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:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
Corning Incorporated
(Name of Registrant as Specified In Its Charter)
Corning Incorporated
(Name of Person(s) Filing Proxy Statement)
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>
Notice of 1998
Annual Meeting of Shareholders
and Proxy Statement
[CORNING LOGO]
<PAGE>
Please Note the Accompanying
Proxy Statement and Proxy Card
It is important to you and to the Corporation that your shares be represented at
the meeting regardless of the number you may hold. If you are unable to be
present in person, we ask that you sign, date and return the enclosed Proxy in
favor of the Proxy Committee designated by the Board of Directors.
Notice of Annual Meeting
To Shareholders of Corning
Incorporated:
Notice is hereby given that the Annual Meeting of the holders of Common Stock
and Series B 8% Convertible Preferred Stock of Corning Incorporated will be held
in the office of the Corporation [in the Corning Glass Center] in the City of
Corning, State of New York, on Thursday, April 30, 1998 at 11:00 o'clock A.M.
The principal business of the meeting will be:
[a] To elect six Directors for three-year terms;
[b] To consider and take action on a proposed 1998 Variable Compensation Plan,
as more particularly described on pages 23-25 in the attached Proxy
Statement;
[c] To consider and take action on a proposed 1998 Worldwide Employee Share
Purchase Plan, as more particularly described on pages 25-28 in the attached
Proxy Statement;
[d] To consider and take action on a proposed 1998 Employee Equity Participation
Program, as more particularly described on pages 28-34 in the attached Proxy
Statement; and
[e] To transact such other business as may properly come before the meeting.
A. John Peck, Jr.
Vice President and Secretary
Corning Incorporated
One Riverfront Plaza
Corning, New York 14831
March 11, 1998
<PAGE>
Proxy Statement
Relating to the Annual Meeting of Shareholders, April 30, 1998. The
enclosed Proxy is solicited by the Board of Directors of Corning Incorporated
[hereinafter referred to as the "Corporation" or "Corning"], Corning, New York
14831. The Corporation anticipates that this Proxy Statement and the enclosed
Proxy will be mailed to holders of the Corporation's Common Stock and Series B
8% Convertible Preferred Stock [hereinafter referred to as the "Preferred
Stock"] commencing on or about March 19, 1998. The Proxy may be revoked by
written notice to the Corporation prior to the meeting or by written notice to
the Secretary at the meeting at any time prior to being voted. Each valid and
timely Proxy not revoked will be voted at the meeting in accordance with the
instructions thereon.
Holders of Common and Preferred Stock on the books of the Corporation at
the close of business on March 11, 1998 are entitled to notice of and to vote at
the meeting. On February 4, 1998, the Corporation had outstanding 231,617,033
shares of Common Stock, each entitled to one vote, and 197,213 shares of
Preferred Stock, each entitled to four votes.
Action to be Taken Under
the Proxy
The persons acting under the Proxy will vote the shares represented thereby
for the election of Roger G. Ackerman, Lawrence S. Eagleburger, John H. Foster,
Norman E. Garrity, Catherine A. Rein and William D. Smithburg as directors and
for the proposals set forth in clauses [b], [c] and [d] of the Notice of Annual
Meeting of Shareholders dated March 11, 1998 or, if otherwise directed by the
person executing the Proxy, in accordance with such direction. The Board of
Directors does not know of any other business to be brought before the meeting,
but it is intended that, as to any such other business, a vote may be cast
pursuant to the Proxy in accordance with the judgment of the person or persons
acting thereunder. Should any above-named nominee for the office of director
become unable to accept nomination or election, which is not anticipated, it is
intended that the persons acting under the Proxy will vote for the election of
such other person as the Board of Directors may recommend.
Voting Procedures
New York's Business Corporation Law provides that, a quorum being present,
nominees for the office of director are to be elected by a plurality of votes
cast at the meeting. Only shares affirmatively voted in favor of a nominee will
be counted toward the achievement of a plurality. Votes withheld [including
broker non-votes] are counted as present for the purpose of determining a quorum
but are not counted as votes cast in determining the plurality.
With respect to the items described in clauses [b], [c] and [d] of the
Notice of Annual Meeting dated March 11, 1998, New York's Business Corporation
Law provides that, a quorum being present, approval is to be determined by a
majority of the votes cast at the meeting. Abstentions and broker non-votes are
counted in determining
1
<PAGE>
the existence of a quorum but are not counted as votes cast for the proposals as
to which the shareholder abstained or the broker withheld authority. Abstentions
and broker non-votes have the effect of reducing the number of affirmative votes
required to achieve a majority of the votes cast.
Nominees for Election as Directors
The Corporation's Board of Directors is divided into three classes. Each of
the above-named nominees for the office of director is a member of the present
Board of Directors and was elected by the Corporation's security holders. The
terms of Roger G. Ackerman, Lawrence S. Eagleburger, John H. Foster, Norman E.
Garrity, Catherine A. Rein and William D. Smithburg expire this year. No nominee
is now the beneficial owner of any of the securities [other than directors'
qualifying shares] of any of the Corporation's subsidiaries. Certain information
with respect to nominees for election as directors and directors whose term of
office will continue after the Annual Meeting is set forth below.
2
<PAGE>
Nominees for Election -- Terms Expiring 2001
[PHOTO OF: ROGER G. ACKERMAN]
Roger G. Ackerman*
Chairman of the Board and Chief Executive Officer
Corning Incorporated
Mr. Ackerman, a graduate of Rutgers University and the PMD program at Harvard,
has served Corning since 1962 in a variety of engineering, sales and management
positions. In 1972 he was elected the president of a Corning subsidiary, Corhart
Refractories Co., in 1975 the general manager and vice president of the Ceramic
Products Division and in 1980 a senior vice president. In 1981 Mr. Ackerman
became the director of the Manufacturing and Engineering Division, in 1983 the
president of MetPath Inc. [now Quest Diagnostics Incorporated] and in 1985 group
president and a director. In 1990 he was elected the president and chief
operating officer of Corning and in 1996 he was elected to his present position.
Mr. Ackerman, 59, is a director of The Pittston Company, The Massachusetts
Mutual Life Insurance Company and Dow Corning Corporation, a trustee of the
Corning Incorporated Foundation, chairman of The Business Council of New York
State and president of the Foundation for the Malcolm Baldridge National Quality
Award.
[PHOTO OF: THE HONORABLE LAWRENCE S. EAGLEBURGER]
The Honorable Lawrence S. Eagleburger[dbldag]
Senior Foreign Policy Advisor
Baker, Donelson, Bearman & Caldwell, Washington, D.C.
A veteran of the U.S. Army, Mr. Eagleburger received B.S. and M.S. degrees from
the University of Wisconsin and retired from the U.S. Department of State in
1984 after 27 years of government service. He returned to U.S. government
service in 1989, becoming Deputy Secretary of State in 1989, Acting Secretary of
State in 1992 and Secretary of State from December 8, 1992 to January 19, 1993,
following which he joined the law firm of Baker, Donelson, Bearman & Caldwell as
senior foreign policy advisor. Mr. Eagleburger, 67, is a director of Dresser
Industries, Inc., Phillips Petroleum Company, Universal Corporation, Stimsonite
Corp. and COMSAT Corp. He was elected a director of the Corporation in 1995.
3
<PAGE>
[PHOTO OF: JOHN H. FOSTER]
John H. Foster[dbldag]
Chairman of the Board
NovaCare, Inc.
Mr. Foster, founder and chairman of the board of NovaCare, Inc., a national
provider of physical rehabilitation and employee services, is also founder,
chairman of the board and chief executive officer of Apogee, Inc., a national
provider of mental health services, and of Foster Management Company, an
investment advisory firm. Mr. Foster, 55, a graduate of Williams College and the
Amos Tuck School of Business Administration at Dartmouth College, is a trustee
of the Hospital for Special Surgery, the Children's Hospital of Philadelphia and
the Independence Seaport Museum and a member of the Dean's Council of the
Harvard School of Public Health and the Amos Tuck School Board of Overseers. He
was elected a director of the Corporation in 1994.
[PHOTO OF: NORMAN E. GARRITY]
Norman E. Garrity*
President, Corning Technologies
Corning Incorporated
Mr. Garrity, a graduate of, and with an advanced degree from, Bucknell
University, has served Corning in various production, sales and marketing, and
management positions since 1966. In 1984 he was named general manager of the
Electrical Products Division and a vice president, in 1987 senior vice president
of manufacturing and engineering for the Specialty Materials Group and in 1990
executive vice president. In 1996 he was elected a director of the Corporation
and to his present position. Mr. Garrity, 56, is a director of Work & Technology
Institute, Dow Corning Corporation, the National Association of Manufacturers, a
trustee of the Corning Incorporated Foundation and Bucknell University and
co-chair of the Coalition for Open Trade.
[PHOTO OF: CATHERINE A. REIN]
Catherine A. Rein[dbldag]
Senior Executive Vice President
Metropolitan Life Insurance Company
Ms. Rein, a graduate of Pennsylvania State University and New York University,
joined Metropolitan Life Insurance Company in 1985 as a vice president in the
human resources department. In 1988 she was named senior vice president and in
1989 was named executive vice president in charge of the business services group
and corporate development and services departments and in 1998 senior executive
vice president. Prior to 1985 she was vice president and general counsel for The
Continental Group, Inc. Ms. Rein, 54, elected a director of the Corporation in
1990, is a director of the Bank of New York, Inc., New England Investment
Companies, Inc., Inroads/NYC, Inc. and GPU, Inc., a trustee emeritus of the
National Urban League and trustee of the New York University Law Center
Foundation.
4
<PAGE>
[PHOTO OF: WILLIAM D. SMITHBURG]
William D. Smithburg[dbldag]
Retired Chairman, President and Chief Executive Officer
The Quaker Oats Company
A graduate of DePaul University with an MBA from Northwestern University, Mr.
Smithburg joined Quaker Oats in 1966. He was elected a vice president in 1971,
executive vice president--U.S. grocery products in 1976, president in 1979,
chairman and chief executive officer in 1983 and served as president from
November 1990 to January 1993 and from November 1995 to November 1997 when he
retired. Mr. Smithburg, who is 59, was elected a director of the Corporation in
1987 and is a director of Abbott Laboratories, Northern Trust Corporation and
Prime Capital Corp.
Directors Continuing in Office
[PHOTO OF: ROBERT BARKER]
Robert Barker[dbldag]
Professor and Provost Emeritus, Cornell University
Dr. Barker, a graduate of the University of British Columbia and the University
of California at Berkeley, has served on the faculties of the University of Iowa
and Michigan State University and in 1995 retired after having been associated
with Cornell University since 1979 as Professor of Biochemistry, Director of the
Division of Biological Sciences, as Vice President for Research and Advanced
Studies, as Provost, as Senior Provost and as Director and Senior Fellow of the
Center for the Environment. He is now Professor and Provost Emeritus of Cornell
University. He has served as a consultant to the National Institutes of Health,
the National Academy of Sciences, the Oak Ridge and Los Alamos National
Laboratories and the National Board of Medical Examiners. Dr. Barker is 69 and
was elected a director of the Corporation in 1986. His term expires at the 2000
Annual Meeting.
5
<PAGE>
[PHOTO OF: JOHN SEELY BROWN]
John Seely Brown[dbldag]
Vice President and Chief Scientist
Xerox Corporation
A graduate of Brown University with advanced degrees from the University of
Michigan, Dr. Brown has served Xerox Corporation since 1978 in various
scientific research positions. In 1986 he was elected vice president in charge
of advanced research and in 1990 director of the Palo Alto Research Center and
in 1992 was appointed chief scientist of Xerox. Dr. Brown, 57, is a director of
NextLevel Systems Inc. and Varian Associates Inc., an advisory director of
numerous scientific and information technology organizations and a member of
numerous professional societies. He was elected a director of the Corporation in
1996. His term expires at the 1999 Annual Meeting.
[PHOTO OF: VAN C. CAMPBELL]
Van C. Campbell*
Vice Chairman, Corning Incorporated
A graduate of Cornell University with an MBA from Harvard, Mr. Campbell joined
Corning in 1964. Elected an assistant treasurer in 1971, treasurer in 1972, a
vice president in 1973, financial vice president in 1975 and senior vice
president for finance in 1980, he became general manager of the Consumer
Products Division in October 1981. He was elected vice chairman responsible for
finance and administration and a director in 1983. Mr. Campbell, who is 59, is a
director of Dow Corning Corporation, Armstrong World Industries, Inc., General
Signal Corporation, Covance Inc. and Quest Diagnostics Incorporated and a
trustee of the Corning Incorporated Foundation. His term expires at the 2000
Annual Meeting.
[PHOTO OF: GORDON GUND]
Gordon Gund[dbldag]
President and Chief Executive Officer
Gund Investment Corporation
Mr. Gund, president and chief executive officer of Gund Investment Corporation,
which manages diversified investment activities, is principal owner of the
Cleveland Cavaliers National Basketball Association team, chairman of the Board
of Governors of the National Basketball Association, co-owner of the San Jose
Sharks National Hockey League team and a member of the Board of Governors of the
National Hockey League. He is chairman and chief executive officer of Gund
Business Enterprises, which owns Nationwide Advertising Services, Inc. and
CAVS/Gund Arena Company. He is a director of the Kellogg Company and co-founder
and chairman of The Foundation Fighting Blindness. Mr. Gund, 58, elected a
director of the Corporation in 1990, is a graduate of Harvard University. His
term expires at the 1999 Annual Meeting.
6
<PAGE>
[PHOTO OF: JOHN M HENNESSY]
John M. Hennessy[dbldag]
Chairman Private Equity
Credit Suisse First Boston Corporation
Mr. Hennessy, a graduate of Harvard College, was a National Science Foundation
Fellow at the Sloan School, Massachusetts Institute of Technology, in economics
and finance and served as Deputy Assistant Secretary of Treasury Affairs for
Development Finance from 1970 to 1972 and as Assistant Secretary for
International Affairs, Department of Treasury, from 1972 to 1974. He became
managing director of First Boston Corporation, a subsidiary of CS First Boston,
Inc., in 1974 and was named vice chairman of First Boston Corporation in 1982.
