<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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-11(c) or Section 240.14a-12
</TABLE>
BRUSH WELLMAN INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(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)(4) 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.
[ ] 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> 2
BRUSH WELLMAN INC.
17876 St. Clair Avenue
Cleveland, Ohio 44110
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The annual meeting of shareholders of Brush Wellman Inc. will be held at
The Forum, One Cleveland Center, 1375 East Ninth Street, Cleveland, Ohio on
Tuesday, May 5, 1998 at 11:00 A.M. (Eastern Daylight Time), for the following
purposes:
(1) To elect three directors, each to serve for a term of three years and
until a successor shall have been elected and qualified.
(2) Approve an amendment to the Brush Wellman Inc. 1995 Stock Incentive
Plan.
(3) Approve adoption of the Brush Wellman Inc. 1997 Incentive Plan for
Non-Employee Directors.
(4) To ratify and approve the selection of Ernst & Young LLP as independent
auditors of the Company for the year 1998.
(5) The transaction of such other business as may properly come before such
meeting.
The Board of Directors has fixed the close of business on March 9, 1998 as
the record date for the determination of shareholders entitled to notice of, and
to vote at, the meeting or any adjournment thereof.
MICHAEL C. HASYCHAK
Secretary
March 16, 1998
IMPORTANT -- YOUR PROXY IS ENCLOSED
PLEASE SIGN, DATE AND RETURN YOUR ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE.
<PAGE> 3
BRUSH WELLMAN INC.
17876 St. Clair Avenue
Cleveland, Ohio 44110
PROXY STATEMENT
MARCH 16, 1998
This statement is furnished in connection with the solicitation by the
Board of Directors of Brush Wellman Inc. (the "Company") of proxies to be used
at the annual meeting of shareholders of the Company to be held on May 5, 1998.
This statement and the related form of proxy are being sent to shareholders on
or about the date of this statement.
If the enclosed form of proxy is properly executed and returned, the shares
represented by it will be voted at the meeting. The proxy may be revoked at any
time prior to its exercise by giving notice to the Company in writing or in open
meeting.
As of March 9, 1998, the record date for the meeting, the Company had
outstanding and entitled to vote 16,523,822 shares of Common Stock.
Each outstanding share of Common Stock is entitled to one vote on each
matter brought before the meeting. Under Ohio law, shareholders have cumulative
voting rights in the election of directors, provided not less than 48 hours
notice in writing is given by any shareholder to the President, any Vice
President or the Secretary of the Company that he desires that voting at such
election be cumulative, and an announcement of the giving of such notice is made
upon the convening of the meeting. When cumulative voting applies, each share
has a number of votes equal to the number of directors to be elected, and a
shareholder may give all of his votes to one nominee or divide his votes among
as many nominees as he sees fit. Unless contrary instructions are received on
proxies given to the Company, in the event that cumulative voting applies, all
votes represented by such proxies will be divided evenly among the candidates
nominated by the Board of Directors, except that if voting in such manner would
not be effective to elect all such nominees, such votes will be cumulated in the
discretion of the Company so as to maximize the number of such nominees elected.
At the annual meeting, the results of shareholder voting will be tabulated
by the inspector of elections appointed for the annual meeting. Under Ohio law
and the Company's Articles of Incorporation and Regulations, properly executed
proxies that are marked "abstain" or are held in "street name" by brokers and
not voted on one or more of the items (if otherwise voted on at least one item)
will be counted for purposes of determining whether a quorum has been achieved
at the annual meeting. Votes withheld in respect of Item 1 will not be counted
in determining the election of directors. Abstentions and broker non-votes in
respect of Items 2, 3 and 4 will not be considered as votes cast for purposes of
determining whether those matters are approved.
In addition to the solicitation of proxies by the use of the mails,
officers and other employees of the Company may solicit the return of proxies by
personal interview, telephone and telecopy. Brokerage houses, banks and other
custodians, nominees and fiduciaries will be requested to forward soliciting
material to the beneficial owners of shares and will be reimbursed for their
expenses. The costs of the solicitation of proxies will be borne by the Company.
<PAGE> 4
1. ELECTION OF DIRECTORS
At the present time it is intended that proxies will be voted for the
election of Joseph P. Keithley, William R. Robertson and John Sherwin, Jr.
If any of these nominees should become unavailable, it is intended that the
proxies will be voted as the Board of Directors shall determine. The Company has
no reason to believe that any of the nominees will be unavailable. The three
nominees receiving the greatest number of votes will be elected as directors of
the Company.
The following table sets forth information concerning the nominees and the
directors whose terms of office will continue after the meeting:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NOMINEES WHOSE TERMS END IN 2001 CURRENT EMPLOYMENT
- --------------------------------------------------------------------------------
<S> <C>
JOSEPH P. KEITHLEY Chairman, Chief Executive Officer & President,
Director since 1997 Keithley Instruments Inc. (Electronic Test &
Member -- Governance Committee and Measurement Products)
Organization and Compensation
Committee
Age -- 49
</TABLE>
Mr. Keithley was elected Chairman, Chief Executive Officer and President of
Keithley Instruments Inc. effective May 1994. He had served as Chairman of the
Board of Keithley Instruments Inc. since 1991. He is a director of Keithley
Instruments Inc.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
WILLIAM R. ROBERTSON Managing Partner, Kirtland Capital Partners (Private
Director since 1997 Equity Investments)
Member -- Audit Committee and
Organization and Compensation
Committee
Age -- 56
</TABLE>
Mr. Robertson has been a Managing Partner of Kirtland Capital Partners since
September 1997. Prior to that time, he was President of National City
Corporation from October 1995 until July 1997. He also served as Deputy Chairman
from August 1988 until October 1995. He is a director of National City
Corporation and National Processing, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
JOHN SHERWIN, JR. President, Mid-Continent Ventures, Inc. (venture
Director since 1981 capital company)
Member -- Audit Committee and
Organization and Compensation
Committee
Age -- 59
</TABLE>
Mr. Sherwin has been President of Mid-Continent Ventures, Inc. during the past
five years.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIRECTORS WHOSE TERMS END IN 2000 CURRENT EMPLOYMENT
- --------------------------------------------------------------------------------
<S> <C>
GORDON D. HARNETT Chairman of the Board, President and Chief Executive
Director since 1991 Officer of the Company
Age -- 55
</TABLE>
Mr. Harnett has been Chairman of the Board, President and Chief Executive
Officer of the Company during the past five years. He is a director of Essef
Corporation, Lubrizol Corporation, MA Hanna Company and National City Bank,
Cleveland.
- --------------------------------------------------------------------------------
2
<PAGE> 5
<TABLE>
<S> <C>
WILLIAM P. MADAR Chairman of the Board,
Director since 1988 Nordson Corporation
Member -- Audit Committee, Governance (industrial application equipment manufacturer)
Committee and Organization
and Compensation Committee
Age -- 58
</TABLE>
Mr. Madar was elected Chairman of the Board of Nordson Corporation effective
October 1997. Prior to that time, he served as Vice Chairman and Chief Executive
Officer of Nordson Corporation from August 2, 1996 and as President and Chief
Executive Officer from February 1986. He is a director of Lubrizol Corporation,
National City Bank, Cleveland and Nordson Corporation.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ROBERT M. MCINNES Business Consultant
Director since 1977
Member -- Governance Committee and
Organization and Compensation
Committee
Age -- 67
</TABLE>
Mr. McInnes was Of Counsel to the law firm of Arter & Hadden from November 1988
to November 1994. Prior to that time he was Group Executive Vice President of
Cleveland-Cliffs Inc. He also served as President and Chief Executive Officer of
Pickands Mather & Co., which became a wholly-owned subsidiary of
Cleveland-Cliffs Inc in December 1986. He is a director of Cliffs Drilling
Company.
================================================================================
<TABLE>
<CAPTION>
DIRECTORS WHOSE TERMS END IN 1999 CURRENT EMPLOYMENT
- --------------------------------------------------------------------------------
<S> <C>
ALBERT C. BERSTICKER Chairman and Chief Executive Officer, Ferro
Director since 1993 Corporation (specialty chemicals)
Member -- Governance Committee and
Organization and
Compensation Committee
Age -- 63
</TABLE>
Mr. Bersticker was elected Chairman of Ferro Corporation in February 1996. He
was elected Chief Executive Officer of Ferro Corporation in 1991. Prior to his
election as Chairman, he was its President during the past eight years. Mr.
Bersticker is a director of Ferro Corporation, KeyCorp Inc. and Oglebay Norton
Company.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
DR. CHARLES F. BRUSH, III Personal investments
Director since 1958
Member -- Audit and Organization
and Compensation Committee
Age -- 74
</TABLE>
There has been no change in Dr. Brush's occupation during the past five years.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
DAVID L. BURNER Chairman and Chief Executive Officer,
Director since 1995 The B.F.Goodrich Company
Member -- Audit Committee, (specialty chemicals and aircraft systems and
Organization and Compensation services)
Committee
Age -- 58
</TABLE>
Mr. Burner was elected Chairman of the B.F. Goodrich Company in July 1997. He
has served as Chief Executive Officer of the B.F. Goodrich Company since
December 1996 and as President since December 1995. Prior to his election as
President, he served as Executive Vice President of The B.F.Goodrich Company
from October 1993 and as Senior Vice President from April 1990. Mr. Burner is a
director of The B.F.Goodrich Company.
- --------------------------------------------------------------------------------
3
<PAGE> 6
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors maintains, among other committees, an Audit
Committee, Governance Committee (formerly the Nominating Committee) and
Organization and Compensation Committee, the members of which are identified in
the above table. During 1997, the Board of Directors eliminated the Finance
Committee and assumed its principal functions, except for the review of the
investment of pension assets and funding position of retirement pensions which
is the responsibility of the Organization and Compensation Committee.
The Audit Committee held three meetings in 1997. Its principal functions
include reviewing the engagement of independent auditors and recommending action
by the full Board of Directors with respect thereto; reviewing the scope and
results of the audit and any non-audit services performed by such auditors;
reviewing the adequacy of the Company's internal auditing, accounting and
financial controls; and reviewing with independent auditors their report and
opinion upon completion of their audit, including a review of any significant
transactions not in the ordinary course of business and compliance with Company
policies and code of conduct.
The Finance Committee held three meetings in 1997. It was eliminated as a
committee effective December 1997. Its principal functions included monitoring
and making recommendations to the Board of Directors regarding debt, capital
structure, dividend policy and shareholder relations and reviewing the
investment of pension assets and the funding position of retirement plans.
The Governance Committee held three meetings in 1997. Its principal
functions include evaluation of candidates for Board membership (including any
nominations of qualified candidates submitted in writing by security holders to
the Secretary of the Company), recommendations to the full Board of Directors of
candidates to fill executive vacancies that arise from time to time and Board of
Directors governance matters.
The Organization and Compensation Committee held two meetings in 1997. Its
principal functions include reviewing executive compensation, taking action
where appropriate or making recommendations to the full Board of Directors with
respect thereto, recommending the adoption of executive benefit plans, granting
stock options and other awards, recommending action on matters relating to
management succession and changes in organizational structure and review of the
investment of pension assets and funding position of retirement pensions.
The Board of Directors held seven meetings in 1997. All of the directors
attended at least 75% of the total meetings held by the Board of Directors and
by the Committees on which they served during 1997.
DIRECTOR COMPENSATION
Each director who is not an officer of the Company receives an annual
retainer fee of $16,500 for each calendar year. The Chairman of each Committee
(if not an officer) receives an additional $1,000 on an annual basis. In
addition, each director who is not an officer of the Company receives a fixed
meeting fee of $17,500 on an annual basis.
The Company maintains a Deferred Compensation Plan for Non-Employee
Directors, which was approved by shareholders in 1992. The Plan provides each
non-employee director the opportunity to defer receipt of all or a portion of
the compensation payable for his services as a director. The Company, in turn,
transfers an amount equal to the reduction in compensation to a trust, which
amounts are invested, at the director's discretion, in the Company's Common
Stock or in accordance with the Company's investment policy. Directors are
encouraged to take all or a portion of their compensation in the form of Common
Stock. For 1997, directors elected to receive an aggregate of $129,500 ($207,000
for 1998) worth of Common Stock on a deferred basis under this Plan.
4
<PAGE> 7
The Company has also maintained a Stock Option Plan for Non-Employee
Directors, which was approved by shareholders in 1990. The Plan authorized a
one-time grant of a non-qualified option to purchase shares of Common Stock, at
fair market value at the date of grant, to each non-employee director who had
never been an employee of the Company. Eleven directors each received a grant
between April 1990 and October 1996 for 5,000 shares of Common Stock. Pursuant
to a one-year extension of the term of the Plan by the Board of Directors during
1997, one additional director received a grant on June 3, 1997 for 5,000 shares.
Each option became exercisable six months after the date of grant and will
expire ten years after the date of grant, subject to earlier termination in the
event of termination of service on the Board or disability. No more shares are
available under this Plan, and it is proposed that the Plan be replaced with the
new 1997 Stock Incentive Plan for Non-Employee Directors. (See Proposal 3
below.) One director received a grant on December 2, 1997 of an option for 5,000
shares at an exercise price of $23.78 under the new Plan, subject to approval by
the shareholders at the 1998 annual meeting.
The Board of Directors terminated the Directors Retirement Plan effective
December 31, 1997. All of the directors except for Messrs. Harnett and Robertson
had accumulated an accrued benefit under the Plan as of that date. Each such
director has elected to credit the present value of his benefit under the Plan
to his deferred compensation account under the Deferred Compensation Plan for
Non-Employee Directors. Each such director has also elected to receive his
credited benefit in the form of shares of the Company's Common Stock upon their
termination of service with the Company.
