<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14a INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Elcor Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] 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:
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<PAGE> 2
[ELCOR CORPORATION LOGO]
14643 DALLAS PARKWAY
SUITE 1000, WELLINGTON CENTRE
DALLAS, TEXAS 75240-8871
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD TUESDAY, OCTOBER 27, 1998
To the Shareholders:
PLEASE TAKE NOTICE that the Annual Meeting of Shareholders of Elcor
Corporation (the "Company") will be held in the Derrick Room of the Midland
Petroleum Club, 501 West Wall Street, Midland, Texas, on Tuesday, October 27,
1998, at 10 a.m., local time, for the following purposes:
1. To elect two directors to hold office for terms expiring in 2001,
as specified in the attached Proxy Statement, or until their successors are
elected and qualified;
2. To consider and vote upon a proposal to amend the Company's
Certificate of Incorporation to increase authorized Common Stock from
50,000,000 shares to 100,000,000 shares;
3. To consider and vote upon a proposal to approve the 1998 Amended
and Restated Elcor Corporation Incentive Stock Option Plan;
4. To ratify the appointment of Arthur Andersen LLP as independent
auditors of the Company for its fiscal year ending June 30, 1999; and
5. To transact such other business as may properly come before such
meeting or any adjournment or adjournments thereof (the "Meeting").
An alphabetical list of the names and addresses of shareholders eligible to
vote at the Meeting, together with the number of shares registered, will be
maintained during ordinary business hours at the offices of Ortloff Engineers,
LTD at Suite 2000, Wilco Building, 415 West Wall Street, Midland, Texas 79701
for at least ten days prior to the Meeting.
The Board of Directors has fixed the close of business on September 8,
1998, as the record date for the determination of shareholders entitled to
notice of and to vote at the Meeting.
By Order of the Board of Directors
DAVID G. SISLER
Secretary
Dated: September 18, 1998
IMPORTANT
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, YOU ARE URGED TO EXECUTE
THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED REPLY ENVELOPE,
WHICH REQUIRES NO POSTAGE, OR VOTE BY TELEPHONE AS DESCRIBED ON THE PROXY. ANY
SHAREHOLDER GRANTING A PROXY MAY REVOKE SAME AT ANY TIME PRIOR TO ITS EXERCISE.
ALSO, WHETHER OR NOT GRANTING A PROXY, SHAREHOLDERS OF RECORD MAY VOTE IN PERSON
IF THEY ATTEND THE MEETING.
<PAGE> 3
[ELCOR CORPORATION LOGO]
14643 DALLAS PARKWAY
SUITE 1000, WELLINGTON CENTRE
DALLAS, TEXAS 75240-8871
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD TUESDAY, OCTOBER 27, 1998
SOLICITATION OF PROXY
The accompanying proxy is solicited on behalf of the Board of Directors of
Elcor Corporation (the "Company") for use at the Annual Meeting of Shareholders
of the Company to be held on Tuesday, October 27, 1998, and at any adjournment
or adjournments thereof (the "Meeting"). In addition to the use of the mails,
proxies may be solicited by personal interview, telephone or facsimile by
directors, officers and other employees of the Company, who will not receive
additional compensation for such services. The Company may also request
brokerage houses, nominees, custodians and fiduciaries to forward the soliciting
material to the beneficial owners of stock held of record and will reimburse
such persons for forwarding such material at the rates suggested by the New York
Stock Exchange. The Company will bear the cost of this solicitation of proxies.
Such costs are expected to be nominal. Proxy solicitation will commence with the
mailing of this Proxy Statement on or about September 18, 1998.
Any shareholder giving a proxy has the power to revoke the same at any time
prior to its exercise by executing a subsequent proxy, by providing written
notice to the Secretary of the Company or by attending the Meeting and
withdrawing the proxy.
PURPOSE OF MEETING
As stated in the Notice of Annual Meeting of Shareholders accompanying this
Proxy Statement, the business to be conducted and the matters to be considered
and acted upon at the Meeting are as follows:
1. To elect two directors to hold office for terms expiring in 2001,
as specified herein or until their successors are elected and qualified;
2. To consider and vote upon a proposal to amend the Company's
Certificate of Incorporation to increase authorized Common Stock from
50,000,000 shares to 100,000,000 shares;
3. To consider and vote upon a proposal to approve the 1998 Amended
and Restated Elcor Corporation Incentive Stock Option Plan (the "Amended
Plan");
4. To ratify the appointment of Arthur Andersen LLP as independent
auditors of the Company for its fiscal year ending June 30, 1999; and
5. To transact such other business as may properly come before the
Meeting.
VOTING AT MEETING
The voting securities of the Company consist solely of common stock, par
value $1 per share ("Common Stock"). The record date for shareholders entitled
to notice of and to vote at the Meeting is the close of business on September 8,
1998 (the "Record Date"). At September 1, 1998, the Company had outstanding and
entitled to vote at the Meeting 13,113,993 shares of Common Stock. Shareholders
are entitled to one vote, in person or by proxy, for each share of Common Stock
held in their respective names on the Record Date. Shareholders representing
fifty-one percent of the Common Stock outstanding and entitled to vote must be
present or represented by proxy at the Meeting to constitute a quorum.
<PAGE> 4
Neither abstentions or shares voted to withhold authority nor broker
non-votes are counted as votes cast on any matter to which they relate. All
shares represented in person or by proxy, including abstentions, shares voted to
withhold authority, and broker non-votes, are considered in determining whether
a quorum has been reached on a particular matter. A broker non-vote will occur
when a broker who holds shares in nominee form, or "street name," for a customer
does not have the authority under the rules of the New York Stock Exchange
("NYSE") or separate agreement to cast a vote on a particular matter, because
the matter is deemed by the NYSE to be non-discretionary, or is
non-discretionary by agreement, and the broker's customer has not furnished
voting instructions.
Shares represented by properly executed proxies will be voted, in the
absence of contrary indication thereon or revocation of such proxies by the
shareholders granting them, in favor of each of the nominees for director and
each of the other proposals set forth below. The persons named as proxies on the
accompanying proxy card have been designated by the Company's management.
If a shareholder is a participant in the Company's Employee Stock Ownership
Plan ("ESOP"), the proxy card will serve as a voting direction for the Trustee
of such plan. Shares not yet allocated to ESOP participants, under the terms of
the ESOP, will be voted in proportion to allocated ESOP shares for which voting
is directed. Allocated shares held through the ESOP for which participants do
not return properly signed proxy cards or telephonic votes will be voted in the
same manner.
In lieu of voting or giving voting direction on proxy cards, a shareholder
or ESOP participant may give voting direction by telephone if they follow the
instructions set forth on the proxy card. By using the telephone to give voting
direction, a shareholder thereby is granting a proxy for the voting of shares
held of record in their name to the Company's stock transfer and tabulation
agent, ChaseMellon Shareholder Services, LLC ("ChaseMellon") and is authorizing
ChaseMellon on their behalf to take all necessary steps to confirm their vote to
the proxies listed on the Company's proxy card. ESOP participants by giving
voting direction by telephone are authorizing ChaseMellon on their behalf to
take all necessary steps to confirm their voting direction to the ESOP trustee
for voting.
The election of directors, the approval of the amendment to the Company's
Certificate of Incorporation, the approval of the Amended Plan, and the
ratification of the appointment of Arthur Andersen LLP as independent auditors
each will require the affirmative vote of a majority of the Common Stock present
or represented by proxy at the meeting and voting thereon. Cumulative voting for
directors is not authorized.
STOCK OWNERSHIP
The following table sets forth as of September 1, 1998, the number of
shares of Common Stock beneficially owned by each director or nominee, each
Named Executive Officer (as defined under "Executive Compensation" below), and
by all directors and executive officers as a group.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER SHARES OF PERCENT
OR IDENTITY OF GROUP COMMON STOCK(1) OF CLASS
------------------------ --------------- --------
<S> <C> <C>
F. H. Callaway............................................ 208,344(2) 1.59
James E. Hall............................................. 190,200(2) 1.45
Dale V. Kesler............................................ 3,200(3) *
Robert M. Leibrock........................................ 338,775(2) 2.58
W. F. Ortloff............................................. 35,284(4) *
David W. Quinn............................................ 12,000(2) *
Richard J. Rosebery....................................... 179,625(5) 1.37
Harold K. Work............................................ 207,747(6) 1.58
Leonard R. Harral......................................... 14,434(7) *
Raul G. Holguin........................................... 18,160(8) *
David G. Sisler........................................... 2,962(9) *
All directors and executive officers as a group (13
persons)................................................ 1,249,087(10) 9.42
</TABLE>
- ---------------
* Percentages of one percent or less have been omitted.
2
<PAGE> 5
(1) All shares reflected in the table are owned directly and the owner has sole
voting and investment power with respect to such shares, except for (i)
option shares as shown in notes (2) through (10); (ii) shares allocated to
such persons' accounts in the ESOP; and (iii) certain shares that are
treated as beneficially owned by such persons for purposes of this table,
such as, but not limited to, shares which are held in the names of the
wives or minor children of such persons, in family partnerships, or as
trustee or custodian for children of such persons, or by children who are
not minors but who reside with such persons.
(2) Includes options currently exercisable for 9,000 shares.
(3) Includes options currently exercisable for 3,000 shares.
(4) Includes options currently exercisable for 6,000 shares.
(5) Includes options currently exercisable or exercisable within sixty days for
34,500 shares.
(6) Includes options currently exercisable or exercisable within sixty days for
55,500 shares.
(7) Includes options currently exercisable or exercisable within sixty days for
3,901 shares.
(8) Includes options currently exercisable or exercisable within sixty days for
3,348 shares.
(9) Includes options currently exercisable or exercisable within sixty days for
1,111 shares.
(10) Includes options currently exercisable or exercisable within sixty days for
152,809 shares.
The following table sets forth as of September 1, 1998, or such other date
indicated below, certain information with respect to each beneficial owner who
is known to the Company to own more than 5 percent of the outstanding shares of
Common Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF SHARES OF PERCENT
BENEFICIAL OWNER COMMON STOCK OF CLASS
------------------- ------------ --------
<S> <C> <C>
FMR Corp.................................................... 1,459,300(1) 11.13%
82 Devonshire Street
Boston, MA 02109
Trustees for the Elcor Corporation Employee Stock Ownership
Plan...................................................... 1,004,061 7.66%
c/o Elcor Corporation
14643 Dallas Parkway
Wellington Centre, Suite 1000
Dallas, TX 75240-8871
State Farm Mutual Automobile Insurance Company.............. 750,000(2) 5.72%
One State Farm Plaza
Bloomington, IL 61710
</TABLE>
- ---------------
(1) This information was taken from a Schedule 13G filed on behalf of FMR as a
parent holding company and certain affiliates as of May 10, 1998. FMR
Corp.'s wholly owned subsidiary, Fidelity Management & Research Company
("Fidelity") acts as an investment advisor to several investment companies
and in such capacity has reported beneficial ownership of 977,250 shares of
the Company's Common Stock, or 7.45% of the number of shares outstanding at
September 1, 1998. Another FMR subsidiary, Fidelity Management Trust
Company, has reported beneficial ownership of 459,550 shares or 3.50% of the
Common Stock outstanding as the result of its serving as investment manager
of the institutional account(s). Fidelity International Limited, a former
Fidelity subsidiary, has reported beneficial ownership of 22,500 shares or
0.17% of the outstanding Common Stock. FMR Corp. reported the sole power to
vote or direct the vote of 444,850 shares and sole power to dispose of
1,459,300 shares.
(2) This information was taken from a letter from State Farm Mutual Automobile
Insurance Company (hereinafter referred to as "State Farm") dated August
31, 1998. State Farm or its affiliates have sole voting power and sole
investment power with respect to 750,000 shares.
As far as is known to management of the Company, no other single person
owns beneficially more than 5 percent of the outstanding shares of Common Stock.
Except as specifically indicated above, the Company has derived the beneficial
ownership information used to prepare the table immediately above solely from
its
3
<PAGE> 6
review of public reports under section 13(d), (g) and (f) of the Securities
Exchange Act of 1934. The information therefore is subject to inaccuracy due to
time lags inherent in the reporting process.
BOARD OF DIRECTORS
The Board of Directors has the responsibility for establishing broad
corporate policies, for approving major corporate transactions and for the
overall performance of the Company, although it is not involved in day-to-day
operating details. The Board meets regularly throughout the year, including the
annual organization meeting following the Annual Meeting of Shareholders. During
the last fiscal year, the Board met twelve times.