In 1989 he was elected chairman of the executive board and group chief executive
officer of CS First Boston Inc. He retired from the latter position on December
31, 1996 and currently acts as non-executive chairman of the firm's private
equity investment business. Mr. Hennessy, 61, was elected a director of the
Corporation in 1989 and is a director of M.I.T. Corporation; Credit Suisse
Group, Zurich and numerous civic and philanthropic organizations, including
United Negro College Funds and Manhattan Institute. His term expires at the 1999
Annual Meeting.
[PHOTO OF: JAMES R. HOUGHTON]
James R. Houghton[dbldag]
Retired Chairman of the Board and Chief Executive Officer
Corning Incorporated
A graduate of Harvard College and Harvard Business School, Mr. Houghton joined
Corning in 1962. He became a vice president of Corning and general manager of
the Consumer Products Division in 1968, a director in 1969, vice chairman in
1971, chairman of the executive committee and chief strategic officer in 1980
and chairman and chief executive officer in April 1983, retiring in April 1996.
Mr. Houghton, 61, is a director of Metropolitan Life Insurance Company, J. P.
Morgan & Co. Incorporated and Exxon Corporation. His term expires at the 2000
Annual Meeting.
7
<PAGE>
[PHOTO OF: JAMES W. KINNEAR]
James W. Kinnear[dbldag]
Retired President and Chief Executive Officer
Texaco Inc.
A 1950 graduate of the United States Naval Academy, Mr. Kinnear joined Texaco in
1954. In 1977 he was elected a director, and from 1987 until April, 1993 was
president and chief executive officer of Texaco Inc. Mr. Kinnear, 69, was
elected a director of the Corporation in 1978 and is a director of ASARCO
Incorporated and Paine Webber Group Inc. and an advisory director of Unilever
N.V. and Unilever PLC. He is Chairman of the Metropolitan Opera Association, a
member of the Board of Overseers and Managers of Memorial Sloan-Kettering Cancer
Center and a member of the Board of Managers of The New York Botanical Garden.
His term expires at the 2000 Annual Meeting.
[PHOTO OF: JOHN W. LOOSE]
John W. Loose*
President, Corning Communications
Corning Incorporated
Mr. Loose, a graduate of Earlham College and the PMD program at Harvard, has
served Corning in various commercial and management positions since 1964. In
1986 he was named vice president and general manager of Asia Pacific and in 1988
senior vice president, International as well as president of Corning Asahi Video
Products Company. In 1990 he was named executive vice president, Information
Display Group. In 1993 he was elected president of Corning Vitro Corporation,
later named Corning Consumer Products Company, and in 1996 to his present
position. Mr. Loose, 56, is a director of Polaroid Corporation, chairman of the
board of Siecor Corporation and a trustee of Corning Incorporated Foundation. He
was elected a director of the Corporation in 1996. His term expires at the 1999
Annual Meeting.
[PHOTO OF: JAMES J. O'CONNOR]
James J. O'Connor[dbldag]
Chairman of the Board and Chief Executive Officer
Unicom Corporation
A graduate of Holy Cross College, Harvard Business School and Georgetown Law
School and a veteran of the U.S. Air Force, Mr. O'Connor joined Commonwealth
Edison Company (the principal subsidiary of Unicom Corporation) in 1963. He
became a vice president of Commonwealth Edison in 1970, executive vice president
in 1973, president in 1977, a director in 1978 and chairman and chief executive
officer in 1980. In 1994 he was also named chairman and chief executive officer
of Unicom Corporation, which then became the parent company of Commonwealth
Edison. Mr. O'Connor, 60, is a director of Tribune Company, First Chicago
Corporation, The First National Bank of Chicago and United Airlines. He was
elected a director of the Corporation in 1984. His term expires at the 2000
Annual Meeting.
8
<PAGE>
[PHOTO OF: HENRY ROSOVSKY]
Henry Rosovsky[dbldag]
Geyser University Professor Emeritus
Harvard University
Dr. Rosovsky, the Lewis P. and Linda L. Geyser University Professor Emeritus,
retired in 1996 after having been associated with the Harvard University
economics department since 1965. From 1973 to 1984 he served as dean of the
faculty of arts and sciences. In 1971 he served as consultant to the President's
Commission on International Trade and Foreign Investment, and in 1977 and 1978
as a consultant to the Asian Development Bank. Dr. Rosovsky, a graduate of the
College of William and Mary with advanced degrees from Harvard, is a director of
Paine Webber Group, Inc. and The Japan Fund, Inc. He is 70 and was elected a
director of the Corporation in 1980. His term expires at the 1999 Annual
Meeting.
[PHOTO OF: H. ONNO RUDING]
H. Onno Ruding[dbldag]
Vice Chairman, Citicorp and Citibank, N.A.
Dr. Ruding, with advanced degrees in economics from Erasmus University,
Rotterdam, has served private firms and the public in various financial
positions, including executive director of the International Monetary Fund from
1977-1980, Minister of Finance of The Netherlands from 1982-1989 and chairman of
the Netherlands Christian Federation of Employers from 1990-1992. He became a
director of Citicorp in 1990 and was appointed vice chairman of Citicorp and
Citibank, N.A. in 1992. Dr. Ruding, 58, is a director of Pechiney, an advisory
director of Unilever N.V. and Unilever PLC, an advisor to Robeco and a member of
the board of trustees of Mount Sinai Hospital and a member of the Committee for
European Monetary Union and the Trilateral Commission. He was elected a director
of the Corporation in 1995. His term expires at the 1999 Annual Meeting.
* Member of the Executive Committee
[dbldag] Alternate member of the Executive Committee
9
<PAGE>
Security Ownership of Certain Beneficial Owners
Unless otherwise indicated, each of the persons named in paragraph [a] and
in paragraph [b] below has sole voting and investment power with respect to the
shares listed.
[a] The only persons who, to the knowledge of the management, owned
beneficially on December 31, 1997 more than 5% of the outstanding shares of
Common and Preferred Stock of the Corporation are set forth below:
<TABLE>
<CAPTION>
Shares Owned
Name and Address and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class
- ------------------------------------------------------------------------
<S> <C> <C>
Brinson Partners, Inc. 13,416,428 Common[1] 5.79%
209 South LaSalle Street
Chicago, IL 60604-1295
Corning Incorporated 12,226,978 Common[2] 5.27%
Investment Plans
c/o The Chase Manhattan Bank, N.A.
770 Broadway
New York, NY 10003
- ------------------------------------------------------------------------
</TABLE>
[1] Brinson Partners, Inc. and its direct and indirect parent entities, Brinson
Holdings, Inc., SBC Holding (USA), Inc. and Swiss Bank Corporation, share
voting and investment power with respect to such shares.
[2] Includes 11,434,966 shares of Common Stock and the voting equivalent thereof
in 198,003 shares of Preferred Stock [being 100% of the Class] held by The Chase
Manhattan Bank, N.A. as the trustee of the Corporation's Investment Plans. Each
share of Common Stock is entitled to one vote. Each share of Preferred Stock is
entitled to four votes and is convertible into 4.79 shares of Common Stock. See
also footnote [3] of paragraph [b] below.
[b] Set forth below is the number of shares of Common Stock [and the voting
equivalent thereof represented by outstanding shares of Preferred Stock] of the
Corporation beneficially owned on December 31, 1997 by the directors and
nominees for directors; by the chief executive officer and the four other most
highly compensated executive officers [collectively, the "named executive
officers"] and by all directors and executive officers of the Corporation as a
group:
<TABLE>
<CAPTION>
Shares Owned
and Nature Percent
of Beneficial of
Name Ownership[1][2][3] Class[7]
- ------------------------------------------------------------
Directors
- ---------
<S> <C> <C>
Robert Barker 9,941[4] --
- ------------------------------------------------------------
John S. Brown 6,229[4] --
- ------------------------------------------------------------
Lawrence S. Eagleburger 6,456 --
- ------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Shares Owned
and Nature Percent
of Beneficial of
Name Ownership[1][2][3] Class[7]
- --------------------------------------------------------------
Directors
- ---------
<S> <C> <C>
John H. Foster 6,629[4] --
- --------------------------------------------------------------
Gordon Gund 226,878[4] --
- --------------------------------------------------------------
John M. Hennessy 9,524[4] --
- --------------------------------------------------------------
James R. Houghton 1,215,917[5] --
- --------------------------------------------------------------
James W. Kinnear 11,029[4] --
- --------------------------------------------------------------
James J. O'Connor 11,621[4] --
- --------------------------------------------------------------
Catherine A. Rein 9,029[4] --
- --------------------------------------------------------------
Henry Rosovsky 8,949[4] --
- --------------------------------------------------------------
H. Onno Ruding 6,888[4] --
- --------------------------------------------------------------
William D. Smithburg 8,229[4] --
- --------------------------------------------------------------
Named Executive Officers
- ------------------------
[*also serve as directors]
Roger G. Ackerman* 520,999 --
- --------------------------------------------------------------
Van C. Campbell* 426,136 --
- --------------------------------------------------------------
Norman E. Garrity* 391,160 --
- --------------------------------------------------------------
John W. Loose* 343,438 --
- --------------------------------------------------------------
James M. Ramich 168,661 --
- --------------------------------------------------------------
All Directors and Executive
Officers as a Group 4,708,739[6] 2.03%
</TABLE>
[1] Includes shares of Common Stock, subject to forfeiture and restrictions on
transfer, granted pursuant to the Corporation's Incentive Stock Plans as well as
options to purchase shares of Common Stock exercisable within 60 days under the
Corporation's Stock Option Plans. Messrs. Ackerman, Campbell, Garrity, Houghton,
Loose and Ramich have the right to purchase 162,300; 139,141; 158,884; 394,077;
112,230 and 59,933 shares, respectively, pursuant to such options. All directors
and executive officers as a group hold options to purchase 1,474,668 such
shares.
[2] Includes shares of Common Stock, subject to forfeiture and restrictions on
transfer, issued pursuant to the Corporation's Restricted Stock Plans for
Non-Employee Directors.
[3] Includes shares of Common Stock and the voting equivalent thereof in
Preferred Stock on the basis of four shares of Common Stock for each share of
Preferred Stock, held by The Chase Manhattan Bank, N.A. as the trustee of the
Corporation's Investment Plans for the benefit of the members of the group, who
may instruct the trustee as to the voting of such shares. If no instructions are
received, the
11
<PAGE>
trustee votes the shares in the same proportion as it votes all of the shares
for which instructions were received. Shares of Preferred Stock may be held only
by the trustee. The power to dispose of shares of Common and Preferred Stock is
also restricted by the provisions of the Plans. The trustee holds for the
benefit of Messrs. Ackerman, Campbell, Garrity, Houghton, Loose and Ramich, and
all directors and executive officers as a group the equivalent of 25,660; 8,446;
15,126; 50,668;13,695; 7,768 and 195,948 shares of Common Stock, respectively,
and for the benefit of all employees who participate in the Plans the equivalent
of 12,226,978 shares of Common Stock, each entitled to one vote, being
11,434,966 shares of Common Stock and the voting equivalent of 198,003 shares
[being 100% of the Class] of Preferred Stock, each entitled to four votes.
[4] In addition, Messrs. Barker, Brown, Foster, Gund, Hennessy, Kinnear,
O'Connor, Rosovsky, Ruding and Smithburg and Ms. Rein have credited to their
accounts the equivalent of an aggregate of 12,077; 1,436; 3,454; 8,516; 10,671;
19,563; 7,220; 9,855; 1,105; 15,831 and 563 shares, respectively, of Common
Stock in valuation entry form under the Corporation's Deferred Compensation Plan
for Directors. Deferred fees will be paid solely in cash at or following
termination of service as a director.
[5] Includes 509,836 shares held in trusts by Market Street Trust Company as a
co-trustee for the benefit of Mr. Houghton as income beneficiary. Does not
include 9,722,220 shares held in trusts by Market Street Trust Company, as to
which Mr. Houghton disclaims beneficial ownership. Market Street Trust Company
is a limited purpose trust company controlled by the Houghton family, the
directors of which include James R. Houghton and other Houghton family members.
[6] Does not include 114,179 shares owned by the spouses, minor children and
family partnerships of certain executive officers and directors as to which such
officers and directors disclaim beneficial ownership.
[7] Unless otherwise indicated, does not exceed 1% of the Class of Common Stock.
Report of the Compensation Committee of the Board of Directors on Executive
Compensation
Executive compensation at Corning is administered by the Compensation
Committee of the Board of Directors, composed entirely of non-employee
directors. The following is the Committee's report.
"The Compensation Committee reviews and recommends executive compensation
levels, cash and equity incentives for executive officers and reports such
recommendations to the Board for its consideration and action.
The philosophy underlying, and the strategies guiding, the Committee's
recommendations regarding the Corporation's compensation program, the impact of
performance within that program and a description of actions affecting 1997
compensation for Mr. Ackerman, Chairman of the Board and Chief Executive Officer
of the Corporation, are discussed below.
12
<PAGE>
Compensation Philosophy
The Committee is responsible for ensuring that executive compensation is
based on objective measures of performance at the individual, corporate and
applicable business unit level. The Committee believes that compensation should
be driven by the long-term interests of the shareholders and should be directly
linked to corporate performance.
Compensation Strategy
The Committee's basic strategic compensation principles are as follows:
[bullet] Executive compensation will reward performance and contribution to
shareholder value and be competitive with positions of similar
responsibility at other companies of comparable complexity, size
and historical performance. The companies which meet such
parameters are referred to as Corning's comparable companies. The
list of comparable companies is modified periodically, most
recently in 1997 to take into account changes in the Corporation
as a result of the spin-off of the healthcare services businesses
at the end of 1996 and the proposed divestiture of the consumer
products business.
[bullet] As employees assume greater responsibilities, an increasing share
of their total compensation package will be derived from variable
incentive compensation [both of a long- and short-term nature]
generated by achievement of performance objectives designed to
produce long-term growth in shareholder value.
[bullet] Performance-based equity incentives and stock option grants are
effective ways to align the long-term interests of employees with
those of shareholders.
[bullet] Stock ownership fosters commitment to long-term shareholder value.
Executives are encouraged to own and hold Common Stock through the
design of the Corporation's long-term equity plans and in
communications which stress the commitment to long-term value.
[bullet] The benefits package for executives will be substantially
identical to that offered to all salaried employees and will be
designed to encourage long-term commitment to the Corporation.