5
<PAGE> 8
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
DIRECTORS AND MANAGEMENT
The following table sets forth information regarding ownership of the
Company's Common Stock as of February 11, 1998 by directors, each of the
executive officers named in the Summary Compensation Table, all directors and
executive officers as a group and certain other persons owning more than 5% of
the Company's Common Stock. Unless otherwise indicated, persons named below held
sole voting power and sole investment power with respect to their shares of the
Company's Common Stock.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK PERCENT OF COMMON STOCK
NON-OFFICER DIRECTORS BENEFICIALLY OWNED(1) BENEFICIALLY OWNED
--------------------- --------------------- ------------------
<S> <C> <C>
Albert C. Bersticker............ 7,681(2)(3) *
Dr. Charles F. Brush, III....... 328,800(2)(3)(4) 1.9%
David L. Burner................. 9,021(2)(3) *
Joseph P. Keithley.............. 6,000(2) *
William P. Madar................ 19,482(2)(3) *
Robert M. McInnes............... 11,165(2)(3) *
William R. Robertson............ 5,864(3)(5) *
John Sherwin, Jr................ 23,129(2)(6) *
EXECUTIVE OFFICERS
- ------------------
Gordon D. Harnett............... 333,285(2) 2.0%
Carl Cramer..................... 37,274(2) *
Stephen Freeman................. 61,938(2) *
Craig B. Harlan................. 70,393(2) *
Alfonso T. Lubrano.............. 7,811 *
All directors and executive
officers as a group (19
persons)...................... 1,131,119(7) 6.6%
OTHER PERSONS
- -------------
Trimark Financial Corporation
One First Canadian Place
Suite 5600, P.O. Box 487
Toronto, Ontario, Canada...... 1,574,000(8) 9.2%
Brush Wellman Inc. Savings and
Investment Plan............... 1,133,123(9) 6.6%
Pioneering Management Company
60 State Street,
Boston, Massachusetts......... 920,000(10) 5.4%
</TABLE>
- ---------
* Less than 1% of Common Stock.
================================================================================
(1) Reported in accordance with the beneficial ownership rules of the
Securities and Exchange Commission (the "Commission"), under which a person
is deemed to be the beneficial owner of a security, for these purposes, if
he has or shares voting power or investment power in respect of such
security or has the right to acquire such security within 60 days. The
shares shown in the table include shares credited to the account of each
executive officer under the Company's Savings and Investment Plan. The
shares shown in the table do not purport to represent beneficial ownership
for any purpose other than compliance with the Commission's reporting
requirements.
6
<PAGE> 9
(2) Includes shares covered by outstanding options exercisable within 60 days,
as follows: Mr. Harnett, 285,000; Mr. Cramer, 23,000; Mr. Harlan, 58,000;
Mr. Freeman, 49,000; and 5,000 for each of Messrs. Bersticker, Brush,
Burner, Keithley, Madar, McInnes, and Sherwin. Also includes Performance
Restricted Shares granted in 1996 and 1998 pursuant to the 1995 Stock
Incentive Plan, which are subject to forfeiture if the performance goals
are not met, as follows: Mr. Harnett 31,245; Mr. Cramer, 11,809; Mr. Harlan
10,370; Mr. Freeman 9,978; and Mr. Lubrano, 5,044.
(3) Includes shares deferred under the Deferred Compensation Plan for
Non-Employee Directors, as follows: Mr. Bersticker, 2,181; Mr. Brush, 364;
Mr. Burner, 4,021; Mr. Madar, 13,282; Mr. McInnes, 2,065; and Mr.
Robertson, 364.
(4) Includes 40,000 shares owned by the Charles F. Brush III Charitable
Remainder Unitrust of which Dr. Brush is trustee and 3,000 shares owned by
Dr. Brush's wife, as to all of which Dr. Brush disclaims ownership.
(5) Includes 500 shares owned by Mr. Robertson's wife of which Mr. Robertson
disclaims ownership.
(6) Includes 10,334 shares owned by Mr. Sherwin's wife and children of which
Mr. Sherwin disclaims ownership.
(7) Includes 611,600 shares subject to outstanding options held by officers and
directors and exercisable within 60 days.
(8) Information regarding share ownership was obtained from Amendment No. 4 to
Schedule 13G filed with the Commission on February 11, 1998.
(9) The Northern Trust Company, Chicago, Illinois, trustee for the Brush
Wellman Inc. Savings and Investment Plan holds the shares in trust. All
participants share voting power with the trustee of the Plan with respect
to shares credited to their account.
(10) Information regarding share ownership was obtained from Schedule 13G filed
with the Commission on January 5, 1998.
7
<PAGE> 10
EXECUTIVE OFFICER COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth total annual compensation earned during the
Company's last three fiscal years by the Chief Executive Officer and by the four
most highly compensated executive officers other than the Chief Executive
Officer.
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION(1) COMPENSATION
----------------------------- ---------------------
AWARDS PAYOUTS
---------- -------
SECURITIES ALL OTHER
NAME AND UNDERLYING LTIP COMPEN-
PRINCIPAL OPTIONS PAYOUTS SATION
POSITION YEAR SALARY($) BONUS($) (#) ($)(2) ($)(3)
--------- ---- --------- -------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Gordon D. Harnett 1997 398,879(4) 160,846(4) 40,000 -- 18,001(4)
Chairman of the 1996 366,222(4) 201,171(4) -- 170,145 16,305(4)
Board, President and 1995 360,000(4) 191,412(4) 30,000 -- 18,828(4)
Chief Executive Officer
Carl Cramer 1997 213,916(5) 61,316 9,000 -- 8,773(5)
Vice President Finance 1996 200,850(5) 78,507 -- 66,167 8,285(5)
and Chief Financial 1995 200,004 75,667 9,000 -- --
Officer
Craig B. Harlan 1997 187,863(6) 53,250 7,500 -- 8,138(6)
Vice President 1996 176,376(6) 83,413 -- 54,919 7,232(6)
International 1995 169,750(6) 64,694 7,500 0 7,856(6)
Stephen Freeman 1997 176,438(7) 50,054 9,000 -- 7,602(7)
Vice President- 1996 162,726(7) 76,958 -- 53,595 6,721(7)
Alloy Products 1995 162,000(7) 61,289 9,000 -- 7,310(7)
Alfonso T. Lubrano 1997 139,338(8) 85,368 6,000 -- 6,024(8)
President-Technical 1996 125,440(8) 72,611 0 46,146 5,101(8)
Materials, Inc. 1995 124,750(8) 43,470 5,000 -- 5,405(8)
</TABLE>
- ---------------
(1) No compensation was paid to any of the named executive officers that
requires disclosure as "Other Annual Compensation."
(2) Reflects Performance Restricted Shares awarded in 1995, which were earned by
the named Executive Officers for the performance period 1995 through 1996,
valued at the Company's Common stock price at February 4, 1997 plus
accumulated dividends earned on those shares. No Performance Restricted
Shares or Performance Shares were granted in 1997.
(3) Except as disclosed in (4), (5), (6), (7) and (8), amounts consist of
Company matching contributions to the Brush Wellman Inc. Savings and
Investment Plan.
(4) Salary for 1997, 1996 and 1995 includes deferred compensation of $19,385,
$18,202 and $18,900, respectively. Bonus for 1997, 1996 and 1995 includes
deferred compensation of $3,868, $7,018 and $6,255, respectively. All Other
Compensation for 1997, 1996 and 1995 includes deferred compensation in
respect of Company matching credits under the Brush Wellman Inc.
Supplemental Retirement Benefit Plan of $13,201, $12,228 and $13,905,
respectively.
(5) Salary for 1997 and 1996 includes deferred compensation of $13,242 and
$12,652, respectively. All Other Compensation for 1997 and 1996 includes
deferred compensation in respect of Company matching credits under the Brush
Wellman Inc. Supplemental Retirement Benefit Plan of $3,973 and $7,575,
respectively.
(6) Salary for 1997, 1996 and 1995 includes deferred compensation of $6,677,
$5,464 and $6,713, respectively. All Other Compensation for 1997, 1996 and
1995 includes deferred compensation in respect of Company matching credits
under the Brush Wellman Inc. Supplemental Retirement Benefit Plan of $3,338,
$2,732 and $3,356, respectively.
(7) Salary for 1997, 1996 and 1995 includes deferred compensation of $9,340,
$7,401 and $9,365, respectively. All Other Compensation for 1997, 1996 and
1995 includes deferred compensation in respect of Company matching credits
under the Brush Wellman Inc. Supplemental Retirement Benefit Plan of $2,802,
$2,221 and $2,810, respectively.
(8) Salary for 1997, 1996 and 1995 includes deferred compensation of $4,081,
$2,002 and $2,414, respectively. All Other Compensation for 1997, 1996 and
1995 includes deferred compensation in respect of Company matching credits
under the Brush Wellman Inc. Supplemental Retirement Benefit Plan of $1,224,
$601 and $905, respectively.
8
<PAGE> 11
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information concerning unexercised stock
options held by the executive officers included in the Summary Compensation
Table and the value of such officers' unexercised options at December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING
UNEXERCISED OPTIONS VALUE OF UNEXERCISED
SHARES AT DECEMBER 31, IN-THE-MONEY OPTIONS
ACQUIRED VALUE 1997(#) AT DECEMBER 31,
ON EXERCISE REALIZED EXERCISABLE/ 1997($) EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
---- ----------- -------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Gordon D. Harnett -0- -0- 285,000/ $2,430,100/
-0- -0- -0- $ -0-
Carl Cramer -0- -0- 23,000/ $ 165,215/
-0- -0- -0- $ -0-
Craig B. Harlan 20,500(1) $131,520 68,000/ $ 418,538/
-0- -0- -0- $ -0-
Stephen Freeman -0- -0- 49,000/ $ 422,015/
-0- -0- -0- $ -0-
Alfonso T. Lubrano 10,000 $ 69,832 7,500/ $ 52,908/
-0- -0- 800 $ 7,000
</TABLE>
- ---------------
(1) Includes unexercised options for 8,000 shares repurchased by the Company to
save administrative costs.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants during 1997 to
the executive officers included in the Summary Compensation Table. There was one
grant of options to the named executive officers during the year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------
% OF TOTAL
OPTIONS POTENTIAL REALIZABLE VALUE AT
(#) OF GRANTED ASSUMED ANNUAL RATES OF STOCK
SECURITIES TO EXERCISE PRICE APPRECIATION
UNDERLYING EMPLOYEES OR BASE FOR OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION --------------------------------
NAME GRANTED YEAR ($/SH) DATE 0%($) 5%($) 10%($)
---- ---------- ---------- -------- ---------- ------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Gordon D. Harnett 40,000 18.82 $18.13 2/4/2007 $ 0 $455,949 $1,155,463
Carl Cramer 9,000 4.23 $18.13 2/4/2007 $ 0 $102,588 $ 259,979
Stephen Freeman 9,000 4.23 $18.13 2/4/2007 $ 0 $102,588 $ 259,979
Craig B. Harlan 7,500 3.53 $18.13 2/4/2007 $ 0 $ 85,490 $ 216,649
Alfonso T. Lubrano 6,000 2.82 $18.13 2/4/2007 $ 0 $ 68,392 173,319
</TABLE>
9
<PAGE> 12
REPORT OF ORGANIZATION AND COMPENSATION COMMITTEE ON
EXECUTIVE COMPENSATION
The Organization and Compensation Committee of the Board of Directors (the
"Committee") was expanded in 1997 to include all independent, non-employee
directors of the Board. The Committee is responsible for developing and making
policy recommendations to the Board with respect to the Company's executive
compensation. In addition, the Committee, pursuant to authority delegated by the
Board, determines on an annual basis the compensation to be paid to the Chief
Executive Officer (the "CEO") and each of the other executive officers of the
Company.
COMPENSATION PHILOSOPHY -- PAY FOR PERFORMANCE
The Committee's compensation philosophy is to recognize superior results
with superior monetary rewards. Where results are below expectation, pay will
directly reflect the less-than-targeted performance.
TOTAL COMPENSATION STRATEGY
The executive compensation strategy is to attract and retain qualified
executives and to provide appropriate incentives to achieve the long-term
success of the Company and to enhance shareholder value over the long term. The
Company employs a total compensation strategy, taking into consideration base
pay, annual performance compensation and long-term incentives. Base salary is
generally established at moderately competitive levels, and greater weight is
put on the performance-driven portions of the compensation package.
BASE SALARY
Base salaries are established by the Committee based on an executive's job
responsibilities, level of experience, individual performance and contribution
to the business. In 1997, the CEO's annual base salary was increased by 6.5%
from, $375,600 to $400,000, in recognition of overall performance and
contribution to the business. Executive officers, other than the CEO, received
4% increases in base salary, which was consistent with generally published
average market increases. A few executives received somewhat higher increases
due primarily to increased responsibilities, which brought the total average
increase to approximately 4.7% for this group.
ANNUAL PERFORMANCE COMPENSATION
A Management Performance Compensation Plan (the "Plan") provides for
annual, single-sum cash payments that are based on achieving preestablished
financial objectives. These objectives are established by the Committee on an
annual basis. The CEO's annual performance compensation is based entirely on
financial performance and is 100% dependent on total Company results. The other
executive officers' annual performance compensation is also completely based on
financial performance and is dependent on Company results and/or relevant
business unit results.
The percentage of base salary available for annual performance compensation
under the Plan varies according to the level of the individual's responsibility.
The CEO may attain 52% of base pay for achieving the targeted objective, 78% for
exceeding the maximum objective, and 0% if the minimum objective is not
attained. Likewise, the other executive officers may achieve 37%, 55.5%, and 0%,
respectively. In 1997, the Company's targeted objective, which was based on
earnings per share, was not achieved. As a result, the CEO received a cash
payout of 40% of base pay. Other executive officers received cash payouts
ranging from 47% of base pay to 28% of base pay due to varying business unit
results.
In addition to the payouts under the Plan, the Committee approved special
additional cash awards to two executive officers who significantly surpassed
their maximum objectives on
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<PAGE> 13
operating profit for their individual business units. The awards were equivalent
to 14% of base pay for one and 4% of base pay for the other. One other executive
officer received a special compensation award for achieving a profitable quarter
for the first time in five years in his business unit. This award was equivalent
to 5% of his base pay.
STOCK INCENTIVE PLAN
LONG-TERM INCENTIVES
The shareholder-approved 1995 Stock Incentive Plan (the "Incentive Plan")
was designed to afford the Committee flexibility in making awards to align the
Company's long-term incentives with shareholder interest. The Incentive Plan
provides the Committee the ability to design stock-based incentives for the
achievement of superior results over three year periods.