The Board has established a number of standing committees of certain of its
members to perform particular areas of responsibility. These are the Executive,
Audit, and the Compensation Committees. There is no Nominating Committee.
The primary function of the Executive Committee is to assist the Board by
acting upon matters when the Board is not in session within general guidelines
previously authorized by the Board. All actions taken by the Committee are
promptly reported to and reviewed by the full Board. The Committee met eight
times during the last fiscal year. The Executive Committee consists of Messrs.
Work, Callaway, Leibrock and Ortloff. Mr. Work was elected to the Executive
Committee as Chairman on August 26, 1997. Mr. Roy E. Campbell, the former
Chairman of the Board, President and Chief Executive Officer of the Company, had
served as Chairman of the Committee for fiscal 1998 through his date of death,
August 22, 1997.
The Audit Committee consists of Messrs. Quinn (Chairman), Hall, Kesler and
Leibrock, all of whom are nonemployee directors. Mr. Leibrock had served as
Chairman of the Audit Committee until April 1998. The functions of the Committee
are to determine whether management has established internal controls which are
sound, adequate and working effectively; to ascertain whether Company assets are
verified and safeguarded; to review and approve external audits; to review audit
fees and the appointment of independent auditors; and to review nonaudit
services provided by the independent auditors. The Committee met three times
during the last fiscal year.
The Compensation Committee consists of Messrs. Callaway (Chairman), Hall
and Ortloff. Its function is to independently review and assess compensation for
the Chief Executive Officer and all other executive officers of the Company and
provide advice and recommendations to the Board of Directors concerning such
compensation, benefits and the development of policies on employee compensation
for the Company. The Committee met six times during the last fiscal year.
All directors attended in excess of seventy-five percent (the reporting
threshold) of the aggregate of Board of Directors and applicable Board committee
meetings during their service as directors in fiscal 1998.
PROPOSAL ONE
ELECTION OF DIRECTORS
At the Meeting, two directors will be elected to serve for terms of three
years expiring on the date of the Annual Meeting of Shareholders in 2001. Each
director elected will continue in office until a successor has been elected or
until resignation or removal in the manner provided by the bylaws of the
Company. The nominees for directors are both currently Board members.
Messrs. James E. Hall and Harold K. Work are nominated for election for a
three-year term or until their successors are elected and qualified.
Under the Company's bylaws, directors are divided into three classes as
equal in number as the total number of directors permits.
None of the nominees has any family relationship with the others or any
officer or director of the Company or any of its subsidiaries. None of the
nominees is being proposed for election pursuant to any
4
<PAGE> 7
special arrangement or understanding between such nominee and any other person.
If the contingency should occur that any such nominee is unable to serve as a
director, it is intended that the shares represented by the proxies will be
voted, in the absence of contrary indication, for any substitute nominee that
management may designate. Management knows of no reason why any nominee would be
unable to serve.
Information about nominees for the Board of Directors and the directors
whose terms will or may continue after the Meeting is set forth below. The
information presented herein with respect to the nominees was obtained in part
from the nominees, and in part from the records of the Company.
NOMINEES FOR THREE-YEAR TERMS
JAMES E. HALL, 63 -- Officer and Director of Chaparral Cars, Inc. and Partner of
Condor Operating Company.
For more than the past five years, Mr. Hall has been President and a
director of Chaparral Cars, Inc., which has built and operated cars for
major national and international racing events, and Manager of Condor
Operating Company, independent oil and gas operators. Mr. Hall is also a
former director and officer of Hall Racing, Inc. and Condor Aviation
Company, Inc. Mr. Hall is a member of the Audit Committee and the
Compensation Committee. He has served as a director since 1974 and his
current term expires in 1998.
HAROLD K. WORK, 65 -- Chairman of the Board, President and Chief Executive
Officer of Elcor Corporation; President and Chief
Executive Officer of Elk Corporation of Dallas.
Mr. Work was elected by the Board to the position of Chairman of the Board,
President and Chief Executive Officer of the Company on August 26, 1997, to
succeed the late Mr. Roy E. Campbell. Mr. Work served for just one week as
Vice Chairman of the Company under a succession plan adopted by the Board
on August 18, 1997. Prior to such time, he had served as Executive Vice
President of the Company since 1993 and as a director since 1996. He has
served as President and Chief Executive Officer of Elk Corporation of
Dallas since 1979, and serves on its board of directors. Mr. Work is also
President, Chief Executive Officer and a director of Elcor Management
Corporation and each of the subsidiaries of Elk Corporation of Dallas. He
is a member of the Board of Directors of Centex Construction Products, Inc.
and of the Asphalt Roofing Manufacturers Association, where he served as
Chairman of the Executive Committee from 1990 to 1992. His current term
expires in 1998.
CONTINUING DIRECTORS
F. H. CALLAWAY, 76 -- Partner, Callaway Oil & Gas Co.
Mr. Callaway, for more than the past five years, has been an independent
oil operator and since May 1981 has been a partner in Callaway Oil & Gas
Co., an oil and gas exploration and production company. Mr. Callaway also
serves as a director of Canark Petroleum Inc., Caljam Oil & Gas Ltd., and
Callaway Production Co., Inc. Mr. Callaway is a member of the Executive
Committee and Chairman of the Compensation Committee and has been a
director of the Company since 1965. His current term expires in 1999.
5
<PAGE> 8
DALE V. KESLER, 59 -- Retired former Managing Partner, Arthur Andersen LLP,
Dallas/Fort Worth.
Mr. Kesler retired in 1996 from Arthur Andersen LLP, where he was Managing
Partner of the Dallas/ Fort Worth office from 1983 to 1994. He began
employment with Arthur Andersen in 1962 and became head of the Audit
Practice at the Dallas office in 1973. In 1982, he moved to Arthur
Andersen's headquarters where he was responsible for strategic planning
worldwide for the Audit and Business Advisory practice of Arthur Andersen.
He currently serves on the boards of directors of American Homestar
Corporation, New Millennium Homes, and the Methodist Hospitals of Dallas,
and serves on several committees and boards of various charitable and civic
organizations. Mr. Kesler was appointed to fill a vacancy, created when the
number of directors on the Board of the Company was increased from seven to
eight on December 15, 1997, for a term beginning January 2, 1998 and
expiring in 2000.
ROBERT M. LEIBROCK, 78 -- Partner, Amerind Oil Company, Ltd.
For more than the past five years, Mr. Leibrock has been an independent oil
operator and since February 1981 has been a partner in Amerind Oil Company,
Ltd., an oil and gas exploration and production company. Mr. Leibrock is a
shareholder of Abell-Hanger Foundation. Mr. Leibrock is a member of the
Executive Committee and is a member and former Chairman of the Audit
Committee. He was a director of the Company from 1965 to January 1968, and
since March 1969. His current term expires in 2000; however, Mr. Leibrock
recently has provided the Company with notice that he may retire from the
Company's Board of Directors in the autumn of 1998.
W. F. ORTLOFF, 75 -- Retired former Executive Vice President and Vice Chairman
of Elcor Corporation.
Mr. Ortloff served as Executive Vice President of the Company (1965-1981)
and Vice Chairman of the Board of the Company (1977-1981). From February
1984 until April 1989, Mr. Ortloff served as President, Chief Executive
Officer and director of Gory Associated Industries, Inc., a subsidiary of
the Company. He retired from part-time employment as an executive with the
Company on May 31, 1995. Mr. Ortloff is a member of the Executive Committee
and the Compensation Committee. He was elected a director in 1965. His
current term expires in 2000.
DAVID W. QUINN, 56 -- Vice Chairman of Centex Corporation.
Prior to his appointment to his current position as Vice Chairman of Centex
Corporation in 1996, Mr. Quinn served as its Executive Vice President since
1987. In addition, Mr. Quinn served as Chief Financial Officer of Centex
since February 1987. He has served on Centex's Board of Directors since
1989, and also serves as a director of its 56.5% owned subsidiary, Centex
Construction Products, Inc. Mr. Quinn also is a member of the Board of
Directors and Executive Committee and is Chairman of the Finance Committee
of Zale Lipshy University Hospital in Dallas, Texas. He serves as Chairman
of the Company's Audit Committee. Mr. Quinn has served as a director of the
Company since 1996 and his current term expires in 1999.
RICHARD J. ROSEBERY, 63 -- Vice Chairman, Chief Financial and Administrative
Officer and Treasurer of Elcor Corporation.
Mr. Rosebery was elected to his current position as Vice Chairman of the
Company on August 18, 1997, having served as Executive Vice President since
1993. He has served as an officer of the Company for 23 years. In addition
to his position with the Company, he serves as a director and officer of
all of Elcor's subsidiaries and is Chairman of the Board or President of
four Elcor subsidiaries. Mr. Rosebery served as a Vice President in various
capacities with Elcor Corporation from 1975 until his election as Vice
Chairman. He also served as President of the Dallas Chapter of the
Financial Executives Institute until June, 1998 and continues to serve as a
director of that organization. Mr. Rosebery's current term expires in 1999.
He has served as a director of the Company since 1996.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR EACH OF THE DIRECTOR NOMINEES.
6
<PAGE> 9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table sets forth certain information regarding compensation
paid during each of the last three fiscal years to each person serving as the
Company's Chief Executive Officer during the last fiscal year and each of the
Company's four other most highly compensated executive officers serving at the
end of the fiscal year (collectively, "Named Executive Officers"), based on
salary and bonus earned during the last fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION ----------------
NAME AND FISCAL -------------------- STOCK OPTIONS ALL OTHER
PRINCIPAL POSITION(A) YEAR SALARY BONUS(B) (# OF SHARES)(C) COMPENSATION(D)
--------------------- ------ -------- -------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Roy E. Campbell............... 1998 $ 61,000 $ 58,427 0 $166,107
1997 378,200 114,538 22,500 78,573
1996 366,000 51,922 22,500 73,329
Leonard R. Harral............. 1998 $106,150 $ 27,096 1,960 $ 10,960
1997 102,167 13,930 1,860 9,242
1996 99,067 6,238 1,777 8,608
Raul G. Holguin............... 1998 $115,583 $ 35,301 3,095 $ 12,629
1997 105,750 25,388 1,567 9,261
1996 -- -- -- --
Richard J. Rosebery........... 1998 $266,933 $117,261 20,000 $ 42,627
1997 219,733 46,485 15,000 33,723
1996 203,165 20,015 15,000 31,149
David G. Sisler............... 1998 $120,367 $ 34,134 3,015 $ 8,328
1997 114,106 11,665 2,557 2,650
1996 98,471 15,000 1,500 0
Harold K. Work................ 1998 $317,033 $149,001 25,000 $ 64,297
1997 272,800 60,505 15,000 64,479
1996 264,000 40,966 15,000 65,258
</TABLE>
- ---------------
(a) Capacities in which person served during the fiscal year ending June 30,
1998:
<TABLE>
<S> <C>
Roy E. Campbell Late Chairman of the Board, Chief Executive Officer and
President. (Served until August 22, 1997.)
Leonard R. Harral Vice President and Chief Accounting Officer.
Raul G. Holguin Vice President Information Systems; Vice
President -- General Manager of the Conductive Coatings
Division of Chromium Corporation. Amounts paid by the
Company to Mr. Holguin in fiscal 1996 are omitted under
applicable regulations of the Securities and Exchange
Commission.
Richard J. Rosebery Vice Chairman, Chief Financial and Administrative Officer
and Treasurer. Mr. Rosebery served as Executive Vice
President, Chief Administrative and Financial Officer and
Treasurer of the Company prior to his election to his
current position on August 18, 1997.
</TABLE>
7
<PAGE> 10
<TABLE>
<S> <C>
David G. Sisler Vice President, General Counsel and Secretary. Amounts for
Mr. Sisler in fiscal 1996 represent amounts paid for the
partial fiscal year beginning on the date of his election on
August 14, 1995.
Harold K. Work Chairman of the Board, President and Chief Executive Officer
of the Company and of Elk Corporation of Dallas. Mr. Work
served as Vice Chairman of the Company from August 18, 1997
to August 26, 1997 when he was elected to his current
position. Prior to August 18, 1997, he served as Executive
Vice President of the Company.