The executive compensation program is composed of three elements: base
salary; annual incentives and long-term equity based incentives, including stock
options. The Committee tests annually each element of the compensation program
against market surveys provided by independent compensation consultants. Such
surveys currently include companies engaged in a variety of manufacturing and
service industries, many of which are "Fortune 500" companies and companies
included in the S&P 500 Index and some of which are included in the S&P
Diversified Manufacturing Index.
It is Corning's compensation strategy to target base salary at
approximately the median of the Corning comparable companies and to have the
13
<PAGE>
equity-based and variable pay incentive compensation components drive total
compensation to the top quartile of such companies if performance meets or
exceeds such top quartile performance.
Compensation Deductibility
The Committee intends to continue to set performance-based goals annually
under the Corporation's Variable Compensation Plan and periodically for longer
terms under the Corporate Performance Plan [described in the section below
entitled Compensation Program] and to deduct compensation paid upon attainment
of such goals in such Plans to the extent consistent with the provisions of
Section 162[m] of the Internal Revenue Code of 1986.
Compensation Program
Annual compensation of the named executive officers as shown in the
"Salary" and "Bonus" columns of the Summary Compensation Table, and
recommendations by the Committee to adjust salary levels and bonus targets, are
based on an individual's responsibilities and performance against established
financial goals such as return on equity, net income and earnings per share,
overall corporate performance and external comparative compensation information.
Annual variable incentives are paid in cash through the Variable
Compensation Plan under which minimum, target and maximum awards are set by the
Committee based on position level. Awards are earned based on achievement of
annual predetermined net earnings goals set by the Committee. In 1997
performance against such goals was very strong with all goals being exceeded.
Under the 1994 Employee Equity Participation Program, the Corporation
developed a series of performance-based plans [herein referred to as the
"Corporate Performance Plan"]. The Corporate Performance Plan provides the
mechanism to reward improvement in corporate performance as measured by earnings
per share.
Under the Corporate Performance Plan covering the 1996-1998 performance
period, the Committee established minimum, target and maximum goals for each of
1996, 1997 and 1998. It awarded shares of Common Stock at target to executive
officers in December 1995 for 1996 performance, in February 1997 for 1997
performance and in December 1997 for 1998 performance. Shares earned under the
Plan may range from 0% to 150% of the target award, depending on actual
performance results. Shares earned for 1997 and 1998 will remain subject to
forfeiture and restrictions on transfer for two years following the end of the
performance period. Based on an increase in 1997 of earnings per share of 28%
compared to 1996, the Committee determined that 150% of the shares awarded in
February 1997 to the named executive officers were earned under the Corporate
Performance Plan [as indicated in the Corporate Performance Plan Activity
Table].
Stock options for the entire three-year performance period of 1996-1998
were granted to the named executive officers in December 1995, in a defined
ratio
14
<PAGE>
to the "performance-based" shares described above. Options to purchase two
shares of Common Stock were granted at the inception of such performance period
for every one performance-based share to be issued over the three-year
performance period. Additional stock options were granted in 1997, and may be
granted in 1998, to reflect changes in job roles and increased responsibilities.
Stock options granted to the named executive officers in 1997 are shown in the
table of Option Grants in Last Fiscal Year.
In determining the number of stock options and shares to be made available
to executives under the Corporate Performance Plan, the Committee evaluated the
comparative external market data described above with respect to the stock
options granted and performance-based shares awarded by the Corning comparable
companies, the number of shares of Common Stock already subject to restrictions
and to options and the number of additional shares to be awarded necessary to
align directly management and shareholder interests.
The pension and welfare benefits provided to executives are substantially
equal to those provided to all salaried employees. Employees whose pensionable
earnings exceed federal limits are eligible to participate in non-qualified
supplemental retirement and investment plans.
CEO Compensation Actions--1997
1997 was a year of significant change and transition for the Corporation
following the distribution to the Corporation's shareholders of the common stock
of both Quest Diagnostics Incorporated and Covance Inc. at the end of 1996. The
Corporation announced in May 1997 its intention to divest its consumer products
business. The Corporation's 1997 financial performance was strong and
consistent, as demonstrated by an increase in earnings per share of 28% compared
to 1996. Targets set under many of the Corporation's executive compensation
programs were met or exceeded by this outstanding performance.
Base Salary: Effective January 1, 1997, the Committee increased Mr.
Ackerman's base salary for 1997 by approximately 3.5%, from $725,000 per annum
to $750,000 per annum, and increased his incentive target for 1997 from 80% to
85% of base salary.
Annual Incentives: Mr. Ackerman's bonus for 1997 was composed of two
parts: First, Mr. Ackerman received 149% of his 1997 base salary under the
Variable Compensation Plan. This award was based on the Corporation's achieving
net profit after tax equivalent to 175% of the target opportunity set by the
Committee in February 1997. Second, Mr. Ackerman received 7.55% [1997 minimum =
0%; maximum = 10%] of his base salary under the Corporation's GoalSharing Plan,
a variable compensation plan in which almost all of the Corporation's employees
participate.
Long-Term Incentives: Under the Corporate Performance Plan, Mr. Ackerman
earned for 1997 performance 60,000 [or 150%] of the 40,000 shares granted to
him in February
15
<PAGE>
1997 in connection with the 1997 earnings per share targets. In addition, the
Committee granted Mr. Ackerman stock options covering 14,000 shares in 1997 in
recognition of his increased responsibilities as chief executive officer. In
December 1997 Mr. Ackerman was awarded 37,500 shares at target under the
Corporate Performance Plan for 1998. Such shares are shown in the Corporate
Performance Plan Table.
Conclusion
The Committee believes that the quality of executive leadership
significantly affects the long-term performance of the Corporation and that it
is in the best interest of the shareholders to compensate fairly executive
leadership for achievement meeting or exceeding the high standards set by the
Committee, so long as there is corresponding risk when performance falls short
of such standards. A primary goal of the Committee is to relate compensation to
corporate performance. Based on the Corporation's performance in 1997, the
Committee believes that Corning's current executive compensation program meets
such standards and has contributed, and will continue to contribute, to the
Corporation's and its shareholders' long-term success.
The Compensation Committee:
James W. Kinnear, Chairman
James J. O'Connor
Catherine A. Rein
William D. Smithburg"
Performance Graphs
Set forth opposite are graphs illustrating the Corporation's cumulative
total shareholder return over the last five years and over the last ten years
compared to two performance indicators of the stock market, the S&P 500 and the
S&P Diversified Manufacturing Companies in which the Corporation is included.
The latter includes the capital weighted performance results of those companies
in the diversified manufacturing companies classification that are also included
in the S&P 500. In prior years the Corporation had compared its shareholder
return to the S&P Miscellaneous Industrial Companies classification, a
classification which is no longer published.
The ten-year cumulative total shareholder return graph shows the
Corporation's compound annual return to be 23.7% compared to annual returns of
25.0% for the S&P 500 and 23.3% for the S&P Diversified Manufacturing Companies.
The five-year cumulative total shareholder return graph, covering a period
heavily influenced by the breast implant controversy and subsequent Chapter 11
filing by Dow Corning Corporation, shows annual returns for the Corporation, the
S&P 500 and the S&P Diversified Manufacturing Companies of 5.5%, 20.2% and
23.0%, respectively.
On December 31, 1996 the Corporation distributed to its shareholders the
common stock of Quest Diagnostics Incorporated and Covance Inc. Such companies
represented 16% of the market price of Corning Common Stock on such date. The
total return of Corning Common Stock for each of the years 1987 through 1995
reflected in the graphs set forth opposite has been adjusted accordingly.
16
<PAGE>
[FIVE-YEAR COMPARISON GRAPHIC OMITTED]
[line chart]
Comparison of Five-Year Cumlative Total Return
Among Corning Incorporated,
S&P 500 and S&P Manufacturing (Diversified) Companies
(Fiscal Years Ending December 31)
Year Corning S&P 500 S&P Manufacturing
Incorporated (Diversified)
1992 100 100 100
1993 76.5 109.9 121.4
1994 83.5 111.3 125.7
1995 91.4 153.2 177
1996 134.2 188.3 243.9
1997 130.4 251.1 290.4
[TEN-YEAR COMPARISON GRAPHIC OMITTED]
[line chart]
Comparison of Ten-Year Cumlative Total Return
Among Corning Incorporated,
S&P 500 and S&P Manufacturing (Diversified) Companies
(Fiscal Years Ending December 31)
Year Corning S&P 500 S&P Manufacturing
Incorporated (Diversified)
1987 100 100 100
1988 152.4 116.6 104.1
1989 193.4 153.6 116.3
1990 206 148.8 115.3
1991 358.5 193.4 141.3
1992 356.1 207.7 153.2
1993 272.4 228.4 186
1994 297.3 231.3 192.5
1995 325.6 318.3 271.1
1996 478 391.2 373.6
1997 464.3 521.7 444.9
17
<PAGE>
Executive Compensation
The following tables and charts set forth information with respect to
benefits made available, and compensation paid or accrued, by the Corporation
during the year ended December 31, 1997 for services by each of the chief
executive officer and the four other most highly compensated executive officers
whose total salary and bonus exceeded $100,000. The Corporation regards total
annual pay as the combination of the cash amounts set forth under the salary and
bonus columns.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
-----------------------------------
Annual Compensation Awards Payouts
- ---------------------------------------------------------------- ----------------------- ---------
Other All
Annual Restricted Securities Incentive Other
Name and Compen- Stock Underlying Plan Compen-
Principal Position Year Salary Bonus sation[1] Awards[2] Options Payouts sation[3]
- ------------------ ---- ------ ----- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Roger G. Ackerman, 1997 $750,000 $1,172,250 $82,213 $2,918,156 14,000 $0 $95,285
Chairman of 1996 683,333 793,077 28,731 2,506,406 0 0 62,411
the Board 1995 600,000 309,300 36,229 376,688 198,000 0 75,441
Van C. Campbell, 1997 625,000 812,813 22,779 1,998,573 0 0 75,210
Vice Chairman 1996 576,667 592,980 14,414 1,905,109 0 0 52,615
1995 515,000 257,315 16,037 336,344 162,000 0 68,209
Norman E. Garrity, 1997 500,000 606,500 61,310 1,778,081 32,000 0 56,834
President, Corning 1996 438,333 420,390 18,191 1,279,033 0 0 47,088
Technologies 1995 380,000 246,620 15,000 335,625 99,000 0 43,081
John W. Loose, 1997 500,000 606,500 62,139 1,924,486 32,000 0 55,813
President, Corning 1996 428,333 403,861 16,353 1,337,124 0 0 40,548
Communications 1995 365,000 210,240 12,351 335,625 96,000 0 40,360
James M. Ramich, 1997 375,000 389,250 52,375 1,193,541 8,000 0 32,521
Executive Vice 1996 341,667 282,450 15,000 1,001,228 0 0 27,711
President 1995 280,000 198,337 12,500 335,625 84,000 0 25,624
</TABLE>
[1] Includes tax gross-up payments.
[2] At year end 1997, Messrs. Ackerman, Campbell, Garrity, Loose and Ramich held
an aggregate of 177,289; 137,158; 99,664; 96,311 and 80,260 shares of
restricted stock, respectively, having an aggregate value on December 31,
1997 of $6,543,081; $5,061,994; $3,678,229; $3,554,483 and $2,962,100,
respectively. Certain of such shares are subject to restrictions on transfer
until the executive officer retires at or after age 60 and are subject to
forfeiture prior to age 60 in whole if such officer voluntarily terminates
employment with the Corporation and in part if such officer's employment is
terminated by the Corporation. Dividends are paid to such individuals on all
shares of restricted Common Stock held by them.
[3] Represents amounts contributed by the Corporation to the Investment Plan and
a non-qualified investment plan maintained by the Corporation to provide
salaried employees the benefits which would have been available to them
pursuant to the terms of the Corporation's Investment Plan but for
limitations on contributions to tax-qualified plans imposed pursuant to the
Employee Retirement Income Security Act.
18
<PAGE>
The Corporation has in place a severance policy pursuant to which it will
provide to all salaried employees upon the happening of certain stated events
compensation in amounts ranging between eight weeks [for employees with at least
one year of service] and fifty-two weeks [for employees with twenty or more
years of service]. The Corporation also has in place a severance policy pursuant
to which it will provide to certain of the Corporation's officers and senior
employees, including the named executive officers, upon the happening of certain
stated events up to three years of cash compensation in light of the length of
time anticipated in securing comparable employment. Such events include a
constructive termination of employment as a result of a substantial change in
such employee's responsibilities, compensation levels, relocation and similar
matters following a change in the ownership and management of the Corporation.
19
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR [1]
<TABLE>
<CAPTION>
Potential Realizable Value at Assumed
Annual Rates of Stock Price Appreciation
Individual Grants for Option Term[2]
- --------------------------------------------------------------------------- ------------------------------------------------
Number of % of Total
Securities Options
Underlying Granted
Options to Employees Exercise Expiration Gain at Gain at Gain at
Name Granted in Fiscal Year Price Date 0% 5% 10%
- ------------------- ------------ ---------------- ------------ ------------ --------- ------------------ -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Roger G. Ackerman 14,000[3] 1.59% $35.32 2/4/2007 $ 0 $ 310,976 $ 788,074
Van C. Campbell 0 -- -- -- -- 0 0
Norman E. Garrity 32,000[3] 3.63% 35.32 2/4/2007 0 710,802 1,801,311
John W. Loose 32,000[3] 3.63% 35.32 2/4/2007 0 710,802 1,801,311
James M. Ramich 8,000[3] .90% 35.32 2/4/2007 0 177,700 450,328
All Shareholders N/A N/A N/A N/A 0 6,184,687,523 15,673,212,472
as a group
All Optionees 879,457[4] 100% 42.45[5] 2007 0 23,480,107 59,503,201
as a group
Optionee Gain As % Of All Shareholders Gain .38% .38%
</TABLE>
[1] No SARs were granted.
[2] The dollar amounts set forth under these columns are the result of
calculations at 0% and at the 5% and 10% rates established by the Securities
and Exchange Commission and therefore are not intended to forecast future
appreciation of the Corporation's stock price.