In accordance with the Incentive Plan, in early 1996, the Committee
established management objectives for a three year performance period beginning
January 1, 1996 through December 31, 1998. Eligible participants were granted
combined awards of Performance Restricted Shares and Performance Shares which
are earned only if the management objectives specified by the Committee are
reached during the performance period. All of the Performance Restricted Shares
covered by an award could be earned if the management objectives are attained at
target level established by the Committee. Performance Shares, however, could
only become payable for performance above target. Since the performance period
will not be completed until December 31, 1998, no awards were paid under the
Incentive Plan in 1997. Also, by Incentive Plan design, no new awards were
granted in 1997.
For 1998, the Committee has changed the Incentive Plan's management
objective from return on invested capital to stock price appreciation so as to
even more closely link management's incentive to shareholder interest.
STOCK OPTIONS
Stock options are typically granted annually to executives and other
selected employees whose contributions and skills are important to the long-term
success of the Company. The options are granted with an exercise price equal to
the market price of the Company's stock on the date of grant, and vest over a
period of up to four years and expire after ten years.
In 1997, a total of 135 selected employees were awarded options. The
overall number of option shares granted was approximately 1.2% of total shares
outstanding.
The Committee established a range of potential option awards for the CEO
and executive officers based on a 1995 total compensation study performed by a
nationally recognized compensation consultant which analyzed comparably-sized
manufacturing and metals companies. The specific number of stock options granted
to an executive is determined by the Committee based upon the individual's level
of responsibility, recommendations by management, and a subjective judgment by
the Committee of the executive's contribution to the performance of the Company.
The number of options currently held by each executive is not taken into
consideration. In 1997, the Committee granted the CEO a stock option covering
40,000 shares of the Company's Common Stock. The grant was based on the CEO's
continued contributions to the Company's financial performance and his effective
leadership of a complex global business.
The Company has continued a limited share buyback program in 1997 to offset
for stock dilution that may occur as a result of the above programs.
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<PAGE> 14
DEDUCTIBILITY OF COMPENSATION IN EXCESS OF $1 MILLION A YEAR
In 1993, Congress enacted Section 162(m) of the Internal Revenue Code of
1986, effective for tax years beginning in 1994. This legislation precludes a
public corporation from taking a deduction for compensation in excess of $1
million per year for its CEO or any of its four other highest-paid executive
officers. However, certain performance-based compensation is specifically exempt
from the deduction limit. The limitation has no immediate applicability to the
Company. However, any compensation derived from Performance Restricted Shares or
Performance Shares awarded under the Incentive Plan is expected to be exempt
from the limit on corporate tax deduction.
The foregoing report has been furnished by the Committee.
William P. Madar (Chairman)
Albert C. Bersticker
Charles F. Brush, III
David L. Burner
Joseph P. Keithley
Robert M. McInnes
William R. Robertson
John Sherwin, Jr.
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<PAGE> 15
CUMULATIVE TOTAL SHAREHOLDER RETURN
The following graph sets forth the cumulative shareholder return on the
Company's Common Stock as compared to the cumulative total return of (a) the S&P
500 Index for the five year period ending December 31, 1997, and (b) a
self-constructed index consisting of the Company, Cabot Corporation, Carpenter
Technology Corp., Chase Brass Industries Inc., Handy and Harmon Inc., Olin
Corporation, Precision Castparts Corp. and Worthington Industries, Inc.(1)
COMPARISON OF FIVE YEAR TOTAL RETURN(2)
<TABLE>
<CAPTION>
BRUSH SELF-
MEASUREMENT PERIOD WELLMAN CONSTRUCTED
(FISCAL YEAR COVERED) INC. S&P 500 INDEX
<S> <C> <C> <C>
1992 $100 $100 $100
1993 $ 95 $110 $129
1994 $117 $111 $136
1995 $117 $153 $205
1996 $115 $188 $207
1997 $177 $251 $255
</TABLE>
(1) The Company is the world's leading supplier of beryllium, and a producer of
a diverse group of engineered materials, including metals, alloys, ceramics,
specialty clad metals and precious metal products. Most competitors are
either divisions or subsidiaries of larger corporations, or privately-held
companies. As such, the Company does not fit easily into any standardized
peer company listing. A customized peer group has been developed, consisting
of specialty engineered materials producers that either compete directly
with the Company for major portions of their business, operate using similar
production technologies, or serve similar markets.
(2) Assumes that the value of the Company's Common Stock and each index was $100
on December 31, 1992 and that all dividends were reinvested.
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<PAGE> 16
PENSION AND RETIREMENT BENEFITS
The Brush Wellman Inc. Pension Plan for Salaried Employees is a defined
benefit plan under which Messrs. Harnett, Cramer, Harlan, and Freeman are
currently accruing benefits. The following table shows the estimated annual
pension benefits under the Brush Wellman Salaried Pension Plan as well as
benefits provided under the Company's Supplemental Retirement Benefit Plan, to
the extent that they supplement benefits provided under the Brush Wellman
Salaried Pension Plan, which would be payable, without reduction for any
optional form of payment, to employees in various compensation classifications
upon retirement at age 65 after selected periods of service:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
FINAL AVERAGE YEARS OF SERVICE AT AGE 65
ANNUAL PAY ---------------------------------------------------------------
AT AGE 65 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- ------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 150,000 $ 21,429 $ 32,143 $ 42,857 $ 53,571 $ 64,286 $ 75,000
200,000 28,571 42,857 57,143 71,429 85,714 100,000
300,000 42,857 64,286 85,714 107,143 128,571 150,000
400,000 57,143 85,714 114,286 142,857 171,429 200,000
500,000 71,429 107,143 142,857 178,571 214,286 250,000
600,000 85,714 128,571 171,429 214,286 257,143 300,000
700,000 100,000 150,000 200,000 250,000 300,000 350,000
800,000 114,286 171,429 228,571 285,714 342,857 400,000
900,000 128,571 192,857 257,143 321,429 385,714 450,000
</TABLE>
The compensation covered by the Brush Wellman Salaried Pension Plan and the
Supplemental Retirement Benefit Plan is regular base salary, sales commissions,
and performance compensation. The compensation covered by the Brush Wellman
Salaried Pension Plan and the Supplemental Retirement Benefit Plan is the same
as the amounts shown in the salary and bonus columns of the Summary Compensation
Table on page 8. Credited service for pension benefit purposes for Messrs.
Harnett, Cramer, Harlan, and Freeman is 20, 3, 11, and 5, respectively. The
Supplemental Retirement Benefit Plan adds 14 years to Mr. Harnett's Brush
Wellman Inc. pension service. The amounts shown in the above table are computed
on the basis of a straight-life annuity (for the employee's life only) and are
shown without reduction for Social Security benefits or other offset amounts.
The benefits shown in the above table are subject to reductions based on Social
Security benefit amounts and, in the case of Mr. Harnett, for certain pension
benefits from previous employers.
The Technical Materials, Inc. Pension Plan is a defined benefit plan under
which Mr. Lubrano and Mr. Harlan will receive a benefit based on their Technical
Materials, Inc. pension service. The following table shows the estimated annual
pension benefits under the Technical Materials, Inc. Pension Plan as well as
benefits provided under the Company's Supplemental Retirement Benefit Plan, to
the extent that they supplement benefits provided under the Technical Materials,
Inc. Pension Plan, which would be payable, without reduction for any
14
<PAGE> 17
optional form of payment, to employees in various compensation classifications
upon retirement at age 65 after selected periods of service:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
FINAL AVERAGE YEARS OF SERVICE AT AGE 65
ANNUAL PAY ----------------------------------------------------
AT AGE 65 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS
- ------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$150,000 $19,154 $28,731 $38,308 $47,884 $ 57,461
200,000 25,538 38,308 51,077 63,846 76,615
300,000 38,308 57,461 76,615 95,769 114,923
</TABLE>
The compensation covered by the Technical Materials, Inc. Pension Plan and
the Supplemental Retirement Benefit Plan is regular base salary, sales
commissions, and performance compensation. The compensation covered by the
Technical Materials, Inc. Pension Plan and the Supplemental Retirement Benefit
Plan is the same as the amounts shown in the salary and bonus columns of the
Summary Compensation Table on page 8. Credited service for pension benefit
purposes for Messrs. Harlan and Lubrano is 10 and 5, respectively. The amounts
shown in the above table are computed on the basis of a straight-life annuity
(for the employee's life only).
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with certain senior
executives, including all of the executive officers named in the Summary
Compensation Table on page 8 except for Mr. Lubrano. These agreements provide
certain benefits to the senior executives in the event there is a change in
control of the Company. The material aspects of the employment agreements are
summarized below.
In general, a change in control of the Company is deemed to have occurred
whenever:
(i) the Board of Directors fails to include a majority of directors
who are either "Original Directors" (those in office on February 20, 1989)
or "Approved Directors" (those who, after February 20, 1989, are elected,
or are nominated for election by the shareholders, by a vote of at least
two-thirds of the Original Directors and the Approved Directors, if any);
(ii) any "person" (as defined in Section 1701.01(G) of the Ohio
General Corporation Law) shall have accumulated shares exceeding specified
threshold levels (one-fifth, one-third or a majority) of the Company's
voting power without first having obtained the shareholder approval
required by, and otherwise complied with, the Ohio Control Share
Acquisition Act (principally Section 1701.831 of the Ohio General
Corporation Law); or
(iii) the Board of Directors determines in good faith that (a) any
particular actual or proposed accumulation of Company shares, tender offer,
merger, consolidation, sale of assets, proxy contest or other event or
series of events will, or is likely to, if carried out, result in a
situation specified in (i) or (ii) above and (b) it is in the best
interests of the Company and its shareholders, and will serve the intended
purposes of the agreements, if the agreements thereupon become immediately
operative.
In the event of such a change in control, each executive will (if then an
employee of the Company) remain employed in substantially his then position for
at least four years or, if earlier, until the first to occur of the death of the
executive or his reaching age 65 (the "Window Period"). During the Window
Period, he will receive an annual amount at least equal to his salary rate in
effect at the beginning of the Window Period (or, if higher, his salary rate at
any time during the two full calendar years immediately preceding the change in
control) plus the highest incentive compensation award received by him in any of
the prior three years. In addition, he is entitled during the Window Period to
continue to participate in all Company
15
<PAGE> 18
benefit plans in which he was participating and to receive all perquisites which
were available to him (or to other benefits and perquisites at the same level as
those he enjoyed) at the time of the change in control.
After a change in control, the executive may be terminated by the Company
for "cause" (the commission of a felony). If he is terminated without cause, or
if he terminates for any of the specified reasons described below, he will be
entitled to receive in a lump sum payment the present value of the remaining
aggregate direct remuneration (salary and incentive compensation) which would
otherwise have been paid to him for the remainder of the Window Period. The
Company is obligated to secure these payments through a trust to be funded at or
prior to the time of any change in control. The executive will also be entitled
in such a case to the continuation of benefits and perquisites. The agreements
include procedures intended to provide that none of the foregoing will
constitute "parachute payments" under Section 280G of the Internal Revenue Code
of 1986, as amended (the "Code"). In general, tax penalties would be imposed on
the executive and the Company if any of the foregoing were determined to
constitute parachute payments. The executive may terminate employment with the
Company and still be entitled to receive the payments specified above in the
event of: (a) his good faith determination that, due to changed circumstances
significantly affecting his position with the Company, he is unable to carry out
his duties and responsibilities; (b) any reduction in compensation or any
substantial reduction in position; or (c) any requirement that he have as his
principal office any place more than 50 miles from his principal residence at
the time of the change in control.
If the executive is terminated without cause, or if the executive
terminates for any of the reasons specified above, he is, in general, obligated
for a period of two years (or, if less, the balance of the Window Period) to use
reasonable efforts to seek other comparable employment. He is also generally
obligated to pay over to the Company 50% of all employment income from other
employers earned by him during that time and is subject for the same time to
specified prohibitions on competition.
The Company is obligated to pay all attorneys' and related fees and
expenses incurred by an executive as a result of the Company's failure to
perform its obligations under his agreement or as a result of specified
challenges to the validity or enforceability of, or the executive's performance
under, such agreement. This obligation of the Company must be secured by
insurance or as the Board of Directors otherwise determines.
In determining whether the Window Period commences, the agreements continue
for five years. They will thereafter continue for successive two year increments
unless either the Company or the executive gives a specified notice to the
other.
2. AMENDMENT TO THE 1995 STOCK INCENTIVE PLAN
GENERAL
On March 3, 1998, the Board of Directors of the Company (the "Board")
amended the Brush Wellman Inc. 1995 Stock Incentive Plan (the "Plan"), subject
to the approval of the Company's shareholders at the 1998 annual meeting of
shareholders, to increase the number of shares of Common Stock available under
the Plan by 750,000.
The Plan was originally approved by shareholders at the 1995 annual meeting
of shareholders. Consistent with changes in Rule 16b-3, the Plan was amended by
the Board on October 7, 1997 to provide that the Committee administering the
Plan be comprised of not less than three persons who are non-employee directors
within the meaning of Rule 16b-3. Shareholder approval was not required for that
amendment.
The Plan serves the Company's objective of aligning the Company's long-term
management objectives closely with shareholder interests. The Plan authorizes
the Organization and Compen-
16
<PAGE> 19
sation Committee of the Board of Directors (the "Committee") to select from
among five categories of incentive awards: performance restricted shares
("Performance Restricted Shares"), performance shares ("Performance Shares"),
performance units ("Performance Units"), restricted shares ("Restricted Shares")
and options to purchase shares of Common Stock ("Option Rights"). This affords
the Committee the flexibility to design stock-based incentives for achievement
of superior performance by officers and other key salaried employees of the
Company.
The amendment of the Plan increases the number of shares of Common Stock
available by 750,000 shares. The Plan originally authorized the issuance of
750,000 shares of Common Stock, of which, as of March 9, 1998, only 66,139
remained available for future grants. In addition 49,790 shares of Common Stock
will remain available for future grants, as of such date, under the 1989 and
1984 Stock Option Plan.
Since 1995 through 1997, the Company has granted Options Rights for 354,727
shares of Common Stock under the Plan. In addition, in 1996 the Company issued
34,678 Performance Restricted Shares and 825 Performance Shares based on
achievement of the return on invested capital and return on assets targets
established by the Committee. The Committee has also awarded 89,815 Performance
Restricted Shares and 40,127 Performance Shares for the performance period
1996-1998, which will be paid out if the appropriate return on invested capital
and return on assets targets established by the Committee are met.
