<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE 14A INFORMATION
PROXY 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 Section 240.14a-12
INTERNATIONAL SPECIALTY PRODUCTS INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
<PAGE>
/ / 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:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INTERNATIONAL SPECIALTY PRODUCTS
1361 ALPS ROAD
WAYNE, NEW JERSEY 07470
SAMUEL J. HEYMAN
CHAIRMAN OF THE BOARD
April 19, 2000
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 15, 2000, 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
1999 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 OF STOCKHOLDERS
TO BE HELD MAY 15, 2000
------------------------
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 15, 2000,
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;
2. To consider and approve the adoption of the International Specialty
Products 2000 Long-Term Incentive Plan;
3. To consider and approve an amendment to the Company's 1991 Incentive
Plan for Key Employees and Directors, as amended, to increase by 4,000,000 the
number of shares of Common Stock for which stock options may be granted
thereunder and to increase to 600,000 the limit on the number of shares of
Common Stock for which stock options may be granted to any eligible person
during any calendar year; and
4. To transact such other business as may properly come before the meeting
and all adjournments thereof.
The Board of Directors has fixed the close of business on March 30, 2000 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 19, 2000
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 15, 2000, 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 March 30, 2000 (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 68,949,702 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; (2) FOR the adoption of the International Specialty Products 2000
Long-Term Incentive Plan ("2000 LTI Plan"); (3) FOR the approval of the
amendment to the Company's 1991 Incentive Plan for Key Employees and Directors,
as amended (the "1991 Incentive Plan"); and (4) in the discretion of the persons
named as proxies on 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,
abstentions and broker non-votes are included in determining whether or not a
quorum is present.
The election of directors of the Company requires the affirmative vote of a
plurality of the votes properly cast at the meeting. The vote required for the
adoption of the 2000 LTI Plan and the approval of the amendment to the 1991
Incentive Plan is the affirmative vote of the holders of a majority of the
shares of Common Stock present in person or represented by proxy and entitled to
vote at the meeting. Any shares not voted (by abstention, broker non-vote or
otherwise) will not be counted as votes cast. Abstentions have the same effect
as votes against a proposal. Broker non-votes on proposals 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 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 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, or direct the vote of, such shares FOR
the election of the Board of Directors' nominees as directors, FOR adoption of
the 2000 LTI Plan and FOR approval of the amendment to the 1991 Incentive Plan.
Accordingly, election of the Board of Directors' nominees as directors, the
adoption of the 2000 LTI Plan and the approval of the amendment to the 1991
Incentive Plan are 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 20, 2000.
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
Seven (7) directors are to be elected to serve until the next Annual
Meeting of Stockholders and until their successors are elected and have been
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.
- --------------------------------------------------------------------------------
- ------------- CHARLES M. DIKER AGE 65
| Photo of | Mr. Diker has been a director of ISP since February 1992. He has
| Charles M.| been a non-managing principal of Weiss, Peck & Greer, an
| Diker | 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.
- --------------------------------------------------------------------------------
- ------------- CARL R. ECKARDT AGE 69
| Photo of | Mr. Eckardt has been a director of ISP since its formation and
| Carl R. | was Executive Vice President, Corporate Development, of ISP from
| Eckardt | November 1996 to November 1999, 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.
- --------------------------------------------------------------------------------
- ------------- HARRISON J. GOLDIN AGE 64
| Photo of | Mr. Goldin has been a director of ISP since its formation. He
| Harrison | has been the senior managing director of Goldin Associates,
| J. Goldin | 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.
- --------------------------------------------------------------------------------
- ------------- SAMUEL J. HEYMAN AGE 61
| Photo of | Mr. Heyman has been a director and Chairman of the Board of ISP
| Samuel J. | since its formation and was Chief Executive Officer of ISP from
| Heyman | its formation to June 1999. Mr. Heyman also has been a director,
- ------------- Chairman of the Board, President and Chief Executive Officer of
GAF and certain of its subsidiaries for more than five years. He
has been a director and Chairman of the Board of Building
Materials Corporation of America ("BMCA"), an indirect, 98.5%-
owned subsidiary of GAF, since its formation and has served as
Chief Executive Officer of BMCA and certain of its subsidiaries
since June 1999, which position he also held 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 83
| Photo of | Mr. Kaplan has been a director of ISP since November 1992. He
| Sanford | has been a private investor and consultant since 1977 when he
| Kaplan | retired from Xerox Corporation, where he was a Senior Vice
- ------------- President and a director.
- --------------------------------------------------------------------------------
- ------------- SUNIL KUMAR AGE 50
| Photo of | Mr. Kumar has been a director, President and Chief Executive
| Sunil | Officer of ISP and President and Chief Executive Officer of
| Kumar | certain of its subsidiaries since June 1999. He was a director,
- ------------- President and Chief Executive Officer of BMCA and certain of its
subsidiaries from May 1995, July 1996 and January 1999,
respectively, to June 1999. He also was Chief Operating Officer
of BMCA and certain of its subsidiaries from March 1996 to
January 1999. Mr. Kumar was President, Commercial Roofing
Products Division, and Vice President of BMCA from February 1995
to March 1996. From 1992 to February 1995, he was Executive Vice
President of Bridgestone/Firestone Inc., a retail distributor
and manufacturer of tires and provider of automobile services.
- --------------------------------------------------------------------------------
- ------------- BURT MANNING AGE 68
| Photo of | Mr. Manning has been a director of ISP since November 1992. He
| Burt | is President of Brookbound Inc., a strategic consulting company.
| Manning | 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 Ice Cream Corporation.
- --------------------------------------------------------------------------------
MEETINGS, COMMITTEES AND DIRECTORS' FEES
The Board of Directors met eight times in 1999.
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 three times during 1999.
3
<PAGE>
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 four times
during 1999.
The Board of Directors does not have a nominating committee.
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 1991 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 an eligible
director and an additional non-qualified option to purchase 3,000 shares of
Common Stock (an "Additional Option") on each anniversary of the date of grant
of the Initial Option. 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 five non-employee directors, Messrs. Diker, Eckardt, Goldin,
Kaplan and Manning. Messrs. Diker, Goldin, Kaplan and Manning were each granted
an Additional Option to purchase 3,000 shares of Common Stock during 1999.
Mr. Eckardt was granted an Initial Option to purchase 5,000 shares of Common
Stock during 2000. Mr. Eckardt also has entered into a consulting arrangement
with the Company. Such arrangement is unrelated to Mr. Eckardt's services as a
director. See "Compensation of Executive Officers of the Company--Other
Agreements."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 30, 2000, 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..................................................... 52,567,240(1)(2) 76%
Sunil Kumar.......................................................... 357,516(3) *
Charles Diker........................................................ 46,000(2)(4) *
Carl R. Eckardt...................................................... 921,481 1.3%
Harrison Goldin...................................................... 20,000(2) *
Sanford Kaplan....................................................... 25,000(2) *
Burt Manning......................................................... 27,000(2) *
Richard A. Weinberg.................................................. 251,833(2) *
Andrew G. Mueller.................................................... 60,220(2) *
Randall R. Lay....................................................... 77,899(2) *
Susan B. Yoss........................................................ 10,000 *
All directors and executive officers of ISP as a group
(12 persons)....................................................... 54,368,189(1)(2) 78.1%
</TABLE>
- ------------------
* 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
(Footnotes continued on next page)
4
<PAGE>
(Footnotes continued from previous page)
voting and investment power in respect of, 52,328,040 of these 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, 239,200 shares; Mr. Diker, 20,000
shares; Mr. Goldin, 20,000 shares; Mr. Kaplan, 20,000 shares; Mr. Manning,
20,000 shares; Mr. Weinberg, 185,833 shares; Mr. Mueller, 50,000 shares;
Mr. Lay, 74,996 shares; and all directors and executive officers as a group,
630,029 shares, subject to options granted under the 1991 Incentive Plan
which are currently exercisable or will become exercisable within the next
60 days. Includes with respect to Mr. Manning 7,000 shares held jointly with
his spouse; Mr. Mueller 2,200 shares held jointly with his spouse and 6,020
shares held in the Company's 401(k) plan as of December 31, 1999; and
Mr. Lay 30 shares held as custodian for the benefit of his minor children
and 2,873 shares held in the Company's 401(k) plan as of December 31, 1999.
(3) Includes with respect to Mr. Kumar 12,917 shares held in the Company's
401(k) plan as of December 31, 1999 and 11,000 shares held by his spouse.
(4) 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.
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 aggregate EIC pool, if
any, for all awards is based principally on the Company's operating income as a
5
<PAGE>
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 Chairman, President and Chief
Executive 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 $1,100,000 in EIC awards should be
paid to the Company's executive officers for the year ended December 31, 1999.
In addition to the EIC awards, from time to time, the Compensation
Committee may award Company employees (including executive officers) annual
incentive compensation for extraordinary individual performance and contribution
to the Company. The Compensation Committee awarded one executive officer $35,000
in recognition of extraordinary individual performance for the year ended
December 31, 1999.
The Compensation Committee has believed that stock ownership by management
encourages management to enhance stockholder value. Accordingly, options to
purchase shares of Common Stock have been an important component of the
Company's performance-based compensation philosophy and have provided 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 1991
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 has granted 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 or its subsidiaries and recommendations by the Company's management,
including the Chairman. In 1999, 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 1991 Incentive Plan. During 1999,
non-qualified stock options for an aggregate of 886,935 shares of Common Stock
were granted to the Company's executive officers, including options for 6,075
shares granted under the ISP Future Leadership Program.
Options under the 1991 Incentive Plan may be granted from time to time
until June 28, 2000, the expiration date of the 1991 Incentive Plan. The
Compensation Committee recently reviewed the Company's executive compensation
policy and the 1991 Incentive Plan and, on February 28, 2000, determined to
adopt, subject to stockholder approval, the International Specialty Products
2000 Long-Term Incentive Plan, a long-term incentive plan based on the Company's
book value rather than market value. The Compensation Committee believes that in
view of the decline in the Company's stock price, such an incentive plan will
better reflect and measure the value of the Company and the contributions of the
Company's employees, as well as provide a meaningful incentive to employees and
greater flexibility to the Company in attracting and retaining highly qualified
executives. See "Proposal No. 2--Adoption of the International Specialty
Products 2000 Long-Term Incentive Plan."
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
6
<PAGE>
and long-term compensation for the Chief Executive Officer. Among the criteria
used in determining the compensation of the Chief Executive Officer 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. Based on the foregoing criteria during
1999, the Compensation Committee maintained Mr. Heyman's annual base salary of
$581,500 until he stepped down as Chief Executive Officer, at which time Mr.