[3] The stock option agreements provide that one half of the options will become
exercisable on February 1, 1999 and all options will become exercisable on
February 1, 2000. The stock option agreements also provide that an
additional option ["Additional Option"] may be granted if the market price
of the Corporation's Common Stock has reached certain prescribed levels and
if the optionee uses shares of the Corporation's Common Stock to pay the
purchase price of an option. The Additional Option will cover the number of
shares tendered in payment of the option price, will be granted at the then
fair market value of the Corporation's Common Stock, will become exercisable
only after the lapse of twelve months and will expire on the expiration date
of the original option.
[4] Includes Additional Options for 18,307 shares.
[5] The exercise price is a weighted average of option prices relating to grants
of options, including Additional Options, made on various occasions in 1997.
20
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTION/SAR VALUES [1]
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at Fiscal Year End At Fiscal Year End
Acquired Value ----------------------------- -----------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------- ------------- ------------ ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Roger G. Ackerman 29,939 $ 850,044 128,767 284,693 $ 879,054 $2,984,979
Van C. Campbell 67,432 1,998,227 109,200 223,981 754,831 2,453,784
Norman E. Garrity 14,792 681,477 134,932 174,532 1,350,736 1,617,340
John W. Loose 44,677 1,656,113 88,278 170,939 439,563 1,578,477
James M. Ramich 29,900 837,573 35,981 132,565 398,971 1,384,932
</TABLE>
[1] There are no SARs outstanding.
CORPORATE PERFORMANCE PLAN ACTIVITY TABLE
This Table illustrates the number of performance-based shares awarded under
the Corporate Performance Plan [as earlier described on page 14.] The number of
shares earned or which may be earned by the named executive is determined by the
achievement of specific return on equity, earnings per share or other objective
goals for the Corporation. The percentage of awards that may be earned ranges
from 0% to 150% of target. The dollar value of the shares earned for 1997 is
reflected in the Restricted Stock Awards column of the Summary Compensation
Table.
In February 1999 the Compensation Committee will assess performance against
goals and determine the number of shares earned of those granted in December
1997. Once earned, such shares remain subject to forfeiture upon termination of
employment and restricted as to transfer for two years.
<TABLE>
<CAPTION>
Number Number Number
Grant of Shares Performance of Shares of Shares
Name Year Date Granted Period Forfeited Earned
- ------------------- ------ ------- ----------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Roger G. Ackerman 1998 12/97 37,500 1998
1997 2/97 40,000 1997 60,000
1996 12/95 33,000 1996 49,500
1995 12/94 14,000 1995 1,946 12,054
Van C. Campbell 1998 12/97 27,000 1998
1997 2/97 30,000 1997 45,000
1996 12/95 27,000 1996 40,500
1995 12/94 12,500 1995 1,737 10,763
Norman E. Garrity 1998 12/97 23,000 1998
1997 2/97 25,000 1997 37,500
1996 12/95 16,500 1996 24,750
1995 12/94 10,000 1995 10,740
John W. Loose 1998 12/97 23,000 1998
1997 2/97 25,000 1997 37,500
1996 12/95 16,000 1996 24,000
1995 12/94 10,000 1995 10,740
James M. Ramich 1997 2/97 18,000 1997 27,000
1996 12/95 14,000 1996 21,000
1995 12/94 10,000 1995 10,740
</TABLE>
21
<PAGE>
PENSION PLAN
The Corporation maintains a Pension Plan, a defined benefit plan, under
which benefits are paid based upon career earnings [regular salary and cash
awards such as those paid under the Corporation's Variable Compensation Plans]
and years of credited service. Employees are required to contribute an amount
equal to 2% of compensation in excess of the social security wage base up to the
compensation limits imposed by the Internal Revenue Code. Salaried employees may
contribute 2% of their annual earnings up to the social security wage base. The
benefit formula is reviewed and adjusted periodically for inflationary and other
factors. The Corporation's contributions to the Plan are determined by the
Plan's actuaries and are not determined on an individual basis. The amount of
benefits payable under the Plan and attributable to the Corporation's
contributions is subject to the provisions of the Employee Retirement Income
Security Act and limits imposed by the Internal Revenue Code.
The Corporation maintains non-qualified supplemental pension plans pursuant
to which it will pay amounts approximately equal to the difference between the
benefits provided under the Pension Plan and benefits which would have been
payable thereunder but for the limitations of the Employee Retirement Income
Security Act and the Internal Revenue Code. Certain employees, including
executive officers, participate in the Executive Supplemental Pension Plan under
which benefits are paid based upon final average compensation [the highest five
consecutive calendar years in the ten calendar years immediately preceding
retirement] and years of credited service. The Corporation has established a
trust to fund benefits payable under the Executive Supplemental Pension Plan,
certain portions of which are presently funded and vested on an individual
basis.
The table below sets forth aggregate annual amounts payable under the
Pension Plan and the Executive Supplemental Pension Plan under the straight life
annuity option, assuming retirement during 1998 of participants who have met the
eligibility requirement for unreduced benefits under the Plans. Additional
benefits may be payable to participants who have elected to contribute
voluntarily to the Pension Plan. The benefits set forth in the table are not
subject to any deduction for social security or other offset amounts. The normal
retirement age specified in the Plans is age 65 with 5 years of credited
service.
<TABLE>
<CAPTION>
Years of Service
Final Average Pay 15 20 25 30 35 40
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 500,000 $110,200 $146,900 $183,600 $220,400 $257,100 $294,600
- -----------------------------------------------------------------------------------------------
600,000 132,700 176,900 221,100 265,400 309,600 354,600
- -----------------------------------------------------------------------------------------------
700,000 155,200 206,900 258,600 310,400 362,100 414,600
- -----------------------------------------------------------------------------------------------
800,000 177,700 236,900 296,100 355,400 414,600 474,600
- -----------------------------------------------------------------------------------------------
900,000 200,200 266,900 333,600 400,400 467,100 534,600
- -----------------------------------------------------------------------------------------------
1,000,000 222,700 296,900 371,100 445,400 519,600 594,600
- -----------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Years of Service
Final Average Pay 15 20 25 30 35 40
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$1,100,000 $245,200 $326,900 $408,600 $490,400 $ 572,100 $ 654,600
- ---------------------------------------------------------------------------------------------------
1,200,000 267,700 356,900 446,100 535,400 624,600 714,600
- ---------------------------------------------------------------------------------------------------
1,300,000 290,200 386,900 483,600 580,400 677,100 774,600
- ---------------------------------------------------------------------------------------------------
1,400,000 312,700 416,900 521,100 625,400 729,600 834,600
- ---------------------------------------------------------------------------------------------------
1,500,000 335,200 446,900 558,600 670,400 782,100 894,600
- ---------------------------------------------------------------------------------------------------
1,600,000 357,700 476,900 596,100 715,400 834,600 954,600
- ---------------------------------------------------------------------------------------------------
1,700,000 380,200 506,900 633,600 760,400 887,100 1,014,600
- ---------------------------------------------------------------------------------------------------
1,800,000 402,700 536,900 671,100 805,400 939,600 1,074,600
- ---------------------------------------------------------------------------------------------------
1,900,000 425,200 566,900 708,600 850,400 992,100 1,134,600
- ---------------------------------------------------------------------------------------------------
2,000,000 447,700 596,900 746,100 895,400 1,044,600 1,194,600
- ---------------------------------------------------------------------------------------------------
</TABLE>
The compensation covered by the Pension Plan and the Executive Supplemental
Pension Plan for each of the named executive officers is the total of salary and
bonus as set forth in the Summary Compensation Table. The amount of bonus is
included as compensation covered by such Plans in the calendar year in which it
is paid. Messrs. Ackerman, Campbell, Garrity, Loose and Ramich have 35, 33, 31,
33 and 24 years of credited service, respectively.
Proposed 1998 Variable Compensation Plan
In 1949, the shareholders of the Corporation adopted a plan which provided
for the payment of additional compensation to such of the Corporation's officers
and employees as might be designated by a Committee of the Board of Directors,
no member of which Committee was to be eligible to participate in the Plan.
Shareholders have approved periodically modifications to these additional
compensation plans, the last such approval being of the 1988 Variable
Compensation Plan [the "1988 Plan"] which had a ten-year term. The Board of
Directors of the Corporation has approved the continuation of the 1988 Plan and
directed that the 1998 Variable Compensation Plan [the "Incentive Plan"] be
submitted to shareholders for approval. The Incentive Plan continues the
Corporation's long-standing approach to the payment of additional compensation.
The Incentive Plan will continue as a compensation program for those employees
who have broad responsibilities for profits and performance at the worldwide
corporate level and whose compensation may be subject to the scope of Section
162[m] of the Internal Revenue Code.
The affirmative vote of the holders of a majority of the shares of the
Corporation's Common Stock cast at the meeting is required to approve the
Incentive Plan. If shareholders approve, the Plan will become effective for
fiscal 1998 and will expire for the fiscal year ending on December 31, 2002. In
the event shareholders do not approve, the Incentive Plan will not become
effective and additional compensation paid to named executive officers may not
be deductible under Section 162[m] of the Internal Revenue Code.
23
<PAGE>
The following is a summary of the principal features of the Incentive Plan.
The principal differences between the Incentive Plan and the 1988 Plan are
discussed at the end of the summary under the heading "Principal Differences."
The Corporation will send without charge the Incentive Plan to any shareholder
who requests a copy.
Committee. The Incentive Plan will be administered by a committee [the
"Committee"] appointed by the Board of Directors, consisting of at least three
directors, each of whom meets each of the requirements for an "outside director"
as that term is defined in Section 162[m] of the Internal Revenue Code. The
members of the Committee will serve as such without compensation other than the
regular fees to which they are entitled for attending meetings of the Board of
Directors or any committee thereof.
Eligibility. The participants in the Incentive Plan will be the
Corporation's chief executive officer and other executive officers, the
deduction of whose compensation may be subject to the provisions of Section
162[m] of the Internal Revenue Code. Other employees, including officers not
participating in the Incentive Plan, will participate in variable compensation
plans which provide incentive for profit and performance and which use measures
of performance substantially similar to those used in the Incentive Plan.
Determination of Incentive Compensation. The Committee will determine the
incentive compensation of each participant based upon the extent to which the
Corporation has met predetermined performance goals. To measure performance the
Committee may use such criteria as operating profits, net profits, earnings per
share, profit returns and margins, revenues, working capital, shareholder return
and/or value, and stock price. Performance criteria may be measured on a
corporate or business unit basis, or a combination thereof. The criteria may
reflect corporate performance alone or corporate performance relative to Corning
comparable companies or other external measures. For 1998, the Committee has
determined to use net profit after tax as the measure.
Payment of Incentive Compensation. All or part of the incentive
compensation for any year may be distributed to participants for such year in
individually designated awards determined by the Committee. It is contemplated
that the amount of incentive compensation payable to each participant is to be
paid in cash in one payment; provided, however, that a participant may, in
accordance with rules adopted by the Committee, elect to defer receipt of all or
some portion of his incentive compensation award. In addition, the Committee may
determine not to pay to a participant in a given year the incentive compensation
earned for such year and may require that the participant defer receipt of such
amount.
In the event that payment of all or a portion of incentive compensation
award is deferred, the Corporation will establish on its books an account for
the amount of incentive compensation so deferred and credit such account with
additional sums. The additional sums will be determined by the Committee by
reference to one or more fac-
24
<PAGE>
tors, such as prevailing interest rates, performance of phantom mutual fund
accounts, or changes in the price of the Corporation's Common Stock.
No participant in the Incentive Plan may receive a payment for any fiscal
year in excess of $2,500,000.
Amendment and Termination. The Board of Directors has the power to
terminate the Incentive Plan in its entirety at any time. The Board of Directors
may also amend or modify the Incentive Plan in such respects as it may deem
advisable, except without shareholder approval the Board may make no amendment
which would jeopardize the deductibility of payments under Section 162[m] of the
Internal Revenue Code.
Taxation. The Corporation will be allowed a federal income tax deduction
with respect to all amounts distributed as incentive compensation in the year of
payment. The amount of any incentive compensation award will constitute ordinary
income to the employee in the year of payment.
Principal Differences. The Incentive Plan differs from the 1988 Plan
principally in the following respects.
The Incentive Plan covers the officers of the Corporation whose
compensation is subject to the deductibility provisions of Section 162[m] of the
Internal Revenue Code. The 1988 Plan covered all officers who had general, broad
corporate-wide responsibilities. Under the Incentive Plan, the Committee is to
establish in writing each year specific objective performance goals tied to such
measures as operating or net profits, earnings per share, profit returns and
margins, shareholder returns and/or value, stock price and working capital and
the payment of incentive compensation is to be based upon the attainment of the
specific goals so established. Under the 1988 Plan, the amounts earned were
based upon various measures of performance but limited to a pool not in excess
of the higher of 3% of "additional profits" [as such term was defined in the
1988 Plan], 75% of salaries of all participants or 5% of the dividends paid
during the applicable fiscal year. The Incentive Plan provides that in no event
may any participant receive more than $2,500,000 for any fiscal year. The
Incentive Plan covers a period of five fiscal years. The 1988 Variable
Compensation Plan covered a period of ten fiscal years.
If the Incentive Plan had been in effect in 1997, the amounts received by
the participating employees would have been the same as the amounts actually
received by such persons for 1997 performance under the 1988 Plan.
The Board of Directors recommends a vote FOR approval of the 1998 Variable
Compensation Plan.
Proposed 1998 Worldwide Employee Share Purchase Plan
At the 1993 Annual Meeting, shareholders approved the 1993 Employees Stock
Purchase Program [the "1993 Program"] pursuant to which the Corporation may make
available for sale to employees shares of its Common Stock at a price equal to
85% of the market value on the first or last day of each calendar quarter,
whichever is lower. The 1993 Program was a con-
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tinuation of a substantially similar program first approved in 1990. The 1993
Program, which covers 3,000,000 shares of the Corporation's Common Stock,
expires by its terms at the end of June 1998 and no additional shares may be
purchased thereunder after June 30, 1998. Pursuant to the 1993 Program,
employees had purchased approximately 1,000,000 shares through December 31,
1997.