In 1998, the Committee awarded 52,552 Performance Restricted Shares and
26,276 Performance Shares, together with tax offset rights worth up to one-half
the value of these awards at the end of the performance period, for the
performance period 1998-2000. The 1998 awards were based on stock price targets
instead of return on invested capital and return on assets, in order to provide
a more direct link to shareholder value.
In addition to the above mentioned awards, under the Company's ongoing
performance programs, the Committee has also used the Plan to meet various other
compensation needs that have arisen from time to time, including grants of
48,000 Performance Shares and 26,838 Performance Restricted Shares used to make
retention awards to a group of employees who joined the Company through an
acquisition.
The only change being presented for approval by the shareholders at the
1998 annual meeting is the increase in shares of Common Stock available,
together with a corresponding increase in the maximum number of Restricted
Shares available under the Plan. A summary of these changes is set forth below,
as part of a summary description of the entire Plan. The following description
of the Plan is qualified by reference to the Plan, which is attached as Appendix
A.
SUMMARY OF THE PLAN
ELIGIBILITY. Officers, including officers who are members of the Board,
and other key salaried employees of the Company and its subsidiaries may be
selected by the Committee to receive benefits under the Plan.
PLAN LIMITS. The maximum number of shares of Common Stock that may be (i)
issued or transferred upon the exercise of Option Rights, (ii) awarded as
Performance Restricted Shares or Restricted Shares and released from substantial
risk of forfeiture thereof or (iii) issued or transferred in payment of
Performance Shares or Performance Units that have been earned, shall not in the
aggregate exceed 1,500,000 shares of Common Stock, 750,000 of which were
approved by shareholders in 1995 and 750,000 of which are being added by the
amendment. These shares may be shares of original issuance or treasury shares or
a combination thereof. However, the number of shares awarded as Restricted
Shares may not exceed 150,000 (excluding forfeitures), of which 75,000 were
approved by shareholders in 1995. These limits are
17
<PAGE> 20
subject to adjustments as provided in the Plan for stock splits, stock
dividends, recapitalizations and other similar transactions or events.
Upon the payment of any option price by the transfer to the Company of
shares of Common Stock or upon satisfaction of tax withholding obligations or
any other payment made or benefit realized under the Plan by the transfer or
relinquishment of shares of Common Stock, there shall be deemed to have been
issued or transferred only the net number of shares actually issued or
transferred by the Company less the number of shares so transferred or
relinquished. However, the number of shares actually issued or transferred by
the Company upon the exercise of Incentive Stock Options shall not exceed
750,000 as approved by shareholders in 1995, subject to adjustment as provided
for in the Plan. Upon the payment in cash of a benefit provided by any award
under the Plan, any shares of Common Stock that were covered by such award shall
again be available for issuance or transfer under the Plan.
THE PLAN SPECIFICALLY PROHIBITS "REPRICING" OF OUTSTANDING OPTION RIGHTS.
SEE ADMINISTRATION AND AMENDMENTS, BELOW.
The number of Performance Units granted under the Plan may not in the
aggregate exceed 750,000 as approved by shareholders in 1995. Performance Units
that are granted under the Plan and are paid in shares of Common Stock or are
not earned by a participant at the end of a performance period are available for
future grants of Performance Units.
No participant shall receive in any one calendar year awards of Performance
Restricted Shares, Performance Shares and Performance Units having an aggregate
value as of their respective dates of grant in excess of $1,000,000. No
participant shall be granted Option Rights for more than 300,000 shares of
Common Stock during any five consecutive calendar years, subject to adjustment
pursuant to the Plan. These units are the same as approved by shareholders in
1995.
PERFORMANCE RESTRICTED SHARES. An award of Performance Restricted Shares
involves the immediate transfer by the Company to a participant of ownership of
a specific number of shares of Common Stock in consideration of the performance
of services. The participant is entitled immediately to voting, dividend and
other ownership rights in such shares. The transfer may be made without
additional consideration from the participant.
The Committee must specify Management Objectives (as discussed below)
which, if achieved, will result in termination or early termination of the
restrictions applicable to such shares. The Committee shall also specify in
respect of the specified Management Objectives, a minimum acceptable level of
achievement and must set forth a formula for determining the number of
Performance Restricted Shares on which restrictions will terminate if
performance is at or above the minimum level, but below full achievement of the
specified Management Objectives.
Performance Restricted Shares must be subject to a "substantial risk of
forfeiture" within the meaning of Section 83 of the Code for a period of at
least one year to be determined by the Committee on the date of the grant. To
enforce these forfeiture provisions, the transferability of Performance
Restricted Shares will be prohibited or restricted in a manner and to the extent
prescribed by the Committee for the period during which the forfeiture
provisions are to continue. The Committee may provide for a shorter period
during which the forfeiture provisions are to apply in the event of retirement,
death or disability or a Change in Control (as defined in the Plan) of the
Company.
PERFORMANCE SHARES AND PERFORMANCE UNITS. A Performance Share is the
equivalent of one share of Common Stock and a Performance Unit is the equivalent
of the market value of one share of Common Stock on the date of the grant. The
participant will be given one or more Management Objectives to meet within a
specified period (the "Performance Period"). The specified Performance Period
may be subject to earlier termination in the event of a Change in Control of the
Company. A minimum level of acceptable achievement will also be established by
18
<PAGE> 21
the Committee. If by the end of the Performance Period, the participant has
achieved the specified Management Objectives, the participant will be deemed to
have fully earned the Performance Shares or Performance Units. If the
participant has not achieved the Management Objectives, but has attained or
exceeded the predetermined minimum level of acceptable achievement, the
participant will be deemed to have partly earned the Performance Shares or
Performance Units in accordance with a predetermined formula. To the extent
earned, the Performance Shares or Performance Units will be paid to the
participant at the time and in the manner determined by the Committee in cash,
shares of Common Stock or any combination thereof.
RESTRICTED SHARES. An award of Restricted Shares involves the immediate
transfer by the Company to a participant of ownership of a specific number of
shares of Common Stock in consideration of the performance of services. The
participant is entitled immediately to voting, dividend and other ownership
rights in the shares. The transfer may be made without additional consideration
from the participant. As noted above, no more than 75,000 shares may be awarded
as Restricted Shares.
As are Performance Restricted Shares, Restricted Shares must be subject to
a "substantial risk of forfeiture" within the meaning of Section 83 of the Code
for a period to be determined by the Committee on the date of the grant. This
period may not be less than three years, except that the Committee may provide
for a shorter period in the event of retirement, death or disability or a Change
in Control of the Company.
OPTION RIGHTS. The Committee may grant Option Rights that entitle the
optionee to purchase shares of Common Stock at a price equal to or greater than
market value on the date of grant. The option price is payable at the time of
exercise (i) in cash, (ii) by the transfer to the Company of nonforfeitable,
unrestricted shares of Common Stock that are already owned by the optionee,
(iii) with any other legal consideration the Committee may deem appropriate or
(iv) by any combination of the foregoing methods of payment.
Payment of the option price of any Non-qualified Option may also be made in
whole or in part in the form of Restricted Shares or other shares of Common
Stock that are subject to risk of forfeiture or restriction on transfer. When
paid for with such consideration, unless otherwise determined by the Committee
on or after the date of the grant, whenever shares of Common Stock received by
the optionee upon the exercise of the Non-qualified Option is subject to the
same risks of forfeiture or restrictions on transfer as applied to the
consideration surrendered by the optionee. However, such risks of forfeiture and
restriction on transfer shall apply only to the same number of shares of Common
Stock received by the optionee as applied to the forfeitable or restricted
shares of Common Stock surrendered by the optionee.
The Committee has the authority to specify at the time Option Rights are
granted that the shares of Common Stock will not be accepted in payment of the
option price until they have been owned by the optionee for a specified period;
however, the Plan does not require any such holding period and would permit
immediate sequential exchanges of shares of Common Stock at the time of exercise
of Option Rights. Any grant of an Option Right may provide for deferred payment
of the option price from the proceeds of sale through a broker of some or all of
the Common Shares to which the exercise relates.
Option Rights granted under the Plan may be Option Rights that are intended
to qualify as "incentive stock options" within the meaning of Section 422 of the
Code or Option Rights that are not intended to so qualify or combinations
thereof.
Any grant of Option Rights may specify Management Objectives which, if
achieved, will result in exercisability of such rights. Successive grants may be
made to the same optionee regardless of whether Option Rights previously granted
to him or her remain unexercised. No Option Right may be exercised more than ten
years from the date of grant. Each grant must specify the period of continuous
employment with the Company or any subsidiary that is
19
<PAGE> 22
necessary before the Option Rights will become exercisable and may provide for
the earlier exercise of the Option Rights in the event of a Change in Control of
the Company.
The market value of a share of Common Stock was $27.125 on March 9, 1998,
which was the closing price of a share of Common Stock on the New York Stock
Exchange on that date.
TRANSFERABILITY. No Option Right or other "derivative security" within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934 (the "Exchange
Act") is transferable by a participant except by will or the laws of descent and
distribution. Option Rights may not be exercised during a participant's lifetime
except by the participant or, in the event of the participant's incapacity, by
the participant's guardian or legal representative acting in a fiduciary
capacity on behalf of the participant under state law and court supervision.
However, the Committee, in its sole discretion, may provide for the
transferability of particular awards under the Plan.
The Committee may specify at the date of grant that all or any part of the
shares of Common Stock that are to be issued or transferred by the Company upon
the exercise of Option Rights or upon payment under any grant of Performance
Shares or Performance Units, or are to be no longer subject to the substantial
risk of forfeiture and restrictions on transfer referred to in Section 5 of the
Plan with respect to Restricted Shares, shall be subject to further restrictions
on transfer.
MANAGEMENT OBJECTIVES. The Plan requires that the Committee establish
"Management Objectives" for purposes of Performance Restricted Shares,
Performance Shares or Performance Units. When so determined by the Committee,
Option Rights may also specify Management Objectives. Management Objectives may
be described in terms of either Company-wide objectives or objectives that are
related to the performance of the individual participant or subsidiary,
division, department or function within the Company or a subsidiary in which the
participant is employed. Management Objectives applicable to any award to a
participant who is, or is determined by the Committee likely to become, a
"covered employee" within the meaning of 162(m)(3) of the Code shall be limited
to specified levels of or growth in (i) return on invested capital, (ii) return
on equity, (iii) return on operating assets, (iv) earnings per share and/or (v)
market value per share. Except in the case of such a covered employee, if the
Committee determines that a change in the business, operations, corporate
structure or capital structure of the Company, or the manner in which it
conducts its business, or other events or circumstances render the Management
Objectives unsuitable, the Committee may modify such Management Objectives, in
whole or in part, as the Committee deems appropriate and equitable.
ADMINISTRATION AND AMENDMENTS. The Plan is to be administered by a
committee consisting of not less than three non-employee directors who are
Non-Employee Directors within the meaning of Rule 16b-3 under the Exchange Act.
In connection with its administration of the Plan, the Committee is authorized
to interpret the Plan and related agreements and other documents. The Committee
may make grants to participants under any or a combination of all of the various
categories of awards that are authorized under the Plan and may condition the
grant of awards on the surrender or deferral by the participant of the
participant's right to receive a cash bonus or other compensation otherwise
payable by the Company or a subsidiary to the participant. The Committee may
delegate its authority to officers of the Company and its subsidiaries in
certain circumstances.
The Plan may be amended from time to time by the Board of Directors, but
without further approval by the shareholders of the Company, except no such
amendment may (i) increase the aggregate number of Common Shares that may be
issued or transferred and covered by outstanding awards, increase the aggregate
number of Performance Units that may be granted, or increase the number of
shares which may be granted to any participant in any one or three fiscal years,
or (ii) otherwise cause Rule 16b-3 under the Exchange Act to cease to be
applicable to the Plan.
20
<PAGE> 23
The Committee shall not, without the further approval of the Shareholders
of the Company, authorize the amendment of any outstanding Option Right to
reduce the option price. Furthermore, no Option Rights shall be cancelled and
replaced with awards having a lower option price without the further approval of
the shareholders of the Company.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain of the federal income tax
consequences of certain transactions under the Plan based on federal income tax
laws in effect on January 1, 1998. This summary is not intended to be exhaustive
and does not describe state or local tax consequences.
Tax Consequences to Participants.
PERFORMANCE RESTRICTED SHARES. A recipient of Performance Restricted
Shares generally will be subject to tax at ordinary income rates on the fair
market value of the Performance Restricted Shares reduced by any amount paid by
the recipient at such time as the shares are no longer subject to a risk of
forfeiture or restrictions on transfer for purposes of Section 83 of the Code.
However, a recipient who so elects under Section 83(b) of the Code within 30
days of the date of transfer of the shares will have taxable ordinary income on
the date of transfer of the shares equal to the excess of the fair market value
of the shares (determined without regard to the risk of forfeiture or
restrictions on transfer) over any purchase price paid for the shares. If a
Section 83(b) election has not been made, any dividends received with respect to
Performance Restricted Shares that are subject at that time to a risk of
forfeiture or restrictions on transfer generally will be treated as compensation
that is taxable as ordinary income to the recipient.
PERFORMANCE SHARES AND PERFORMANCE UNITS. No income generally will be
recognized upon the grant of Performance Shares or Performance Units. Upon
payment in respect of the earn-out of Performance Shares or Performance Units,
the recipient generally will be required to include as taxable ordinary income
in the year of receipt an amount equal to the amount of cash received and the
fair market value of any unrestricted shares of Common Stock received.
RESTRICTED SHARES. A recipient of Restricted Shares will be taxed in a
manner substantially similar to that described above in the case of a recipient
of Performance Restricted Shares.
NON-QUALIFIED OPTIONS. In general: (i) no income will be recognized by an
optionee at the time a Non-qualified Option is granted; (ii) at the time of
exercise of a Non-qualified Option, ordinary income will be recognized by the
optionee in an amount equal to the difference between the option price paid for
the shares and the fair market value of the shares if they are unrestricted on
the date of exercise; and (iii) at the time of sale of shares acquired pursuant
to the exercise of a Non-qualified Option, any appreciation (or depreciation) in
the value of the shares after the date of exercise will be treated as either a
capital gain (or loss).