Heyman's annual base salary was lowered to $100,000. Upon Mr. Kumar's
commencement of employment with the Company as President and Chief Executive
Officer, the Compensation Committee determined that Mr. Kumar should receive an
annual base salary of $325,000. Mr. Kumar also received two grants of options
under the 1991 Incentive Plan, one to purchase 100,000 shares of Common Stock at
an exercise price of $4.781 and the other to purchase 500,000 shares of Common
Stock at an exercise price of $9.563. These options are subject to certain
vesting requirements, and the latter option is subject to stockholder approval
of the proposed amendment to the 1991 Incentive Plan. See "--Options and Stock
Appreciation Rights" and "Proposal No. 3--Amendment to the 1991 Incentive Plan."
In connection with Mr. Kumar's commencement of employment with the Company
as President and Chief Executive Officer, the Compensation Committee determined
that for competitive and other business reasons, including for retention
purposes and to align further Mr. Kumar's interests with those of the Company's
stockholders, Mr. Kumar should be granted the right to purchase 318,599 shares
of Common Stock for a purchase price of $9.563 per share, or an aggregate of
$3,046,762. The Company loaned Mr. Kumar the funds to pay the purchase price of
the shares at an interest rate of six percent (6%) per annum. The principal
amount of the loan is payable in four installments; however, if Mr. Kumar
remains continuously employed by the Company through each installment date, the
principal amount of the loan due on such date will be forgiven. See "--Other
Agreements."
Messrs. Heyman and Kumar are also 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 for 1999, but voluntarily waived his award so that the
aggregate EIC pool for 1999 could be awarded in its
entirety to the other executives of the Company. Based on the performance
criteria described above, Mr. Kumar received an EIC award of $300,000 for 1999.
The Compensation Committee also considers Mr. Kumar'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. Kumar'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 non-cash compensation for each
of the last three fiscal years awarded to or earned by each person who served as
ISP's Chief Executive Officer in 1999; the four other most highly compensated
executive officers who were employed by the Company or its subsidiaries as of
December 31, 1999; and a former executive officer who would have been one of the
four other most highly compensated executive officers had he not retired from
the Company before December 31, 1999.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
------------------------------------------------ UNDERLYING
NAME AND PRINCIPAL OTHER ANNUAL OPTIONS/ ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION SARS(1) COMPENSATION
- ----------------------------------- ---- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Samuel J. Heyman .................. 1999 $340,750 $ 0 $ -- 0 $ 13,601(7)
Chairman of the Board 1998 581,500 0 -- 0 21,352(7)
1997 579,125 0 -- 0 20,579(7)
Sunil Kumar ....................... 1999 $174,500(2) $300,000(2) $ -- 600,000(2) $ 6,975(2)
President and Chief Executive 1998 --(2) --(2) -- -- (2) --(2)
Officer 1997 --(2) --(2) -- -- (2) --(2)
Richard A. Weinberg ............... 1999 $281,700 $250,000(3) $ -- 95,140(9) $850,694(3)
Executive Vice President, General 1998 260,875 235,000 -- 378,056(3) 360,705(3)
Counsel and Secretary 1997 252,475 250,000 -- 0 15,118(3)
Andrew G. Mueller ................. 1999 $256,250 $125,000 $ -- 35,000 $ 21,221(4)
Executive Vice President, 1998 250,000 90,956 -- 25,000 25,199(4)
Operations 1997 166,667(4) 92,226(4) 43,701(4) 50,000(4) 15,155(4)
Randall R. Lay .................... 1999 $230,000 $ 85,000 $ -- 32,500 $207,590(5)
Executive Vice President and 1998 188,550 61,268 -- 128,165(5) 360,545(5)
Chief Financial Officer 1997 126,216 61,242 -- 0 13,791(5)
Susan B. Yoss ..................... 1999 $217,500 $160,000 $ -- 32,575(9) $ 14,806(6)
Senior Vice President and 1998 174,231(6) 57,172(6) -- 36,775(6) 6,496(6)
Treasurer 1997 --(6) --(6) -- --(6) --(6)
Carl R. Eckardt ................... 1999 $318,736 $100,000 $ -- 59,720(8) $ 24,198(8)
Former Executive Vice President, 1998 340,704 140,000 -- 0 8,649(8)
Corporate Development(8) 1997 340,704 156,277 -- 0 8,500(8)
</TABLE>
- ------------------
(1) The options are for shares of Common Stock. See Notes (3) and (5) below and
"--Options and Stock Appreciation Rights."
(2) Included in "All Other Compensation" for Mr. Kumar are: $2,869, representing
the Company's contribution under the Company's 401(k) plan in 1999; $2,736
for the premium paid by the Company for a life insurance policy in 1999;
and $1,370 for the premium paid by the Company for a long-term disability
policy in 1999. Mr. Kumar commenced employment with the Company in June
1999.
(3) Included in "All Other Compensation" for Mr. Weinberg are: $11,300 in each
of 1999, 1998 and 1997, representing the Company's contribution under the
Company's 401(k) plan in such year; $1,938, $1,264 and $1,914 for the
premiums paid by the Company for a life insurance policy in 1999, 1998 and
1997, respectively; and $1,963, $1,963 and $1,904 for the premiums paid by
the Company for a long-term disability policy in 1999, 1998 and 1997,
respectively. In connection with the merger of Old ISP into ISP Holdings,
the options to purchase shares of redeemable convertible preferred stock of
ISP Holdings ("ISP Holdings Options"), including 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 1991 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
$835,493 and $346,178 of
(Footnotes continued on next page)
8
<PAGE>
(Footnotes continued from previous page)
these cash payments in 1999 and 1998, respectively, which amounts are
included in "All Other Compensation" for Mr. Weinberg for such years.
(4) Included in "Other Annual Compensation" for Mr. Mueller are a relocation
allowance of $25,882 and a tax reimbursement of $17,819 in 1997. Included in
"All Other Compensation" for Mr. Mueller are: $11,700, $11,700 and $2,310,
representing the Company's contribution under the Company's 401(k) plan in
1999, 1998 and 1997, respectively; $7,558, $11,536 and $11,536 for the
premiums paid by the Company for a life insurance policy in 1999, 1998 and
1997, respectively; and $1,963, $1,963 and $1,309 for the premiums paid by
the Company for a long-term disability policy in 1999, 1998 and 1997,
respectively. Mr. Mueller commenced employment with the Company in May
1997.
(5) Included in "All Other Compensation" for Mr. Lay are: $11,450 in each of
1999, 1998 and 1997, representing the Company's contribution under the
Company's 401(k) plan in such year; $2,814, $1,437 and $1,350 for the
premiums paid by the Company for a life insurance policy in 1999, 1998 and
1997, respectively; and $1,806, $1,480 and $991 for the premiums paid by
the Company for a long-term disability policy in 1999, 1998 and 1997,
respectively. In connection with the merger of Old ISP into ISP Holdings,
the ISP Holdings Options, including ISP Holdings Options held by Mr. Lay,
were terminated. In consideration of the termination of the ISP Holdings
Options held by Mr. Lay, Mr. Lay received, subject to his continued
employment through each vesting date (the last of which will occur in
December 2002), options to purchase 113,865 shares of Common Stock under
the 1991 Incentive Plan (which options are included in "Securities
Underlying Options/SARs" for 1998) and the right to receive cash payments
of $1,169,566 in the aggregate. Mr. Lay received $191,520 and $346,178 of
these cash payments in 1999 and 1998, respectively, which amounts are
included in "All Other Compensation" for Mr. Lay for such years.
(6) Included in "All Other Compensation" for Ms. Yoss are: $11,450 and $4,735,
representing the Company's contribution under the Company's 401(k) plan in
1999 and 1998, respectively; $1,649 and $393 for the premiums paid by the
Company for a life insurance policy in 1999 and 1998, respectively; and
$1,707 and $1,368 for the premiums paid by the Company for a long-term
disability policy in 1999 and 1998, respectively. Ms. Yoss commenced
employment with the Company in February 1998.
(7) Included in "All Other Compensation" for Mr. Heyman are: $11,138, $18,889
and $18,116 for the premiums paid by the Company for a life insurance policy
in 1999, 1998 and 1997, respectively; and $1,963 in each of 1999, 1998 and
1997 for the premiums paid by the Company for a long-term disability policy
in such year. Mr. Heyman also was Chief Executive Officer of the Company
until June 1999.
(8) Included in "All Other Compensation" for Mr. Eckardt are: $7,713 and $9,703
in benefits paid to Mr. Eckardt in 1999 under the Company's non-qualified
retirement plan and as supplemental retirement benefits, respectively;
$4,818, $6,686 and $6,537 for the premiums paid by the Company for a life
insurance policy in 1999, 1998 and 1997, respectively; and $1,963 in each
of 1999, 1998 and 1997 for the premiums paid by the Company for a long-term
disability policy in such year. Mr. Eckardt retired from the Company as of
November 19, 1999. The options to purchase 59,720 shares of Common Stock
granted to Mr. Eckardt in 1999 were cancelled in accordance with their
terms upon Mr. Eckardt's retirement. See "--Other Agreements."
(9) Excluded are stock appreciation rights relating to shares of the common
stock of an affiliate of the Company. See Note (6) to the first table under
"--Options and Stock Appreciation Rights."
9
<PAGE>
OPTIONS AND STOCK APPRECIATION RIGHTS
The following two tables summarize options to acquire Common Stock granted
during 1999 to the executive officers named in the Summary Compensation Table
above, the potential realizable value of such options and the value of the
unexercised options held by such persons at December 31, 1999. No options were
exercised by such persons during 1999.