The Board of Directors has approved the 1998 Worldwide Employee Share
Purchase Plan [the "1998 Plan"] and directed that it be submitted to
shareholders for approval. The 1998 Plan will not become effective unless a
majority of the shares of the Corporation's Common Stock cast at the meeting
affirmatively vote in favor of the 1998 Plan.
A summary of the principal features of the 1998 Plan, which is a
continuation without substantive change of the 1993 Program, follows. The
principal differences between the 1993 Program and the 1998 Plan are discussed
at the end of the summary. The Corporation will send without charge the 1998
Plan to any shareholder who requests a copy.
Committee. The 1998 Plan will be administered by a committee [the
"Committee"] appointed by the Board of Directors, consisting of not less than
three employees of the Corporation, all of whom shall be eligible to participate
in the Plan. The Committee shall have control of the administration and
interpretation of the Plan with all power necessary to enable it to fulfill its
duties. The Committee shall make such rules and regulations as it may deem
necessary to carry out the provisions of the Plan.
Eligibility. All employees of the Corporation shall, upon invitation of the
Committee, be eligible to participate in the 1998 Plan. The Committee may limit
the employees eligible to participate to designated payroll groups or to
designated locations. It may in its discretion invite only the salaried or only
the non-unionized hourly employees of the Corporation or of any subsidiary of
the Corporation to participate in the Plan. However, substantially all employees
of the Corporation were invited to participate in the 1993 Program and it is
expected that substantially all 20,000 employees will be invited to participate
in the 1998 Plan.
Stock. Under the 1998 Plan no more than 2,000,000 shares of the
Corporation's Common Stock may be offered or sold to eligible employees. The
2,000,000 shares represent less than 1% of the shares of the Corporation's
Common Stock outstanding on December 31, 1997.
Shares of the Corporation's Common Stock which are available for sale under
the 1998 Plan may be either treasury shares or authorized but unissued shares or
may be purchased from time to time on the open market.
The 1998 Plan provides for appropriate adjustments in the aggregate number
of shares subject to the Plan in the case of changes in the capital stock of the
Corporation resulting from recapitalization, stock dividend, stock split or any
other increase or decrease effected without receipt of consideration by the
Corporation, or a merger
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or consolidation in which the Corporation is the surviving corporation.
Purchases and Price. The 1998 Plan is designed to give eligible employees
the opportunity to purchase shares of the Corporation's Common Stock through
payroll deductions in a series of quarterly offerings commencing July 1, 1998,
the effective date of the 1998 Plan, and ending no later than June 30, 2003.
All eligible employees may purchase shares of the Corporation's Common
Stock through payroll deduction. Any eligible employee may elect to participate
in the 1998 Plan on a quarterly basis. The employee may authorize deductions of
up to 10% of regular compensation or such other higher percentage of non-fixed
compensation [such as the amount paid annually as a performance or goal sharing
bonus] as may be permitted by the Committee. An eligible employee may terminate
his payroll deduction at any time. The employee may increase or reduce
prospectively the amount of his deduction as of the beginning of any calendar
quarter. At the end of each calendar quarter, a participating employee will
purchase with the funds deducted from his compensation shares of the
Corporation's Common Stock. The number of shares purchased will be a number
determined by dividing the amount withheld by the lower of 85% of the closing
price of a share of the Corporation's Common Stock on the New York Stock
Exchange on the first or last business day of the particular calendar quarter.
The purchase price of shares for employees located outside of the United States
will generally be 85% of the price of the Corporation's Common Stock on the last
day of a business quarter or a day reasonably close thereto. An employee will
have no interest in any shares of Common Stock until such shares are actually
purchased by him.
Payments received by the Corporation from the sale of shares of treasury
stock or authorized and unissued shares shall be used for general corporate
purposes.
Taxation. The Corporation believes that the federal income tax
consequences of the 1998 Plan are as follows:
An employee who purchases shares of Common Stock under the 1998 Plan will
recognize compensation taxable as ordinary income [subject to withholding] in an
amount equal to the difference between the fair market value of the shares on
the date of purchase and the price actually paid for such shares, and the
Corporation or the subsidiary will be entitled to a deduction in the same
amount. The employee's basis in such shares will be increased by the amount
taxable as compensation, and his capital gain or loss when he disposes of the
shares will be calculated using such increased basis. The capital gain or loss
on disposition of the shares will be either long-term or short-term, depending
on the holding period of the shares.
Amendment and Termination. The 1998 Plan will commence as of July 1, 1998
and will have a term of five years. No shares may be offered for sale or sold
under the Plan for any period which begins after June 30, 2003. The Board of
Directors is authorized to terminate or amend the 1998 Plan, except
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that it may not increase the number of shares available thereunder, decrease the
price at which shares may be offered for sale or extend its term without the
approval of the holders of a majority of the shares of the Common Stock of the
Corporation cast at a meeting at which such matter is considered.
Principal Difference. The 1998 Plan covers 2,000,000 shares of the
Corporation's Common Stock. The 1993 Program covered 3,000,000 shares.
Cost. It is not possible to state in advance the total amount which the
Corporation will be required to make available under the 1998 Plan as that
amount will depend upon many factors, including the fair market value of the
Corporation's Common Stock at any given point in time and the number of
employees participating in the 1998 Plan and the extent of their participation.
Based upon the Corporation's experience with the 1993 Program, the Corporation
estimates that the 1998 Plan will cost approximately $2,100,000 annually.
The Board of Directors recommends a vote FOR approval of the 1998 Worldwide
Employee Share Purchase Plan.
Proposed 1998 Employee Equity Participation Program
The Corporation adopted in 1994 an Employee Equity Participation Program
[the "1994 Program"] consisting of two plans: [a] a Stock Option Plan and [b] an
Incentive Stock Plan. The 1994 Program, which was a continuation of similar
programs first adopted in 1974, expires by its terms in June 1999. The 1994
Program was designed to provide a flexible mechanism to permit employees to
obtain equity ownership in the Corporation, thereby increasing their proprietary
interest in the Corporation's growth and success. The Board of Directors
believes the 1994 Program has been successful and should be continued. The Board
of Directors has approved the 1998 Employee Equity Participation Program [the
"1998 Program"] and directed that it be submitted to shareholders for approval
at this time in conjunction with the request for approval of the 1998 Worldwide
Employee Share Purchase Plan and the 1998 Variable Compensation Plan.
The 1998 Program consists of two plans: [i] a Stock Option Plan [the "1998
Stock Option Plan"] and [ii] an Incentive Stock Plan [the "1998 Incentive Stock
Plan"]. An affirmative vote of a majority of the shares of the Corporation's
Common Stock cast at the meeting is necessary to approve the 1998 Program. In
the event shareholders do not approve the 1998 Program, the 1994 Program will
continue until its scheduled expiration in June 1999.
A summary of the principal features of the 1998 Program follows. The
principal differences between the 1998 Program and the 1994 Program are
discussed at the end of this summary. The Corporation will send without charge
the 1998 Program to any shareholder who requests a copy.
Committee. The 1998 Program will be administered by a committee [the
"Committee"] appointed by the Board of Directors, consisting of three or more
directors, each of whom meets
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each of the requirements of Rule 16b-3 promulgated under the Securities Exchange
Act of 1934 and the definition of an "outside director" under the regulations
promulgated pursuant to Section 162[m] of the Internal Revenue Code. The
Committee will report to the Board of Directors the employees who are selected
to participate in the 1998 Program and the extent of their participation in the
1998 Stock Option Plan or the 1998 Incentive Stock Plan. No member of the
Committee shall be eligible to participate in the 1998 Program. The Committee
may delegate to an executive officer of the Corporation certain rights and
responsibilities, including the right to grant awards to eligible employees who
are not officers of the Corporation.
Eligibility. The Committee will select the key executive, managerial and
technical employees [including officers and employees who are directors] of the
Corporation and of any subsidiary who shall be eligible to participate in the
1998 Stock Option Plan and the 1998 Incentive Stock Plan.
It is expected that the 1998 Program will be administered in a manner
similar to the 1994 Program in which approximately 2,000 employees participated.
Stock. Under the proposed 1998 Program, there may be optioned or granted to
eligible employees up to 8,000,000 shares of the Corporation's Common Stock plus
such number of shares of Common Stock available for option or grant under the
1994 Program (960,149 such shares at February 5, 1998, 70,000 shares being
reserved for issuance as restricted stock grants and the balance being available
only for the grant of stock options). The 8,960,149 shares which may be
available under the 1998 Program represent approximately 3.9% of the shares of
the Corporation's Common Stock outstanding on December 31, 1997. If the 1998
Program is approved, the 1994 Program will terminate on May 1, 1998.
Shares from expired or terminated options and shares withheld for the
payment of taxes under the 1994 and 1998 Stock Option Plans and shares not
earned or forfeited and shares withheld for the payment of taxes under the 1994
and 1998 Incentive Stock Plans will be made available again under the 1998
Program.
Shares of the Corporation's Common Stock which are optioned or awarded
under the 1998 Program may be either treasury shares or authorized but unissued
shares.
The 1998 Program provides for appropriate adjustments in the aggregate
number of shares subject to such Program and in the number of shares and the
price per share, or either, of outstanding options in the case of changes in the
capital stock of the Corporation resulting from any recapitalization, stock or
unusual cash dividend, stock split or any other increase or decrease effected
without receipt of consideration by the Corporation, or a merger or
consolidation in which the Corporation is the surviving corporation. The 1998
Program also provides that in any merger or consolidation in which the
Corporation is not the survivor and in which incentive stock options are not
granted in substitution of incentive stock options outstanding
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under the 1998 Stock Option Plan, or predecessor option plans, the Committee may
make provision for adjustments and/or settlements as it deems appropriate and
consistent with such Plan's purposes.
Stock Option Plan. Under the 1998 Stock Option Plan, the Committee may
grant to eligible employees either non-qualified or "incentive stock" options,
or both, to purchase shares of the Corporation's Common Stock at not less than
100% of fair market value on the date of grant. The Committee may also provide
that options may not be exercised in whole or in part for any period or periods
of time. The number of shares covered by incentive stock options which may be
first exercised by an individual in any year cannot have an aggregate fair
market value in excess of $100,000, measured at the date of grant. All options
shall expire no more than ten years from the date of grant. The Committee may
provide that in the event the employment of an employee is terminated, the right
to exercise options held under the 1998 Stock Option Plan may continue through
its original expiration date or for such shorter period of time after such event
as the Committee may determine appropriate. Options are not assignable or
transferable except for limited circumstances on death and, with the consent of
the Committee, to certain family members to assist with estate planning. The
Committee may establish rules and procedures to permit an optionee to defer
recognition of gain upon the exercise of a stock option.
The 1998 Stock Option Plan permits the granting of stock appreciation
rights which permit an optionee, in lieu of exercising all or a portion of a
matured option, to receive in cash or Common Stock [as determined by the
Committee] an amount equal to the difference between the option price and the
market price of the Common Stock on the date the right is exercised.
The option price must be paid to the Corporation by the optionee in full
prior to delivery of the stock. The optionee may pay the option price in cash or
with shares of the Corporation's Common Stock owned by him. The optionee has no
rights as a shareholder with respect to the shares subject to option until
shares are issued upon exercise of the option.
Under the 1998 Stock Option Plan the Committee may grant so-called
"restoration" options pursuant to which an optionee who uses shares of the
Corporation's Common Stock to pay the purchase price of an option shall receive
on the date of exercise an additional option to purchase shares of the
Corporation's Common Stock provided that the market price of Corning's Common
Stock on the date of exercise is at least 25% higher than the price of the
option being exercised. Such additional option shall cover the number of shares
tendered in payment of the option price, shall be at the then fair market value
of the Corporation's Common Stock, shall become exercisable only after the lapse
of twelve months and shall expire on the date of the original option. The
Committee may impose additional conditions upon the grant of restoration
options.
Incentive Stock Plan. Under the 1998 Incentive Stock Plan, the Committee
may award to eligible employees up to
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2,000,000 shares, or the right to receive shares, of the Corporation's Common
Stock. The Committee shall determine the number of shares which are to be
awarded to individual employees and the number of rights covering shares to be
issued. The Committee may also award to eligible employees the right to receive
cash. The Committee shall determine the conditions, restrictions and
contingencies to be placed upon the grant of shares or the grant of a right to
receive shares or cash in the future. These conditions and contingencies may
include the attainment of predetermined performance goals, such as operating or
net profits, earnings per share, profit returns, margins, revenues, shareholder
returns and/or value, stock price and working capital which meet the
requirements of Section 162[m] of the Internal Revenue Code. No performance
period is to exceed five years. The shares awarded to or earned by individual
employees shall be made subject to forfeiture and to certain restrictions
prohibiting sale or other disposition for a period of at least three years
following the date of grant for the applicable performance period. The
restrictions on transfer and the possibility of forfeiture may be waived, with
the approval of the Committee, if an employee's employment relationship is
terminated by reason of death, disability or retirement with the Corporation's
consent or by reason of a subsidiary ceasing to be such. In addition, the
Committee may remove, in its discretion and in whole or in part, the
restrictions on sale or transfer and the possibility of forfeiture in the event
of the termination of employment if circumstances so warrant. Shares may be
issued to recognize past performance either generally or upon attainment of
specific objectives. Shares issuable for performance will be payable only to the
extent that the Committee determines that an eligible employee has met such
objectives and will generally be valued as of the date of such determination. No
employee shall have any right to receive shares based upon the attainment of
objectives prior to the expiration of the date set for the performance of his
objectives unless [i] otherwise determined by the Committee or [ii] his
employment is terminated by reason of disability or retirement, in each case
with the consent of the Corporation.
The utilization of contingent awards under the 1998 Incentive Stock Plan
will require a charge to operations each year. The amount of such charge will
depend, in part, on the fair market value of the Corporation's Common Stock, the
period over which restrictions on transfer and the possibility of forfeiture may
lapse and the degree to which an individual is meeting his performance goals.
Program Limitations. No one individual may receive under the 1998 Program
stock awards in any form (i.e. options, stock appreciation rights or shares of
restricted stock) covering more than 1,600,000 shares of the Corporation's
Common Stock. In addition, the maximum payment that may be made to any one
individual in the form of shares of restricted stock or cash is $7,500,000, the
value of the shares of the Corporation's Common Stock being their fair market
value on the date of the contingent award by the Committee.