</TABLE>
Effective December 16, 1997, all of the Company's officers became employees
of Elcor Management Corporation, a wholly owned subsidiary of the Company,
which pays such officers their cash compensation.
(b) Bonus amounts in the summary compensation table were paid under the
Company's Incentive Cash Bonus Plan. These amounts ordinarily are determined
through the application of formula calculations based on a targeted range of
earnings before federal income taxes of the Company as a whole or of the
appropriate business unit. For more information, see the Compensation
Committee Report included with this Proxy Statement.
(c) See the table below entitled "Option Grants During Fiscal 1998" for
information concerning the grant of options in fiscal year 1998 for shares
of Elcor Common Stock. All option information in this Proxy Statement has
been adjusted, if applicable, for the Company's three-for-two stock split in
November 1997.
(d) Represents employer contributions to the Elcor Corporation Employees' 401(k)
Savings Plan and Employee Stock Ownership Plan, loans forgiven under the
Stock/Loan Plan, and supplemental retirement benefits summarized as follows:
Employer Contributions to Employees' 401(k) Savings Plan and Employee Stock
Ownership Plan:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------
NAME 1998 1997 1996
---- -------- ------- -------
<S> <C> <C> <C>
Roy E. Campbell...................................... $ 8,000 $ 6,900 $ 6,900
Leonard R. Harral.................................... 6,369 5,203 4,811
Raul G. Holguin...................................... 7,504 5,282 --
Richard J. Rosebery.................................. 8,000 6,900 6,900
David G. Sisler...................................... 6,987 1,807 0
Harold K. Work....................................... 8,000 6,900 6,900
</TABLE>
Loans Forgiven Under the Stock/Loan Plan:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------
NAME 1998 1997 1996
---- -------- ------- -------
<S> <C> <C> <C>
Roy E. Campbell...................................... $158,107 $49,989 $47,275
Leonard R. Harral.................................... 4,591 4,039 3,797
Raul G. Holguin...................................... 5,125 3,979 --
Richard J. Rosebery.................................. 22,349 19,453 18,429
David G. Sisler...................................... 1,341 843 0
Harold K. Work....................................... 39,421 44,353 44,139
</TABLE>
8
<PAGE> 11
Supplemental Retirement Benefits Contributed:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------
NAME 1998 1997 1996
---- ------- ------- -------
<S> <C> <C> <C>
Roy E. Campbell....................................... $ 0 $21,684 $19,154
Leonard R. Harral..................................... 0 0 0
Raul G. Holguin....................................... 0 0 --
Richard J. Rosebery................................... 12,278 7,370 5,820
David G. Sisler....................................... 0 0 0
Harold K. Work........................................ 16,876 13,226 14,219
</TABLE>
AGGREGATED OPTION EXERCISES DURING FISCAL 1998 AND FISCAL YEAR END OPTION VALUES
The following table provides information related to options exercised
during fiscal 1998 and options held under the Company's Incentive Stock Option
Plan at June 30, 1998 by the Named Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(B)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME* EXERCISE REALIZED(A) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Leonard R. Harral........... 1,809 $ 32,703 2,465 6,599 $ 33,911 $ 57,637
Raul G. Holguin............. 2,132 37,851 2,090 7,003 28,705 50,060
Richard J. Rosebery......... 0 0 43,050 60,200 703,400 499,575
David G. Sisler............. 0 0 300 6,772 3,100 48,258
Harold K. Work.............. 7,500 104,062 43,050 65,200 703,400 504,976
</TABLE>
- ---------------
(a) Market value of underlying securities at exercise date minus the exercise
price, not reduced for taxes, if any, payable upon exercise.
(b) The unrealized value of in-the-money options at fiscal year-end represents
the aggregate difference between the market value of the underlying
securities at June 30, 1998 and the applicable exercise prices. These
differences accumulate over what may be, in many cases, several years.
* Mr. Roy E. Campbell did not exercise any options during fiscal 1998; his
wife individually and as independent executrix of his estate exercised the
options for 71,250 shares he held at the time of his death, adjusted for
the November 1997 stock split.
OPTION GRANTS DURING FISCAL 1998
The following table provides information related to options granted under
the Company's Incentive Stock Option Plan to the Named Executive Officers during
the fiscal year ended June 30, 1998.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ------------------------------------------------------------------------------ POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF STOCK
SECURITIES OPTIONS EXERCISE PRICE APPRECIATION FOR OPTION
UNDERLYING GRANTED TO OR BASE TERMS(C)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION -----------------------------
NAME* GRANTED(A) FISCAL 1998 SHARE(B) DATE 5% 10%
----- ---------- ------------ --------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Leonard R. Harral.......... 1,960 1.31% $24.17 10/27/2007 $ 29,793 $ 75,501
Raul G. Holguin............ 3,095 2.07% 24.17 10/27/2007 47,045 119,222
Richard J. Rosebery........ 20,000 13.35% 24.17 10/27/2007 304,008 770,415
David G. Sisler............ 3,015 2.01% 24.17 10/27/2007 45,829 116,140
Harold K. Work............. 25,000 16.68% 24.17 10/27/2007 380,010 963,019
All Shareholders(d)........ N/A N/A N/A N/A $201,027,287 $509,442,612
</TABLE>
- ---------------
(a) Options become exercisable 20% per year on the second through the sixth
anniversary dates of the grant and for a term of ten years, subject to
earlier termination upon certain events related to certain terminations of
employment. Upon the optionee's death, permanent and total disability,
retirement after age 65, or a Change in Control of the Company, all options
reflected in this table become immediately exercisable.
(b) All options above were granted at market value at date of grant. The
exercise price may be paid in cash, delivery of already owned shares or a
combination of the foregoing.
(c) Gains are reported net of the option exercise price, but before any taxes
associated with the exercise. These gains are calculated based on the
stated assumed compounded rates of appreciation as set by the Securities
and Exchange Commission for disclosure purposes. Actual gains, if any, on
stock option exercises are dependent on the future performance of the
Common Stock, overall stock market
9
<PAGE> 12
conditions, as well as the option holders' continued employment through the
period over which options become exercisable in increments. The amounts
reflected in this table may not be achieved.
(d) The potential realizable value for all shareholders is calculated over a
period of ten years from October 28, 1997, the grant date for the of the
options listed above, based on (i) a beginning stock price of $24.17, the
exercise price of such options, and (ii) the number of outstanding shares
on October 28, 1997, adjusted, like the number of options and exercise
price, for split shares issued in November 1997.
* Mr. Campbell did not receive any option grants during fiscal 1998.
STOCK/LOAN PLAN
Under the Company's Stock/Loan Plan, described in the Compensation
Committee Report included with this Proxy Statement, the Named Executive
Officers had outstanding loans from the Company of which the highest outstanding
balance and ending outstanding balance for the fiscal year ended June 30, 1998
are reflected in the table below.
<TABLE>
<CAPTION>
LOANS UNDER STOCK/LOAN PLAN
----------------------------------------------------
HIGHEST OUTSTANDING OUTSTANDING
NAME BALANCE IN FISCAL 1998 BALANCE AT JUNE 30, 1998
---- ---------------------- ------------------------
<S> <C> <C>
Roy E. Campbell............................ $128,804 --
Leonard R. Harral.......................... * *
Raul G. Holguin............................ * *
Richard J. Rosebery........................ $ 80,183 $ 78,698
David G. Sisler............................ * *
Harold K. Work............................. $113,530 $111,298
</TABLE>
- ---------------
* Balances of not more than $60,000 have been omitted.
EMPLOYMENT CONTRACTS; TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
As described in the Compensation Committee Report included with this Proxy
Statement, the Company has entered into severance agreements with Named
Executive Officers and certain other officers and employees. Under the
agreements, each of the Named Executive Officers, as well as certain other
officers and employees, would be entitled to a Severance Payment (as defined in
the Compensation Committee Report) and forgiveness of outstanding loans under
the Stock/Loan Plan, if such person's employment were terminated under certain
circumstances within three years after a Change in Control. Such circumstances
include such person's being terminated by the Company or its subsidiary without
Cause (as defined in the agreement) or such person's terminating employment with
the Company for Good Reason (as defined in the agreement). During a "thirty-day
window" period beginning one year after a Change in Control, any reason for
terminating such employment would constitute Good Reason. The thirty-day window
is intended to provide additional incentive to remain with the Company or its
subsidiary through the crucial transitional period of one-year following any
Change in Control. The agreements would provide security for Severance Payment
obligations upon a Change in Control with an escrow of funds or letters of
credit, as the Company elects. The agreements also would provide the Named
Executive Officers and other officers and key employees who are party to the
severance agreements with certain life, health and disability insurance coverage
guarantees described in the Compensation Committee Report. Furthermore, the
agreements provide that the Company will provide reimbursement of certain excise
taxes payable by reason of a Severance Payment and related payments.
The Amended Plan (see Proposal Three) would accelerate the exercisability
of previously unvested options held by an optionee, including a Named Executive
Officer, upon the occurrence of a Change in Control. The Named Executive
Officers already hold option grants from fiscal 1998 containing such change-
in-control acceleration provisions. They are not parties to any other
employment, severance or other change-in-control agreements with the Company.
10
<PAGE> 13
COMPANY STOCK PERFORMANCE
The following graphs set forth a comparison of the cumulative total return
of the Company's Common Stock against the cumulative total return of the Dow
Jones Building Materials index and the Russell 2000 index for the five year
period ending June 30, 1998 and the ten year period ending June 30, 1998.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG ELCOR CORPORATION, THE RUSSELL 2000 INDEX
AND THE DOW JONES BUILDING MATERIALS INDEX
<TABLE>
<CAPTION>
DOW JONES
MEASUREMENT PERIOD ELCOR RUSSELL BUILDING
(FISCAL YEAR COVERED) CORPORATION 2000 MATERIALS
<S> <C> <C> <C>
6/30/93 100.00 100.00 100.00
6/30/94 94.69 104.24 98.62
6/30/95 85.99 125.23 113.93
6/30/96 71.13 155.13 135.00
6/30/97 110.07 180.61 174.90
6/30/98 151.04 214.50 222.37
</TABLE>
* $100 INVESTED ON 6/30/93 IN STOCK OR INDEX-INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING JUNE 30.
COMPARISON OF 10 YEAR CUMULATIVE TOTAL RETURN**
AMONG ELCOR CORPORATION, THE RUSSELL 2000 INDEX
AND THE DOW JONES BUILDING MATERIALS INDEX
<TABLE>
<CAPTION>
DOW JONES
MEASUREMENT PERIOD ELCOR RUSSELL BUILDING
(FISCAL YEAR COVERED) CORPORATION 2000 MATERIALS
<S> <C> <C> <C>
6/88 100.00 100.00 100.00
6/89 149.53 112.70 107.38
6/90 141.63 116.12 101.67
6/91 98.99 117.36 99.07
6/92 131.35 134.64 115.18
6/93 394.05 169.82 132.09
6/94 373.11 177.02 130.27
6/95 338.84 212.66 150.49
6/96 280.27 263.43 178.32
6/97 433.74 306.70 231.02
6/98 595.18 364.25 293.74
</TABLE>
** $100 INVESTED ON 6/30/88 IN STOCK OR INDEX-INCLUDING REINVESTMENT
OF DIVIDENDS. FISCAL YEAR ENDING JUNE 30.
11
<PAGE> 14
DIRECTORS' COMPENSATION
Nonemployee directors receive $15,000 per year, and an additional $1,000
per meeting, for serving on the Board. The employee directors are not
compensated separately for service on the Board. Under the Company's existing
Incentive Stock Option Plan (ISOP) approved by the Company's shareholders, the
directors previously approved annual grants through October 1999 of options to
buy 3,000 shares of Common Stock to each of the nonemployee directors serving
after each Annual Meeting of Shareholders. The purpose of these grants was to
attract and retain highly qualified independent directors and to underscore
their mutual interest with shareholders, consistent with what management
perceives to be a general desire in the investor community that significant
elements of director compensation be equity-based and thereby dependent on
corporate performance. Options granted to nonemployee directors under the ISOP
will be nonqualified options and will become exercisable immediately. Each
option will have a term ending the earlier of ten years after the grant date or
three months after the cessation of a participant's status as a director of the
Company for any reason other than death or disability, in which case the options
generally remain exercisable for one year.
Nonemployee members of the Executive Committee receive $6,000 per year for
service on such Committee. The employee director is not compensated separately
for service on such Committee.