ISP COMMON STOCK OPTION GRANTS IN 1999(6)
<TABLE>
<CAPTION>
% OF TOTAL POTENTIAL REALIZABLE VALUE AT
NUMBER OF OPTIONS ASSUMED
SECURITIES GRANTED TO EXERCISE/ MARKET ANNUAL RATES OF STOCK PRICE
UNDERLYING EMPLOYEES BASE PRICE APPRECIATION FOR OPTION TERM
OPTIONS IN FISCAL PRICE ON DATE EXPIRATION -----------------------------------
NAME GRANTED(1) 1999 ($/SHARE) OF GRANT DATE 0% 5% 10%
- ------------------------ ---------- ---------- ---------- -------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Samuel J. Heyman ....... -- -- -- -- -- -- -- --
Sunil Kumar ............ 100,000(2) 2.9% $ 4.781 $ 9.563 06/22/05 $478,200 $1,005,435 $1,776,805
500,000(3) 14.4% $ 9.563 $ 9.563 06/22/08 $ -- $2,636,176 $6,493,027
Richard A. Weinberg .... 50,000(2) 1.4% $ 4.875 $ 9.750 02/10/05 $243,750 $ 512,523 $ 905,749
45,140(4) 1.3% $ 10.188 $ 10.188 06/30/08 $ -- $ 253,548 $ 624,502
Andrew G. Mueller ...... 35,000(4) 1.0% $ 10.188 $ 10.188 06/30/08 $ -- $ 196,593 $ 484,217
Randall R. Lay ......... 32,500(4) 0.9% $ 10.188 $ 10.188 06/30/08 $ -- $ 182,550 $ 449,630
Susan B. Yoss .......... 29,500(4) 0.9% $ 10.188 $ 10.188 06/30/08 $ -- $ 165,699 $ 408,126
3,075(2) 0.1% $ 4.594 $ 9.188 12/31/05 $ 14,127 $ 29,703 $ 52,493
Carl R. Eckardt ........ 59,720(5) 1.7% $ 10.188 $ 10.188 06/30/08 $ -- $ 335,443(5) $ 826,213(5)
</TABLE>
- ------------------
(1) All stock options represent options to purchase shares of Common Stock and
were granted under the 1991 Incentive Plan. The 1991 Incentive Plan provides
that the vesting of options will be accelerated automatically if at any time
following a "Change of Control" (as defined), the Company terminates without
cause the optionee's employment, 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 fully vest 2 1/2 years from the date of grant, and, to the
extent vested, are exercisable for six years from the date of grant.
(3) 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. See "Proposal
No. 2--Adoption of the International Specialty Products 2000 Long-Term
Incentive Plan--New Plan Benefits Under the 2000 LTI Plan."
(4) These options vest over a three-year period at the rate of 33 1/3% 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.
(5) These options would have vested over a three-year period at the rate of
33 1/3% per year on each anniversary of the date of grant. Upon
Mr. Eckardt's retirement from the Company in November 1999, all of these
options were cancelled in accordance with their terms.
(6) Excluded are stock appreciation rights ("SARs") relating to 13,089 shares
and 4,363 shares of the common stock of an affiliate of the Company issued
to Mr. Weinberg and Ms. Yoss, respectively, as of December 31, 1999. These
SARs represent the right to receive a cash payment based upon the
appreciation in value of the specified number of shares of such affiliate's
common stock over the determined initial Book Value (as defined) per share
of such affiliate's common stock. The 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. The SARs
held by Mr. Weinberg and Ms. Yoss have potential realizable values of
$175,580 and $58,527, respectively, at a 5% assumed annual rate of Book
Value appreciation and $444,954 and $148,318, respectively, at a 10%
assumed annual rate of Book Value appreciation. Such potential realizable
values are calculated on the basis of a ten-year period from the date of
grant.
10
<PAGE>
VALUE OF ISP COMMON STOCK OPTIONS AT DECEMBER 31, 1999
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY ISP OPTIONS
ISP OPTIONS AT 12/31/99 AT 12/31/99(1)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---------------------------------------------------------------- ------------------------- -------------------------
<S> <C> <C>
Samuel J. Heyman................................................ 209,200/30,000 $262,560/$ 65,640
Sunil Kumar(2).................................................. 0/600,000 $ 0/$440,700
Richard A. Weinberg(2) ......................................... 143,404/367,202 $ 0/$215,650
Andrew G. Mueller............................................... 0/110,000 $ 0/$ 0
Randall R. Lay(2) .............................................. 74,996/118,359 $ 5,599/$ 1,824
Susan B. Yoss(2) ............................................... 0/69,350 $ 0/$ 17,330
Carl R. Eckardt................................................. 178,120/0 $129,032/$ 0
</TABLE>
- ------------------
(1) Options for 150,000, 100,000, 50,000, 10,520, 78,520, and 8,200 shares of
Common Stock were in-the-money for Messrs. Heyman, Kumar, Weinberg, Lay,
Eckardt and Ms. Yoss, respectively, at December 31, 1999 and none of the
options held by Mr. Mueller were in-the-money at December 31, 1999.
(2) Excluded are SARs held by Messrs. Kumar, Weinberg, Lay and Ms. Yoss,
relating to the common stock of an affiliate of the Company, as
follows: Mr. Kumar--12,526 exercisable SARs, 5,165 of which were
in-the-money and had a value of $37,649, and 5,284 unexercisable SARs,
3,444 of which were in-the-money and had a value of $25,100 as of
December 31, 1999; Mr. Weinberg--7,392 exercisable SARs, all of which
were in-the-money and had a value of $41,532, and 18,017 unexercisable
SARs, 4,928 of which were in-the-money and had a value of $27,689 as of
December 31, 1999; Mr. Lay--2,227 exercisable SARs, all of which were
in-the-money and had a value of $3,883, and 1,484 unexercisable SARs,
all of which were in-the-money and had a value of $2,589 as of December 31,
1999; and Ms. Yoss--4,363 SARs, none of which were exercisable or
in-the-money as of December 31, 1999.
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 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.
11
<PAGE>
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 fourteen 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.
Mr. Eckardt, who retired from the Company in November 1999, received $7,713 in
benefits under the Retirement Plan and $9,703 in supplemental retirement
benefits in 1999. These payments are reflected in the "All Other Compensation"
column of the Summary Compensation Table.
OTHER AGREEMENTS
In connection with his becoming President and Chief Executive Officer of
ISP, on September 29, 1999, the Company granted to Mr. Kumar the right to
purchase, and on such date Mr. Kumar purchased, 318,599 shares of Common Stock
for a purchase price of $9.563 per share, or an aggregate of $3,046,762. Under
the purchase agreement, the Company loaned to Mr. Kumar the funds to purchase
the shares, which loan is evidenced by a recourse promissory note ("Note") of
Mr. Kumar in the foregoing principal amount. The Note bears interest at a rate
of six percent (6%) per annum. The principal amount of the Note is payable in
four installments on each June 11 of the years 2001, 2002 and 2003 and on
January 11, 2004, the first three of which are in the amount of $761,691 each
and the last of which is for the balance of the then outstanding principal
amount. If Mr. Kumar remains continuously employed by the Company or any of its
subsidiaries through each installment payment date, the principal amount due on
such installment payment date will be forgiven, so that if Mr. Kumar remains
continuously employed by the Company or any of the subsidiaries through
January 11, 2004, the loan and the Note will be discharged and cancelled in
full, provided that all interest due on the Note has been paid. In addition, if
a "Change of Control" (as defined) occurs, and at any time following such Change
of Control, the Company (or its successor) terminates without "cause" (as
defined) Mr. Kumar's employment, or Mr. Kumar's employment is terminated as a
result of his death or permanent disability, or Mr. Kumar terminates his
employment for "good reason" (as defined), the principal amount of the loan then
outstanding shall be immediately forgiven. If Mr. Kumar's employment with the
Company is otherwise terminated for any reason whatsoever, the entire principal
balance outstanding, together with all interest accrued thereon, will be
immediately due and payable at the Company's election.
Upon his retirement from the Company, Mr. Eckardt entered into a consulting
agreement with the Company pursuant to which Mr. Eckardt agreed to provide
the Company with consulting services for a term of two years, expiring on
November 19, 2001, unless earlier terminated or extended by mutual written
agreement of the parties. In accordance with the consulting agreement,
Mr. Eckardt will receive from the Company $1,900 for each day on which he
provides consulting services to the Company during the term of the agreement.
12
<PAGE>
For information with respect to certain other arrangements relating to
certain executive officers, see also Notes (3) and (5) 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 1999.
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 January 1, 1995 through the end of
1999. The graph assumes that the value of the investment in Common Stock and in
each index was $100 on December 31, 1994 and that all dividends were reinvested.
STOCK PRICE PERFORMANCE
TOTAL RETURN ON $100 INVESTMENT
(DIVIDENDS REINVESTED)
[CHART]
<TABLE>
<CAPTION>
Dec 94 Dec 95 Dec 96 Dec 97 Dec 98 Dec 99
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
International Specialty Products Inc. 100 153 172 210 190 129
S&P 500 Index 100 138 169 226 290 351
S&P Specialty Chemicals Index 100 131 135 167 142 157
</TABLE>
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 2000, 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 $6.1 million for 1999. 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, 2000, the term
of the Management Agreement was extended through the end of 2000, and the
management fees payable under the agreement were increased. In addition, the
Management Agreement was amended to reflect the Company's obligation to pay to
G-I Holdings Inc. annual lease payments in the amount of $57,300 for the use of
one of the Company's sales offices. Total payments in connection with this lease
for the year 2000 are expected to be $473,081, which includes the annual rent
and arrearages in the amount of $419,381. 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 1999 under the Management Agreement, the
aggregate amount payable to the Company under the Management Agreement for 2000,
net of the lease payments to G-I Holdings Inc., 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 under a requirements contract, 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. Effective
January 1, 1999, this contract was amended to cover, among other things,
purchases of colored roofing granules by BMCA's subsidiaries. This contract is
subject to annual renewal unless terminated by either party to the agreement. In
1999, BMCA and its subsidiaries purchased
14
<PAGE>
a total of $57.3 million of mineral products from the Company, representing 7.3%
of the Company's total net sales and 65.7% 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."
In April 2000, the Company made a loan to Mr. Weinberg in the principal
amount of $143,635 to enable such executive officer to satisfy certain
withholding tax obligations in connection with the award by the Company to him
of 65,000 shares of unrestricted Common Stock. The loan bears interest at an
annual rate of 6.45% and is due and payable in full, together with accrued
interest thereon, on April 15, 2001.
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 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 ISP group of companies, and certain Heyman family enterprises, are effected
at the same price as the investments of such other entities.
15
<PAGE>
PROPOSAL 2
ADOPTION OF THE INTERNATIONAL SPECIALTY PRODUCTS
2000 LONG-TERM INCENTIVE PLAN
BACKGROUND
The Board of Directors is proposing for stockholder approval the
International Specialty Products 2000 Long-Term Incentive Plan (the "2000 LTI
Plan"). The 2000 LTI Plan is intended to provide benefits which will attract and
retain highly qualified persons as officers and employees of the Company and its
subsidiaries, by providing a long-term incentive system that supports the
Company's business strategy and emphasizes pay for performance by tying reward
opportunities to corporate goals.
The following description of the 2000 LTI Plan is qualified in its entirety
by reference to the full text of the 2000 LTI Plan, which is attached to this
proxy statement as Annex A. In the event that this description and the 2000 LTI
Plan are in conflict, the text of the 2000 LTI Plan will control in all cases.
In 1991, the Company adopted the 1991 Incentive Plan for the purposes of
retaining and attracting key employees. As of March 30, 2000, options to
purchase 7,134,801 shares of Common Stock had been granted under the 1991
Incentive Plan (a portion of which is subject to stockholder approval of the
proposed amendment to the 1991 Incentive Plan), and 1,865,199 shares of Common
Stock for which options may be granted were available. See "Proposal
3--Amendment to the 1991 Incentive Plan."