Taxation. The Corporation believes that the federal income tax conse-
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quences of the 1998 Program are as follows:
1998 Stock Option Plan. An optionee who exercises a non-qualified option
granted under the 1998 Stock Option Plan will recognize compensation taxable as
ordinary income [subject to withholding] in an amount equal to the difference
between the option price and the fair market value of the shares on the date of
exercise, and the Corporation or the subsidiary employing the optionee will be
entitled to a deduction from income in the same amount. The optionee's basis in
such shares will be increased by the amount taxable as compensation, and his
capital gain or loss when he disposes of the shares will be calculated using
such increased basis. The capital gain or loss on disposition of the shares will
be either long-term or short-term, depending on the holding period of the
shares.
If all applicable requirements of the Internal Revenue Code with respect to
incentive stock options are met, including the requirement that the stock is
held for more than two years from the date of grant of the option and more than
one year from the date of exercise, no income to the optionee will be recognized
and no deduction will be allowable to the Corporation at the time of the grant
or exercise of an incentive stock option. The excess of the fair market value of
the shares at the time of exercise over the amount paid is an item of tax
preference which may be subject to the alternative minimum tax. In general, if
an incentive stock option is exercised after three months of termination of
employment, the optionee will recognize ordinary income in an amount equal to
the difference between the option price and the fair market value of the shares
on the date of exercise and the Corporation will be entitled to a deduction in
the same amount. If the shares are sold within one year of the date of exercise
or two years from the date of grant, the optionee will recognize ordinary income
in an amount equal to the difference between the option price and the lesser of
the fair market value of the shares on the date of exercise or the sale price
and the Corporation will be entitled to a deduction from income in the same
amount. Any excess of the sale price over the fair market value on the date of
exercise will be taxed as a capital gain. If the shares are held for more than
one year from the date of exercise and more than two years from the date of
grant, the optionee will be entitled to a long-term capital gain or loss when he
disposes of the shares and the Corporation will not be entitled to a deduction.
1998 Incentive Stock Plan. Shares of Common Stock which are not subject to
restrictions and possibility of forfeiture and which are awarded to an employee
under the 1998 Incentive Stock Plan will be treated as ordinary income, subject
to withholding, to an employee at the time of the transfer of the shares to him
and the value of such awards will be deductible by the Corporation or by the
subsidiary employing the employee at the same time and in the same amount.
Shares granted subject to restrictions and possibility of forfeiture will not be
subject to tax nor will such grant result in a tax deduction for the Corporation
at the time of award. However, when such shares become free of restrictions and
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possibility of forfeiture, the fair market value of such shares at that time [i]
will be treated as ordinary income to the employee and [ii] will be deductible
by the Corporation or by the subsidiary employing the employee.
Alternatively, an employee receiving shares subject to restriction and
possibility of forfeiture may elect to include in his gross income, for the
taxable year in which such shares are transferred to him, the fair market value
of such shares at that time; in such case, he need not include any amount in
gross income at the time the shares become free of restrictions and possibility
of forfeiture. However, an employee making such an election will not be allowed
a deduction if the shares are subsequently forfeited.
The employee will have a tax basis for the shares equal to their fair
market value at the time they are included in gross income and will realize
long-term or short-term capital gain on disposition of the shares, depending on
the holding period of the shares, which will commence at the time the employee
is deemed to be in receipt of ordinary income with respect to such shares.
Amendment, Administration and Termination. The 1998 Program has a term of
five years and no shares may be optioned or awarded and no rights to receive
shares may be granted after the expiration of the 1998 Program. The Board of
Directors is authorized to terminate or amend the 1998 Program, except that it
may not increase the number of shares available thereunder, decrease the price
at which options may be granted, or extend the term of the 1998 Program or
options granted thereunder without the approval of the holders of a majority of
the outstanding shares of Common Stock of the Corporation cast at a meeting at
which such matter is considered. To the extent any provision of the 1998 Program
fails to comply with any condition of Rule 16b-3 of the Securities Exchange Act
of 1934, such provision shall be null and void to the extent permitted by law.
Principal Differences. The 1998 Program is basically a continuation of the
1994 Program. However, it does differ from the 1994 Program in the following
respects.
[i] Under the 1998 Program, no individual may receive more than an
aggregate of 1,600,000 shares of Corning Common Stock or options to
purchase the same. The 1994 Stock Option Plan, as submitted to
shareholders, limited the number of shares which could be made
subject to options granted to an individual to 675,000 shares.
[ii] The 1998 Stock Option Plan provides for the transferability of stock
options under limited circumstances. The 1994 Stock Option Plan
did not permit the transfer of options.
[iii] The 1998 Stock Option Plan, unlike the 1994 Stock Option Plan,
makes provision for the grant of stock appreciation rights and the
deferral of recognition of gain upon the exercise of a stock
option.
[iv] The 1998 Program, unlike the 1994 Program, makes provi-
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sion for the settlement of long-term incentives in cash.
[v] The 1998 Stock Option Plan, like the 1994 Stock Option Plan, permits
the grant of restoration options. The terms of the 1998 Plan make
explicit the practice followed under the 1994 Plan that no
restoration option is granted unless the fair market value of the
Corporation's Common Stock being used to pay the option price is at
least 25% greater than the price of the option then being exercised.
Cost. It is not possible to state in advance the total amount which the
Corporation will be required to charge to operations under the 1998 Program.
That amount will depend upon many factors, including the fair market value of
the Corporation's Common Stock, the outcome of the deliberations of the
Financial Accounting Standards Board with respect to accounting for stock
options and the degree to which participants are meeting specific goals. Under
the 1994 Program, however, the Corporation charged to operations during the last
three fiscal years an average of $22,000,000 per year.
The Board of Directors recommends a vote FOR approval of the 1998 Employee
Equity Participation Program.
Receipt of Shareholder Proposals
Any shareholder proposal intended to be presented at the 1999 Annual
Meeting and included in the Corporation's Proxy Statement and Proxy relating to
that meeting must be received by the Corporation at One Riverfront Plaza,
Corning, New York 14831; Attention: The Secretary not later than November 12,
1998.
Directors' Compensation and Other Matters Relating to Directors
Each director of the Corporation, other than a director who is an employee
of the Corporation, received during 1997 $22,500 for service as a director and
was also paid $750 for each meeting of the Board or any committee thereof which
he attended. In lieu of a meeting fee, chairmen of committees of the Board were
paid a retainer ranging from $3,000 to $6,500, depending upon the committee
which the director chaired. Pursuant to a Deferred Compensation Plan for
Directors adopted by the Corporation in 1983, each director may elect to defer
until a date specified by him receipt of all or a portion of his compensation.
Such Plan provides that amounts deferred shall be paid only in cash and while
deferred may be allocated to [i] a cash account upon which amounts deferred may
earn interest, compounded quarterly, at the prime rate of Citibank, N.A. in
effect on certain specified dates, [ii] a market value account, the value of
which will be based upon the market value of the Corporation's Common Stock from
time to time, or [iii] a combination of such accounts. At December 31, 1997
eleven directors had elected to defer compensation pursuant to such Plan.
Pursuant to the Restricted Stock Plans for Non-Employee Directors, the
Corporation during 1997 issued to each non-employee director elected in 1997 400
shares of the Corporation's Common Stock for each year
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specified in the term of service for which such director was elected, subject to
forfeiture and restrictions on transfer.
The Corporation has established a Directors' Charitable Giving Program
funded by insurance policies on the lives of the directors. In 1997 the
Corporation paid a total of $396,790 in premiums on such policies. Upon the
death of a director, the Corporation will donate $1,250,000 [on behalf of a
non-employee director] and $1,000,000 [on behalf of an employee director] to one
or more qualified charitable organizations recommended by such director and
approved by the Corporation. The directors derive no financial benefit from the
Program as all charitable deductions and cash surrender value of life insurance
policies accrue solely to the Corporation. Five years of service as a director
is required to participate in the Program. Messrs. Brown, Eagleburger, Foster,
Garrity, Loose and Ruding have less than five years of service as directors and
do not currently participate in the Program.
The Board of Directors of the Corporation held during 1997 five regularly
scheduled and two special meetings. Each director attended at least 75% of all
meetings of the Board of Directors and the meetings of the committees of which
each was a member.
The Corporation has audit, compensation and nominating committees composed
of members of the Board of Directors.
The Audit Committee, composed of Messrs. O'Connor, Barker, Brown and
Smithburg and Ms. Rein, met four times during 1997. It recommends the firm of
independent accountants to conduct the annual examination of the Corporation's
consolidated financial statements, confers with such accountants and reviews the
scope of the examination and brings to the entire Board of Directors for review
those items relating to such examination or to accounting practices which the
Audit Committee believes merit such review. The Compensation Committee, composed
of Messrs. Kinnear, O'Connor and Smithburg and Ms. Rein, met five times during
1997. It makes recommendations to the Board of Directors with respect to the
compensation of officers and executive employees of the Corporation and
administers the Corporation's Variable Compensation Plan, Employee Equity
Participation Program and the Executive Supplemental Pension Plan. The
Nominating Committee, composed of Messrs. Houghton, Ackerman, Eagleburger,
Kinnear, Rosovsky and Ruding met two times during 1997. It proposed the nominees
for election as directors at the Annual Meeting of Shareholders to be held on
April 30, 1998. It reviews, considers and proposes nominees for election as
directors of the Corporation and makes such other proposals with respect to the
organization, size and composition of the Board of Directors as it deems
advisable. While the Committee may consider persons nominated by shareholders,
it has no explicit procedures in this regard.
Mr. Hennessy, a director of the Corporation and chairman of the Finance
Committee, acts as the non-executive chairman of the private equity investment
business of Credit Suisse First
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Boston Corporation which received fees in 1997 from the Corporation for advisory
services in connection with the sale of the Corporation's sunglass business.
Compensation Committee Interlocks and Insider Participation
Ms. Rein, Senior Executive Vice President of Metropolitan Life Insurance
Company, of which Mr. Houghton is a director, is a member of the Corporation's
Compensation Committee.
Other Matters
Corning Consumer Products Company, a wholly-owned subsidiary, leased retail
space in Corning, New York from Mr. Robert L. Ecklin, an executive officer. The
monthly rental under such lease, which expired on February 28, 1998, was $1,200.
The Corporation also leases office space in Corning, New York owned by Mr.
Ecklin. During 1997 the Corporation paid an average base monthly rental of
$15,065 for such space. The lease expires on September 30, 1998.
The Corporation has purchased insurance from National Union Fire Insurance
Company of Pittsburgh, Pennsylvania, Federal Insurance Company, Zurich Insurance
Company, Royal Insurance Company of America and Columbia Casualty Company
providing for reimbursement of directors and officers of the Corporation and its
subsidiary companies for costs and expenses incurred by them in actions brought
against them in connection with their actions as directors or officers,
including actions as fiduciaries under the Employee Retirement Income Security
Act of 1974. The insurance coverage, which expires in May 1998, costs $1,100,000
on an annual basis, which will be paid by the Corporation.
At the meeting of the Corporation's Board of Directors held on February 4,
1998, the Board appointed Price Waterhouse LLP as the independent accountants
for the Corporation for its 1998 fiscal year, pursuant to the recommendation of
the Audit Committee. Audit services performed by Price Waterhouse LLP for the
fiscal year ended December 31, 1997 consisted of examination of the consolidated
financial statements of the Corporation, limited review of the unaudited
quarterly consolidated financial statements and limited assistance and
consultation in connection with filings with the Securities and Exchange
Commission.
The Corporation expects representatives of Price Waterhouse LLP to be
present at and available to respond to appropriate questions which may be raised
at the Annual Meeting. Representatives of Price Waterhouse LLP will have the
opportunity to comment on the Corporation's financial statements if they so
desire.
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The cost of the solicitation of Proxies will be borne by the Corporation.
In addition to solicitation of the Proxies by use of the mails, some of the
directors, officers and regular employees of the Corporation, without extra
remuneration, may solicit Proxies personally or by telephone or telegraph. The
Corporation has retained Georgeson & Co. Inc., at a cost of $12,000, to assist
in soliciting Proxies in connection with the Annual Meeting. The Corporation may
also request brokerage houses, nominees, custodians and fiduciaries to forward
soliciting material to beneficial owners of shares held of record. The
Corporation will reimburse such persons for their expenses in forwarding
soliciting material.
By order of the Board of Directors.
A. John Peck, Jr.
Vice President and Secretary
March 11, 1998
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[RECYCLE SYMBOL] Printed on recycled paper using soybean ink
<PAGE>
The Board of Directors recommends a vote FOR all nominees for directors and FOR
Proposal Nos. 2, 3 and 4.
1. Nominees: Roger G. Ackerman, FOR WITHHOLD
Lawrence S. Eagleburger, John H. --- --------
Foster, Norman E. Garrity,
Catherine A. Rein and William D. ----- -----
Smithburg
----- FOR ALL (except
Nominee(s) written below:)
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
--- ------- -------
2. Proposed 1998 Variable
Compensation Plan. ----- ----- -----
3. Proposed 1998 Worldwide
Employee Share Purchase Plan. ----- ----- -----
4. Proposed 1998 Employee Equity
Participation Program. ----- ----- -----
For Information Only:
Check here if you plan to attend the meeting.
- -----
Check here to discontinue mailing duplicate Annual Report.
- -----
Signature(s) Dated: 1998
----------------------------------------------- -----,
Please sign exactly as name appears hereon. Joint owners should each sign.
Where applicable, indicate official position or representative capacity.
Proxy Solicited on Behalf of The Board of Directors For The
Annual Meeting of Shareholders--April 30, 1998
The undersigned appoints Roger G. Ackerman and Van C. Campbell, and each of
them, as proxies, with full power of substitution and revocation, to vote, as
designated on the reverse side hereof, all the Common Stock of Corning
Incorporated which the undersigned has power to vote, with all powers which the
undersigned would possess if personally present, at the annual meeting of
shareholders thereof to be held on April 30, 1998, or at any adjournment
thereof.
Unless otherwise marked, this proxy will be voted FOR the election of the
nominees named and FOR Proposal Nos. 2, 3 and 4.
Check here for address change.