Audit Committee members (all of whom are nonemployees) receive $1,000 per
meeting, except the Chairman, who receives $1,400 per meeting.
Compensation Committee members (all of whom are nonemployees) receive
$1,000 per meeting, except the Chairman, who receives $1,400 per meeting.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1998, no member of the Compensation Committee was an officer
or employee of the Company or any of its subsidiaries. Mr. Ortloff is a former
officer of the Company and certain of its subsidiaries. No director, member of
the Compensation Committee, or executive officer of the Company had a
relationship with the Company or any other company during fiscal 1998 that is
required by Securities and Exchange Commission regulations to be disclosed as a
compensation committee interlock.
COMPENSATION COMMITTEE REPORT
The Compensation Committee provides advice and recommendations to the Board
concerning the compensation, including base salaries, bonuses and stock option
awards under the Company's Incentive Stock Option Plan ("ISOP") for the Named
Executive Officers, ISOP awards to other eligible employees, employer
contributions to the ESOP and 401(k) Savings Plans, and the compensation of
directors of Elcor. The Compensation Committee, however, does not actually
approve the awards of compensation. The nonemployee members of the Board assess
and approve the award of stock options. All nonemployee directors evaluate the
Chief Executive Officer's performance and approve other elements of his
compensation. The Board approves all other elements of compensation for the
other Named Executive Officers with the abstention of Messrs. Rosebery and Work
each from consideration and decisions regarding compensation for either of them.
The objectives of Elcor's executive compensation program are to:
1. Compensate competitively in order to attract, retain and motivate a
highly competent executive team dedicated to achieving the Company's
mission and strategic plans, which are designed to result in long-term
growth in shareholder value;
2. Tie individual compensation to individual and team performance and the
success of the Company;
3. Align the executive officers' and certain eligible employees' interests
with those of the Company by making incentive compensation dependent
upon the performance of the Company or the appropriate business unit;
12
<PAGE> 15
4. Align executive officers' and certain eligible employees' interests
with those of the Company and its shareholders by providing long-term
compensation opportunities through participation in the Company's
Incentive Stock Option Plans, Stock/Loan Plan and Employee Stock
Ownership Plan; and
5. Maximize the tax deductibility of executive compensation.
To achieve these compensation objectives, Elcor uses a combination of short-term
and long-term compensation elements, all of which are affected by the
performance of the individual and/or the performance of Elcor or the appropriate
business unit. A significant amount of the total compensation is longer term
compensation through stock ownership to assure alignment with shareholder
interests. In addition, the Named Executive Officers participate in other
compensation plans offered to all non-union employees. The Company does not
provide post-retirement health care benefits (except for a prescription drug
plan, the cost of which is paid entirely by an enrolled retiree) or defined
benefit pension plans for the Named Executive Officers or any other non-union
employees.
Section 162(m) of the Internal Revenue Code limits the deductibility of
compensation paid to specified executive officers to $1 million per officer in
any one year. Compensation which qualifies as performance-based compensation
will not have to be taken into account for purposes of this limitation. The
Committee does not expect that cash compensation to be paid to any executive
officer will exceed the $1 million limit per officer in the foreseeable future.
Because it is unlikely that the cash compensation payable to any executive
officer will exceed the $1 million per year limit for at least several years,
the Committee has decided at this time to take no action to limit or restructure
any elements of cash compensation paid to any of the Company's executive
officers. Should the compensation level of any executive officer approach the $1
million level, the Committee will reevaluate this decision.
BASE SALARY
Base compensation of executive officers is set based on offering
competitive salaries in comparison to market salaries. Independent survey data
developed by an independent data service for comparable executive positions in
other similarly sized industrial companies is used to establish a minimum,
median and maximum salary and bonus level for each executive position. These
ranges may be subjectively adjusted from industry averages for factors such as
local market conditions or unique aspects, responsibilities or qualifications of
the position not believed to be normally associated with the position in other
similarly sized companies. Base salary ranges are reviewed annually. A range of
predetermined percentage increases and a maximum merit increase is established
for various performance levels. The base salary position within the range is set
after an annual subjective review of performance in areas of the executives'
responsibilities. This review includes an evaluation of work performance,
achievement of specific goals, position requirements and financial performance
of the applicable business unit in relation to expected performance based on the
annual strategic plan. No specific weighting of factors is used in evaluating
overall job performance. Increases in base salaries of executive officers,
including Named Executive Officers, are consistent with the Company's overall
guidelines for other employee salary percentage increases for defined
performance levels. These guidelines are revised annually to reflect the
influence of economic, industry and Company factors. Salary increases are not
necessarily granted each year. All base salaries for the Named Executive
Officers fall within the range of compensation for their specific positions
based on the independent survey data unless circumstances justify an exception
during certain periods.
INCENTIVE CASH BONUS
All Named Executive Officers are currently eligible for bonuses under the
Elcor Incentive Cash Bonus Plan, which currently has a plan year of October 1 to
September 30. Prior to January 1, 1998, Mr. Work was eligible for bonuses under
the Elk Corporation of America Incentive Cash Bonus Plan, which also has a plan
year of October 1 to September 30. Historically, the incentive plan year for
Elcor and Elk differed from the Company's fiscal year due to seasonality
considerations. Effective October 1, 1998, the incentive plan year for Elcor and
Elk will be changed to correspond to the Company's fiscal year, with payment
limits established in the earlier quarters to provide assurance that executive
incentive bonuses accurately reflect full year financial
13
<PAGE> 16
performance. The bonus plans for other business units will continue to
correspond to the Company's fiscal year.
Incentive cash bonuses under the Incentive Cash Bonus Plans are paid
quarterly for the Named Executive Officers, almost all eligible non-union
employees, and certain union employees. Bonuses are calculated based on a
targeted range of earnings before federal income taxes. Such earnings are
modified to include a factor for increases or decreases in total assets
employed. The target earnings range for which bonuses will be paid is
established annually based on (1) the fiscal year strategic plan for Elcor or
the appropriate business unit, and (2) threshold and target levels of earnings,
subjectively determined to represent a beginning level and target bonus level
that provides incentive to achieve desired results. Desired results are
subjectively determined. However, the target is considered to be in the range of
the upper quartile performance for the business circumstances present during the
plan year. The threshold level is considered to be in the range of average
performance under the business circumstances. No bonus is payable until the
minimum threshold level of earnings is achieved.
The relationship of bonuses to base salaries in the Summary Compensation
Table generally reflects the performance level of the Company or applicable
business unit for each of the three fiscal years presented through the
application of formula calculations based on earnings above the targeted
thresholds. Bonuses paid for target performance vary by executive officer and
range from 22 1/2% to 50% of base salary for the Named Executive Officers.
Should earnings exceed the upper end of the target range, a premium bonus is
awarded. Premium bonuses are calculated at a reduced rate (20%) of the amount of
bonus that would have paid had these earnings in excess of target been within
the target range.
STOCK/LOAN PLAN
Under the Stock/Loan Plan the Company may grant to certain eligible key
employees rights to apply to the Company for a loan, the proceeds of which must
be used to purchase Elcor Common Stock within six months of the loan or applied
to previous stock purchases not made in connection with the Stock/Loan Plan. The
normal maximum amount which may be loaned to each eligible key employee is a
percentage of the payment earned under the Incentive Cash Bonus Plan. For the
Named Executive Officers, stock loans are granted at 37 1/2% to 50% of amounts
earned under the Incentive Cash Bonus Plan. Beginning July 1, 1998, such loans
bear interest at the applicable federal rate. Loans granted before July 1, 1998
were non interest-bearing. Loans granted under the Stock/Loan Plan are repayable
by the key employee through continued service with the Company or a subsidiary.
The principal amount of the loan is forgiven at the rate of 20% for each
year of continuous service subsequent to the date of the making of the loan. All
accrued interest is forgiven with each year of continuous service subsequent to
the date of the making of the loan. The amount of forgiveness is considered
compensation to the employee at the time of forgiveness by the Company. The
outstanding balances of such loans are required to be repaid on any termination
of employment with the Company, with interest, except for termination due to
disability, death or retirement.
LONG-TERM COMPENSATION
Under the Company's Incentive Stock Option Plan, which has previously been
approved by the shareholders, the Company may grant qualified and/or
nonqualified options to purchase the Company's Common Stock to the Named
Executive Officers and eligible directors and key employees of the Company and
its subsidiaries. Stock options awarded in fiscal 1998 must be exercised within
ten years from the date of grant. Such options for the Named Executive Officers
and key employees become exercisable in 20% annual increments commencing on the
second anniversary date of grant. The number of options granted is individually
determined for each Named Executive Officer based on subjective evaluation of
the individual's responsibility level and criticality to the Company, and is
influenced by applying a formula of base pay times a predetermined percentage
currently ranging from 26% to 50% of base pay, and dividing this number by the
average market price of the Company's stock during the preceding thirty-six
months prior to the grant. In recognition of unique performance, some awards are
greater than provided by this formula. In fiscal 1998,
14
<PAGE> 17
options were subjectively awarded to Mr. Work, Mr. Rosebery, and Mr. Holguin in
amounts above the formula calculation.
EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
The Named Executive Officers and all employees of the Company and its
subsidiaries, except those covered by other plans established through collective
bargaining, are eligible to participate in the ESOP upon completion of one year
of service with the Company under the ESOP. The Company currently contributes a
percentage (2.5% in fiscal 1998) of each participant's annual compensation,
subject to limitations imposed by the Internal Revenue Service. Amounts
contributed to the ESOP vest over a period of years (20% after three years of
service and an additional 20% for each additional year of service thereafter
until 100% vested).
ELCOR CORPORATION EMPLOYEES' 401(K) SAVINGS PLAN
The Elcor Corporation Employees' 401(k) Savings Plan provides for
participation in employer contributions by all employees, including the Named
Executive Officers, after one year of service, except those covered by other
plans established through collective bargaining. The Company currently
contributes a percentage (2.5% in fiscal 1998) of each participant's annual
compensation to the plan. In addition, beginning January 1, 1998, to encourage
increased employee participation in the plan, the Company began contributing an
additional $0.50 for every $1.00 of employee contributions into the plan,
limited to a maximum matching of 2.0% of an employee's compensation. Company
contributions are also subject to limitations imposed by the Internal Revenue
Service. Vesting of any Company contributions occurs according to the same
schedule as that of the ESOP described above.
SUPPLEMENTAL RETIREMENT BENEFITS
In accordance with Internal Revenue Code Section 401(a)(17)(A), qualified
benefit plans must limit the annual compensation of each employee taken into
account under the plans for any year to an indexed dollar amount, currently
$160,000. In September 1994, the Board of Directors determined that this
limitation reduces retirement funds intended for the benefit of the employees
affected by this limitation and authorized a special cash payment to any
employee, including the Named Executive Officers, in an amount equal to the
difference between the actual amount contributed for their benefit to the ESOP
and 401(k) Savings Plan and the amount that would have been contributed to these
plans for their benefit, including a factor to offset a portion of the Federal
tax liability due on the payment had there been no statutory dollar limitation.
CHANGE-IN-CONTROL AND SEVERANCE AGREEMENTS
In May 1998, the Board of Directors approved severance agreements with
certain officers and employees, including each of the Named Executive Officers.
The Compensation Committee believes that the agreements will serve to protect
the Company and its shareholders, as well as these officers and employees, in
the event of a threatened or actual change in control of the Company. The
agreements are designed to reinforce these officers' and employees' dedication
to the Company's best interests before and after such a transaction, and would
reduce the likelihood that these officers and employees would leave the Company
prematurely. In structuring and deciding upon the level of benefits, the
Compensation Committee and Board utilized, among other things, a survey prepared
by the Company's outside counsel of competitive practices within the Company's
peer group based on public filings.
The agreements provide for severance benefits upon certain terminations of
employment within three years after a Change in Control of the company. Change
in Control events under the employment agreements include (a) the acquisition of
40% or more of the Company's outstanding voting securities, (b) certain mergers
or consolidations, (c) the approval by the Company's shareholders of a plan of
dissolution or liquidation, or (d) certain sales or transfers of 67% or more of
the fair value of the Company's operating assets or earning power.
Under the agreements, if the officer's or employee's employment with the
Company or its subsidiary is terminated within three years of a Change in
Control under certain circumstances, the officer or employee will
15
<PAGE> 18
be entitled to receive a lump-sum severance payment equal to two times (except
for Messrs. Work and Rosebery who would receive 2.99 times) the highest annual
cash compensation he received in any calendar year during the three year period
immediately preceding termination (the "Severance Payment"), plus all
outstanding loans under the Company's Stock/Loan Plan would be forgiven in full.