INCENTIVE STOCK OPTIONS. No income generally will be recognized by an
optionee upon the grant or exercise of an Incentive Stock Option. If shares of
Common Stock are issued to an optionee pursuant to the exercise of an Incentive
Stock Option and no disqualifying disposition of the shares is made by the
optionee within two years after the date of grant or within one year after the
transfer of the shares to the optionee, then upon the sale of the shares any
amount realized in excess of the option price will be taxed to the optionee as a
capital gain and any loss sustained will be a capital loss.
If shares of Common Stock acquired upon the exercise of an Incentive Stock
Option are disposed of prior to the expiration of either holding period
described above, the optionee generally will recognize ordinary income in the
year of disposition in an amount equal to any excess of the fair market value of
the shares at the time of exercise (or, if less, the amount realized on the
disposition of the shares in a sale or exchange) over the option price paid for
the
21
<PAGE> 24
shares. Any further gain (or loss) realized by the optionee generally will be
taxed as a capital gain (or loss).
Tax Consequences to the Company or Subsidiary.
To the extent that a participant recognizes ordinary income in the
circumstances described above, the Company or subsidiary for which the
participant performs services will be entitled to a corresponding deduction
provided that, among other things, the income meets the test of reasonableness,
is an ordinary and necessary business expense and is not an "excess parachute
payment" within the meaning of Section 280G of the Code and is not disallowed by
the $1 million limitation on certain executive compensation.
VOTE REQUIRED
A favorable vote of the majority of votes cast on the matter is necessary
for approval of the amendment to the Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO
THE PLAN.
3. 1997 STOCK INCENTIVE PLAN FOR NON-EMPLOYEE DIRECTORS
GENERAL
The 1990 Stock Option Plan for Non-Employee Directors (the "1990 Plan"),
which provided for the award of options to purchase shares of Common Stock of
the Company to non-employee directors, no longer has any shares available and
will terminate on the second business day following the 1998 annual meeting of
shareholders. To replace the 1990 Plan, the Board of Directors adopted the 1997
Stock Incentive Plan for Non-Employee Directors (the "1997 Plan"), subject to
approval by the shareholders of the Company at the 1998 annual meeting. In
addition to stock options, the 1997 Plan will also provide for annual awards of
shares of Common Stock on a deferred basis to each non-employee director. The
purpose of the 1997 Plan is to increase the ownership interest in the Company of
non-employee directors and provide an additional incentive to serve as directors
to persons whose services are considered essential to the Company's continued
progress. The following description of the 1997 Plan is qualified by reference
to the 1997 Plan, which is attached as Appendix B.
SUMMARY OF THE 1997 PLAN
ELIGIBILITY. Any director who has never been an employee of the Company or
any subsidiary or affiliate of the Company will be eligible to participate in
the 1997 Plan ("Eligible Director").
1997 PLAN LIMITS. An aggregate of 50,000 shares of Common Stock will be
available for issuance upon the exercise of options granted under the 1997 Plan
and as deferred shares under the 1997 Plan. This limit is subject to adjustment
as provided in the 1997 Plan for stock splits, stock dividends,
recapitalizations and other similar transactions or events.
ADMINISTRATION. The 1997 Plan will be administered by the Governance
Committee of the Board (the "Governance Committee"), who will be authorized to
interpret the 1997 Plan, but will have no discretion with respect to the
eligibility or selection of directors to receive options or deferred shares
under the 1997 Plan, the times at which such awards are granted or when such
options become exercisable, the number of shares subject to any option, or the
purchase price for shares subject to any option.
OPTIONS. Options to purchase 5,000 shares of Common Stock will be granted
automatically to up to six new Eligible Directors who have not received options
under the 1990 Plan on the
22
<PAGE> 25
first business day following the date on which the Eligible Director is elected
or appointed to the Board. Each grant will permit the optionee to purchase from
the Company 5,000 Shares of Common Stock at the fair market value of such shares
on the date the options are granted. Payment to the Company may be in the form
of cash, shares of Common Stock previously owned by the optionee for more than 6
months or a combination thereof. The period during which option grants may be
made under the 1997 Plan will terminate on the second business day following the
2005 annual meeting of shareholders.
The options will expire ten years after the date they were granted, or at
an earlier date if the optionee's service on the Board terminates for any reason
other than completion of 5 years of service as a Director, death, or total and
permanent disability. Options become exercisable six months after the date of
grant.
The market value of a share of Common Stock on March 9, 1998 was $27.125,
which was the closing price of a share of Common Stock on the New York Stock
Exchange on that date.
DEFERRED SHARES. Beginning with the 1998 annual meeting of shareholders,
each Eligible Director will automatically be granted 500 deferred shares on the
first business day following the annual meeting of shareholders. Each grant will
be subject to a deferral period beginning on the date of grant and ending upon
termination of service as a director. During the deferral period, the Eligible
Directors will have no right to transfer any rights under their awards, and will
have no rights to vote the deferred shares. Eligible Directors will be credited
with dividend equivalents in an amount equal to the amount per share of any cash
dividends declared on the deferred shares during the deferral period. Such
dividend equivalents, which will likewise be credited with dividend equivalents,
will be deferred until the end of the deferral period and will then be paid out
in additional shares of Common Stock.
The Company will be entitled, but not obligated, to establish a grantor
trust or similar arrangement to secure the Company's obligations to deliver
deferred shares under the 1997 Plan. However, any funds contained in such trust
will remain subject to the claims of the Company's general creditors.
TRANSFERABILITY. Except as otherwise determined by the Governance
Committee, no options or deferred shares granted under the 1997 Plan may be
transferred by will or the laws of descent and distribution. Except as otherwise
determined by the Governance Committee, options may be exercised during the
optionee's lifetime only by the optionee or by the optionee's guardian or legal
representative.
Notwithstanding the foregoing, options will be transferable by an Eligible
Director, without payment of consideration therefor by the transferee, to any
one or more members of the Eligible Director's immediate family or to one or
more trusts established solely for the benefit of one or more members of the
Eligible Director's immediate family or to one or more partnerships in which the
only partners are members of the immediate family of the Eligible Director.
However, no such transfer will be effective unless reasonable prior notice of
such transfer is delivered to the Company and such transfer is then effected in
accordance with any terms and conditions required by the Company or the
Governance Committee. Any transferee will be subject to the same terms and
conditions under the 1997 Plan as the Eligible Director.
ADJUSTMENTS. Adjustments may be made by the Governance Committee in the
option price, the number or kind of shares of Common Stock or other securities
covered by options and deferred shares, the number of shares covered by the 1997
Plan and the number of shares to be granted to each Eligible Director as may be
equitably required as a result of stock splits or other changes affecting the
shares of Common Stock.
AMENDMENTS. The 1997 Plan may be amended by the Board of Directors, but no
amendment may change the selection or eligibility of directors to receive
options or deferred shares under the 1997 Plan, the times at which options will
be granted or become exercisable, the times
23
<PAGE> 26
at which deferred shares will be granted, the number of shares of Common Stock
subject to any such options or such awards of deferred shares or the purchase
price under any such options.
1997 PLAN BENEFITS
Subject to approval of the shareholders at the 1998 annual meeting, one new
Director has been awarded an option to purchase 5,000 shares of Common Stock
under the 1997 Plan. On the first business day after the 1998 annual meeting, 8
Directors will receive their first annual grant of 500 deferred shares pursuant
to the 1997 Plan. The table below reflects these awards:
NEW PLAN BENEFITS TABLE
<TABLE>
<CAPTION>
DEFERRED
OPTIONS SHARES
------- ------------------
DOLLAR
NAME AND POSITION SHARES VALUE(1) SHARES
----------------- ------ -------- ------
<S> <C> <C> <C>
Gordon D. Harnett........................................... 0 0 0
Carl Cramer................................................. 0 0 0
Craig B. Harlan............................................. 0 0 0
Stephen Freeman............................................. 0 0 0
Alfonso T. Lubrano.......................................... 0 0 0
Executive Group............................................. 0 0 0
Non-Executive Director Group................................ 5,000 $108,500 4,000
Non-Executive Officer
Employee Group............................................ 0 0 0
</TABLE>
- ---------------
(1) The dollar values shown are based on the market price of a share of Common
Stock on March 9, 1998.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain of the federal income tax
consequences of certain transactions under the 1997 Plan based on federal income
tax laws in effect on January 1, 1998. This summary is not intended to be
exhaustive and does not describe state or local tax consequences.
TAX CONSEQUENCES TO ELIGIBLE DIRECTORS
OPTIONS. The options granted under the 1997 Plan will be non-qualified
stock options. In general, (i) no income will be recognized by an Eligible
Director at the time an option is granted; (ii) at the time an option is
exercised, ordinary income will be recognized by the Eligible Director in an
amount equal to the difference between the option price paid for the shares and
the fair market value of the shares, if unrestricted, on the date of exercise;
and (iii) at sale, appreciation (or depreciation) after the date of exercise
will be treated as a capital gain.
DEFERRED SHARES. No income generally will be recognized upon the grant of
deferred shares. The receipt of a deferred share grant generally will be subject
to tax at ordinary income rates on the fair market value of unrestricted shares
on the date that such shares are transferred to the Eligible Director under the
grant, and the capital gains/loss holding period for such shares will also
commence on such date.
TAX CONSEQUENCES TO THE COMPANY
To the extent that an Eligible Director recognizes ordinary income in the
circumstances described above, the Company will be entitled to a corresponding
deduction provided that, among other things, the income meets the test of
reasonableness, is an ordinary and necessary
24
<PAGE> 27
business expense and is not an "excess parachute payment" within the meaning of
Section 280G of the Code.
VOTE REQUIRED
A favorable vote of the majority of votes cast on the matter is necessary
for approval of the amendment to the 1997 Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
4. APPOINTMENT OF AUDITORS
The Board of Directors recommends ratification and approval of the
appointment of Ernst & Young LLP, independent auditors, to audit the books and
accounts of the Company for the year 1998. This proposal will be approved if a
majority of the votes cast on this proposal at the annual meeting are in favor
of the proposal.
It is expected that a representative of Ernst & Young LLP will attend the
meeting, with the opportunity to make a statement if he so desires and will be
available to answer appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
SUBMISSION OF SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the annual meeting of
shareholders in 1999 must be received by the Company at 17876 St. Clair Avenue,
Cleveland, Ohio, 44110, Attention: Secretary for inclusion in the Company's
proxy statement and form of proxy for that meeting not later than November 16,
1998.
GENERAL
The Company does not know of any matters to be brought before the meeting
except as indicated in the notice. However, if any other matters properly come
before the meeting for action, it is intended that the person authorized under
solicited proxies may vote or act thereon in accordance with his own judgment.
By order of the Board of Directors.
BRUSH WELLMAN INC.
MICHAEL C. HASYCHAK
Secretary
Cleveland, Ohio
March 16, 1998
25
<PAGE> 28
APPENDIX A
BRUSH WELLMAN INC.
1995 STOCK INCENTIVE PLAN
(AS AMENDED MARCH 3, 1998)
1. PURPOSE. The purpose of this Plan is to attract and retain officers and
other key salaried employees of Brush Wellman Inc. (the "Corporation") and its
Subsidiaries and to provide such persons with incentives and rewards for
superior performance.
2. DEFINITIONS. As used in this Plan,
"BOARD" means the Board of Directors of the Corporation.
A "CHANGE IN CONTROL" of the Corporation shall have occurred if any of the
following events shall occur:
(a) The Board at any time shall fail to include a majority of
Directors who are either "Original Directors" or "Approved Directors". An
Original Director is a Director who is serving on February 7, 1995. An
Approved Director is a Director who, after such date, is elected, or is
nominated for election by the shareholders, by a vote of at least
two-thirds of the Original Directors and the previously elected Approved
Directors, if any.
(b) Any person (as the term "person" is defined in Section 1701.01(G)
of the Ohio Revised Code) shall have made a "control share acquisition" (as
the term "control share acquisition" is defined in Section 1701.01(Z) of
the Ohio Revised Code) of shares of the Corporation without having first
complied with Section 1701.831 of the Ohio Revised Code (dealing with
control share acquisitions).
(c) The Board shall at any time determine in the good faith exercise
of its judgment that (i) any particular actual or proposed accumulation of
shares of the Corporation, tender offer for shares of the Corporation,
merger, consolidation, sale of assets, proxy contest, or other transaction
or event or series of transactions or events will, or is likely to, if
carried out, result in a Change in Control falling within paragraph (a) or
(b) above and (ii) it is in the best interests of the Corporation and its
shareholders, and will serve the intended purposes of this Plan, if such
transaction or event or series of transactions or events is deemed to be a
Change in Control.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
"COMMITTEE" means the committee described in Section 15(a) of this Plan.
"COMMON SHARES" means (i) Common Shares of the par value of $1 per share of
the Corporation and (ii) any security into which Common Shares may be converted
by reason of any transaction or event of the type referred to in Section 9 of
this Plan.
"DATE OF GRANT" means the date specified by the Committee on which a grant
of Performance Restricted Shares, Performance Shares or Performance Units,
Restricted Shares or Option Rights shall become effective, which shall not be
earlier than the date on which the Committee takes action with respect thereto.
"DESIGNATED SUBSIDIARY" means a subsidiary that is (i) not a corporation or
(ii) a corporation in which at the time the Corporation owns or controls,
directly or indirectly, less than 80 percent of the total combined voting power
represented by all classes of stock issued by such corporation.
"INCENTIVE STOCK OPTION" means an Option Right that is intended to qualify
as an "incentive stock option" under Section 422 of the Code or any successor
provision thereto.
"MANAGEMENT OBJECTIVES" means the achievement of a performance objective or
objec-
A-1
<PAGE> 29
tives established pursuant to this Plan for Participants who have received
grants of Performance Restricted Shares, Performance Shares or Performance Units
or, when so determined by the Committee, Option Rights. Management Objectives
may be described in terms of Corporation-wide objectives or objectives that are
related to the performance of the individual Participant or the Subsidiary,
division, department or function within the Corporation or Subsidiary in which
the Participant is employed. The Management Objectives applicable to any award
to a Participant who is, or is determined by the Committee to be likely to
become, a "covered employee" within the meaning of Section 162(m) of the Code
(or any successor provision) shall be limited to specified levels of or growth
in:
<TABLE>
<C> <S>
(i) return on invested capital;
(ii) return on equity;
(iii) return on operating assets;
(iv) earnings per share; and/or
(v) market value per share.