- -----
New Address:
------------------------------------
------------------------------------
------------------------------------
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.) CORNING
<PAGE>
Variable Compensation Plan
Corning Incorporated
1998 Variable Compensation Plan
1. PURPOSE
The purpose of the Corning Incorporated 1998 Variable Compensation Plan
(the "Plan") is to motivate and reward performance with tax deductible
payments to those executive officers of Corning Incorporated (Corning
or the "Corporation") subject to Section 162(m) of the Internal Revenue
of 1986, as amended, and to the regulations and rulings promulgated
thereunder (the "Code").
2. EFFECTIVE DATE AND TERM
The Plan shall be effective for Corning's 1998 fiscal year upon
approval by Corning's shareholders and will continue for each
subsequent fiscal year through 2002 unless earlier terminated by
Corning's Board of Directors (the "Board").
3. PARTICIPANTS
The individuals who may receive payments under the Plan, based on
performance for any fiscal year while the Plan is in effect, shall be
those persons employed by the Corporation at the end of each fiscal
year who constitute the Corporation's chief executive officer and all
other highly compensated executive officers whose compensation may be
subject to the scope of Section 162(m) of the Code.
4. COMMITTEE ADMINISTRATION
The Plan shall be administered by a committee appointed by the Board of
Directors and consisting of at least three non-employee directors, each
of whom satisfies the requirements for an "outside director" as that
term is defined under Section 162(m) of the Code. The Committee shall
have the sole authority and discretion to administer and interpret the
Plan in good faith to satisfy the requirements for tax deductibility of
payments in accordance with Section 162(m) of the Code. Such authority
shall include selection of the performance criteria for any applicable
fiscal year and for the individual participants. Decisions of the
Committee shall be final, conclusive and binding on all parties
including the Corporation, its stockholders and participants, and their
beneficiaries and heirs.
5. PERFORMANCE CRITERIA
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2
The Committee shall select the performance criterion or criteria for
each individual participant for any fiscal year during the first fiscal
quarter of such year and the formula or formulae for determining the
amount of payment that the Committee may award for performance during
such year. The performance criteria which the Committee may use are:
operating profits (including EBITDA), net profits, earnings per share,
profit returns and margins, revenues, shareholder return and/or value,
working capital and stock price. Performance criteria may be measured
solely on a corporate, subsidiary or business unit basis, or a
combination thereof. Further, performance criteria may reflect
corporate performance alone or performance relative to the performance
of a peer group of entities or other external measure of the criteria
selected. Profit, earnings and revenues used for any performance
criteria measurements shall exclude: gains or losses on operating asset
sales or dispositions; asset write-downs; litigation or claim judgments
or settlements; accruals for historic environmental obligations; effect
of changes in tax law or rate on deferred tax liabilities; accruals for
reorganization and restructuring programs; uninsured catastrophic
property losses; the cumulative effect of changes in accounting
principles; and any extraordinary non-recurring items as described in
Accounting Principles Board Opinion No. 30 and/or in management's
discussion and analysis of financial performance appearing in the
Corporation's annual report to shareholders for the applicable year.
6. PERFORMANCE GOALS
Prior to the end of the first quarter of each fiscal year the Plan is
in effect, the Committee shall establish in writing the performance
goals, based on one or more of the performance criteria set forth in
Section 5, and payment schedules or formulae tied to such goals for the
individuals described in Section 3.
7. PAYMENTS
The Committee shall certify in writing the attainment of the applicable
performance goals before making any payments for the applicable
performance year. The Committee, at its sole discretion, may reduce the
amount of payment below that determined using the applicable
performance criteria or formulae for a given participant. No
participant may receive an aggregate payment for a fiscal year's
performance in excess of $2,500,000. Payments may be made in cash,
shares of common stock of the Corporation or a combination. If any
payments are made in the form of common stock of the Corporation, the
value thereof shall be determined as of the date the Committee
certifies the attainment of performance goals and the number of shares
so issued shall be deducted from the number of shares available for
issue under the Corporation's 1998 Employee Equity Participation
Program.
8. PAYMENT DEFERRALS
The Committee may mandate and/or permit the deferral of all or a
portion of any payment earned under the Plan. Deferred payment accounts
may be denominated in: cash amounts with the crediting of interest;
phantom mutual fund accounts; or common
<PAGE>
3
stock unit accounts, provided that any crediting of interest or
dividend equivalents shall not cause the eventual payment to be
nondeductible under Section 162(m) of the Code as determined in good
faith by the Committee at the time of such crediting.
9. PLAN AMENDMENT
The Board of Directors may amend or otherwise modify the Plan from time
to time as it deems appropriate to serve the Plan's purposes. However,
the Board of Directors shall not amend the Plan, without the
appropriate approval of shareholders of the Corporation, if such
amendment would result in payments not qualifying for deductibility
under Section 162(m) of the Code as determined by the Board in good
faith.
10. OTHER INCENTIVE PLANS
The Board may provide that persons specified in Section 3 may
participate in and receive payments under other incentive compensation
plans, programs and arrangements maintained by the Corporation as it
deems appropriate and necessary.
11. GOVERNING LAW
The validity, construction and effect of the Plan and any agreements or
other instruments issued under it shall be determined in accordance
with the laws of New York without reference to the principles of
conflict of laws.
<PAGE>
Worldwide Employee
Share Purchase Plan
CORNING INCORPORATED
1998 WORLDWIDE EMPLOYEE SHARE PURCHASE PLAN
The purpose of the 1998 Worldwide Employee Share Purchase Plan (the
"Plan") of Corning Incorporated ("Corning" or the "Corporation") is to provide
to employees of the Corporation and its subsidiaries an ongoing opportunity to
purchase shares of the Corporation's Common Stock, par value $.50 per share,
("Corning Common Stock") through offerings to be made during a five-year period
commencing July 1, 1998. Two Million (2,000,000) shares of Corning Common Stock
in the aggregate have been approved for this purpose.
1. Administration. The Plan will be administered by a committee
appointed by the Board of Directors of the Corporation, consisting of at least
three employees (the "Committee"). Members of the Committee shall be eligible to
participate in the Plan on the same terms as other employees. The Committee will
have authority to make rules and regulations for the administration of the
Program and its interpretations and decisions with regard thereto shall be final
and conclusive.
2. Eligibility. The persons eligible to participate in the Plan shall
be such groups of employees of Corning or its subsidiaries as the Committee may
from time to time designate, in accordance with such rules as the Committee may
prescribe from time to time.
3. Offerings. Each calendar quarter the Corporation shall offer to
eligible employees the opportunity to purchase shares of Corning Common Stock
pursuant to the Plan. Each offering period shall be a calendar quarter. Amounts
received as compensation by an eligible employee during such period shall
constitute the measure of the employee's participation in the offering to the
extent participation is based on compensation.
4. Participation. An eligible employee may participate in such offering
by completing and forwarding to the employee's appropriate payroll location by a
date, selected by the Committee, prior to the first day of a calendar quarter a
payroll deduction authorization form. The employee will authorize a regular
payroll deduction from his regular compensation and will specify the date on
which such deduction is to commence, which may not be retroactive. If the
Committee so determines, the employee may also specify whether he wishes
deductions to be made from such non-fixed, bonus compensation as he may receive
from time to time.
5. Deductions. The Corporation will maintain payroll deduction accounts
for all participating employees. With respect to offerings made under the Plan,
an employee may authorize a payroll deduction in terms of whole number of
dollars, but (i) not in excess of a maximum of 10% of the regular compensation
an employee receives during the offering period (or during such portion thereof
as an employee may elect to participate) and (ii) not in excess of a
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percentage of non-fixed, bonus compensation as the Committee may from time to
time determine pursuant to Section 4 above.
6. Deduction Changes. During any offering period, the employee may at
any time stop the employee's payroll deduction by filing a new payroll
authorization form. The cessation of contributions shall become effective as
soon as possible after receipt of the form. The employee may thereafter begin
participation again only during a succeeding quarterly offering period. A
payroll deduction may not be increased or reduced during any offering period.
7. No Withdrawal of Funds. Once an employee has begun participation in
any quarterly offering, he may stop his payroll deductions but may not withdraw
any balance accumulated in his account.
8. Interest. The Corporation shall not credit an employee's account
with interest.
9. Purchase and Price of Shares. Each employee participating in any
offering under the Plan will purchase as many shares of Corning Common Stock as
the amounts withheld pursuant to Section 5 above shall cover.
The purchase price for each share purchased will be 85% of the market
price on either the first or last business day of the calendar quarter
(whichever price is lower).
As of the last day of calendar quarter, the account of each
participating employee shall be totaled and funds in the employee's account as
of that date shall be used to purchase Corning Common Stock. The employee shall
be deemed to have exercised an option to purchase such shares at such price and
the employee's account shall be charged for the amount of the purchase.
Subsequent shares purchased by the employee will be purchased in the same
manner, subject to funds having again been deposited in the employee's account.
For employees of subsidiaries of Corning located outside of the United
States, the purchase price for each share purchased shall be 85% of the market
price on the date of purchase of shares of Corning Common Stock by a third party
agent for use by the Plan, such date being the last day of a calendar quarter or
a day reasonably close thereto. Funds in the employee's account shall be
converted during each calendar quarter of the offering to U.S. dollars. As of
the last day of any calendar quarter during the offering or the date of
purchase, as appropriate, the account of such participating employee shall be
totaled and funds in the employee's account shall be used to purchase Corning
Common Stock. The date of purchase during any calendar quarter during the
offering shall be the last day of such calendar quarter, or as soon as
administratively practicable thereafter.
10. Registration of Certificates. It is anticipated that shares of
Corning Common Stock purchased by the employee shall be held by a third party
agent in an investment account established for and by the employee and that,
unless special arrangements are made to the contrary, dividends paid on shares
of Corning Common Stock purchased under the Plan will be reinvested.
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<PAGE>
Upon request by the employee to the third party agent or Corning, as
appropriate, certificates for whole shares will be delivered to the employee.
Fractional shares will not be delivered.
Certificates when issued may be registered only in the name of the
employee, or, if the employee so indicates on the employee's payroll deduction
authorization form, in the employee's name jointly with a member of the
employee's family or another.
11. Definitions. The phrase "market price" means the closing price of
Corning Common Stock on the New York Stock Exchange on a given day or, if no
sales of Corning Common Stock were made on that day, the closing price of stock
on the next preceding day on which sales were made on such Exchange.
The term "subsidiary" means a subsidiary of the Corporation within the
meaning of Section 424(f) of the Internal Revenue Code of 1986 and the
regulations promulgated thereunder; provided, however, that the Plan shall not
be deemed to cover the employees of any subsidiary unless so authorized by the
Committee.
12. Rights as a Stockholder. A participating employee shall not have
any of the rights or privileges of a stockholder with respect to shares
purchased under the Plan unless and until payment is made for such shares and
his ownership interest has been evidenced on Corning's books.
13. Rights on Retirement, Death, or Termination of Employment. In the
event of a participating employee's retirement, death, or termination of
employment during a quarterly offering period, no payroll deduction shall be
taken from any pay due and owing to an employee at such time. In the event of an
employee's death and upon the request of his estate but subject to the approval
of the Committee, the balance in the deceased employee's account shall be paid
to the employee's estate in cash.
14. Rights Not Transferable. Rights under the Plan are not transferable
by a participating employee and are exercisable during the employee's lifetime
only by the employee.
15. Application of Funds. All funds received or held by Corning under
the Plan may be used for any corporate purpose.
16. Adjustment in Case of Changes Affecting Corning Common Stock. In
the event of a subdivision of outstanding shares, or the payment of a stock
dividend or other corporate transaction affecting capital structure, the number
of shares approved for the Plan, and the share limitations contained herein,
shall be increased proportionately, and such other adjustment shall be made as
may be deemed equitable by the Board of Directors. In the event of any other
change affecting Corning Common Stock, such adjustment shall be made as may be
deemed equitable by the Board of Directors to give proper effect to such event.
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<PAGE>
17. Amendment of the Plan. The Board of Directors may at any time, or
from time to time, amend the Plan in any respect, except that, without the
approval of a majority of the shares of capital stock of the Corporation present
at a meeting notice for which included such purpose, no amendment shall be made
(i) increasing the number of shares approved for the Plan (other than as
provided in Section 16), (ii) decreasing the purchase price per share, or (iii)
changing the designation of subsidiaries eligible to participate in the Program.
18. Termination of the Plan. The Program and all rights of employees
under any offering hereunder shall terminate:
(a) on the day that participating employees become entitled to
purchase a number of shares greater than the number of shares remaining
available for purchase; provided, however, if the number of shares so
purchasable is greater than the shares remaining available, the
available shares shall be allocated by the Committee among such
participating employees in such manner as it deems fair; or
(b) at any time, at the discretion of the Board of Directors.
No offering hereunder shall be made which shall extend beyond June 30,
2003. Upon termination of the Program all amounts in the accounts of
participating employees shall be carried forward into the employee's payroll
deduction account under a successor program, if any, or promptly refunded.
19. Governmental Regulations. The Corporation's obligation to sell and
deliver shares of Corning Common Stock under the Plan is subject to the approval
of any governmental authority required in connection with the authorization,
issuance, or sale of such stock.
20. Stock. The shares of Corning Common Stock subject to sale under the
Plan may be either (i) authorized and unissued, (ii) issued and held in the
Corporation's treasury, or (iii) purchased on the open market by a third party
agent.
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<PAGE>
Employee Equity
Participation Program
Corning Incorporated
1998 Employee Equity Participation Program
1. PURPOSE
a) Purpose. The Corning Incorporated 1998 Employee Equity
Participation Program (the "1998 Program") is intended to
benefit the shareholders of Corning Incorporated ("Corning" or
"the Corporation") by providing a means to attract, retain and
reward the key executive, managerial and technical employees
of the Corporation and its subsidiaries selected by the
Committee as individuals who have contributed or may
contribute to the longer term financial success of the
Corporation. The award of shares of the Corporation's Common
Stock, par value $.50 per share, ("Corning Common Stock") is
designed to increase the recipient's proprietary interest in
the Corporation's success and more closely align the
recipient's interests with the interests of shareholders of
the Corporation.
b) Effective Date. The 1998 Program will become effective upon
its approval by the affirmative vote of a majority of the
votes cast at Corning's 1998 Annual Meeting of Shareholders
and will continue until the fifth anniversary, plus 60
calendar days, of the 1998 Program's Effective date.