The Board of Directors, in consultation with management, reviewed the
Company's executive compensation policy and the 199l Incentive Plan. After a
thorough process involving competitive analyses and deliberations, the Board of
Directors has determined to adopt an incentive plan based on the Company's book
value, rather than market value, that will, in the opinion of the Board of
Directors, better reflect and measure the value of the Company and the
contributions of the Company's employees, as well as provide a meaningful
incentive to employees and greater flexibility to the Company in attracting and
retaining highly qualified executives.
The Compensation Committee adopted, subject to stockholder approval, the
2000 LTI Plan on February 28, 2000 (the "Effective Date").
PLAN SUMMARY
Administration
The 2000 LTI Plan will be administered by a committee of at least two
"outside" directors designated by the Board of Directors, which committee is
currently the Compensation Committee. The Compensation Committee's powers and
responsibilities in respect of the 2000 LTI Plan will include the following:
(i) establishing rules and regulations for the proper administration of the 2000
LTI Plan, (ii) determining the eligibility of any individual to participate in
the 2000 LTI Plan, (iii) computing the amount of benefits payable to any
employee or beneficiary in accordance with the provisions of the 2000 LTI Plan,
and (iv) authorizing the payment of benefits from the 2000 LTI Plan.
Employees Who May Participate
Every employee of the Company or any of its subsidiaries is eligible to
participate in the 2000 LTI Plan. However, the employees entitled to receive
grants of Incentive Units (as defined below) or exchange options for Incentive
Units shall be determined by the Compensation Committee in its sole discretion.
As of March 30, 2000, the Company had approximately 2,650 employees.
Description of Incentive Units
The number of incentive units ("Incentive Units") granted to each employee
will be determined by the Compensation Committee in its sole discretion. The
number of Incentive Units to be received by each employee in exchange for stock
options, and the number of stock options that can be exchanged for Incentive
Units, will also be determined by the Compensation Committee in its sole
discretion. The maximum number of Incentive
16
<PAGE>
Units which may be received by any employee under the 2000 LTI Plan in any
calendar year is 500,000, subject to adjustment in the case of reorganization,
recapitalization, stock split, stock dividend, combination of shares or
otherwise. No Incentive Units will be granted under the 2000 LTI Plan more than
five years after the Effective Date.
The initial value (the "Initial Value") of Incentive Units to be granted
under the 2000 LTI Plan will be equal to the value of such Incentive Units as of
the Valuation Date (as defined) on which the grant occurs, except that the
initial value of Incentive Units exchanged for stock options will be equal to
the value of such Incentive Units determined as of a Valuation Date selected by
the Compensation Committee in its sole discretion. The value of an Incentive
Unit is the sum of the Company's total stockholders' equity (adjusted to exclude
accumulated comprehensive income and losses), divided by the total number of
outstanding shares of Common Stock. A "Valuation Date" is the last business day
of each fiscal quarter of the Company.
In the event of a change in the Company's outstanding Common Stock by
reason of any reorganization, recapitalization, stock split, stock dividend,
combination of shares or otherwise, there will be substituted for, added to or
subtracted from each Incentive Unit then outstanding under the 2000 LTI Plan the
number of additional or partial Incentive Units that, in the sole discretion of
the Compensation Committee, accurately reflect the effect of such
reorganization, recapitalization, stock split, stock dividend, share combination
or other such event, and the Initial Value of each Incentive Unit shall also be
adjusted by the Compensation Committee if it determines in its sole discretion
that such adjustment is appropriate.
Incentive Units Available
The Compensation Committee has authorized 5,000,000 Incentive Units for
issuance to participants.
Exchange of Options
The 1991 Incentive Plan is scheduled to expire on June 28, 2000. The
Compensation Committee may, in its sole discretion, permit any one or more
employees to exchange options they hold under the 1991 Incentive Plan for
Incentive Units under the 2000 LTI Plan.
Upon adoption of the 2000 LTI Plan by the Compensation Committee on
February 28, 2000, the Compensation Committee determined to offer to all
employees of the Company and its subsidiaries who hold options under the 1991
Incentive Plan the opportunity to exchange, on a grant-by-grant basis, any or
all of their outstanding options, vested or unvested, for Incentive Units,
subject to stockholder approval of the 2000 LTI Plan. As of March 31, 2000, the
expiration date for the exchange, employees of the Company and its subsidiaries
had exchanged options to purchase 2,033,194 shares of Common Stock for 1,508,211
Incentive Units, subject to stockholder approval of the 2000 LTI Plan. The
Initial Value of each Incentive Unit to be received in exchange for such stock
options is equal to $8.63, the value of such Incentive Unit as of September 30,
1999.
Vesting and Duration
Incentive Units will vest cumulatively, in twenty percent (20%) increments,
on each anniversary of the date such Incentive Units were granted to the
employee or received in exchange for stock options. Vesting will end upon the
termination of an employee's employment with the Company or any subsidiary for
any reason. Incentive Units may be exercised for six years from the date of
grant, subject to the provisions regarding "Termination of Employment" described
below.
In the event of a "Change in Control" of the Company (as defined in the
2000 LTI Plan), all Incentive Units granted by the Compensation Committee under
the 2000 LTI Plan will become fully and immediately vested and payable in cash.
Exercise of Incentive Units, Exercise Price
Upon exercise of an Incentive Unit, the employee will receive from a
subsidiary of the Company in cash the excess, if any, of the value of such
Incentive Unit as of the Valuation Date on or, in the event of an exercise
between Valuation Dates, immediately preceding the exercise date (the "Final
Value"), over the Initial Value of such Incentive Unit (subject to all
appropriate withholdings). The value of a partial Incentive Unit will be
17
<PAGE>
determined by the same method, but pro rated to reflect the percentage of a
whole Incentive Unit reflected by such partial Incentive Unit.
If an employee received any Incentive Units in exchange for stock options,
a special provision of the 2000 LTI Plan governs the cash amount to be received
by such employee in the event of a Change in Control of the Company within one
year of such exchange of stock options. In such event, the amount to be received
(subject to all appropriate withholdings) will be equal to the greater of (i)
the amount determined by subtracting the Initial Value from the Final Value of
each Incentive Unit pursuant to the procedures described in the immediately
preceding paragraph, or (ii) the difference between the market price of the
Common Stock at the time of the Change in Control and the exercise price of the
stock options exchanged by the employee for Incentive Units, multiplied by the
number of shares of Common Stock underlying such stock options.
Termination of Employment, Transferability
Upon termination of an employee's employment with the Company or any
subsidiary for Good Cause (as defined in the 2000 LTI Plan), the Incentive Units
granted to such employee will be immediately forfeited and unexercisable. If an
employee's employment is terminated due to his or her death, long-term
disability or retirement, the vested Incentive Units granted to such employee
will be exercisable for one year, unless, prior to the end of one year, the
sixth anniversary of the grant of such Incentive Units occurs. If an employee's
employment is terminated for any other reason, the employee will have 90 days to
exercise his or her vested Incentive Units, unless, prior to the end of such 90
days, the sixth anniversary of the grant of such Incentive Units occurs.
An employee may not sell, assign, redeem, pledge, transfer or otherwise
encumber an accrued but unpaid Incentive Unit, except by will or the laws of
descent and distribution.
Costs
The costs and expenses of administering the 2000 LTI Plan will be borne by
the Company and will not be charged against any award or to any employee
receiving an Incentive Unit.
Amendment
The Compensation Committee may amend the 2000 LTI Plan from time to time or
suspend or terminate the 2000 LTI Plan at any time. No amendment of the 2000 LTI
Plan may be made without approval of the stockholders of the Company if the
amendment will (i) increase the maximum number of Incentive Units that may be
granted to an individual participant under the 2000 LTI Plan during any
particular calendar year, (ii) modify the requirements as to eligibility for
participation in the 2000 LTI Plan or (iii) change the vesting provisions of the
2000 LTI Plan.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The discussion below of the principal U.S. federal income tax consequences
of Incentive Units under the 2000 LTI Plan is based on federal income tax law
and authorities as of the date of this proxy statement, which are subject to
change at any time (possibly with retroactive effect). The law is technical and
complex, and the discussion below represents only a general summary of some of
the applicable provisions of federal income tax law.
Incentive Units. An employee who receives an Incentive Unit will not
recognize any taxable income upon the grant of such Incentive Unit. However, the
employee generally will recognize ordinary income upon the receipt of cash
pursuant to the exercise of an Incentive Unit. The ordinary income recognized
with respect to the receipt of cash upon exercise of an Incentive Unit will be
subject to both wage withholding and other employment taxes.
Dividend Equivalents. Holders of Incentive Units who are credited with
additional Incentive Units under the 2000 LTI Plan to account for dividends paid
on the Common Stock will be taxed with respect to such additional Incentive
Units in the manner described in the preceding paragraph (i.e., no income
recognition on date of receipt of additional Incentive Units, but rather
ordinary income recognition on the date of exercise).
18
<PAGE>
Company Tax Treatment. A federal income tax deduction generally will be
allowed to the Company in an amount equal to the ordinary income included by the
individual with respect to his or her Incentive Units, provided that such amount
constitutes an ordinary and necessary business expense to the Company, is
reasonable, and the limitations of Sections 280G and 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code") (discussed below) do not apply.
Change in Control. In general, if the total amount of payments to an
individual that are contingent upon a "change in control" of the Company (as
defined in Section 280G of the Code), including payments under the 2000 LTI Plan
that vest upon a "change in control," equals or exceeds three times the
individual's "base amount" (generally such individual's average annual
compensation for the five calendar years preceding the change in control), then,
subject to certain exceptions, the payments may be treated as "parachute
payments" under the Code, in which case a portion of such payments would be
non-deductible to the Company and the individual would be subject to a 20%
excise tax on such portion of the payments.
Certain Limitations on Deductibility of Executive Compensation. With
certain exceptions, Section 162(m) of the Code denies a deduction to publicly
held corporations for compensation paid to certain executive officers in excess
of $1 million per executive per taxable year (taking into account any deduction
with respect to the exercise of an Incentive Unit). One such exception applies
to certain performance-based compensation, provided that such compensation has
been approved by stockholders in a separate vote and certain other requirements
are met. If the 2000 LTI Plan is approved by its stockholders, the Company
believes that Incentive Units granted under the 2000 LTI Plan (other than
Incentive Units granted to participants in exchange for options) should qualify
for the performance-based compensation exception to Section 162(m) of the Code.