</TABLE>
Except in the case of such a covered employee, if the Committee determines that
a change in the business, operations, corporate structure or capital structure
of the Corporation, or the manner in which it conducts its business, or other
events or circumstances render the Management Objectives unsuitable, the
Committee may modify such Management Objectives or the related minimum
acceptable level of achievement, in whole or in part, as the Committee deems
appropriate and equitable.
"MARKET VALUE PER SHARE" means the fair market value of the Common Shares
as determined by the Committee from time to time.
"NONQUALIFIED OPTION" means an Option Right that is not intended to qualify
as a Tax-qualified Option.
"OPTIONEE" means the person so designated in an agreement evidencing an
outstanding Option Right.
"OPTION PRICE" means the purchase price payable upon the exercise of an
Option Right.
"OPTION RIGHT" means the right to purchase Common Shares from the
Corporation upon the exercise of a Nonqualified Option or a Tax-qualified Option
granted pursuant to Section 7 of this Plan.
"PARTICIPANT" means a person who is selected by the Committee to receive
benefits under this Plan and (i) is at that time an officer, including without
limitation an officer who may also be a member of the Board, or other salaried
employee of the Corporation or any Subsidiary or (ii) has agreed to commence
serving in any such capacity.
"PERFORMANCE PERIOD" means, in respect of a Performance Share or
Performance Unit, a period of time established pursuant to Section 5 of this
Plan within which the Management Objective relating thereto is to be achieved.
"PERFORMANCE RESTRICTED SHARES" means Common Shares granted pursuant to
Section 4 of this Plan as to which neither substantial risk of forfeiture nor
the restrictions on transfer referred to in such Section 4 has expired.
"PERFORMANCE SHARE" means a bookkeeping entry that records the equivalent
of one Common Share and is awarded pursuant to Section 5 of this Plan.
"PERFORMANCE UNIT" means a bookkeeping entry that records a unit equivalent
to the Market Value per Share of one Common Share on the Date of Grant and is
awarded pursuant to Section 5 of this Plan.
A-2
<PAGE> 30
"RESTRICTED SHARES" means Common Shares granted pursuant to Section 6 of
this Plan as to which neither the substantial risk of forfeiture nor the
restrictions on transfer referred to in such Section 6 has expired. Restricted
shares are not subject to Management Objectives specified by the Committee.
"RULE 16B-3" means Rule 16b-3, as promulgated and amended from time to time
by the Securities and Exchange Commission under the Securities Exchange Act of
1934, or any successor rule to the same effect.
"SUBSIDIARY" means a corporation, partnership, joint venture,
unincorporated association or other entity in which the Corporation has a direct
or indirect ownership or other equity interest; provided, however, that for
purposes of determining whether any person may be a Participant for purposes of
any grant of Incentive Stock Options, "Subsidiary" means any corporation in
which the Corporation owns or controls directly or indirectly more than 50
percent of the total combined voting power represented by all classes of stock
issued by such corporation at the time of the grant.
"TAX-QUALIFIED OPTION" means an Option Right that is intended to qualify
under particular provisions of the Code, including without limitation an
Incentive Stock Option.
3. SHARES AND PERFORMANCE UNITS AVAILABLE UNDER THE PLAN. (a) Subject to
adjustment as provided in Section 9 of this Plan, the number of Common Shares
which may be (i) issued or transferred upon the exercise of Option Rights, (ii)
awarded as Restricted Shares or Performance Restricted Shares and released from
substantial risk of forfeiture thereof or (iii) issued or transferred in payment
of Performance Shares or Performance Units that have been earned, shall not in
the aggregate exceed 1,500,000* Common Shares, which may be Common Shares of
original issuance or Common Shares held in treasury or a combination thereof;
provided, however, that the number of Restricted Shares shall not in the
aggregate exceed 150,000** (excluding any forfeitures), subject to adjustment as
provided in Section 9 of this Plan.
(b) Upon the full or partial payment of any Option Price by the transfer to
the Corporation of Common Shares or upon satisfaction of tax withholding
obligations in connection with any such exercise or any other payment made or
benefit realized under this Plan by the transfer or relinquishment of Common
Shares, there shall be deemed to have been issued or transferred under this Plan
only the net number of Common Shares actually issued or transferred by the
Corporation less the number of Common Shares so transferred or relinquished;
provided, however, that the number of Common Shares actually issued or
transferred by the Corporation upon the exercise of Incentive Stock Options
shall not exceed the number of Common Shares first specified above in Section
3(a), subject to adjustment as therein provided.
(c) Upon payment in cash of the benefit provided by any award granted under
this Plan, any Common Shares that were covered by that award shall again be
available for issuance or transfer hereunder.
(d) The number of Performance Units that may be granted under this Plan
shall not in the aggregate exceed 750,000. Performance Units that are granted
under this Plan and are paid in Common Shares or are not earned by the
Participant at the end of the Performance Period shall be available for future
grants of Performance Units hereunder.
(e) Notwithstanding any other provision of this Plan to the contrary, in no
event shall any Participant in any period of one calendar year receive awards of
Performance Restricted Shares,
- ---------------
* Consists of 750,000 shares approved by shareholders in 1995, of which only
66,139 remain available for future grants, and 750,000 proposed to be
approved at the annual meeting.
** Consists of 75,000 restricted shares approved by shareholders in 1995 and
75,000 proposed to be approved at the annual meeting.
A-3
<PAGE> 31
Performance Shares and Performance Units having an aggregate value as of their
respective Dates of Grant in excess of $1,000,000.
(f) Notwithstanding any other provision of this Plan to the contrary, no
Participant shall be granted Option Rights for more than 300,000 Common Shares
during any period of five consecutive calendar years, subject to adjustment as
provided in Section 9 of this Plan.
4. PERFORMANCE RESTRICTED SHARES. The Committee may also authorize grants
to Participants of Performance Restricted Shares upon such terms and conditions
as the Committee may determine in accordance with the following provisions:
(a) Each grant shall constitute an immediate transfer of the ownership
of Common Shares to the Participant in consideration of the performance of
services, entitling such Participant to dividend, voting and other
ownership rights, subject to the substantial risk of forfeiture and
restrictions on transfer hereinafter referred to.
(b) Any grant of Performance Restricted Shares shall specify
Management Objectives which, if achieved, will result in termination or
early termination of the restrictions applicable to such Shares and each
grant shall specify in respect of the specified Management Objectives, a
minimum acceptable level of achievement and shall set forth a formula for
determining the number of Performance Restricted Shares on which
restrictions will terminate if performance is at or above the minimum
level, but falls short of full achievement of the specified Management
Objectives; provided, however, that no such termination shall occur less
than one year after the Date of Grant, except in the event of retirement,
death or disability of the Participant or a Change in Control of the
Corporation.
(c) Each grant may be made without payment of additional consideration
from the Participant.
(d) Each grant shall provide that the Performance Restricted Shares
covered thereby shall be subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code for a period to be determined
by the Committee on the Date of Grant, and any grant may provide for the
earlier termination of such period in the event of retirement, death or
disability of the Participant or a Change in Control of the Corporation or
other similar transaction or event.
(e) Each grant shall provide that, during the period for which such
substantial risk of forfeiture is to continue, the transferability of the
Performance Restricted Shares shall be prohibited or restricted in the
manner and to the extent prescribed by the Committee on the Date of Grant.
Such restrictions may include without limitation rights of repurchase or
first refusal in the Corporation or provisions subjecting the Performance
Restricted Shares to a continuing substantial risk of forfeiture in the
hands of any transferee.
(f) Any grant or sale may require that any or all dividends or other
distributions paid on the Performance Restricted Shares during the period
of such restrictions be automatically sequestered. Such distribution may be
reinvested on an immediate or deferred basis in additional Common Shares,
which may be subject to the same restrictions as the underlying award or
such other restrictions as the Committee may determine.
(g) Each grant shall be evidenced by an agreement, which shall be
executed on behalf of the Corporation by any officer thereof and delivered
to and accepted by the Participant and shall contain such terms and
provisions as the Committee may determine consistent with this Plan. Unless
otherwise directed by the Committee, all certificates representing
Performance Restricted Shares, together with a stock power that shall be
endorsed in blank by the Participant with respect to the Performance
Restricted Shares, shall be held in custody by the Corporation until all
restrictions thereon lapse.
5. PERFORMANCE SHARES AND PERFORMANCE UNITS. The Committee may also
authorize grants of Performance Shares and Performance Units, which shall become
payable to the
A-4
<PAGE> 32
Participant upon the achievement of specified Management Objectives, upon such
terms and conditions as the Committee may determine in accordance with the
following provisions:
(a) Each grant shall specify the number of Performance Shares or
Performance Units to which it pertains, which may be subject to adjustment
to reflect changes in compensation or other factors.
(b) The Performance Period with respect to each Performance Share or
Performance Unit shall be determined by the Committee on the Date of Grant
and may be subject to earlier termination in the event of a Change in
Control of the Corporation.
(c) Each grant shall specify the Management Objectives that are to be
achieved by the Participant and each grant shall specify in respect of the
specified Management Objectives a minimum acceptable level of achievement
below which no payment will be made and shall set forth a formula for
determining the amount of any payment to be made if performance is at or
above the minimum acceptable level, but falls short of full achievement of
the specified Management Objective.
(d) Each grant shall specify the time and manner of payment of
Performance Shares or Performance Units that shall have been earned, and
any grant may specify that any such amount may be paid by the Corporation
in cash, Common Shares or any combination thereof and may either grant to
the Participant or reserve to the Committee the right to elect among those
alternatives.
(e) Any grant of Performance Shares or Performance Units may specify
that the amount payable, or the number of Common Shares issued, with
respect thereto may not exceed maximums specified by the Committee on the
Date of Grant.
(f) Any grant of Performance Shares may provide for the payment to the
Participant of dividend equivalents thereon in cash or additional Common
Shares on a current, deferred or contingent basis.
(g) Each grant shall be evidenced by an agreement, which shall be
executed on behalf of the Corporation by any officer thereof and delivered
to and accepted by the Participant and shall contain such terms and
provisions as the Committee may determine consistent with this Plan.
6. RESTRICTED SHARES. The Committee may also authorize grants to
Participants of Restricted Shares upon such terms and conditions as the
Committee may determine in accordance with the following provisions:
(a) Each grant shall constitute an immediate transfer of the ownership
of Common Shares to the Participant in consideration of the performance of
services, entitling such Participant to dividend, voting and other
ownership rights, subject to the substantial risk of forfeiture and
restrictions on transfer hereinafter referred to.
(b) Each grant may be made without payment of additional consideration
from the Participant.
(c) Each grant shall provide that the Restricted Shares covered
thereby shall be subject to a "substantial risk of forfeiture" within the
meaning of Section 83 of the Code for a period of at least three years to
be determined by the Committee on the Date of Grant, and any grant may
provide for the earlier termination of such period in the event of
retirement, death or disability of the Participant or a Change in Control
of the Corporation.
(d) Each grant shall provide that, during the period for which such
substantial risk of forfeiture is to continue, the transferability of the
Restricted Shares shall be prohibited or restricted in the manner and to
the extent prescribed by the Committee on the Date of Grant. Such
restrictions may include without limitation rights of repurchase or first
refusal in the Corporation or provisions subjecting the Restricted Shares
to a continuing substantial risk of forfeiture in the hands of any
transferee.
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<PAGE> 33
(e) Any grant may require that any or all dividends or other
distributions paid on the Restricted Shares during the period of such
restrictions be automatically sequestered. Such distribution may be
reinvested on an immediate or deferred basis in additional Common Shares,
which may be subject to the same restrictions as the underlying award or
such other restrictions as the Committee may determine.
(f) Each grant shall be evidenced by an agreement, which shall be
executed on behalf of the Corporation by any officer thereof and delivered
to and accepted by the Participant and shall contain such terms and
provisions as the Committee may determine consistent with this Plan. Unless
otherwise directed by the Committee, all certificates representing
Restricted Shares, together with a stock power that shall be endorsed in
blank by the Participant with respect to the Restricted Shares, shall be
held in custody by the Corporation until all restrictions thereon lapse.
7. OPTION RIGHTS. The Committee may from time to time authorize grants to
Participants of options to purchase Common Shares upon such terms and conditions
as the Committee may determine in accordance with the following provisions:
(a) Each grant of Option Rights shall specify the number of Common
Shares to which it pertains.
(b) Each grant shall specify an Option Price per Common Share, which
shall be equal to or greater than the Market Value per Share on the Date of
Grant.
(c) Each grant shall specify the form of consideration to be paid in
satisfaction of the Option Price and the manner of payment of such
consideration, which may include (i) cash in the form of currency or check
or other cash equivalent acceptable to the Corporation, (ii)
nonforfeitable, unrestricted Common Shares, which are already owned by the
Optionee and have a value at the time of exercise that is equal to the
Option Price, (iii) any other legal consideration that the Committee may
deem appropriate, including without limitation any form of consideration
authorized under Section 7(d) below, on such basis as the Committee may
determine in accordance with this Plan and (iv) any combination of the
foregoing.
(d) Any grant of a Nonqualified Option may provide that payment of the
Option Price may also be made in whole or in part in the form of Restricted
Shares or other Common Shares that are subject to risk of forfeiture or
restrictions on transfer. Unless otherwise determined by the Committee on
or after the Date of Grant, whenever any Option Price is paid in whole or
in part by means of any of the forms of consideration specified in this
Section 7(d), the Common Shares received by the Optionee upon the exercise
of the Nonqualified Option shall be subject to the same risks of forfeiture
or restrictions on transfer as those that applied to the consideration
surrendered by the Optionee; provided, however, that such risks of
forfeiture and restrictions on transfer shall apply only to the same number
of Common Shares received by the Optionee as applied to the forfeitable or
restricted Common Shares surrendered by the Optionee.
(e) Any grant may provide for deferred payment of the Option Price
from the proceeds of sale through a broker of some or all of the Common
Shares to which the exercise relates.
(f) Successive grants may be made to the same Optionee regardless of
whether any Option Rights previously granted to the Optionee remain
unexercised.