2. ADMINISTRATION
a) Committee. The 1998 Program shall be administered by a
Committee (the "Committee"), appointed by the Board of
Directors of the Corporation (the "Board"), which shall
consist of no less than three of its members, all of whom
shall be "outside directors" as such term is defined in
Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code") and a "non-employee director" as such
term is defined in Rule 16b-3 under Section 16(b) of the
Securities Exchange Act of 1934, as amended (the "Act"). The
Committee may delegate certain responsibilities and powers
with respect to matters not involving officers of the
Corporation to any executive officer or officers selected by
it. Any such delegation may be revoked by the Committee at any
time.
b) Powers and Authority. The Committee's powers and authority
include, but are not limited to: selecting individuals, who
are the executive, managerial and technical employees of the
Corporation and any subsidiary of the Corporation (or other
similar entity in which the Corporation has ownership interest
of at least 50%), to receive awards under the 1998 Program;
determining the types and terms and conditions of all awards
granted, including performance and other earnout and/or
vesting contingencies; permitting transferability of options
to eligible third
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<PAGE>
parties; interpreting the 1998 Program's provisions; and
administering the 1998 Program in a manner that is consistent
with its purpose.
c) Award Prices. Awards denominated or made in shares of Corning
Common Stock shall use as the per share price the mean between
the high and low prices of Corning Common Stock on the New
York Stock Exchange on the applicable date, or if shares are
not traded on such date, such mean price on the next preceding
day on which such shares are traded. The applicable date shall
be the day on which the award is granted (or other relevant
transaction occurs). Except as provided for in Section 3(d),
the per share exercise price of any stock option or stock
appreciation right may not be decreased after the grant of the
award, and a stock option or stock appreciation right may not
be surrendered as consideration in exchange for the grant of a
new award with a lower per share exercise price.
3. SHARES SUBJECT TO THE PROGRAM AND ADJUSTMENTS
a) Maximum Shares Available for Delivery. Subject to Section
3(d), the maximum number of shares of Corning Common Stock
that may be delivered to participants and their beneficiaries
under the 1998 Program shall not exceed 8,000,000 plus such
number of shares of Corning Common Stock available, at the
effective date of the 1998 Program, for option or grant under
the 1994 Employee Equity Participation Program of the
Corporation (the "1994 Program"). Shares of Corning Common
Stock, which are forfeited, expire, are withheld for the
payment of taxes, or are canceled without the delivery of
shares or which result in the forfeiture of shares back to the
Corporation because of the failure to meet an award
contingency or condition under the 1994 Program or the 1998
Program shall again be available for awards or the grant of
options under the 1998 Program. Any shares of Corning Common
Stock covered by an award (or portion of an award) granted
under the 1998 Program, which is forfeited or canceled,
expires or is settled in cash, including the settlement of tax
withholding obligations using shares, shall be deemed not to
have been delivered for purposes of determining the maximum
number of shares available for delivery under the 1998
Program. Likewise, if any stock option is exercised by
tendering shares, either actually or by attestation, to the
Corporation as full or partial payment for such exercise under
the 1998 Program, only the number of shares issued net of the
shares tendered shall be deemed delivered for the purposes of
determining the maximum number of shares available for
delivery under the 1998 Program. Further, shares issued or
options granted through the settlement, assumption or
substitution of outstanding awards or obligations to grant
future awards as a condition of the Corporation acquiring
another entity shall not reduce the maximum number of shares
available for delivery under the 1998 Program.
b) Other Program Limits. Subject to Section 3(d), the following
additional maximums are imposed under the 1998 Program. The
maximum number of shares that may be issued in connection with
stock options whether intended to
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comply with Section 422 of the Code ("incentive stock
options") or otherwise shall be 8,000,000 plus such number of
shares of Corning Common Stock available under the 1994
Program at the effective date of the 1998 Program in each case
as calculated as set forth in Section 3(a) above. The maximum
number of shares that may be issued in conjunction with awards
granted pursuant to Section 4(d) shall be 2,000,000 calculated
as set forth in Section 3(a) above. The maximum aggregate
number of shares that may be covered by awards granted to any
one individual pursuant to Sections 4(b), 4(c) and 4(d) shall
not exceed 1,600,000 during the life of the 1998 Program. The
maximum payment that can be made for awards granted to any one
individual pursuant to Sections 4(d) and 4(e) shall be
$7,500,000 for attainment of established performance goals. If
a payment under Section 4(d) is made in shares, the value of
such shares for determining this maximum individual payment
amount will be the mean price of a share of Corning Common
Stock (as set forth in Section 2(c)) on the date of the award
by the Compensation Committee. A specified performance period
for purposes of this performance goal payment limit shall not
exceed a sixty (60) consecutive month period.
c) Payment Shares. Subject to the limitations on the number of
shares of Corning Common Stock that may be delivered under the
1998 Program overall and as set forth in Section 3(b) above,
the Committee may, in addition to granting awards under
Section 4, use available shares as the form of payment for
compensation, grants or rights earned or due under any other
compensation plans or arrangements of the Corporation or its
subsidiaries.
d) Adjustments for Corporate Transactions.
(i) The Committee may determine that a corporate
transaction has affected the price per share of
Corning Common Stock such that an adjustment or
adjustments to outstanding awards are required to
preserve (or prevent enlargement of) the benefits or
potential benefits intended at time of grant. For
this purpose a corporate transaction will include,
but is not limited to, any stock dividend, stock
split, extraordinary cash dividend, recapitalization,
reorganization, merger, consolidation, split-up,
spin-off, combination or exchange of shares, or other
similar occurrence. In the event of such a corporate
transaction, the Committee may in such manner as the
Committee deems equitable, adjust (i) the number and
kind of shares which may be delivered under the 1998
Program pursuant to Sections 3(a) and 3(b); (ii) the
number and kind of shares subject to outstanding
awards; and (iii) the exercise price of outstanding
stock options and stock appreciation rights.
(ii) In the event that the Corporation is not the
surviving company of a merger, consolidation or
amalgamation with another company, or in the event of
a liquidation or reorganization of the Corporation,
and in the absence of the
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surviving corporation's assumption of outstanding
awards made under the 1998 Program, the Committee may
provide for appropriate adjustments and/or
settlements of such grants either at the time of
grant or at a subsequent date. The Committee may also
provide for adjustments and/or settlements of
outstanding awards as it deems appropriate and
consistent with the 1998 Program's purpose.
4. TYPES OF AWARDS
a) General. An award may be granted singularly, in combination
with another award or awards or in tandem whereby exercise or
vesting of one award held by a participant cancels another
award held by the participant. Awards shall be evidenced by
agreements in such form as the Committee may from time to time
approve and containing the terms set forth below and such
other terms not inconsistent therewith. The types of awards
that may be granted under the 1998 Program include:
b) Stock Option. A stock option represents a right to purchase a
specified number of shares of Corning Common Stock during a
specified period at a price per share which is no less than
100% of the per share amount stipulated by Section 2(c). The
longest term during which a stock option may be outstanding
shall be 10 years. A stock option may be in the form of an
incentive stock option which meets the requirements of Section
422 of the Code or in another form which may or may not
qualify for favorable federal income tax treatment. The shares
covered by a stock option may be purchased by means of a cash
payment or such other means as the Committee may from time to
time permit, including (i) tendering (either actually or by
attestation) shares valued using the market price set forth in
Section 2(c) at the time of exercise and (ii) authorizing a
third party to sell shares (or a sufficient portion thereof)
acquired upon exercise of a stock option and to remit to the
Corporation a sufficient portion of the sale proceeds to pay
for all the shares acquired through such exercise and any tax
withholding obligations resulting from such exercise. The
Committee may establish rules permitting an optionee paying
the purchase price of an option in already-owned, freely
transferable, unencumbered shares of Corning Common Stock to
receive new options to purchase shares of Corning Common Stock
at the then current market price for the same number of shares
surrendered upon exercise of the original option; provided
that the market price of Corning Common Stock on the date of
exercise is at least 25% higher than the price of the option
being exercised. In no circumstance will the total number of
shares subject to the new option granted exceed the number of
shares surrendered upon exercise of the original option, will
the new option be exercisable within six months of the date of
exercise or will the new option have a life beyond that of the
original option.
c) Stock Appreciation Right. A stock appreciation right is a
right to receive a payment in cash, shares or a combination
(as determined by the Committee),
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equal to the excess of the aggregate market price at time of
exercise of a specified number of shares over the aggregate
exercise price of the stock appreciation right being
exercised. The longest term a stock appreciation right may be
outstanding shall be 10 years. Such exercise price shall be
based on 100% of the per share amount stipulated by Section
2(c).
d) Stock Award. A stock award is a grant of shares of Corning
Common Stock or of a right to receive shares (or their cash
equivalent or a combination of both) in the future. Except in
cases of certain terminations of employment or an
extraordinary event, each stock award shall be subject to
restrictions on transfer and/or the possibility of forfeiture
for at least three years following the date of grant for the
applicable performance period and shall be governed by such
other conditions, restrictions and contingencies as the
Committee shall determine. Such other conditions, restrictions
and contingencies may include continuous service and/or the
achievement of performance goals established by the Committee
consistent with the requirements for deductibility of payments
under Section 162(m) of the Code. The performance goals that
may be used by the Committee for such awards shall consist of:
operating profits (including EBITDA), net profits, earnings
per share, profit returns and margins, revenues, shareholder
return and/or value, stock price and working capital.
Performance goals may be measured solely on a corporate,
subsidiary or business unit basis, or a combination thereof.
Performance criteria may reflect absolute entity performance
or a relative comparison of entity performance to the
performance of a peer group of entities or other external
measure of the selected performance criteria. Profit, earnings
and revenues used for any performance goal measurement shall
exclude: gains or losses on operating asset sales or
dispositions; asset write-downs; litigation or claim judgments
or settlements; accruals for historic environmental
obligations; effect of changes in tax law or rate on deferred
tax liabilities; accruals for reorganization and restructuring
programs; uninsured catastrophic property losses; the
cumulative effect of changes in accounting principles; and any
extraordinary non-recurring items as described in Accounting
Principles Board Opinion No. 30 and/or in management's
discussion and analysis of financial performance appearing in
the Corporation's annual report to shareholders for the
applicable year.
e) Cash Award. A cash award is a right denominated in cash or
cash units to receive a payment, based on the attainment of
pre-established performance goals, subject to a three-year
minimum restriction and/or forfeiture period, as described in
(d) above, and such other conditions, restrictions and
contingencies as the Committee shall determine. The
performance goals to be used by the Committee for such awards
shall be those set forth in Section 4(d) above.
5. AWARD SETTLEMENTS AND PAYMENTS
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a) Dividends and Dividend Equivalents. An award may contain the
right to receive dividends or dividend equivalent payments
which may be paid either currently or credited to a
participant's account. Any such crediting of dividends or
dividend equivalents or reinvestment in shares of Corning
Common Stock may be subject to such conditions, restrictions
and contingencies as the Committee shall establish, including
the reinvestment of such credit amounts in share equivalents.
b) Payments. Awards may be settled through cash payments, the
delivery of shares of Corning Common Stock, and/or the
granting of awards, or combination thereof, as the Committee
shall determine. Any award settlement may be subject to such
conditions, restrictions and contingencies as the Committee
shall determine. The Committee may permit or require the
deferral of any award payment, subject to such rules and
procedures as it may establish, which may include provisions
for the payment or crediting of interest, or dividend
equivalents, including converting such credits into deferred
share equivalents. The Committee may also permit, subject to
such rules and procedures as it may establish, an optionee to
defer recognition of gain upon exercise of an option to
purchase shares of Corning Common Stock. Subject to the
limitation on the number of shares that may be issued under
the 1998 Program as set forth in Sections 3(a) and 3(b), the
Committee may, in addition to granting awards under Section 4,
use available shares as the form of payment for other
compensation plans or arrangements of the Corporation or its
subsidiaries.
6. PROGRAM AMENDMENT AND TERMINATION
a) Amendments. The Board may amend the 1998 Program as it deems
necessary and appropriate to better achieve the 1998 Program's
purposes; provided, however, that (i) the share limitations
set forth in Sections 3(a) and 3(b) cannot be increased and
(ii) the minimum stock option and stock appreciation right
exercise prices set forth in Sections 2(c) and 4(b) and (c)
cannot be changed unless such an amendment is approved by the
Corporation's shareholders.
b) Program Suspension and Termination. The Board may suspend or
terminate the 1998 Program at any time. Any such suspension or
termination shall not of itself impair any outstanding option
or award granted under the 1998 Program or a participant's
rights regarding such option or award.
7. MISCELLANEOUS
a) No Individual Rights. No person shall have any claim or right
to be granted an award under the 1998 Program. Neither the
1998 Program nor any action taken hereunder shall be construed
as giving any employee or other person any right to continue
to be employed by or to perform services for the Corporation
or any subsidiary or related entity. The right to terminate
the employment of or
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performance of services by any 1998 Program participant at any
time and for any reason is specifically reserved to the
employing entity.
b) Administration. The Committee's interpretation and
construction of any provisions of the 1998 Program or any
right, option or award granted or contract executed under it
shall be final unless otherwise determined by the Board of
Directors, which determination shall be final. No member of
the Board of Directors or the Committee shall be liable for
any action or determination made in good faith.
c) Unfunded Program. The 1998 Program shall be unfunded and shall
not create (or be construed to create) a trust or a separate
fund or funds. The 1998 Program shall not establish any
fiduciary relationship between the Corporation and any
participant or beneficiary of a participant.
d) Other Benefit and Compensation Programs. Unless otherwise
specifically determined by the Committee, settlements of
awards received by participants under the 1998 Program shall
not be deemed a part of a participant's regular, recurring
compensation for purposes of calculating payments or benefits
from any of the Corporation's benefit plans or severance
program. The Corporation may adopt other compensation
programs, plans or arrangements as it deems appropriate.
e) No Fractional Shares. No fractional shares of Corning Common
Stock shall be issued or delivered pursuant to the 1998
Program. The Committee shall determine whether cash shall be
paid in lieu of any fractional shares.
f) Governing Law. The validity, construction and effect of the
1998 Program and any award, agreement or other instrument
issued under it shall be determined in accordance with the
laws of the State of New York without reference to principles
of conflict of law.
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