NEW PLAN BENEFITS UNDER THE 2000 LTI PLAN
The following table sets forth the amount of Incentive Units that have been
granted, or exchanged for stock options, as of the date of this proxy statement,
to the extent such amounts are determinable, to the persons and groups referred
to below, subject to stockholder approval at the meeting.
<TABLE>
<CAPTION>
NAME AND POSITION NUMBER OF INCENTIVE UNITS(1)
- -------------------------------------------------------------------------------------- ----------------------------
<S> <C>
Samuel J. Heyman ..................................................................... 0(2)
Chairman of the Board
Sunil Kumar .......................................................................... 488,818(3)
President and Chief Executive Officer
Andrew G. Mueller .................................................................... 41,642(4)
Executive Vice President, Operations
Richard A. Weinberg .................................................................. 0(2)
Executive Vice President, General Counsel and Secretary
Randall R. Lay ....................................................................... 30,434(5)
Executive Vice President and Chief Financial Officer
Susan B. Yoss ........................................................................ 0(2)
Senior Vice President and Treasurer
Carl R. Eckardt, ..................................................................... 0(2)
Former Executive Vice President, Corporate Development
Executive Group ...................................................................... 575,234(6)
Non-Executive Director Group ......................................................... 0(2)
Non-Executive Employee Group ......................................................... 1,055,866(7)
</TABLE>
- ------------------
(1) Issuance of Incentive Units is subject to approval of the 2000 LTI Plan by
stockholders.
(2) Messrs. Heyman, Weinberg and Ms. Yoss have elected not to exchange any stock
options for Incentive Units. With respect to Mr. Eckardt, Non-Executive
Directors are not eligible to participate in the 2000 LTI Plan.
(3) Represents Incentive Units issued in exchange of an option to purchase
500,000 shares of Common Stock. See "Proposal 3--Amendment to the 1991
Incentive Plan."
(4) Represents Incentive Units issued in exchange of options to purchase 60,000
shares of Common Stock.
19
<PAGE>
(5) Represents Incentive Units issued in exchange of options to purchase 128,165
shares of Common Stock.
(6) Represents Incentive Units issued in exchange of options to purchase an
aggregate of 728,715 shares of Common Stock held by members of the Executive
Group.
(7) Includes 932,977 Incentive Units issued in exchange for options to purchase
an aggregate of 1,304,479 shares of Common Stock and grants of an aggregate
of 122,889 Incentive Units.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE INTERNATIONAL
SPECIALTY PRODUCTS 2000 LONG-TERM INCENTIVE PLAN.
20
<PAGE>
PROPOSAL 3
AMENDMENT TO THE 1991 INCENTIVE PLAN
BACKGROUND
The Board of Directors has viewed stock options as an important component
of its long-term compensation philosophy, giving employees incentives based upon
the appreciation in value of the Common Stock as well as providing a vehicle to
attract and retain highly qualified employees. Stock options issued under the
1991 Incentive Plan have served the interests of the Company and its
stockholders by aligning compensation with stockholder objectives and by
encouraging and rewarding performance.
The 1991 Incentive Plan currently provides that the maximum number of
shares of Common Stock for which options may be granted is 9,000,000. In June
1999, the Board of Directors unanimously approved amending the 1991 Incentive
Plan, subject to stockholder approval, to increase by 4,000,000 the maximum
number of shares of Common Stock for which options may be granted under the 1991
Incentive Plan to an aggregate of 13,000,000 shares. The Board of Directors also
unanimously approved amending the 1991 Incentive Plan, subject to stockholder
approval, to increase the limit on the number of shares of Common Stock for
which options may be granted to any eligible person during any calendar year
from 200,000 to 600,000 shares. These amendments have permitted the Company
greater flexibility in attracting and retaining highly qualified employees. The
closing price of the Common Stock on the New York Stock Exchange on April 10,
2000 was $6.1875.
The following is a summary of the principal provisions of the 1991
Incentive Plan as it exists without giving effect to the proposed amendments.
PLAN SUMMARY
The 1991 Incentive Plan provides for (a) the granting of options to
purchase shares of Common Stock to key employees of ISP and its subsidiaries and
to non-employee directors of ISP and (b) the sale of Common Stock to key
employees of ISP and its subsidiaries. The 1991 Incentive Plan was adopted by
the Board of Directors and approved by the sole stockholder of ISP on June 28,
1991, before the initial public offering of the Common Stock. Under the 1991
Incentive Plan, options may be granted from time to time until June 28, 2000,
the expiration date of the 1991 Incentive Plan.
Approximately 2,300 persons are eligible to participate in the 1991
Incentive Plan. The 1991 Incentive Plan is designed to encourage stock ownership
by key employees and directors. Its objectives are to provide an increased
incentive for employees and directors, to promote the well-being of the Company
and to facilitate the efforts of the Company to secure and retain employees and
directors of outstanding ability.
Employees and Directors Who May Participate
Key employees of ISP and its subsidiaries and non-employee directors of ISP
are eligible to receive options under the 1991 Incentive Plan. The selection of
eligible employees to receive options is made by the Compensation Committee. The
Compensation Committee is advised by the Company's management, including the
Company's Chairman, as to whom options should be granted. Awards of options
generally are based upon the Compensation Committee's evaluation of an
employee's past or potential contribution to ISP or its subsidiaries, such
employee's respective grade level and the Company's stock price at the time of
grant, as well as the recommendations of the Company's management.
Grant of Options and Awards
The Compensation Committee determines the number of shares underlying
options to be granted to an employee (including directors who are also
employees), the date of the option grant, whether the option is intended to be
an incentive stock option or a non-qualified option and the other terms
governing the options. There is no stated maximum or minimum number of options
or shares which may be issued under the 1991 Incentive Plan to any one eligible
person or group of persons, except that currently the number of shares as to
which options may be granted to any eligible person during any calendar year is
limited to 200,000 shares. If the proposed amendment to the 1991 Incentive Plan
is approved, the number of shares as to which options may be granted to any
eligible person during any calendar year will be limited to 600,000 shares.
The 1991 Incentive Plan also provides for an automatic grant to each
non-employee director of 5,000 non-qualified stock options upon the commencement
of service as a non-employee director and an automatic annual
21
<PAGE>
grant of 3,000 non-qualified stock options on each anniversary of the initial
grant during the period the person serves as a director.
Currently, the maximum number of shares for which options may be granted
under the 1991 Incentive Plan is 9,000,000. If the proposed amendment to the
1991 Incentive Plan is approved, the maximum number of shares of Common Stock
for which approved options may be granted under the 1991 Incentive Plan will be
13,000,000 shares. As of March 30, 2000, options to purchase 7,134,801 shares of
Common Stock have been granted, a portion of which was granted in June 1999
subject to stockholder approval of the proposed amendment. The 1991 Incentive
Plan also authorizes the sale of up to 1,000,000 shares subject to prescribed
restrictions as to disposition or without such restrictions. No options or
awards will be granted under the 1991 Incentive Plan after June 28, 2000, the
expiration date of the 1991 Incentive Plan.
Exercise of Options, Exercise Price and Duration
The exercise price of non-qualified options granted under the 1991
Incentive Plan is determined by the Compensation Committee in its discretion at
the time of grant, provided that the exercise price must be at least equal to
50% of the fair market value of the underlying shares on the date of grant. The
exercise price of incentive stock options must be at least equal to the fair
market value of the underlying shares on the date of grant; provided that if an
incentive stock option is granted to a participant (an "Over-Ten-Percent
Shareholder") who owns stock possessing more than 10% of the voting rights of
the Company's outstanding capital stock on the date of grant, the exercise price
of the option must be at least equal to 110% of the fair market value on the
date of the grant. The exercise price may be paid either in cash or, subject to
certain limitations, by surrender of shares of the Common Stock owned by the
optionee and valued at their then fair market value, or a combination thereof.
The term of each option granted to an employee and the vesting period
thereof is determined by the Compensation Committee in its discretion, except
that incentive stock options granted to an Over-Ten-Percent Shareholder may not
be exercised more than five years after the date of grant. There is no maximum
number of options that may be exercised in any one year.
The term of each option granted to non-employee directors is nine years.
Initial grants vest as to one-third of the shares subject thereto on each of the
first through third anniversaries of the date of grant. Subsequent grants become
exercisable in full on the first anniversary of the date of grant.
The vesting of options will be accelerated automatically if at any time
following a "Change in Control" (as defined in the 1991 Incentive Plan), the
optionee's employment with the Company is terminated without cause by the
Company, the optionee's employment is terminated as a result of death or
permanent disability or such optionee terminated his employment for "Good
Reason" (as defined in the 1991 Incentive Plan).
Termination of Employment, Transferability
On termination of employment for any reason except death or disability, an
optionee may, at any time before the earlier to occur of the expiration of 90
days after the date of termination or the expiration date of an option, exercise
any option or portion thereof which was vested on the date of termination. If an
optionee's employment or service as a non-employee director is terminated as a
result of his death or disability, the optionee or the persons to whom the
option is transferred by will or the laws of descent and distribution may, at
any time within one year after the date of death or disability but not later
than the expiration date of the option, exercise the option to the extent the
optionee was entitled to do so on the date of death or disability. Subject to
the foregoing, non-employee directors have the right to exercise vested options
not later than the earlier to occur of the expiration date of the option or the
expiration of 60 days following the date service as a director ceases.
The 1991 Incentive Plan permits option agreements to contain limited stock
appreciation rights ("Limited Rights"). Under the Limited Rights, should a
tender or exchange offer for the Common Stock be made by a bidder other than the
Company, the optionee would be entitled to surrender any option or portion
thereof (regardless of the extent to which the option was then exercisable) and
to receive cash or Common Stock (or a combination thereof), as determined by the
Compensation Committee, equal to the difference between the aggregate fair
market value of the shares subject to options on the date of surrender (as
determined in accordance with the Limited Rights) and the aggregate exercise
price.
Nothing in the 1991 Incentive Plan or any option agreement executed in
accordance therewith confers on any employee any right to continue in the employ
of the Company (or any of its subsidiaries) or affects the right of the Company
(or any subsidiary) to terminate such employee's employment at any time.
22
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The discussion below is based on federal income tax law and authorities as
of the date of this proxy statement, which are subject to change at any time
(possibly with retroactive effect). The law is technical and complex and the
discussion represents only a general summary of some of the applicable
provisions of federal income tax law.
Incentive Stock Options. Incentive stock options ("ISOs") granted under
the 1991 Incentive Plan are intended to meet the definitional requirements of
Section 422(b) of the Code for "incentive stock options." An employee who
receives an ISO does not recognize any taxable income upon the grant of such
ISO. Similarly, the exercise of an ISO generally does not give rise to federal
income tax to the employee, provided that (i) the federal "alternative minimum
tax," which depends on the employee's particular tax situation, does not apply
and (ii) the employee is employed by the Company from the date of grant of the
option until three months prior to the exercise thereof, except where such
employment terminates by reason of disability (where the three-month period is
extended to one year) or death (where this requirement does not apply). If an
employee exercises an ISO after these requisite periods, the ISO will be treated
as an NSO (as defined below) and will be subject to the rules set forth below
under the caption "Non-Qualified Options."