(g) Each grant shall specify the period or periods of continuous
employment of the Optionee by the Corporation or any Subsidiary that are
necessary before the Option Rights or installments thereof shall become
exercisable, and any grant may provide for the earlier exercise of the
Option Rights in the event of a Change in Control of the Corporation.
(h) Option Rights granted pursuant to this Section 7 may be
Nonqualified Options or Tax-qualified Options or combinations thereof.
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<PAGE> 34
(i) Any grant of Option Rights may specify Management Objectives
which, if achieved, will result in exercisability of such rights.
(j) No Option Right granted pursuant to this Section 7 may be
exercised more than 10 years from the Date of Grant; subject to this limit,
the Committee may cause Option Rights to continue to be exercisable after
termination of employment of the Participant under circumstances specified
by the Committee.
(k) Each grant shall be evidenced by an agreement, which shall be
executed on behalf of the Corporation by any officer thereof and delivered
to and accepted by the Optionee and shall contain such terms and provisions
as the Committee may determine consistent with this Plan.
8. TRANSFERABILITY. (a) No Option Right or other derivative security (as
that term is defined in Rule 16b-3) granted under this Plan may be transferred
by a Participant except by will or the laws of descent and distribution. Option
Rights granted under this Plan may not be exercised during a Participant's
lifetime except by the Participant or, in the event of the Participant's legal
incapacity, by his guardian or legal representative acting in a fiduciary
capacity on behalf of the Participant under state law and court supervision.
Notwithstanding the foregoing, the Committee, in its sole discretion, may
provide for the transferability of particular awards under this Plan so long as
such provisions will not disqualify the exemption for other awards under Rule
16b-3.
(b) Any grant made under this Plan may provide that all or any part of the
Common Shares that are to be issued or transferred by the Corporation upon the
exercise of Option Rights or in payment of Performance Shares or Performance
Units, or are no longer subject to the substantial risk of forfeiture and
restrictions on transfer referred to in Sections 4 and 6 of this Plan, shall be
subject to further restrictions upon transfer.
9. ADJUSTMENTS. The Committee may make or provide for such adjustments in
the number of Common Shares covered by outstanding Option Rights and Performance
Shares granted hereunder, the Option Prices per Common Share and the kind of
shares (including shares of another issuer) covered thereby, as the Committee
may in good faith determine to be equitably required in order to prevent
dilution or expansion of the rights of Participants that otherwise would result
from (a) any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Corporation or
(b) any merger, consolidation, spin-off, reorganization, partial or complete
liquidation or other distribution of assets, issuance of warrants or other
rights to purchase securities or any other corporate transaction or event having
an effect similar to any of the foregoing. In the event of any such transaction
or event, the Committee may provide in substitution for any or all outstanding
awards under this Plan such alternative consideration as it may in good faith
determine to be equitable under the circumstances and may require in connection
therewith the surrender of all awards so replaced. Moreover, the Committee may
on or after the Date of Grant provide in the agreement evidencing any award
under this Plan that the holder of the award may elect to receive an equivalent
award in respect of securities of the surviving entity of any merger,
consolidation or other transaction or event having a similar effect, or the
Committee may provide that the holder will automatically be entitled to receive
such an equivalent award. The Committee may also make or provide for such
adjustments in the maximum numbers of Common Shares and Restricted Shares
specified in Section 3(a) of this Plan, the maximum number of Performance Units
specified in Section 3(d) of this Plan and the maximum number of Common Shares
specified in Section 3(f) of this Plan as the Committee may in good faith
determine to be appropriate in order to reflect any transaction or event
described in this Section 9. This Section 9 shall not be construed to permit the
re-pricing of any Option Rights in the absence of any of the circumstances
described above in contravention of Section 16(b) hereof.
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<PAGE> 35
10. FRACTIONAL SHARES. The Corporation shall not be required to issue any
fractional Common Shares pursuant to this Plan. The Committee may provide for
the elimination of fractions or for the settlement thereof in cash.
11. WITHHOLDING TAXES. To the extent that the Corporation is required to
withhold federal, state, local or foreign taxes in connection with any payment
made or benefit realized by a Participant or other person under this Plan, and
the amounts available to the Corporation for the withholding are insufficient,
it shall be a condition to the receipt of any such payment or the realization of
any such benefit that the Participant or such other person make arrangements
satisfactory to the Corporation for payment of the balance of any taxes required
to be withheld. At the discretion of the Committee, any such arrangements may
without limitation include relinquishment of a portion of any such payment or
benefit or the surrender of outstanding Common Shares. The Corporation and any
Participant or such other person may also make similar arrangements with respect
to the payment of any taxes with respect to which withholding is not required.
12. PARTICIPATION BY EMPLOYEES OF DESIGNATED SUBSIDIARIES. As a condition
to the effectiveness of any grant or award to be made hereunder to a Participant
who is an employee of a Designated Subsidiary, whether or not such Participant
is also employed by the Corporation or another Subsidiary, the Board may require
such Designated Subsidiary to agree to transfer to such employee (when, as and
if provided for under this Plan and any applicable agreement entered into with
any such employee pursuant to this Plan) the Common Shares that would otherwise
be delivered by the Corporation, upon receipt by such Designated Subsidiary of
any consideration then otherwise payable by such Participant to the Corporation.
Any such award shall be evidenced by an agreement between the Participant and
the Designated Subsidiary, in lieu of the Corporation, on terms consistent with
this Plan and approved by the Board and such Designated Subsidiary. All such
Common Shares so delivered by or to a Designated Subsidiary shall be treated as
if they had been delivered by or to the Corporation for purposes of Section 3 of
this Plan, and all references to the Corporation in this Plan shall be deemed to
refer to such Designated Subsidiary, except for purposes of the definition of
"Board" and except in other cases where the context otherwise requires.
13. FOREIGN EMPLOYEES. In order to facilitate the making of any grant or
combination of grants under this Plan, the Board may provide for such special
terms for awards to Participants who are foreign nationals or who are employed
by the Corporation or any Subsidiary or Designated Subsidiary outside of the
United States of America as the Board may consider necessary or appropriate to
accommodate differences in local law, tax policy or custom. Moreover, the Board
may approve such supplements to or amendments, restatements or alternative
versions of this Plan as it may consider necessary or appropriate for such
purposes, without thereby affecting the terms of this Plan as in effect for any
other purpose, and the Secretary or other appropriate officer of the Corporation
may certify any such document as having been approved and adopted in the same
manner as this Plan. No such special terms, supplements, amendments or
restatements, however, shall include any provisions that are inconsistent with
the terms of this Plan as then in effect unless this Plan could have been
amended to eliminate such inconsistency without further approval by the
shareholders of the Corporation.
14. CERTAIN TERMINATIONS OF EMPLOYMENT, HARDSHIP AND APPROVED LEAVES OF
ABSENCE. Notwithstanding any other provision of this Plan to the contrary, in
the event of termination of employment by reason of death, disability, normal
retirement, early retirement with the consent of the Corporation, termination of
employment to enter public or military service with the consent of the
Corporation or leave of absence approved by the Corporation, or in the event of
hardship or other special circumstances, of a Participant who holds an Option
Right that is not immediately and fully exercisable, any Restricted Shares as to
which the substantial risk of forfeiture or the prohibition or restriction on
transfer has not lapsed, any Performance Shares
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<PAGE> 36
or Performance Units that have not been fully earned, or any Common Shares that
are subject to any transfer restriction pursuant to Section 8(b) of this Plan,
the Committee may take any action that it deems to be equitable under the
circumstances or in the best interests of the Corporation, including without
limitation waiving or modifying any limitation or requirement with respect to
any award under this Plan.
15. ADMINISTRATION OF THE PLAN. (a) This Plan shall be administered by the
Organization and Compensation Committee of the Board, which shall be composed of
not less than three members of the Board, each of whom shall be a Non-Employee
Director within the meaning of Rule 16b-3 and an "outside director" within the
meaning of Section 162(m) of the Code. A majority of the Committee shall
constitute a quorum, and the acts of the members of the Committee who are
present at any meeting thereof at which a quorum is present, or acts unanimously
approved by the members of the Committee in writing, shall be the acts of the
Committee.
(b) The interpretation and construction by the Committee of any provision
of this Plan or any agreement, notification or document evidencing the grant of
Option Rights, Restricted Shares, Performance Restricted Shares, Performance
Shares or Performance Units, and any determination by the Committee pursuant to
any provision of this Plan or any such agreement, notification or document,
shall be final and conclusive. No member of the Committee shall be liable for
any such action taken or determination made in good faith.
(c) The Committee may delegate to the appropriate officer or officers of
the Corporation or any Subsidiary, part or all of its authority with respect to
the administration of awards made by the Committee to individuals who are not
officers or directors of the Corporation within the meaning of the Securities
Exchange Act of 1934.
16. AMENDMENTS AND OTHER MATTERS. (a) This Plan may be amended from time to
time by the Board; provided, however, (i) except as expressly authorized by this
Plan, no such amendment shall increase the maximum numbers of Common Shares and
Restricted Shares specified in Section 3(a) hereof, increase the maximum number
of Performance Units specified in Section 3(d) hereof, increase the numbers of
Common Shares specified in Section 3(e) hereof, or otherwise cause this Plan to
cease to satisfy any applicable condition of Rule 16b-3 or otherwise cause any
award under the Plan to cease to qualify for the performance-based exception to
Section 162(m) of the Code, without the further approval of the shareholders of
the Corporation.
(b) The Committee shall not, without the further approval of the
shareholders of the Corporation, authorize the amendment of any outstanding
Option Right to reduce the Option Price. Furthermore, no Option Rights shall be
cancelled and replaced with awards having a lower Option Price without the
further approval of the shareholders of the Corporation.
(c) The Committee may condition the grant of any award or combination of
awards authorized under this Plan on the surrender or deferral by the
Participant of his or her right to receive a cash bonus or other compensation
otherwise payable by the Corporation or a Subsidiary to the Participant.
(d) This Plan shall not confer upon any Participant any right with respect
to continuance of employment or other service with the Corporation or any
Subsidiary and shall not interfere in any way with any right that the
Corporation or any Subsidiary would otherwise have to terminate any
Participant's employment or other service at any time.
(e)(i) To the extent that any provision of this Plan would prevent any
Option Right that was intended to qualify as a Tax-qualified Option from so
qualifying, any such provision shall be null and void with respect to any
such Option Right; provided, however, that any such provision shall remain
in effect with respect to other Option Rights, and there shall be no
further effect on any provision of this Plan.
(ii) Any award that may be made pursuant to an amendment to this Plan
that shall have been adopted without the approval of the stockholders of
the Corporation shall be null
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<PAGE> 37
and void if it is subsequently determined that such approval was required
in order for this Plan to continue to satisfy the applicable conditions of
Rule 16b-3.
17. TERMINATION OF THE PLAN. No further awards shall be granted under this
Plan after the passage of 10 years from the date on which this Plan was first
approved by the shareholders of the Corporation.
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<PAGE> 38
EXHIBIT B
1997 STOCK INCENTIVE PLAN FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE
The purpose of this 1997 Stock Incentive Plan for Non-Employee Directors
(the "Plan") of Brush Wellman Inc. (the "Company") is to increase the ownership
interest in the Company of non-employee directors and to provide further
incentive to persons whose services are considered essential to the Company's
continued progress to serve as directors of the Company.
2. ADMINISTRATION
The Plan shall be administered by the Governance Committee of the Board of
Directors (the "Committee"). Subject to the provisions of the Plan, the
Committee shall be authorized to interpret the Plan, to establish, amend and
rescind any rules and regulations relating to the Plan, and to make all other
determinations necessary or advisable for the administration of the Plan. The
Committee shall have no discretion with respect to the eligibility or selection
of directors to receive options or deferred shares under the Plan, the times at
which such awards shall be granted or such options shall become exercisable or
the number of shares subject to any such options or the Plan or the purchase
price thereunder, except for adjustments as described in Section 8. The
determination of the Committee in the administration of the Plan, as described
herein, shall be final and conclusive and binding upon all persons, including,
without limitation, the Company, its shareholders and persons granted options or
deferred shares under the Plan. The Secretary of the Company shall be authorized
to implement the Plan in accordance with its terms and to take such actions of a
ministerial nature as shall be necessary to effectuate the intent and purposes
hereof. The validity, construction, and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in accordance with the
internal substantive laws of the State of Ohio.
3. PARTICIPATION IN THE PLAN
Any director of the Company who has never been an employee of the Company
or any subsidiary or affiliate of the Company shall be eligible to participate
in the Plan ("Eligible Director").
4. SHARES SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 8, an aggregate of 50,000
shares of the Company's Common Stock of the par value of $1 per share ("Common
Stock") shall be available for issuance upon the exercise of options granted
under the Plan and as deferred shares under the Plan. The shares of Common Stock
deliverable upon the exercise of options or as deferred shares may be made
available from authorized but unissued share or shares reacquired by the
Company, including shares purchased in the open market or in private
transactions, or any combination thereof. If any option granted under the Plan
shall expire or terminate for any reason without having been exercised in full,
the shares subject to, but not delivered under, such option shall again become
available for the grant of other options or deferred shares under the Plan. If
there are not enough shares of Common Stock remaining available for awards to be
made under the Plan at a particular time, the Governance Committee shall
determine how the shares shall be allocated.
5. NON-STATUTORY STOCK OPTIONS
All options granted under the Plan shall be non-statutory options not
intended to qualify under Section 422 of the Internal Revenue Code of 1986, as
amended. Each option granted under
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<PAGE> 39
the Plan shall provide that such option will not be treated as an "incentive
stock option," as that term is defined in Section 422(b) of such Code.