In addition, under the agreements, for a period of two years following a Change
in Control (three years for Messrs. Work and Rosebery), the officers and
employees would be entitled to medical, disability and life insurance coverage
at a cost to the officer or employee of no more than 120% of the amount the
employee paid for such benefits immediately prior to the Change in Control.
CEO COMPENSATION
The Chief Executive Officer of Elcor, Harold K. Work, participated during
fiscal 1998 in the same compensation programs as the other Named Executive
Officers with each component of his compensation determined by the Board of
Directors according to the same criteria described above. Mr. Work's base salary
was generally determined in the same manner as other executive officers and as
described in the Base Salary section described previously. Mr. Work's incentive
compensation was calculated on a formula basis using the same methodology and
guidelines as described in the Incentive Cash Bonus section of this report.
In fiscal 1998, Mr. Work was awarded qualified and nonqualified stock
options in an amount above the formula calculations for stock option grants.
All other compensation for Mr. Work was determined on the same basis and
using the same criteria as the other Named Executive Officers.
Dated: August 18, 1998 F.H. Callaway, Chairman
James E. Hall, Member
W.F. Ortloff, Member
16
<PAGE> 19
PROPOSAL TWO
INCREASE IN AUTHORIZED COMMON STOCK
The Board of Directors has deemed advisable and recommends the
shareholders' approval of an amendment to Article Fourth (A) of the Company's
Certificate of Incorporation to increase authorized Common Stock from 50,000,000
shares to 100,000,000 shares (the "Amendment"). The text of the proposed Article
Fourth (A) is set forth as Appendix A to this Proxy Statement.
The Certificate of Incorporation currently authorizes the Company to issue
50,000,000 shares of Common Stock and 1,000,000 shares of preferred stock. As of
September 1, 1998, there were 13,113,993 shares of Common Stock issued and
outstanding and 211,576 shares of Common Stock held by the Company in treasury.
None of the Company's 1,000,000 shares of authorized preferred stock have been
issued.
Except for the potential reservation of 1,147,484 additional shares of
Common Stock for the proposed Amended Plan (see Proposal Three), the Company has
no specific plans or commitments for the issuance of the proposed additional
shares of Common Stock. The Board of Directors believes that the increase in
authorized Common Stock is desirable because the additional shares would be
available for any future stock dividends or stock splits effected by
distributing additional shares, employee benefit plans, or other general
purposes. With additional authorized Common Stock, the Company also would
possess greater flexibility to take advantage of potential financing and
acquisition opportunities, if any.
The issuance of additional Common Stock, except through a stock split,
stock dividend or other pro rata distribution to shareholders, would reduce
existing shareholders' voting power. In addition, depending on the amount of
consideration received for the Common Stock and how such consideration is
utilized by the Company, the issuance of additional Common Stock could affect
the earnings per share of the existing Common Stock.
Although the Board has no present intention of issuing any additional
shares of Common Stock in defense of a takeover attempt, such an issuance could
be used to create an impediment to gaining control of the Company. The issuance
of additional shares could be used to dilute the voting power of shares then
outstanding, or shares could be issued to persons or entities who would support
the Board of Directors in opposing a takeover bid. Any such actions, however,
would be subject to applicable law and the fiduciary duties of the Board of
Directors.
The additional shares would be available for issuance by the Board of
Directors without delay and without the necessity of further action by
shareholders, except as may in some instances be required by law or applicable
stock exchange requirements. The additional shares, upon issuance, would have
the same voting and other rights as presently authorized shares of Common Stock.
The holders of Common Stock do not have preemptive rights to subscribe for
additional shares of Common Stock. Assuming approval of the above Amendment by
the Company's shareholders, it is anticipated that the filing with the Delaware
Secretary of State implementing the Amendment would be made and would become
effective as soon thereafter as practicable.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE FOR PROPOSAL TWO.
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<PAGE> 20
PROPOSAL THREE
1998 AMENDED AND RESTATED ELCOR CORPORATION
INCENTIVE STOCK OPTION PLAN
On June 29, 1998, the Board of Directors adopted, subject to the approval
of the Company's shareholders, the 1998 Amended and Restated Elcor Corporation
Incentive Stock Option Plan (the "Amended Plan"). If approved by the
shareholders, the Amended Plan would amend and restate the Company's 1993
Incentive Stock Option Plan in its entirety. Except as specifically provided by
the Amended Plan, outstanding options under the 1993 Incentive Stock Option Plan
would be governed by the original terms of that plan and the individual option
agreements evidencing such options. The Amended Plan would become effective as
of the date approved by the Company's shareholders.
The purposes of the Amended Plan, like the 1993 Incentive Stock Option
Plan, are to attract, retain and motivate the nonemployee directors, officers
and key employees of the Company and its subsidiaries, to encourage stock
ownership by such persons by providing them with the means to acquire shares of
the Company's Common Stock or to increase their stock holdings. Such ownership
is intended to provide a greater community of interest between such persons and
the Company's other shareholders. Approximately 70 officers and employees of the
Company and its subsidiaries and each of the Company's six nonemployee directors
have received grants of options under the 1993 Amended Plan. Management believes
that a substantially similar number of officers, key employees and directors
would be eligible for grants under the Amended Plan.
In principal effect, the Amended Plan would amend the 1993 Incentive Stock
Option Plan: to make 1,147,484 additional shares available under such plan; to
provide for acceleration of the exercisability of all options under the plan
outstanding for at least six months if a dissolution, liquidation or Change in
Control of the Company should occur; to conform the retirement age at which
options become exercisable in full to the normal retirement age of 62 set forth
in the Company's other plans; to permit optionees to relinquish options for
shares of Common Stock on specified terms in lieu of exercising them; and to
clarify existing terms and update the plan according to current laws and
regulations.
The following table reflects as of September 1, 1998, the number of shares
of Common Stock available for or subject to options authorized for issuance,
granted, exercised, outstanding and available for future grants under the 1983
Incentive Stock Option Plan, the 1993 Incentive Stock Option Plan, and the
Amended Plan:
<TABLE>
<CAPTION>
COMMON
STOCK
COMMON STOCK SUBJECT COMMON STOCK
COMMON STOCK SUBJECT TO TO SUBJECT TO COMMON STOCK
AUTHORIZED OPTIONS GRANTED OPTIONS OUTSTANDING AVAILABLE FOR
PLAN FOR OPTIONS (NET OF FORFEITURES) EXERCISED OPTIONS FUTURE GRANTS
---- ------------ -------------------- --------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
1983 ISOP(1)................. 1,500,000 1,137,426 992,309 145,117 0
1993 ISOP(1)................. 750,000 497,484 84,420 413,064 252,516
Amended Plan(2).............. 1,147,484 0 0 0 1,147,484
</TABLE>
- ---------------
(1) Shares in the table above have been adjusted for stock splits to show
current equivalents.
(2) Shares in the table above for the Amended Plan represent only proposed
amounts beyond current shares authorized for issuance pursuant to 1993
Incentive Stock Option Plan.
The principal provisions of the Amended Plan are summarized below. The
summary is qualified in its entirety by reference to the complete text of the
Amended Plan attached to this Proxy Statement as Appendix B.
PRINCIPAL PROVISIONS OF THE AMENDED PLAN
The Amended Plan provides for the grant of options to acquire Common Stock
to nonemployee directors, officers and key employees of the Company and its
subsidiaries. Certain options under the Amended Plan are intended to qualify as
"incentive stock options" under Section 422 of the Internal Revenue Code of
18
<PAGE> 21
1986 (as amended, the "Internal Revenue Code"). The Amended Plan also provides
for the grant of non-qualified stock options to acquire Common Stock.
A maximum of 1,400,000 shares of Common Stock of the Company may be issued
under the Amended Plan, including the existing 252,516 shares already reserved
for issuance under the 1993 Incentive Stock Option Plan, and 1,147,484
additional shares. If any option expires or otherwise terminates without being
fully exercised, shares that were subject to such option but as to which the
option was not exercised may again be awarded under the Amended Plan. Shares of
Common Stock issued upon the exercise of options will be either authorized and
unissued shares or treasury shares. Except as may be expressly provided in
individual agreements for nonqualified stock options, options granted under the
Amended Plan will be nontransferable, except by will, the laws of descent and
distribution.
The Amended Plan will be administered by the Board of Directors or a
committee appointed by the Board. Within the limitations of the Amended Plan,
the Board of Directors or its delegate will determine which eligible persons
will be granted options, the times at which awards will be made, the number of
shares covered by such options and the other terms of the options.
Options granted under the Amended Plan will be exercisable during a period
fixed by the Board of Directors or its delegate, but no option may have a term
longer than ten years from the date of grant, except that if on the date of
grant the recipient of an incentive stock option owns stock representing more
than 10 percent of the voting power of all classes of stock of the Company, the
option may not have a term longer than five years from the date of grant.
Options will be exercisable in their entirety upon the death or permanent and
total disability of the employee, or retirement on or after age 62. Further,
under the Amended Plan, all options outstanding for at least six months,
including options already issued and outstanding under the 1993 Incentive Stock
Option Plan, become immediately exercisable upon a Change in Control of the
Company (as defined in the Amended Plan consistent with the definition found in
the Compensation Committee Report included with this Proxy Statement).
No grantee of options under the Amended Plan may be issued options upon
more than 100,000 shares in any one calendar year. Further, no such grantee may
be granted incentive stock options that become first exercisable in any one
calendar year covering shares of Common Stock having a fair market value on the
date of grant in excess of $100,000.
The exercise price of options issued under the Amended Plan will be
determined by the Board of Directors upon granting the options. The exercise
price of shares acquired upon the exercise of an incentive stock option under
the Amended Plan may not be less than 100 percent of the fair market value of
such shares on the date the option is granted, generally defined as the closing
price of the Common Stock on the NYSE on the date of grant. On September 1,
1998, the closing price of the Common Stock on the NYSE was $21 15/16 per share.
If, however, the recipient of the incentive stock option owns stock representing
more than 10 percent of the voting power of all classes of stock of the Company,
the exercise price may not be less than 110 percent of such fair market value.
Although non-qualified stock options under the Amended Plan are not subject to
the same restrictions, the exercise price of such options must be not less than
the par value of the underlying shares. To date, the Company has not made any
grants of options with an exercise price less than fair market value on the date
of grant. Further, the Company has not repriced outstanding options to set a
lower exercise price than set at the time of original grant.
The Amended Plan permits relinquishment of options by an optionee for
shares of Common Stock, unless otherwise provided in the individual option
agreement. This permits the optionee, in lieu of exercising an exercisable
option, to relinquish all or any part of the option in exchange for a number of
shares having a fair market value equal to the spread, or difference between the
fair market value and exercise price of the relinquished option or part thereof.
The Amended Plan provides for adjustment in the number of shares reserved
for issuance under the plan, the number of shares covered by outstanding
options, and the exercise price of outstanding options if the Company changes
the number of issued shares of Common Stock without consideration to the
Company,
19
<PAGE> 22
such as, for example, by stock dividends or stock splits. The adjustment
provision is intended to prevent dilution of the value of the options or
dilution of the voting power or value of the underlying shares.
The Board of Directors has the right to terminate or amend the Amended
Plan; however, no amendment may be made without shareholder approval if it would
increase the number of shares of Common Stock that could be issued under the
Amended Plan, or if shareholder approval is otherwise required by specified laws
and regulations.
FEDERAL TAX CONSEQUENCES
The following sets forth a summary of the principal federal income tax
consequences of the grant and exercise of stock options under the Amended Plan
and the subsequent disposition of stock acquired through the exercise of such
options.
Incentive stock options granted under the Amended Plan are designed to
qualify as "incentive stock options" within the meaning of section 422 of the
Internal Revenue Code. An employee recognizes no income upon the grant or
exercise of an incentive stock option. If the employee holds the stock purchased
upon exercise of the incentive stock option for at least two years from the date
of grant and one year from the date of exercise, any profit gained upon the sale
or other disposition of the shares purchased will be taxable as long-term
capital gain and not as ordinary income. Absent a disqualifying disposition of
the underlying shares, the Company will not be entitled to any federal income
tax deduction in connection with the grant or exercise of an incentive stock
option or the sale or disposition of the stock acquired by the employee upon
exercise of an incentive stock option.