Further, if after exercising an ISO, an employee disposes of the Common
Stock so acquired more than two years from the date of grant and more than one
year from the date of transfer of the Common Stock pursuant to the exercise of
such ISO (the "applicable holding period"), the employee will normally recognize
a capital gain or loss equal to the difference, if any, between the amount
received for the shares and the exercise price. If, however, an employee does
not hold the shares so acquired for the applicable holding period, thereby
making a "disqualifying disposition," the employee would realize ordinary income
on the excess of the fair market value of the shares at the time the ISO was
exercised over the exercise price and the balance, if any, would be long-term
capital gain (provided the holding period for the shares exceeded 12 months and
the employee held such shares as a capital asset at such time).
The Company is not allowed a federal income tax deduction upon the grant or
exercise of an ISO or the disposition, after the applicable holding period, of
the Common Stock acquired upon exercise of an ISO. In the event of a
disqualifying disposition, however, the Company generally will be entitled to a
deduction in an amount equal to the ordinary income included by the employee,
provided that such amount constitutes an ordinary and necessary business expense
to the Company and is reasonable and the limitations of Sections 280G and 162(m)
of the Code (described below) do not apply.
Non-Qualified Options. Non-qualified stock options ("NSOs") granted under
the 1991 Incentive Plan are options that do not qualify as ISOs. An employee who
receives an NSO does not recognize any taxable income upon the grant of such
NSO. However, the employee generally will recognize ordinary income upon
exercise of an NSO in an amount equal to the excess of (i) the fair market value
of the shares of Common Stock at the time of exercise over (ii) the exercise
price.
The ordinary income recognized with respect to the receipt of shares upon
exercise of an NSO will be subject to both wage withholding and employment
taxes. In addition to the customary methods of satisfying the withholding tax
liabilities that arise upon the exercise of an NSO, upon the election of the
employee the Company may satisfy the liability in whole or in part by
withholding shares of Common Stock from those that otherwise would be issuable
to the individual or by the employee tendering other shares owned by him or her,
valued at their fair market value as of the date that the tax withholding
obligation arises.
A federal income tax deduction generally will be allowed to the Company in
an amount equal to the ordinary income included by the individual with respect
to his or her NSO, provided that such amount constitutes an ordinary and
necessary business expense to the Company and is reasonable and the limitations
of Section 280G and 162(m) of the Code (described below) do not apply.
If an individual exercises an NSO by delivering shares of Common Stock to
the Company, other than shares previously acquired pursuant to the exercise of
an ISO which is treated as a "disqualifying disposition" as described above, the
individual will not recognize gain or loss with respect to the exchange of such
shares, even if their then fair market value is different from the individual's
tax basis. The individual, however, will be taxed as described above with
respect to the exercise of the NSO as if he or she paid the exercise price in
cash, and the Company likewise generally will be entitled to an equivalent tax
deduction.
Change in Control. As described above, upon a "Change in Control" (as
defined in the 1991 Incentive Plan), if certain subsequent events occur, all the
then outstanding stock options will immediately become
23
<PAGE>
exercisable. In general, if the total amount of payments to an individual that
are contingent upon a "change of control" of the Company (as defined in
Section 280G of the Code), including payments under the 1991 Incentive Plan that
vest upon a "change in control," equals or exceeds three times the individual's
"base amount" (generally, such individual's average annual compensation for the
five complete years preceding the change in control), then, subject to certain
exceptions, the payments may be treated as "parachute payments" under the Code,
in which case a portion of such payments would be non-deductible to the Company
and the individual would be subject to a 20% excise tax on such portion of the
payments.
ERISA. The 1991 Incentive Plan is not subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended.
Certain Limitations on Deductibility of Executive Compensation. With
certain exceptions, Section 162(m) of the Code denies a deduction to publicly
held corporations for compensation paid to certain executive officers in excess
of $1 million per executive per taxable year (taking into account any deduction
with respect to the exercise of a stock option). One such exception applies to
certain performance-based compensation, provided that such compensation has been
approved by its stockholders in a separate vote and certain other requirements
are met. If approved by its stockholders, the Company believes that stock
options granted under the 1991 Incentive Plan generally should qualify for the
performance-based compensation exception to Section 162(m) of the Code. The
Compensation Committee's present intention is to structure compensation to be
tax-deductible; provided, however, that it retains the right to authorize
compensation that does not qualify for income tax deductibility.
Certain options granted in June 1999 under the 1991 Incentive Plan are
subject to stockholder approval of the proposed amendment. The following table
sets forth the options that have been granted to the persons and groups referred
to below under the 1991 Incentive Plan in 1999, subject to stockholder approval
of the proposed amendment to the 1991 Incentive Plan:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
NAME AND POSITION UNDERLYING OPTIONS(1)
- -------------------------------------------------------------------------------------------- ---------------------
<S> <C>
Samuel J. Heyman ........................................................................... (2)
Chairman of the Board
Sunil Kumar ................................................................................ 500,000(3)
President and Chief Executive Officer
Richard A. Weinberg ........................................................................ 45,140
Executive Vice President, General Counsel and Secretary
Andrew G. Mueller .......................................................................... 35,000
Executive Vice President, Operations
Randall R. Lay ............................................................................. 32,500
Executive Vice President and Chief Financial Officer
Susan B. Yoss .............................................................................. 29,500
Senior Vice President and Treasurer
Carl R. Eckardt ............................................................................ (4)
Former Executive Vice President, Corporate Development
Executive Group ............................................................................ 671,140(4)
Non-Employee Directors ..................................................................... (2)
Non-Executive Employee Group ............................................................... 2,234,330
</TABLE>
- ------------------
(1) The dollar value of the options is not readily ascertainable. See
"Compensation of Executive Officers of the Company--Options and Stock
Appreciation Rights" for potential realizable value at certain assumed rates
of return.
(2) The proposed amendment to the 1991 Incentive Plan does not affect the
options held by this person or group.
(3) Subject to stockholder approval of both the proposed amendment to the 1991
Incentive Plan and the proposed 2000 LTI Plan, Mr. Kumar has elected to
exchange these options for 488,818 Incentive Units. See "Proposal
No. 2--Adoption of the International Specialty Products 2000 Long-Term
Incentive Plan."
(4) Excludes options to purchase 59,720 shares of Common Stock granted to
Mr. Eckardt in June 1999 that were cancelled in accordance with their terms
upon Mr. Eckardt's retirement from the Company in November 1999.
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If the proposed amendment is approved, the options described above will
become effective, and, until June 28, 2000, key employees, including the
executive officers named in the Summary Compensation Table, will be eligible to
receive, at the discretion of the Compensation Committee, future grants of
options as the Compensation Committee in its discretion may determine. See
"Proposal No. 2--Adoption of the International Specialty Products 2000 Long-Term
Incentive Plan."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ADOPTION OF THE PROPOSED
AMENDMENT TO THE 1991 INCENTIVE PLAN
INDEPENDENT PUBLIC ACCOUNTANTS
No accounting firm has been selected to date to audit the accounts of the
Company for 2000. 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 1999.
A representative of Arthur Andersen is expected to be present at the meeting to
answer appropriate questions that may be asked by stockholders and will have an
opportunity to make a statement.
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Proposals of security holders intended for possible action at the 2001
Annual Meeting of Stockholders must be received by the Company at its principal
executive offices prior to December 21, 2000. 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 2001 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 6, 2001, 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 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 persons named in the accompanying proxy 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, 1999 as filed with the Securities and Exchange Commission, please
contact: Stockholder Relations Department, International Specialty Products,
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 19, 2000
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<PAGE>
ANNEX A
INTERNATIONAL SPECIALTY PRODUCTS
2000 LONG-TERM INCENTIVE PLAN
INTRODUCTION
International Specialty Products Inc., a Delaware corporation (hereinafter
referred to as the "Corporation"), hereby establishes an incentive compensation
plan to be known as the "INTERNATIONAL SPECIALTY PRODUCTS 2000 LONG-TERM
INCENTIVE PLAN" (hereinafter referred to as the "Plan"), as set forth in this
document. The Plan permits the grant of Incentive Units (as hereafter defined)
to eligible employees of the Corporation and the Subsidiaries (as hereafter
defined). The Plan provides for a long-term incentive system that supports the
Corporation's business strategy and emphasizes pay-for-performance by tying
reward opportunities to corporate goals.
The Plan shall become effective on February 28, 2000 (the "Effective
Date"), the date on which the Plan was adopted by the Committee (as hereafter
defined), provided that the Plan is approved by the stockholders of the
Corporation at an annual meeting, any special meeting or by written consent of
the stockholders of the Corporation within 12 months of the Effective Date, and
such approval of the stockholders shall be a condition to the right of each
participant to receive any Incentive Units hereunder. Any Incentive Units
granted under the Plan prior to such approval of the stockholders shall be
effective as of the date of grant, but no such Incentive Unit may be exercised
and no restrictions relating to any Incentive Unit may lapse prior to such
stockholder approval, and if the stockholders fail to approve the Plan as
specified hereunder, any such Incentive Unit shall be cancelled. This Plan shall
terminate five (5) years after Effective Date (unless sooner terminated by the
Committee).
I DEFINITIONS
For purposes of this Plan, the following terms shall be defined as follows
unless the context clearly indicates otherwise:
(a) "Board of Directors" or "Board" shall mean the Board of Directors
of the Corporation.
(b) "Change in Control of the Corporation" shall be deemed to have
occurred if the Heyman Group ceases to have, in the aggregate, directly or
indirectly, at least 20% of the voting power of the Corporation. The
"Heyman Group" shall mean (i) Samuel J. Heyman, his heirs, administrators,
executors and entities of which a majority of the voting stock is owned by
Samuel J. Heyman, his heirs, administrators or executors and (ii) any
entity controlled, directly or indirectly, by Samuel J. Heyman or his
heirs, administrators or executors.
(c) "Code" shall have the meaning set forth in Section II(a) hereof.
(d) "Corporation" shall have the meaning set forth in the
Introduction.
(e) "Committee" shall have the meaning set forth in Section
II(a) hereof.
(f) "Effective Date" shall have the meaning set forth in the
Introduction.
(g) "Employee" shall mean a common-law employee of the Corporation or
of any Subsidiary.
(h) "Exercise Date" shall have the meaning set forth in Section
IV(f) hereof.