6. TERMS, CONDITIONS AND FORM OF OPTIONS
Each option granted under this Plan shall be evidenced by a written
agreement in such form as the Committee shall from time to time approve, which
agreements shall comply with the Plan and be subject to the following terms and
conditions:
a. Option Grant Dates. Options to purchase 5,000 shares of Common
Stock (as adjusted pursuant to Section 8) shall be granted automatically to
up to six Eligible Directors who have not received an award under the 1990
Stock Option Plan for Non-Employee Directors on the business day next
following the date on which such Eligible Director is elected or appointed
to the Board.
b. Purchase Price. The purchase price per share of Common Stock for
which each option is exercisable shall be a price reflecting the mean of
the high and the low of the price quoted on said grant date for Brush
Wellman Inc. Common Stock on the New York Stock Exchange.
c. Exercisability and Term of Options. Each option granted under the
Plan shall become exercisable six months after the date of grant. Each
option granted under the Plan shall expire ten years from the date of grant
and shall be subject to earlier termination as hereinafter provided. If an
Eligible Director subsequently becomes an employee of the Company while
remaining a member of the Board of Directors, any options held under the
Plan by such individual at the time of such commencement of employment
shall not be affected thereby.
d. Termination of Service. In the event of the termination of service
on the Board by the holder of any option, other than after completion of 5
years of service as a Director or by reason of total and permanent
disability or death, the then outstanding options of such holder granted
under the Plan may be exercised only to the extent that they were
exercisable on the date of such termination and shall expire three months
after such termination, or on their stated expiration date, whichever
occurs first.
e. Termination after 5 Years, Disability or Death. In the event of
(i) termination of service after completion of 5 years of service as a
Director or (ii) the total and permanent disability of the holder of any
option granted under the Plan, each of the then outstanding options of such
holder may be exercised at any time (after completion of the six month
period specified in paragraph c above) within five years after such
retirement or disability, but in no event after the expiration date of the
term of the option. In the event of the death of an Eligible Director, each
of his or her then outstanding options granted under the Plan shall
immediately become exercisable in full by the optionee's legal
representative at any time prior to the stated expiration date of the term
of the option.
f. Payment. Options may be exercised only upon payment to the Company
in full of the purchase price of the shares to be delivered. Such payment
shall be made in cash or in Common Stock previously owned by the optionee
for more than 6 months or in a combination of cash and such Common Stock.
The sum of the cash and the fair market value of such Common Stock shall be
at least equal to the aggregate purchase price of the shares to be
delivered.
7. DEFERRED SHARES
Deferred shares granted under this Plan shall be evidenced by a written
agreement in such form as the Committee shall from time to time approve, which
agreements shall comply with the Plan and be subject to the following terms:
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<PAGE> 40
a. Annual Grants. Beginning with the 1998 Annual Meeting of
Shareholders, each Eligible Director shall automatically be granted 500
deferred shares on the business day following the Annual Meeting of
Shareholders. Each such grant shall constitute the agreement by the Company
to deliver shares of Common Stock to the Eligible Director in the future,
at the end of the deferral period provided for in 7(b) below, in
consideration of the performance of services.
b. Deferral Period. Each grant shall be subject to a deferral period
beginning on the date of grant and ending upon termination of service as a
director. During the deferral period, the Eligible Director shall have no
right to transfer any rights under his or her award and shall have no
rights of ownership in the deferred shares and shall have no right to vote
them.
c. Dividend Equivalents. Eligible Directors will be credited with
dividend equivalents in an amount equal to the amount per share of any cash
dividends declared on the deferred shares during the deferral period. Such
dividend equivalents, which shall likewise be credited with dividend
equivalents, shall be deferred until the end of the deferral period and
shall be paid out in additional shares of Common Stock.
d. Security Arrangement for Deferred Shares. The Company shall be
entitled, but not obligated, to establish a grantor trust or similar
arrangement to secure the Company's obligations to deliver deferred shares
under the Plan; provided, however, that any funds contained therein shall
remain subject to the claims of the Company's general creditors.
8. ADJUSTMENT UPON CHANGES IN STOCK
The Committee may make or provide for such adjustments in the option price
and in the number or kind of shares or other securities covered by outstanding
options and deferred shares as the Committee in its sole discretion, exercised
in good faith, may determine is equitably required to prevent dilution or
enlargement of rights of optionees that would otherwise result from (a) any
stock dividend, stock split, combination of shares, issuance of rights or
warrants to purchase stock, recapitalization or other changes in the capital
structure of the Company, (b) any merger, consolidation, reorganization or
partial or complete liquidation, or (c) any other corporate transaction or event
having an effect similar to any of the foregoing. The Committee may also make or
provide for such adjustments in the number or kind of shares of the Company's
Common Stock or other securities which may be sold under this Plan and the
number of such securities to be awarded to each Eligible Director as the
Committee in its sole discretion, exercised in good faith, may determine is
appropriate to reflect any transaction or event described in the preceding
sentence. The determination of the Committee as to what adjustments shall be
made, and the extent thereof, shall be final, binding and conclusive.
9. ASSIGNABILITY AND TRANSFERABILITY
a. Except as otherwise determined by the Committee, no options or
deferred shares granted under the Plan shall be transferable by an Eligible
Director other than by will or the laws of descent and distribution. Except
as otherwise determined by the Committee, options shall be exercisable
during the Optionee's lifetime only by the Optionee or by the Optionee's
guardian or legal representative.
b. Notwithstanding the provisions of Section 9(a), options shall be
transferable by an Eligible Director, without payment of consideration
therefor by the transferee, to any one or more members of the Eligible
Director's Immediate Family (as defined in Rule 16a-(e) under the
Securities Exchange Act of 1934) (or to one or more trusts established
solely for the benefit of one or more members of the Eligible Director's
Immediate Family or to one or more partnerships in which the only partners
are members of the Immediate Family); provided, however, that (i) no such
transfer shall be effective unless reasonable prior notice thereof is
delivered to the Company and such transfer is thereafter effected in
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<PAGE> 41
accordance with any terms and conditions that shall have been made
applicable thereto by the Company or the Committee and (ii) any such
transferee shall be subject to the same terms and conditions hereunder as
the Eligible Director.
10. NO RIGHT TO CONTINUE AS DIRECTOR
Neither the Plan, nor the granting of an option or deferred shares nor any
other action taken pursuant to the Plan, shall constitute or be evidence of any
agreement or understanding, express or implied, that the director has a right to
continue as a director for any period of time, or at any particular rate of
compensation.
11. EFFECTIVE DATE AND DURATION OF PLAN
The Plan shall become effective immediately following approval by the
shareholders at the 1998 Annual Meeting of Shareholders. The period during which
option grants and awards of deferred shares shall be made under the Plan shall
terminate on the second business day following the 2005 Annual Meeting of
Shareholders, but such termination shall not affect the terms of any then
outstanding options or deferred shares.
12. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
The Board of Directors may suspend or terminate the Plan or amend it in any
respect whatsoever; provided, however, that without approval of the
shareholders, no amendment shall change the selection or eligibility of
directors to receive options or deferred shares under the Plan, the times at
which options shall be granted or shall become exercisable, the times at which
deferred shares shall be granted, the number of shares of Common Stock subject
to any such options, such awards of deferred shares or the purchase price under
any such option.
13. FRACTIONAL SHARES
No fractional shares shall be issued pursuant to options granted hereunder,
but in lieu thereof, the cash value of such fraction shall be paid.
14. EFFECTIVE DATE OF THE PLAN
The Plan shall be effective on the date it is approved by the shareholders
of the Company. Grants made prior to such shareholder approval shall be
contingent on such approval.
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DETACH CARD
- --------------------------------------------------------------------------------
BRUSH WELLMAN INC. -- PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Gordon D. Harnett, or if he is unable or unwilling to
act, then Michael C. Hasychak, with full power of substitution, to vote and act
for and in the name of the undersigned as fully as the undersigned could vote
and act if personally present at the annual meeting of shareholders of Brush
Wellman Inc. to be held on May 5, 1998 and at any adjournment or postponement
thereof:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES IN PROPOSAL 1, 2, 3
AND 4
<TABLE>
<S> <C>
1. ELECTION OF DIRECTORS, Nominees: WITHHOLD AUTHORITY [ ]
FOR all nominees listed below [ ] to vote for all nominees listed below
(except as indicated to the contrary below)
</TABLE>
Joseph P. Keithley, William R. Robertson, John Sherwin, Jr.
INSTRUCTION: (TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW)
-----------------------------------------------------------------------------
2. Approve an amendment to the Brush Wellman Inc. 1995 Stock Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approve adoption of the Brush Wellman Inc. 1997 Incentive Plan for
Non-Employee Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(CONTINUED, AND TO BE SIGNED ON OTHER SIDE)
<PAGE> 43
DETACH CARD
- --------------------------------------------------------------------------------
PROXY NO. SHARES
(Continued from the other side)
4. Confirming the appointment of Ernst & Young LLP as independent auditors of
the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In accordance with his judgment upon any other matter properly presented.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF DIRECTIONS
ARE NOT INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND FOR ITEMS 2,
3 AND 4.
Dated................, 1998
...........................
Signature
...........................
Signature
...........................
Title
NOTE: Please sign exactly
as name appears hereon.
Joint owners should each
sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please add your
title as such.
PLEASE SIGN, DATE AND RETURN YOUR PROXY
PROMPTLY
IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO
POSTAGE.
<PAGE> 44
DETACH CARD
- --------------------------------------------------------------------------------
CONFIDENTIAL VOTING INSTRUCTIONS
TO: THE NORTHERN TRUST COMPANY, TRUSTEE UNDER THE BRUSH WELLMAN INC. PAYSOP
Pursuant to section 6.8 of the Brush Wellman Inc. Savings and Investment Plan,
the undersigned as a participant in the Plan hereby directs the Trustee to vote
(in person or by proxy) all shares of Common Stock of Brush Wellman Inc.
credited to the undersigned's PAYSOP Contribution Account under the Plan on the
record date for the annual meeting of shareholders of Brush Wellman Inc. to be
held on May 5, 1998 and at any adjournment or postponement thereof, on the
following matters as checked below:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES IN PROPOSAL 1, 2, 3
AND 4
<TABLE>
<S> <C>
1. ELECTION OF DIRECTORS, Nominees: WITHHOLD AUTHORITY [ ]
FOR all nominees listed below [ ] to vote for all nominees listed below
(except as indicated to the contrary below)
</TABLE>
Joseph P. Keithley, William R. Robertson, John Sherwin, Jr.
INSTRUCTION: (TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW)
-----------------------------------------------------------------------------
2. Approve an amendment to the Brush Wellman Inc. 1995 Stock Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approve adoption of the Brush Wellman Inc. 1997 Incentive Plan for
Non-Employee Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(CONTINUED, AND TO BE SIGNED ON OTHER SIDE)
<PAGE> 45
DETACH CARD
- --------------------------------------------------------------------------------
(Continued from the other side)
4. Confirming the appointment of Ernst & Young LLP as independent auditors of
the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In accordance with his judgment upon any other matter properly presented.
PLEASE SIGN EXACTLY AS NAME APPEARS BELOW. THE TRUSTEE SHALL NOT VOTE SHARES OF
THE COMPANY FOR WHICH IT DOES NOT RECEIVE INSTRUCTIONS.
THIS CONFIDENTIAL VOTING INSTRUCTIONS CARD WILL BE SEEN ONLY BY AUTHORIZED
PERSONNEL OF THE TRUSTEE. THE SHARES REPRESENTED BY THIS CARD WILL BE VOTED AS
DIRECTED, OR IF DIRECTIONS ARE NOT INDICATED BUT THIS CARD IS EXECUTED AND
RETURNED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND FOR ITEMS 2, 3 AND 4.
Dated................, 1998
...........................
Signature
...........................
Signature
...........................
Title
NOTE: Please sign exactly
as name appears hereon.
When signing as attorney,
executor, administrator,
trustee or guardian, please
add your title as such.
PLEASE SIGN, DATE AND RETURN YOUR VOTING
CARD PROMPTLY
IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO
POSTAGE.
<PAGE> 46
DETACH CARD
- --------------------------------------------------------------------------------
CONFIDENTIAL VOTING INSTRUCTIONS
TO: THE NORTHERN TRUST COMPANY, TRUSTEE UNDER THE BRUSH WELLMAN INC.
SAVINGS AND INVESTMENT PLAN.
Pursuant to section 6.8 of the Brush Wellman Inc. Savings and Investment Plan,
the undersigned as a participant in the Plan hereby directs the Trustee to vote
(in person or by proxy) all shares of Common Stock of Brush Wellman Inc.
credited to the undersigned's account (other than shares credited under the
PAYSOP Contribution Account) under the Plan on the record date for the annual
meeting of shareholders of Brush Wellman Inc. to be held on May 5, 1998 and at
any adjournment or postponement thereof, on the following matters as checked
below:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES IN PROPOSAL 1, 2, 3
AND 4
<TABLE>
<S> <C>
1. ELECTION OF DIRECTORS, Nominees: WITHHOLD AUTHORITY [ ]
FOR all nominees listed below [ ] to vote for all nominees listed below
(except as indicated to the contrary below)
</TABLE>
Joseph P. Keithley, William R. Robertson, John Sherwin, Jr.
INSTRUCTION: (TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW)
-----------------------------------------------------------------------------
2. Approve an amendment to the Brush Wellman Inc. 1995 Stock Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approve adoption of the Brush Wellman Inc. 1997 Incentive Plan for
Non-Employee Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(CONTINUED, AND TO BE SIGNED ON OTHER SIDE)
<PAGE> 47
DETACH CARD
- --------------------------------------------------------------------------------
(Continued from the other side)
4. Confirming the appointment of Ernst & Young LLP as independent auditors of
the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In accordance with his judgment upon any other matter properly presented.
PLEASE SIGN EXACTLY AS NAME APPEARS BELOW. THE TRUSTEE SHALL VOTE SHARES OF THE
COMPANY FOR WHICH IT DOES NOT RECEIVE INSTRUCTIONS IN THE SAME PROPORTION AS
SUCH SHARES FOR WHICH IT RECEIVES VOTING INSTRUCTIONS.
THIS CONFIDENTIAL VOTING INSTRUCTIONS CARD WILL BE SEEN ONLY BY AUTHORIZED
PERSONNEL OF THE TRUSTEE. THE SHARES REPRESENTED BY THIS CARD WILL BE VOTED AS
DIRECTED, OR IF DIRECTIONS ARE NOT INDICATED BUT THIS CARD IS EXECUTED AND
RETURNED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND FOR ITEMS 2, 3 AND 4.
Dated................, 1998
...........................
Signature
...........................
Signature
...........................
Title
NOTE: Please sign exactly
as name appears hereon.
When signing as attorney,
executor, administrator,
trustee or guardian, please
add your title as such.
PLEASE SIGN, DATE AND RETURN YOUR VOTING
CARD PROMPTLY
IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO
POSTAGE.