If the holder exercising an incentive stock option sells the shares thereby
acquired within one year of the exercise of the option or within two years from
the date of grant of the option (a disqualifying disposition), the optionee may
realize taxable ordinary income at the time of such sale in an amount equal to
the excess of the fair market value of the shares over the option price thereof
at the time the option was exercised, and such amount will usually be deductible
for federal income tax purposes by the Company.
Upon exercise of an incentive stock option, the excess of fair market value
of the stock acquired over the purchase price will be treated as an item of tax
preference and may be subject to alternative minimum tax under the Internal
Revenue Code in the year in which the option is exercised.
An optionee recognizes no income on the granting of a nonqualified stock
option. On the exercise of such an option, the employee generally will recognize
ordinary income in an amount equal to the excess of the fair market value of the
shares over the option price thereof at the time the option was exercised. An
amount equal to such ordinary income generally will be deductible for federal
income tax purposes by the Company.
The provisions described above which limit the number of shares of Common
Stock for which options are granted and providing for administration of the
Amended Plan are intended to preserve the Company's ability to deduct, for
federal income tax purposes, compensation recognized by certain optionees upon
the exercise of a nonqualified stock option or upon a disqualifying disposition
of an incentive stock option. Section 162(m) of the Internal Revenue Code would
deny a deduction by a publicly traded corporation such as the Company for
certain compensation in excess of $1 million per year paid by such employer to
the executive officers whose compensation is required to be disclosed in the
proxy statement. Compensation with respect to stock options will be excluded
from this deduction limit if it satisfies certain requirements, including the
following: (i) the options must be granted at an exercise price not lower than
fair market value on the date of grant; (ii) the option grant must be made by a
compensation committee composed of two or more "outside directors" within the
meaning of section 162(m); (iii) the Amended Plan must state the maximum number
of shares with respect to which options may be granted during a specified period
to any individual; and (iv) the material terms of the Amended Plan must be
disclosed to and approved by the shareholders in a separate vote prior to
payment. The 1993 Incentive Stock Option Plan did not have a limitation on the
maximum number of shares for which options may be granted to any individual
during a specified period.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE FOR PROPOSAL THREE.
20
<PAGE> 23
PROPOSAL FOUR
RATIFICATION OF APPOINTMENT OF AUDITORS
On recommendation of the Audit Committee, the Board of Directors has
appointed, subject to ratification by the shareholders, Arthur Andersen LLP, of
Dallas, Texas, as independent auditors of the Company for the fiscal year ending
June 30, 1999. This firm has made the annual audit of the accounts of the
Company since 1966. The Company has been advised that neither Arthur Andersen
LLP nor any member thereof has any direct or indirect financial or other
interest in the Company or any of its subsidiaries. The Board of Directors each
year requests the shareholders to ratify the appointment of auditors and in the
past, the shareholders have overwhelmingly ratified the appointment each year.
In the unlikely event that such appointment is not ratified, the Board of
Directors will consider alternatives which might be pursued. Such alternatives
could include the selection of another auditor or continuation of Arthur
Andersen LLP as auditor.
A representative of Arthur Andersen LLP will attend the Annual Meeting of
Shareholders and will have the opportunity to make a statement if he desires to
do so, and such representative will be available to respond to appropriate
shareholder questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE FOR PROPOSAL FOUR.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on a review of Forms 3, 4 and 5 and amendments thereto
furnished to the Company and certain written representations of its directors
and officers, the Company believes that all reports required by Section 16(a) of
the Securities Exchange Act of 1934 applicable to its directors, executive
officers and greater than ten percent shareholders were timely filed in such
fiscal year and prior fiscal years, except as previously reported. It is the
practice of the Company to act as filing agent and attend to the electronic
filing of Section 16(a) forms on behalf of the directors and executive officers
of the Company.
SHAREHOLDER PROPOSALS
Proposals of shareholders with respect to matters to be voted upon at the
Company's 1999 Annual Meeting of Shareholders, now scheduled to be held on
October 26, 1999, must be received by the Company's Secretary on or before May
21, 1999, in order to be considered for inclusion in the Company's proxy
statement and proxy relating to that meeting. The bylaws of the Company require
that notice to the Company of any such proposal must be given by July 28, 1999
or the proposal will not be considered at next year's Annual Meeting of
Shareholders.
As to this year's Meeting, consistent with Securities and Exchange
Commission rules, by signing and returning the accompanying proxy, a shareholder
thereby grants to the named proxies the discretion to vote the shares
represented thereby against any shareholder proposal, since the required notice
under the Company's bylaws of 90 days prior to the Meeting has not been given as
to any such proposal.
ANNUAL REPORT AND FORM 10-K
The Annual Report of the Company for the year ending June 30, 1998,
including financial statements, is being mailed to shareholders of record as of
the close of business on the record date together with this Proxy Statement.
UPON WRITTEN REQUEST BY ANY SHAREHOLDER ENTITLED TO VOTE AT THE 1998 ANNUAL
MEETING, THE COMPANY WILL FURNISH THAT PERSON WITHOUT CHARGE A COPY OF THE FORM
10-K ANNUAL REPORT, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE
FISCAL YEAR ENDED JUNE 30, 1998. REQUESTS SHOULD BE ADDRESSED TO RICHARD J.
ROSEBERY, VICE CHAIRMAN, ELCOR CORPORATION, 14643 DALLAS PARKWAY, SUITE 1000,
DALLAS, TEXAS 75240-8871.
21
<PAGE> 24
OTHER MATTERS
No business other than that referred to in this Proxy Statement is expected
to come before the Meeting, but should any other matters requiring a vote arise,
including a question of adjourning the Meeting, the persons named as proxies in
the enclosed proxy will vote thereon according to their best judgment in the
interest of the Company. Although the minutes from last year's Annual Meeting of
Shareholders are expected to be presented for approval at the Meeting, approval
of such minutes will not itself constitute ratification of the matters voted
upon at last year's meeting.
By Order of the Board of Directors
DAVID G. SISLER
Secretary
Dated: September 18, 1998
22
<PAGE> 25
APPENDIX A
PROPOSED AMENDMENT TO
CERTIFICATE OF INCORPORATION OF
ELCOR CORPORATION
RESOLVED, that paragraph (A) of the Fourth Article of the Restated
Certificate of Incorporation of Elcor Corporation (the "Corporation") be and
hereby is amended and restated in its entirety to be and read as follows:
"FOURTH. (A) The maximum number of shares of stock which the
Corporation shall have authority to issue is One Hundred One Million
(101,000,000) shares, divided into two classes as follows:
1. One class consisting of One Hundred Million (100,000,000) shares
of the par value of One Dollar ($1.00) per share and to be known as
"Common Stock"; and
2. One class consisting of One Million (1,000,000) shares without
par value designated and to be known as "Preferred Stock"."
The Restated Certificate of Incorporation, except as provided above, is not
amended hereby and remains in full force and effect.
A-1
<PAGE> 26
APPENDIX B
1998 AMENDED AND RESTATED ELCOR CORPORATION
INCENTIVE STOCK OPTION PLAN
(QUALIFIED AND NON-QUALIFIED STOCK OPTIONS)
1. INTRODUCTION. The purpose of this 1998 Amended and Restated Elcor
Corporation Incentive Stock Option Plan (hereinafter referred to as the "Plan")
is to further the success of the Company and certain of its affiliates by making
Common Stock of the Company available for purchase by Participants, and thus to
provide an additional incentive to Participants to continue in the service of
the Company or its affiliates and to give them a greater interest as
shareholders in the success of the Company. Accordingly, the Committee is hereby
authorized to designate those Participants who are to receive Options under this
Plan, and upon the due execution of an Option Agreement, to grant Options to
such Participants. This Plan is an amendment and restatement of the Elcor
Corporation Incentive Stock Option Plan (effective August 30, 1993), as amended
(the "Prior Plan"). All Options granted prior to the Effective Date hereof shall
be deemed granted pursuant to the terms of the Prior Plan (except to the extent
provisions of this Plan are expressly made applicable). Options granted prior to
the Effective Date may be granted only to the extent shares are available for
issuance under the terms of the Prior Plan. As of the Effective Date, all
Options granted shall be granted under the terms and limitations of this Plan.
This Plan does not amend or restate any plans of the Company that were adopted
prior to the effective date of the Prior Plan.
2. DEFINITIONS. As used in this Plan, the terms set forth below shall have
the following meanings:
(a) "BENEFICIAL OWNER" and its derivatives means any Person who,
directly or indirectly, through any contract, trust, power of attorney,
pooling or other arrangement, understanding, relationship or otherwise has
or shares voting power, which includes the power to vote or direct the
voting of a security, and/or investment power, which includes the power to
dispose or direct the disposition of such security, provided however that
for purposes of this Plan, Beneficial Ownership will not be deemed to
result solely by virtue of a Person's right to acquire a security under any
agreement, arrangement or understanding, including without limitation any
option, conversion or exchange rights, warrants or option, until such
rights are actually exercised or asserted, as the case may be; and
provided, further, that no Person will be deemed to be a Beneficial Owner
of securities solely as a result of acting as a member of the proxy
committee appointed by the Board, or by virtue of a revocable proxy given
in response to a public proxy or consent solicitation made in accordance
with the Securities Exchange Act of 1934; and, provided further, that no
Person ordinarily engaged in business as an underwriter of securities will
be deemed a Beneficial Owner of any securities acquired through such
person's participation in good faith in a firm commitment underwriting
until the expiration of forty days after the date of such acquisition and
then only if such securities continue to be owned by such Person at the
expiration of such forty day period.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CHANGE IN CONTROL" means the consummation of a transaction or
series of transactions having the effect of changing possession, direct or
indirect, of the power to direct or cause the direction of the management
and policies of the Company or its successor through the Beneficial
Ownership of voting securities of the Company or its successor, by contract
or otherwise; provided, that, without limitation, such a Change in Control
will conclusively be deemed to have occurred if:
(A) any Person is or becomes the Beneficial Owner of voting
securities of the Company representing forty (40%) or more of the
combined voting power of the Company's then outstanding voting
securities; or
(B) a merger or consolidation of the Company with any other entity
becomes effective, other than (i) a merger or consolidation which would
result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding
or by being converted into voting securities of the surviving entity) at
least sixty percent (60%) of the combined voting securities of the
Company or such surviving entity outstanding immediately after such
merger or consolidation or (ii) a merger or consolidation effected to
implement a recapitaliza-
B-1
<PAGE> 27
tion of the Company (or similar transaction) in which no Person acquires
forty percent (40%) or more of the combined voting power of the
Company's then outstanding securities; or
(C) the shareholders of the Company approve a plan of complete
liquidation of the Company or the shareholders of the Company or Board
approve an agreement or plan for the sale or disposition by the Company
in one transaction or a series of transactions resulting in the
acquisition by any Person of operating assets or earning power
constituting more than sixty-seven percent (67%) of the fair market
value of all operating assets or earning power of the Company and its
subsidiaries, taken as a whole; provided, that no Change in Control will
be deemed to have occurred solely by virtue of changes of the
composition of the Board, without changes in Beneficial Ownership of the
Company or its successor.
(d) "CODE" means the Internal Revenue Code of 1986 and the regulations
promulgated thereunder.
(e) "COMMITTEE" means the body administering the Plan as described and
defined in Paragraph 3 hereof.
(f) "COMMON STOCK" means the Company's common stock, par value $1.00
per share.
(g) "COMPANY" means Elcor Corporation, a Delaware corporation, and any
successor in interest.
(h) "CONTINUING DIRECTOR" will mean (A) any member of the Board as of
the Effective Date of this Plan (a "Current Director"), (B) any person who
subsequently becomes a member of the Board if such Person's election or
nomination for election to the Board is recommended or approved by a
majority of directors who are Current Directors (an "Approved Director"),
or (C) any person who subsequently becomes a member of the Board if such
Person's election or nomination for election to the Board is approved by a
majority of any and all Current Directors and Approved Directors then
serving on the Board.
(i) "DATE OF GRANT" means the date of the Committee action granting an
Option unless a subsequent date is specified by the Committee.
(j) "EFFECTIVE DATE" means the effective date of this Plan specified
in Paragraph 14 hereof.
(k) "ELIGIBLE PERSONS" means any of the employees and officers of the
Company and its affiliates, and non-employee directors providing services
to any of such entities.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as it
may be amended from time to time.