(i) "Final Value" shall have the meaning set forth in Section
IV(g) hereof.
(j) "Good Cause" shall, with respect to any Employee, mean (i) the
Employee's willful or gross misconduct or willful or gross negligence in
the performance of his duties for the Corporation or for any Subsidiary,
(ii) the Employee's intentional or habitual neglect of his duties for the
Corporation or for any Subsidiary, (iii) the Employee's theft or
misappropriation of funds of the Corporation or of any Subsidiary, fraud,
criminal misconduct, breach of fiduciary duty or dishonesty in the
performance of his duties on behalf of the Corporation or any Subsidiary or
commission of a felony, or crime of moral turpitude or any other conduct
reflecting adversely upon the Corporation or any Subsidiary or (iv) the
Employee's violation of any covenant not to compete or not to disclose
confidential information with respect to the Corporation or any Subsidiary.
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(k) "Incentive Unit" shall mean a bookkeeping item equal in value, as
of any Valuation Date, to (i) the Corporation's total stockholders' equity
(adjusted to exclude accumulated comprehensive income and losses) divided
by (ii) the total number of outstanding shares of the Corporation's common
stock, all determined as of such Valuation Date. The value of each
Incentive Unit as of a Valuation Date, the determination of accumulated
comprehensive income and losses as of a Valuation Date and the number of
outstanding shares of the Corporation's common stock as of a Valuation Date
shall each be determined by the Committee in its sole discretion.
(l) "Initial Value" shall have the meaning set forth in Section
IV(a) hereof.
(m) "Options" shall mean options granted to any Employee under the
Corporation's 1991 Incentive Plan for Key Employees and Directors, as
amended.
(n) "Plan" shall have the meaning set forth in the Introduction.
(o) "Retirement" shall mean an Employee's termination of employment
after (i) he attains age fifty-five (55) and (ii) the sum of his age and
the number of his years of service with the Corporation and/or any
Subsidiary equals sixty (60) or more.
(p) "Subsidiary" shall mean a corporation or other entity of which
more than fifty percent (50%) of the aggregate of its outstanding voting
securities are owned directly or indirectly by the Corporation.
(q) "Valuation Date" shall mean the last day of business of each
fiscal quarter of the Corporation.
II ADMINISTRATION
(a) Administration; Term of Office; Appointment of Chairperson. The
Plan shall be administered by a committee (the "Committee") appointed by
the Board from among its members and shall be comprised, unless otherwise
determined by the Board, of not less than two members each of whom shall be
an "outside director" within the meaning of Treasury Regulation Section
1.162-27(e)(3) under Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"). Each member of the Committee shall hold office
until the date that he or she resigns from the Committee or is removed from
membership on the Committee by action of the Board. In the event an
individual for any reason ceases to be a member of the Committee, the Board
shall appoint another qualified individual to serve on the Committee. The
members of the Committee shall choose from among themselves one such member
to serve as chairperson of the Committee.
(b) Place of Meeting. Meetings of the Committee shall be held at the
principal office of the Corporation or at such other place as the
chairperson of the Committee may from time to time determine or as shall be
designated in the respective notices or waivers of notice thereof.
(c) Regular Meetings. Regular meetings of the Committee shall be at
such time as the Committee may fix. If any day fixed for a regular meeting
shall be a legal holiday at the place where the meeting is to be held, then
the meeting which would otherwise be held on that day shall be held at the
same hour on the next succeeding business day.
(d) Special Meetings. Special meetings of the Committee may be called
by the chairperson of the Committee or by a majority of the members of the
entire Committee.
(e) Notice of Meetings. Notice of each meeting of the Committee shall
be given by the chairperson of the Committee as hereinafter provided in
this Section 2(e) in which notice shall be stated the time and place of the
meeting. Except as otherwise required by this Plan, such notice need not
state the purposes of such meeting. Notice of each such meeting shall be
mailed, postage prepaid, to each member of the Committee, addressed to him
at his residence or usual place of business, by first-class mail, at least
two days before the day on which such meeting is to be held, or shall be
sent addressed to him at such place by telecopy, or be delivered to him
personally or by telephone or E-Mail, at least twenty-four (24) hours
before the time at which such meeting is to be held. Notice of any such
meeting need not be given to any member of the Committee who shall, either
before or after the meeting, submit a signed waiver of notice or who shall
attend such meeting without protesting, prior to or at its commencement,
the lack of notice to him.
(f) Quorum and Manner of Acting. Except as hereinafter provided, a
majority of the members of the entire Committee shall constitute a quorum
for the transaction of business and the vote of a majority of the
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Committee members present at the time of the vote shall be the act of the
Committee. In the absence of a quorum at any meeting of the Committee, a
majority of the Committee members present thereat may adjourn such meeting
to another time and place. Notice of the time and place of any such
adjourned meeting shall be given to the Committee members who were not
present at the time of the adjournment and, unless such time and place were
announced at the meeting at which the adjournment was taken, to the other
Committee members. At any adjourned meeting at which a quorum is present,
any business may be transacted which might have been transacted at the
meeting as originally called. The Committee members shall act only as a
Committee and the individual Committee members shall have no power as such.
In the event any Committee member is disqualified from acting on a specific
matter pursuant to Section 2(k) hereof, such individual shall not be taken
into account in determining whether a quorum of the Committee exists for
taking action with respect to such matter.
(g) Action Without a Meeting. Any action required or permitted to be
taken by the Committee at a meeting may be taken without a meeting if all
members of the Committee consent in writing to the adoption of a resolution
authorizing such action. The resolution and written consents thereto by the
members of the Committee shall be filed with the minutes of the proceedings
of the Committee.
(h) Telephonic Participation. Any one or more members of the
Committee may participate in a meeting of the Committee by means of a
conference telephone or similar communications equipment allowing all
persons participating in the meeting to hear each other at the same time.
Participation by such means shall constitute presence in person at the
meeting.
(i) Organization. At each meeting of the Committee, the chairperson
of the Committee, or in his absence or inability to act, another Committee
member chosen by a majority of the Committee members present, shall act as
chairperson of the meeting and preside thereat. Any person (who need not be
a member of the Committee) appointed by the chairperson of the Committee
shall act as secretary of the meeting and keep the minutes thereof.
(j) Compensation. Members of the Committee shall be compensated for
service as a Committee member as determined by the Board of Directors.
(k) Disqualification. Each member of the Committee shall be
disqualified from acting as such with respect to all matters that concern
such person individually.
(l) Responsibilities of the Committee. The Committee has all
responsibilities for controlling and administering the Plan as set forth
hereunder. Specifically, the Committee will have certain specific powers,
responsibilities, and duties, including, but not limited to, the following:
(i) to establish and enforce certain rules, regulations, and
procedures as it deems necessary or proper for the efficient
administration of the Plan;
(ii) to interpret the Plan, with its interpretations made in good
faith to be final and conclusive, and to decide all questions concerning
the Plan;
(iii) to determine the eligibility of any individual to participate
in the Plan, and to require any person to furnish any information as it
may request to properly administer the Plan as a condition to that
person receiving any benefit under the Plan;
(iv) to compute the amount of benefits that are payable to any
Employee or beneficiary in accordance with the provisions of the Plan,
and to determine the person or persons to whom those benefits will be
paid; and
(v) to authorize the payment of benefits from the Plan.
III ELIGIBILITY TO PARTICIPATE
Each individual who is an Employee of the Corporation, or of any
Subsidiary, shall be initially eligible to participate in the Plan.
Notwithstanding the above, the identity of the Employees who will be entitled to
receive grants of Incentive Units under this Plan or exchange Options for
Incentive Units shall be determined by the Committee in its sole discretion. No
individual shall automatically be entitled to receive a grant of Incentive Units
or exchange Options for Incentive Units solely because he is classified as an
Employee.
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IV INCENTIVE UNITS
(a) Grant of Incentive Units. The Committee may, in its sole
discretion, grant Incentive Units to any one or more Employees. The number
of Incentive Units granted to each Employee shall be determined by the
Committee in its sole discretion. Subject to adjustment as provided in
Section IV(d) below, the maximum number of Incentive Units which may be
granted to any individual participant under the Plan (including Incentive
Units granted to a participant in exchange for Options) during any
particular calendar year shall not exceed 500,000. Incentive Units may only
be granted on a Valuation Date. Subject to adjustment as provided in
Section IV(d) below, the "Initial Value" of any Incentive Unit granted
under this Plan shall be equal to the value of such Incentive Unit
determined (under Section I(k) hereof) as of the Valuation Date on which
such Incentive Unit is granted.
(b) Exchange of Options for Incentive Units. The Committee may, in
its sole discretion, permit any one or more Employees to exchange Options
for Incentive Units on a Valuation Date. The number of Incentive Units to
be received by each Employee in exchange for Options, and the number of
Options that can be exchanged for Incentive Units, shall be determined by
the Committee in its sole discretion. Notwithstanding anything in this Plan
to the contrary, the "Initial Value" of any Incentive Unit received in
exchange for Options shall be equal to the value of such Incentive Units
determined (under Section I(k) hereof) as of a Valuation Date selected by
the Committee in its sole discretion.
(c) Dividend Equivalents. Each Employee who has been granted one or
more Incentive Units under this Plan or has exchanged Options for Incentive
Units shall be credited with additional whole or partial Incentive Units as
of any date that dividends are declared on the Corporation's common stock.
As of each such date, the number of whole and/or partial Incentive Units
credited under this Section IV(c) shall be determined by multiplying the
number of Incentive Units otherwise held by the Employee by a fraction, the
numerator being the amount of the dividend payable on one share of the
Corporation's common stock and the denominator being the value of an
Incentive Unit as calculated pursuant to Section I(k) hereof as of the date
the dividend is declared.
(d) Recapitalization, Etc. In the event there is any change in the
outstanding common stock of the Corporation by reason of any
reorganization, recapitalization, stock split, stock dividend, combination
of shares or otherwise, there shall be substituted for, added to or
subtracted from each Incentive Unit then outstanding under the Plan the
number of additional or partial Incentive Units that, in the sole
discretion of the Committee, shall accurately reflect the effect of such
reorganization, recapitalization, stock split, stock dividend, share
combination or other such event, and the Initial Value of each Incentive
Unit shall also be adjusted by the Committee if it determines in its sole
discretion that such adjustment is appropriate.
