statement as to the nature of such matter.
OTHER MATTERS
The cost of the solicitation will be borne by the Company. In addition to
use of the mails, proxies may be solicited by telephone, telegraph or personal
interview by employees of ISP without additional compensation.
The Company will reimburse brokerage firms, banks, trustees, nominees and
other persons authorized by the Company for their out-of-pocket expenses in
forwarding proxy material to the beneficial owners of the Common Stock.
Management does not know of any other matters that will be presented at the
meeting other than matters incident to the conduct thereof. However, if any
matters properly come before the meeting or any adjournment or postponement
thereof, it is intended that the holders of the proxies named in the
accompanying proxy card will vote thereon in their discretion.
For a copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 1998 as filed with the Securities and Exchange Commission, please
contact: Shareholder Relations Department, International Specialty Products
Inc., 1361 Alps Road, Wayne, New Jersey 07470.
By Order of the Board of Directors,
/s/ Richard A. Weinberg
RICHARD A. WEINBERG
Secretary
Wayne, New Jersey
April 26, 1999
15
<PAGE>
APPENDIX I
FORM OF PROXY CARD
INTERNATIONAL SPECIALTY PRODUCTS INC.
Proxy for the Annual Meeting to be held at 10:00 a.m.,
local time, on Monday, May 24, 1999,
Weil, Gotshal & Manges LLP, 767 Fifth Avenue, 25th Floor,
New York, New York
The undersigned hereby appoints James P. Rogers and Richard A.
Weinberg, and each of them, proxies, with full power of substitution, to
represent and to vote and act with respect to all of the undersigned's shares of
common stock of International Specialty Products Inc. at the Annual Meeting of
Stockholders of International Specialty Products Inc. to be held on Monday, May
24, 1999, and at any adjournment or postponement thereof, as designated herein
upon the proposals set forth herein and, in their discretion, upon such other
matters as may properly be brought before the meeting.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY. When
properly executed it will be voted as directed by the stockholder but, unless
otherwise specified, it will be voted FOR the Election of Directors.
Change of Address
________________________________ INTERNATIONAL SPECIALTY PRODUCTS INC.
________________________________ P.O. BOX 11028
________________________________ NEW YORK, N.Y. 10203-0028
(continued on the reverse side)
<PAGE>
The Board of Directors recommends a vote FOR Election of Directors.
1. ELECTION OF DIRECTORS
FOR all nominees WITHHOLD AUTHORITY to vote *EXCEPTIONS
listed below ____ for all nominees listed below ____ ____
Nominees: Charles M. Diker, Carl R. Eckardt, Harrison J. Goldin,
Peter R. Heinze, Samuel J. Heyman, Sanford Kaplan and Burt Manning
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided below.)
*Exceptions ________________________________________________________
2. Such other business as may properly come before the meeting and any
adjournment or postponement thereof.
Change of Address
On Reverse Side ____
Please vote, sign and date this proxy and return it
promptly in the enclosed envelope. No postage is
required if mailed in the United States. Your
signature(s) should correspond with the name(s)
appearing in the space at the left. Where signing in a
fiduciary or representative capacity, please give your
full title as such. If shares are held in more than one
capacity, this proxy will be deemed to vote all shares
held in all capacities.
Dated _______________________________________, 1999
_________________________________________________
Signature
_________________________________________________
Signature, if held jointly
Please Sign, Date and Return the Proxy Votes must be indicated
Card Promptly Using the Enclosed Envelope. (x) in Black or Blue ink. X