(m) "INCENTIVE STOCK OPTION" means an Option qualifying under Section
422 of the Code.
(n) "NON-EMPLOYEE DIRECTOR" means a member of the Board who is both
(a) a "non-employee director" within the meaning of Rule 16b-3 promulgated
under SEC Release 34-37260 (May 31, 1996), as such rule may be amended, and
(b) an "outside director" for purposes of Code Section 162(m).
(o) "NON-QUALIFIED STOCK OPTION" means an Option that is not an
Incentive Stock Option.
(p) "OPTION" means an Option granted pursuant to this Plan and may be
either an Incentive Stock Option or a Non-qualified Stock Option.
(q) "OPTION AGREEMENT" means a written agreement between the Company
and a Participant pursuant to which Options are granted to a Participant
under this Plan.
(r) "OPTION PRICE" means the price per share of Common Stock,
determined under Paragraph 7(a) hereof, for which an Option may be
exercised.
(s) "OPTIONEE" shall mean the Participant who is entitled to exercise
an Option.
(t) "PARTICIPANTS" means any of the Eligible Persons granted Options
pursuant to this Plan.
(u) "PERSON" means any person or entity, or group or association of
the foregoing, other than (1) the Company, (2) any trustee, investment
advisor or other fiduciary holding, voting or otherwise exercising control
of securities under the Corporation's Second Amended and Restated Employee
Stock
B-2
<PAGE> 28
Ownership Plan dated January 1, 1994, as amended, (the "ESOP") or any
successor employee plan to the ESOP, (3) any other employee benefit plan or
employee compensation arrangement approved by Continuing Directors of the
Company, (4) any corporation owned, directly or indirectly, by the
shareholders of the Corporation in substantially the same proportions
(relative to other shareholders individually and in the aggregate) as their
ownership of stock of the Corporation, or (5) as this definition is applied
under an Option Agreement with a given Optionee, that Optionee or any group
in which that Optionee is a participant, prior to the consummation of the
Change in Control, through beneficial ownership of equity securities;
provided, however, that such Optionee will not be deemed a participant in
any group solely by virtue of being a Beneficial Owner of an investment of
$250,000.00 or less of publicly traded securities.
(v) "SUBSIDIARY" means a subsidiary corporation of the Company as
defined in Section 424(f) of the Code.
3. ADMINISTRATION OF PLAN. The Board shall administer the Plan; provided,
however, that the Board may appoint a committee (the "Committee") composed of
not less than two persons to administer the Plan. For purposes of this Plan, the
term "Committee" shall also refer to the Board during all periods in which the
Board has not appointed a committee to administer the Plan. Only Non-Employee
Directors shall be eligible to serve as members of any Committee composed of
less than the full Board. The Committee shall report all action taken by it to
the Board, which shall review and ratify or approve those actions that are by
law required to be so reviewed and ratified or approved by the Board. The
Committee shall have full and final authority in its discretion, subject to the
provisions of the Plan, to determine which Eligible Persons will be
Participants, and the time or times at which, Options shall be granted and the
number of shares and purchase price of Common Stock covered by each Option; to
construe and interpret the Plan and any agreements made pursuant to the Plan; to
determine the terms and provisions (which need not be identical or consistent
with respect to each Participant) of the respective Option Agreements and any
agreements ancillary thereto, including, without limitation, terms covering the
payment of the Option Price; and to make all other determinations and take all
other actions deemed necessary or advisable for the proper administration of
this Plan. All such actions and determinations shall be conclusively binding for
all purposes and upon all persons. The foregoing notwithstanding, however,
neither the Committee nor any other person shall have discretion to increase the
amount of compensation payable under an Option already granted hereunder if such
Option was granted to a "covered employee" under Code Section 162(m)(4).
4. OPTIONS AUTHORIZED. The Options granted under this Plan may be Incentive
Stock Options or Non-qualified Stock Options. The Committee shall have the full
power and authority to determine which Options shall be Non-qualified Stock
Options and which shall be Incentive Stock Options; and to grant only Incentive
Stock Options or only Non-qualified Stock Options or any combination thereof.
Under no circumstances may Non-qualified Stock Options be granted in tandem with
Incentive Stock Options in violation of Temporary Treasury Regulations section
14a.422A-1, Q&A 39 (or any successor provision) or be granted such that the
exercise of such Non-qualified Stock Options may affect the exercise of
Incentive Stock Options granted pursuant to the Plan. Options may be granted
such that the receipt of shares (or substitute property) upon their exercise may
be deferred. Options may be granted under the Plan on and after the adoption of
the Plan by the Board, but no Option may be exercisable prior to the Effective
Date. The designation of a Participant at any time to receive Options under this
Plan shall not in itself entitle such person to receive Options at any other
time unless affirmatively granted pursuant to the Plan. In addition to any other
limitations set forth herein, the aggregate fair market value (determined in
accordance with Paragraph 7(a) of the Plan as of the time the Option is granted)
of the Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by a Participant in any calendar year (under all
plans of the Company and of any Subsidiary) shall not exceed $100,000.
5. COMMON STOCK SUBJECT TO OPTIONS. The aggregate number of shares of the
Company's Common Stock that may be issued upon the exercise of Options shall not
exceed 1,400,000 shares, subject to the provisions of Paragraph 1 hereof and
subject to adjustment under the provisions of Paragraph 8 hereof; provided,
however, that no one Participant who is an employee may be granted Options
covering more than 100,000 shares in any one calendar year. The shares of Common
Stock to be issued upon the exercise of Options may be authorized but unissued
shares, or shares issued and reacquired by the Company. In the event
B-3
<PAGE> 29
any Option shall, for any reason, terminate or expire or be surrendered without
having been exercised in full, the shares subject to such Option shall again be
available for Options to be granted under the Plan.
6. ELIGIBILITY AND PARTICIPATION. Except as hereinafter provided, Options
may be granted under the Plan to any Eligible Person. In determining the
Eligible Person to whom Options shall be granted and the number of shares to be
covered by such Option, the Committee may take into account the nature of the
services rendered by the respective Eligible Person, their present and potential
contributions to the Company's success and profitability, and such other factors
as the Committee in its discretion shall deem relevant. A Participant who has
been granted an Option under the Plan may be granted an additional Option or
Options under the Plan, in the Committee's discretion. Incentive Stock Options
may only be granted to Eligible Persons who are employees of the Company or its
Subsidiaries.
7. TERMS AND CONDITIONS OF OPTIONS. The grant of an Option under the Plan
shall be evidenced by an Option Agreement executed by the Company and the
applicable Participant and such Option Agreement (and any amendments or
restatements to it) shall contain such terms and be in such form as the
Committee may from time to time approve, subject to the following limitations
and conditions:
(a) OPTION PRICE. The Option Price per share with respect to each
Option shall be determined by the Committee, but shall in no instance be
less than the par value of the shares subject to the Option. In addition
and subject to Paragraph 7(g) below, the Option Price per share with
respect to Incentive Stock Options granted hereunder shall in no instance
be less than the fair market value of the shares subject to the Option as
of the Date of Grant. For purposes of this Paragraph 7(a), fair market
value shall be, where applicable, the closing price of the Common Stock on
the Date of Grant as reported on the New York Stock Exchange or, if the
Common Stock is not traded on the New York Stock Exchange, as reported on
any other national securities exchange or market on which the Common Stock
may be traded. If the Common Stock was not traded on the Date of Grant, the
next previous business day on which such trading did occur shall be
substituted in the preceding sentence. Notwithstanding the foregoing,
however, fair market value shall be determined consistent with Code Section
422(b)(4) or any successor provisions.
(b) PERIOD OF OPTION. The expiration date of each Option shall be
fixed by the Committee, but, notwithstanding any provision of the Plan to
the contrary, such expiration date shall not be more than 10 years from the
Date of Grant.
(c) VESTING OF SHAREHOLDER RIGHTS. Neither an Optionee nor his/her
successor in interest shall have any of the rights of a shareholder of the
Company solely by virtue of the ownership of such Option until the Option
is exercised in accordance with its terms and such person's ownership of
the shares relating to the Option is recorded in the Company's stock
transfer records.
(d) EXERCISE OF OPTION. The Committee may make Options exercisable at
such time or times as it shall determine in its sole discretion. Except as
otherwise specifically provided in an Option Agreement, each Option shall
become exercisable with respect to 20% of the total number of shares
subject to the Option on the second anniversary of the Date of Grant, and
such Option shall become exercisable with respect to each additional 20% of
the shares on each of the next four anniversary dates of the Date of Grant,
such that the Option shall be 100% exercisable on the sixth anniversary of
the Date of Grant. Each Option shall be exercisable, during the Optionee's
lifetime, only by him/her or, during periods of legal disability, by
his/her legal representative. After the termination of employment or
service of the Optionee, including without limitation termination by reason
of death, permanent and total disability or retirement of the Optionee, an
Option may be exercised as provided in Paragraph 16 hereof. All shares of
Common Stock purchased under Options shall be paid for in full at the time
the Options are exercised. Such shares may be paid for in cash or with
stock of the Company (the value of which shall be the fair market value on
the date of exercise of the Option as defined in Paragraph 7(a)) or by a
combination of cash and stock of the Company, as the Optionee may elect.
(e) NONTRANSFERABILITY OF OPTION. Except as may be otherwise expressly
permitted in an Option Agreement with respect to Non-qualified Stock
Options, no Option shall be transferable or assignable by an Optionee,
other than by will or the applicable laws of descent and distribution. No
Option shall be subject to execution, attachment, or similar process.
B-4
<PAGE> 30
(f) DISQUALIFYING DISPOSITION. The Option Agreement evidencing any
Incentive Stock Options granted under this Plan shall provide that if the
Optionee makes a disposition, within the meaning of Section 424(c) of the
Code and regulations promulgated thereunder, of any share or shares of
Common Stock issued to him/her pursuant to exercise of the Option within
the two-year period commencing on the day after the Date of Grant of such
Option or within the one-year period commencing on the day after the date
of issuance of the share or shares to him/her pursuant to the exercise of
such Option, he/she shall, within 10 days of such disposition date, notify
the Company of the sales price or other value ascribed to or used to
measure the disposition of the share or shares thereof and immediately
deliver to the Company any amount of federal income tax withholding
required by law.
(g) LIMITATION ON GRANTS TO CERTAIN SHAREHOLDERS. An Incentive Stock
Option may be granted to a Participant only if such Participant, at the
time the Incentive Stock Option is granted, does not own, after application
of the attribution rules of Section 424(d) of the Code, stock possessing
more than 10% of the total combined voting power of all classes of Common
Stock of the Company or of its Subsidiary. The preceding restriction shall
not apply if at the time the Incentive Stock Option is granted the Option
Price is at least 110% of the fair market value (as defined in Paragraph
7(a) above) of the Common Stock subject to the Incentive Stock Option and
such Incentive Stock Option by its terms is not exercisable after the
expiration of five years from the Date of Grant.
(h) CONSISTENCY WITH CODE. The provisions of Option Agreements for
Incentive Stock Options shall not violate the requirements of the Code
applicable to such Incentive Stock Options.
(i) AMENDMENTS. Option Agreements may be amended or restated, in any
respect consistent with this Plan, by an instrument in writing executed by
the Company and the Optionee.
(j) CHANGE IN CONTROL. If a dissolution, liquidation or Change in
Control of the Corporation shall occur, all Options (including all those
Options granted under the Prior Plan) that have then been outstanding for
at least six months shall immediately become fully exercisable.
8. ADJUSTMENTS. The Committee shall make such adjustments in the Option
Price and the number of shares covered by outstanding Options if such
adjustments are required or appropriate to prevent any increase or decrease in
the aggregate consideration payable to the Company and any dilution or
enlargement of the rights or value held by the holders of such Options that
would otherwise result from any reorganization, recapitalization, stock split,
stock dividend, combination of shares, merger, consolidation, issuance of
rights, or other change in the capital structure of the Company. The Committee
shall also make such adjustments in the total number of shares that may be
subject to the future grant of Options (and that may be subject to grant to a
single employee over any period of time) if such adjustments are required or
appropriate to reflect any transaction or event described in the preceding
sentence.