(e) Vesting in Incentive Units. The Incentive Units granted to an
Employee or received by an Employee in exchange for Options (including any
additional whole or partial Incentive Units credited to the Employee as a
result of the payment of a dividend on the Corporation's common stock or a
recapitalization) shall vest cumulatively, in twenty percent (20%)
increments, on each anniversary of the date such Incentive Units were
granted to the Employee or received in exchange for Options and such
vesting shall end upon the termination of an Employee's employment with the
Corporation or any subsidiary for any reason whatsoever. However, (i) such
Incentive Units will become fully and immediately vested and payable in
cash (pursuant to the terms of Section IV(g) hereof) in the event of a
Change in Control of the Corporation and (ii) such Incentive Units, to the
extent not then exercised, shall become immediately forfeited and totally
unexercisable upon the termination of an Employee's employment with the
Corporation or any Subsidiary for Good Cause.
(f) Exercise of Incentive Units. Subject to the following, an
Employee may exercise his vested Incentive Units at such times as are
determined by the Committee in its sole discretion (an "Exercise Date").
Notwithstanding the preceding sentence, and subject to the forfeiture rules
set forth in Section IV(e) hereof, no Incentive Unit may be exercised after
the earlier of (i) the sixth (6th) anniversary of the date the Incentive
Unit is granted or (ii) the later of (A) one year after the Employee's
termination of employment with the Corporation or any Subsidiary due to his
(1) death, (2) long-term disability or (3) Retirement or (B) ninety
(90) days after the Employee's termination of employment for any other
reason. Any and all of an Employee's Incentive Units that are not timely
exercised shall become null and void and totally unexercisable. An Employee
shall exercise his vested Incentive Units by completing a Notice of
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Exercise Form in the form of Exhibit A hereto, and delivering such form to
the Corporation in accordance with the notice provisions set forth herein.
(g) Value of Incentive Unit Upon Exercise; Guarantee. Upon the
exercise of an Incentive Unit, the Employee shall receive from ISP
Management Company, Inc. in cash the excess, if any, of the "Final Value"
of such Incentive Unit (which Final Value shall equal the value of the
Incentive Unit determined under Section I(k) hereof as of the Valuation
Date on or, in the event of an exercise between Valuation Dates,
immediately preceding the Exercise Date) over the Initial Value of such
Incentive Unit. The value of a partial Incentive Unit shall be determined
under the immediately preceding sentence, but pro rated to reflect the
percentage of a whole Incentive Unit reflected by such partial Incentive
Unit. The payment obligations of ISP Management Company, Inc. hereunder are
fully and unconditionally guaranteed by its parent company, ISP Opco
Holdings Inc.
(h) Special Rule for Incentive Units Received in Exchange for Stock
Options. If any Employee receives, pursuant to Section IV(b) hereof, any
Incentive Units in exchange for Options, in the event of a Change in
Control of the Corporation within one year of such exchange, the cash
amount received by such Employee (subject to all appropriate withholdings)
shall be equal to the greater of (i) the amount determined under Section
IV(g) hereof or (ii) the "Traded In Stock Option Gain" which will equal the
difference between the stock price at the time of the Change in Control of
the Corporation and the grant price of the Options traded in, multiplied by
the number of shares of the Corporation's common stock covered by the
Options traded in by the Employee.
V MISCELLANEOUS PROVISIONS
(a) Assignment or Transfer. No right to any accrued but unpaid
Incentive Unit shall be sold, assigned, redeemed, pledged, transferred or
otherwise encumbered by an Employee except by will or the laws of descent
and distribution.
(b) Withholding Taxes. The Corporation or the appropriate Subsidiary
shall have the right to deduct from all cash payments hereunder any
federal, state, local or foreign income and employment taxes required by
law to be withheld with respect to such payments.
(c) Costs and Expenses. The costs and expenses of administering the
Plan shall be borne by the Corporation and shall not be charged against any
award nor to any Employee receiving an Incentive Unit.
(d) Funding of Plan. The Plan shall be unfunded. The Corporation
shall not be required to segregate any of its assets to assure the payment
of any Incentive Unit under the Plan. Neither the Employees nor any other
persons shall have any interest in any fund or in any specific asset or
assets of the Corporation or any other entity by reason of any accrued but
unpaid Incentive Unit. The interests of each Employee hereunder are
unsecured and shall be subject to the general creditors of the Corporation
and the applicable Subsidiaries.
(e) Other Incentive Plans. The adoption of the Plan does not preclude
the adoption by appropriate means of any other incentive plan for Employees
of the Corporation or any Subsidiary.
(f) Plurals and Gender. Where appearing in this Plan, masculine
gender shall include the feminine and neuter genders, and the singular
shall include the plural, and vice versa, unless the context clearly
indicates a different meaning.
(g) Headings. The headings and sub-headings in this Plan are inserted
for the convenience of reference only and are to be ignored in any
construction of the provisions hereof.
(h) Severability. In case any provision of this Plan shall be held
illegal or void, such illegality or invalidity shall not affect the
remaining provisions of this Plan, but shall be fully severable, and the
Plan shall be construed and enforced as if said illegal or invalid
provisions had never been inserted herein.
(i) Liability and Indemnification. (i) Neither the Corporation nor
any Subsidiary shall be responsible in any way for any action or omission
of the Committee, or any other fiduciaries in the performance of their
duties and obligations as set forth in this Plan. Furthermore, neither the
Corporation nor any Subsidiary shall be responsible for any act or omission
of any of their agents, or with respect to reliance upon advice of their
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counsel, provided that the Corporation and/or the appropriate Subsidiary
relied in good faith upon the action of such agent or the advice of such
counsel.
(ii) Neither the Corporation, any Subsidiary, the Committee, nor
any agents, employees, officers, directors or stockholders of any of
them, nor any other person shall have any liability or responsibility
with respect to this Plan, except as expressly provided herein.
(j) Incapacity. If the Committee shall receive evidence satisfactory
to it that a person entitled to receive payment of, or exercise, any
Incentive Unit is, at the time when such benefit becomes payable, a minor,
or is physically or mentally incompetent to receive such Incentive Unit and
to give a valid release thereof, and that another person or an institution
is then maintaining or has custody of such person and that no guardian,
committee or other representative of the estate of such person shall have
been duly appointed, the Committee may make payment of such Incentive Unit
otherwise payable to such person to such other person or institution,
including a custodian under a Uniform Gifts to Minors Act, or corresponding
legislation (who shall be an adult, a guardian of the minor or a trust
company), and the release by such other person or institution shall be a
valid and complete discharge for the payment or exercise of such Incentive
Unit.
(k) Cooperation of Parties. All parties to this Plan and any person
claiming any interest hereunder agree to perform any and all acts and
execute any and all documents and papers which are necessary or desirable
for carrying out this Plan or any of its provisions.
(l) Governing Law. All questions pertaining to the validity,
construction and administration of the Plan shall be determined in
accordance with the laws of the State of New Jersey, without giving effect
to conflict of law principles.
(m) Nonguarantee of Employment. Nothing contained in this Plan shall
be construed as a contract of employment between the Corporation or any
Subsidiary and any Employee, as a right of any Employee to be continued in
the employment of the Corporation or any Subsidiary, or as a limitation on
the right of the Corporation or any Subsidiary to discharge any of its
Employees, at any time, with or without cause.
(n) Notices. Each notice relating to this Plan shall be in writing
and delivered in person, by recognized overnight courier or by certified
mail to the proper address. Except as otherwise provided in any Incentive
Unit award agreement with respect to the exercise thereunder, all notices
to the Corporation or the Committee shall be addressed to it at 1361 Alps
Road, Wayne, New Jersey 07470, Attn: Senior Vice President Human Resources.
All notices to Employees, former Employees, beneficiaries or other persons
acting for or on behalf of such persons shall be addressed to such person
at the last address for such person maintained in the Corporation's
records.
VI AMENDMENT OR TERMINATION OF PLAN
The Committee may amend the Plan from time to time or suspend or terminate
the Plan at any time. No amendment of the Plan may be made without approval of
the stockholders of the Corporation if the amendment will (i) increase the
maximum number of Incentive Units that may be granted to an individual
participant under the Plan during any particular calendar year as set forth in
Section IV(a) hereof; (ii) modify the requirements as to eligibility for
participation in the Plan; or (iii) change the vesting provisions provided
hereunder. In the event the Plan is terminated for any reason, the vesting,
exercise, and expiration provisions, as described in this Plan, for all
Incentive Units granted up to and including the date of the termination of the
Plan, will remain in effect.
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EXHIBIT A
INTERNATIONAL SPECIALTY PRODUCTS
NOTICE OF EXERCISE FORM
LONG-TERM INCENTIVE UNITS
Human Resources Department
International Specialty Products
1361 Alps Road
Wayne, New Jersey 07470
Attention: Compensation
Dear Sir/Madam:
Pursuant to the provisions of the International Specialty Products 2000
Long-Term Incentive Plan (the "Plan"), pursuant to which you have granted to me
Incentive Units, I hereby notify you that I elect to exercise the Incentive
Units indicated on this Notice of Exercise Form. I understand that the terms of
this exercise, and the amount of cash (subject to income tax and all other
applicable withholding) I will receive pursuant to such exercise, shall be
determined under the terms of the Plan.
1. Name (Please Print)
--------------------------------------------
Social Security # (US Only)
--------------------------------------------
Work Location
--------------------------------------------
Company Telephone Number
--------------------------------------------
Home Address
--------------------------------------------
--------------------------------------------
--------------------------------------------
Home Telephone Number
--------------------------------------------
2. I would like to exercise the following Incentive Units:
DATE OF INCENTIVE INCENTIVE UNIT VALUE AT
UNIT GRANT # OF INCENTIVE UNITS TIME OF GRANT
- -------------------------------------------------------------------------------
| | | |
- -------------------------------------------------------------------------------
| | | |
- -------------------------------------------------------------------------------
| | | |
- -------------------------------------------------------------------------------
| | | |
- -------------------------------------------------------------------------------
____________________________________
Signature and Date
* Please call Human Resources, Compensation, at 973-628-3578, if you need to
verify the number of exercisable Incentive Units.
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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 15, 2000
Weil, Gotshal & Manges LLP, 767 Fifth Avenue, 25th Floor,
New York, New York
The undersigned hereby appoints Richard A. Weinberg and Randall R. Lay,
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 15, 2000, 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 and FOR
Items 2 and 3.
Change of Address
______________________________ INTERNATIONAL SPECIALTY PRODUCTS INC.
______________________________ P.O. BOX 11028
______________________________ NEW YORK, N.Y. 10203-0028
(continued on reverse side)
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3.
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, Samuel J.
Heyman, Sanford Kaplan, Sunil Kumar, 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. ADOPTION OF THE INTERNATIONAL SPECIALTY PRODUCTS 2000 LONG-TERM INCENTIVE
PLAN
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. APPROVAL OF AMENDMENT TO THE 1991 INCENTIVE PLAN FOR KEY EMPLOYEES AND
DIRECTORS
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. 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 ________________________________, 2000
____________________________________________
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