9. RELINQUISHMENT OF OPTIONS.
(a) Unless the Option Agreement provides otherwise, an Optionee, or
his/her heirs or other legal representatives (to the extent entitled to
exercise the Option under the terms of this Plan), in lieu of purchasing
the entire number of shares subject to purchase pursuant to such Option,
shall have the right to relinquish all or any part of the unexercised
portion of the Option (such portion of the Option relinquished being
hereinafter referred to as the "Relinquished Option") for a number of whole
shares of Common Stock equal to the product of (i) the number of shares of
Common Stock subject to the Relinquished Option and (ii) a fraction, the
numerator of which is (A) the current fair market value per share of Common
Stock covered by the Relinquished Option minus (B) the Option Price of such
Relinquished Option, and the denominator of which is the then current fair
market value per share of such Common Stock. No fractional shares of Common
Stock will be issued pursuant to the exercise of Relinquished Options.
Rather, cash equal to the fractional amount of such share multiplied by the
fair market value per share will be paid to the Optionee, subject to the
federal income and other tax withholding requirements of Paragraph 13
hereof.
(b) The Committee, in granting Options hereunder, shall have
discretion to make substitute or supplementary provisions to paragraph 9(a)
of the Plan in determining the terms upon which such Options shall be
relinquishable, including such provisions as deemed advisable to permit the
exemption
B-5
<PAGE> 31
from the operation of Section 16(b) of the Exchange Act, in whole or in
part, of any such transaction involving such relinquishment. Outstanding
Option Agreements (other than Option Agreements evidencing Incentive Stock
Options) may be amended, if necessary, to permit relinquishment pursuant to
this Paragraph.
10. RESTRICTIONS ON ISSUING SHARES. The exercise of each Option shall be
subject to the condition that if at any time the Company shall determine in its
discretion that the satisfaction of withholding tax or other withholding
liabilities, or that the listing, registration, or qualification of any shares
otherwise deliverable upon such exercise upon any securities exchange or under
any state or federal law, or that the consent or approval of any regulatory
body, is necessary or desirable as a condition of, or in connection with, such
exercise or the delivery or purchase of shares pursuant thereto, then in any
such event, such exercise shall not be effective until such withholding,
listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Company;
provided, however, that any Options exercised by Optionee in accordance with
their terms shall not expire by operation of this paragraph; and provided,
further, that the Company shall use its best efforts to satisfy the conditions
described in this paragraph.
11. USE OF PROCEEDS. The proceeds received by the Company from the sale of
Common Stock pursuant to the exercise of Options granted under the Plan shall be
added to the Company's general funds and used for general corporate purposes.
12. AMENDMENT, SUSPENSION, AND TERMINATION OF PLAN. The Board may at any
time suspend or terminate the Plan or may amend it from time to time in such
respects as the Board may deem advisable in order that the Options granted
thereunder may conform to any changes in the law or in any other respect which
the Board may deem to be in the best interests of the Company, provided,
however, that without approval by the shareholders of the Company voting the
proper percentage of its voting power, no such amendment shall make any change
in the Plan for which shareholder approval is required of the Company by (a) the
Code or regulatory provisions dealing with Incentive Stock Options; (b) any
rules for listed companies promulgated by the New York Stock Exchange or any
other national stock exchange on which the Company's stock is listed; (c) Code
Section 162(m); or (d) any other applicable rule or law. Unless sooner
terminated hereunder, the Plan shall terminate 10 years after the Effective
Date. No Option may be granted during any suspension or after the termination of
the Plan. No amendment, suspension, or termination of the Plan shall, without an
Optionee's consent, impair or negate any of the rights or obligations under any
Option theretofore granted to such Optionee under the Plan.
13. TAX WITHHOLDING. The Committee may, in its sole discretion, (a) require
an Optionee to remit to the Company a cash amount sufficient to satisfy, in
whole or in part, any federal, state, and local withholding tax requirements
prior to the delivery of any certificate for shares pursuant to the exercise of
an Option hereunder; (b) grant to an Optionee the right to satisfy, in whole or
in part, any such withholding tax requirements by electing to require that the
Company, upon any exercise of the Option, withhold from the shares of Common
Stock issuable to the Optionee upon the exercise of the Option, that number of
full shares of Common Stock having a fair market value equal to the amount or
portion of the amount required to be withheld; or (c) satisfy such withholding
requirements through another lawful method, including through additional
withholdings against the Optionee's other compensation with the Company.
14. EFFECTIVE DATE OF PLAN. This Plan shall become effective on the date
(the "Effective Date") of the last to occur of (a) the adoption of the Plan by
the Board; and (b) the approval, within 12 months of such adoption, by a
majority (or such other proportion as may be required by state law or the
Certificate of Incorporation of the Company) of the outstanding voting shares of
stock of the Company, voted either in person or by proxy, at a duly held
shareholders meeting. Options may be granted under the Plan prior to its
approval by shareholders, provided that such Options may not be exercised prior
to such approval and all such Options issued under this Plan shall be nullified,
automatically, without any action on the part of any party, and shall be of no
further force or effect if the shareholders fail to approve the Plan on or prior
to the first anniversary of its adoption by the Board.
B-6
<PAGE> 32
15. EXERCISE OF OPTIONS AFTER TERMINATION OF EMPLOYMENT OR SERVICE;
DISABILITY; DEATH. Except as otherwise expressly provided in an Option
Agreement, the following provisions shall apply to each Option granted
hereunder:
Notwithstanding the vesting schedule as to which any Option is otherwise
exercisable, any Option granted under the Plan may be exercised in its entirety
(subject to the time limitations described below) upon the occurrence of any of
the following events: (A) upon the termination of employment or service
resulting from the permanent and total disability of the Optionee within the
meaning of Section 22(e)(3) of the Code (as determined by the Committee) while
employed by, or in the service of, the Company or a Subsidiary, and for a period
of one year thereafter commencing on the date of such termination of employment
or service; (B) upon the death of the Optionee, and for a period of one year
thereafter, commencing on the date of death through and including the first
annual anniversary of such date of death; or (C) upon the retirement of the
Optionee at any time on or after age 62, and in the event of the retirement of
the Optionee prior to age 62, if such early retirement and the right to exercise
such Option is approved by the Committee, and for a period of not more than
three months thereafter, commencing on the last date of employment or service.
Upon termination of employment or service of an Optionee other than by reason of
death, permanent and total disability, or retirement, an Option may be exercised
for a period of not more than three months thereafter commencing on the last
date of employment or service to the extent that the Option was exercisable at
the time of such termination. Under no circumstances, however, shall any Option
be exercisable after the expiration date provided in such Option.
16. LOANS. The Company or any Subsidiary may but shall not be required to
lend money or guarantee loans by third parties to an individual to finance the
exercise of any Option under the Plan.
17. DISSOLUTION, LIQUIDATION, MERGER, CONSOLIDATION, ETC.
(a) If a dissolution or liquidation of the Company shall occur, the
Company shall give notice of the proposed dissolution or liquidation of the
Company and shall notify the Optionees of their right to exercise such
Options (including Options which have been accelerated) within a period not
to exceed sixty (60) days of the mailing of the notice, provided that such
60 day exercise period shall not extend the exercise date of any Option.
Any Options which are not exercised within the notice period shall
terminate upon the dissolution or liquidation of the Company.
(b) If the outstanding shares of the Company shall be exchanged for
shares of the Company, or another corporation by reason of any merger,
consolidation, or other recapitalization, or in the event of any other
material change in the capital stock of the Company by reason of any
reclassification, reorganization, recapitalization, or otherwise, there
shall be a proportionate and equitable adjustment of the terms of the
Option with respect to the amount and class of shares remaining subject to
the Option and the purchase price to be paid thereof, as follows: if the
outstanding shares of the Company shall be exchanged for other stock of the
Company or of another corporation, the Optionee shall be entitled to
purchase, pursuant to his/her Option, such number of shares of the Company
or of such other corporation as were exchangeable for the number of shares
of the Company which the Optionee would have been entitled to purchase
except for such action, and the cash consideration payable per share shall
be proportionately and equitably adjusted in the discretion of the Board.
(c) If, as a result of any of the events hereinabove specified, the
Committee shall be of the opinion that the other provisions of this
Paragraph 17 will not effect an equitable and proportionate adjustment of
the terms of the Option with respect to the amount and class of shares
remaining subject thereto and the purchase price to be paid therefor, there
shall be made such other or further adjustments in the terms of the Option
as shall be necessary in the opinion of the Committee to effectuate an
equitable and proportionate adjustment of the terms of the Option or
Options.
B-7
<PAGE> 33
ELCOR
CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 27, 1998, 10:00 A.M.
DERRICK ROOM OF THE MIDLAND PETROLEUM CLUB, 501 WEST WALL STREET, MIDLAND,TEXAS
The undersigned, revoking all prior proxies, hereby appoints Harold K. Work,
Richard J. Rosebery and David G. Sisler, or any one of them, with full power of
substitution, as proxies to represent and vote as designated hereon all shares
of common stock which the undersigned would be entitled to vote at the Annual
Meeting of Shareholders of Elcor Corporation dated October 27, 1998 and at any
adjournment(s) thereof (collectively, the "Meeting") with all the powers the
undersigned would possess if personally present and voting thereat, (a) as
instructed on the reverse side with respect to the following matters more fully
described in the Proxy Statement dated September 18, 1998, and (b) in their
discretion upon other matters which properly come before the Meeting.
PLEASE SEE REVERSE SIDE
- -------------------------------------------------------------------------------
*FOLD AND DETACH HERE*
- -------------------------------------------------------------------------------
<PAGE> 34
<TABLE>
<CAPTION>
<S> <C> <C>
UNLESS OTHERWISE INSTRUCTED HEREON, IT IS INTENDED THAT THE PROXIES WILL VOTE Please mark your vote
THE SHARES FOR ITEMS 1, 2, 3 AND 4. as indicated in this
example [X]
1. ELECTION OF DIRECTORS Nominees: Messrs. James E. Hall and Harold K. Work 3. APPROVAL OF 1998 AMENDED AND RESTATED
ELCOR CORPORATION INCENTIVE STOCK
OPTION PLAN
FOR WITHHOLD To withhold authority to vote for any individual FOR AGAINST ABSTAIN
all AUTHORITY Nominee, write that Nominee's name on the line
Nominees for all Nominees below. [ ] [ ] [ ]
[ ] [ ] -------------------------------------------------
2. APPROVAL OF INCREASE IN AUTHORIZED COMMON STOCK 4. APPROVAL OF ARTHUR ANDERSEN
LLP AS AUDITORS FOR FISCAL 1999
FOR AGAINST ABSTAIN
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
[ ] [ ] [ ]
Please date and sign exactly as name appears on this proxy. Joint owners should each
sign. If held by a corporation, please sign full corporate name by duly authorized
officer. Executors, Administrators, Trustees, etc. should give full title as such.
Dated , 1998
---------------------------------
- ------------------------------------------
Signature of Shareholder
- ------------------------------------------
Signature of Shareholder
</TABLE>
- -------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
*VOTE BY TELEPHONE*
QUICK *** EASY *** IMMEDIATE
Your telephone voting direction authorizes the named proxies or trustee, as the
case may be, to vote your shares in the same manner as if you marked, signed and
returned your proxy card. You are also thereby authorizing your voting
direction to be tabulated and confirmed to the named proxies or trustee, as the
case may be, by the Company's tabulation agent, ChaseMellon Shareholder
Services, LLC.
* You will be asked to enter a Control Number which is located in the box in
the lower right hand corner of this form.
- --------------------------------------------------------------------------------
OPTION #1: To vote as the Board of Directors recommends on ALL
proposals: Press 1.
- --------------------------------------------------------------------------------
OPTION #2: If you choose to vote on each proposal separately press 0. You will
hear these instructions:
- --------------------------------------------------------------------------------
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
Proposal 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL
nominees, press 9.
To withhold FOR AN INDIVIDUAL nominee, press 0 and listen to
the instructions.
Proposal 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
The Instructions are the same for all remaining proposals.
When asked, please confirm your vote by Pressing 1.
- --------------------------------------------------------------------------------
PLEASE DO NOT RETURN THE ABOVE PROXY CARD, IF VOTED BY PHONE.
- --------------------------------------------------------------------------------
CALL ** TOLL FREE ** ON A TOUCH TONE TELEPHONE
1-800-840-1208 - ANYTIME
There is NO CHARGE to you for this call. [CONTROL NUMBER
123-456-789-12]
[THIS AREA TO BE LEFT BLANK
CMSS TO IMPRINT CONTROL NUMBER]
