<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. )
<TABLE>
<S> <C>
Filed by the registrant [X] [ ] Confidential, for Use of the
Filed by a party other than the registrant [ ] Commission Only (as permitted
by Rule 14a-(e)(2))
Check the appropriate box:
[ ] Preliminary Proxy Statement
[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)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[ELCOR LOGO]
14643 DALLAS PARKWAY
SUITE 1000, WELLINGTON CENTRE
DALLAS, TEXAS 75240-8871
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD TUESDAY, OCTOBER 26, 1999
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 26,
1999, at 10 a.m., local time, for the following purposes:
1. To elect two directors to hold office for terms expiring in 2002,
as specified in the attached Proxy Statement, or until their successors are
elected and qualified;
2. To ratify the appointment of Arthur Andersen LLP as independent
auditors of the Company for its fiscal year ending June 30, 2000; and
3. 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 7,
1999, 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 17, 1999
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 LOGO]
14643 DALLAS PARKWAY
SUITE 1000, WELLINGTON CENTRE
DALLAS, TEXAS 75240-8871
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD TUESDAY, OCTOBER 26, 1999
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 26, 1999 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 prescribed 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 17, 1999.
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 2002,
as specified herein, or until their successors are elected and qualified;
2. To ratify the appointment of Arthur Andersen LLP as independent
auditors of the Company for its fiscal year ending June 30, 2000; and
3. 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 7, 1999 (the "Record Date"), at
which time the Company had outstanding and entitled to vote at the Meeting
19,988,074 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. NYSE rules do not bar discretionary voting on the matters
to be voted upon at the Meeting.
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 in
favor of the ratification of auditors, as 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
telephone voting direction 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 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 7, 1999, 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>
James E. Hall.............................................. 289,800(2) 1.45
Thomas D. Karol............................................ 11,250(3) *
Dale V. Kesler............................................. 10,500(4) *
W. F. Ortloff.............................................. 51,875(5) *
David W. Quinn............................................. 22,500(2) *
Richard J. Rosebery........................................ 289,998(6) 1.45
Harold K. Work............................................. 335,544(7) 1.67
Leonard R. Harral.......................................... 23,846(8) *
Raul G. Holguin............................................ 29,893(9) *
David G. Sisler............................................ 7,883(10) *
All directors and executive officers as a group (12
persons)................................................. 1,130,227(11) 5.58
</TABLE>
- ---------------
* Percentages of one percent or less have been omitted.
2
<PAGE> 5
(1) All shares reflected in the above 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 (11); (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 18,000 shares.
(3) Includes options currently exercisable for 4,500 shares.
(4) Includes options currently exercisable or exercisable within sixty days for
9,000 shares.
(5) Includes options currently exercisable or exercisable within sixty days for
13,500 shares.
(6) Includes options currently exercisable or exercisable within sixty days for
73,500 shares.
(7) Includes options currently exercisable or exercisable within sixty days for
89,625 shares.
(8) Includes options currently exercisable or exercisable within sixty days for
6,635 shares.
(9) Includes options currently exercisable or exercisable within sixty days for
5,170 shares.
(10) Includes options currently exercisable or exercisable within sixty days for
3,022 shares.
(11) Includes options currently exercisable or exercisable within sixty days for
254,281 shares.
The following table sets forth, as of September 7, 1999, certain
information with respect to the only 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>
Trustees for the Elcor Corporation Employee Stock Ownership
Plan...................................................... 1,462,025 7.31
c/o Elcor Corporation
14643 Dallas Parkway
Wellington Centre, Suite 1000
Dallas, TX 75240-8871
</TABLE>
As far as is known to management of the Company, including through its
review of public reports under section 13(d), (g) and (f) of the Securities
Exchange Act of 1934, no other single person owns beneficially more than 5
percent of the outstanding shares of Common Stock. The information in public
reports, however, may not be current 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 eight 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 Compensation Committees. There is not a 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 did not
formally meet during the last fiscal year. The Executive Committee consists of
Messrs. Work, Rosebery, Hall and Ortloff.
3
<PAGE> 6
The Audit Committee consists of Messrs. Quinn (Chairman), Hall and Kesler,
all of whom are nonemployee directors. 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. Kesler (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 and benefits, and the development of policies on employee
compensation for the Company. The Committee met six times during the last fiscal
year.
All current directors attended, in person or by telephone, 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 1999.
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 2002. 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. Under the Company's bylaws, directors are divided into three classes,
each of which is to be composed of approximately one-third of the directors.
Messrs. David W. Quinn and Richard J. Rosebery are nominated for election
for a three-year term or until their successors are elected and qualified. The
nominees for directors are both currently Board members.
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 special arrangement or
understanding between such nominee and any other person.
Shares represented by properly executed proxies will be voted, in the
absence of contrary indication therein or revocation thereof by the shareholder
granting such proxy, in favor of the election of the nominees named herein as
directors to hold office for the terms stated herein. The persons named as
proxies in the enclosed proxy have been designated by the Company's management
and intend to vote for the election to the Board of Directors of the nominees
named below. 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 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
DAVID W. QUINN, 57 -- 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
from 1987 to August 1997. He has served on Centex's Board of Directors
since 1989, and also serves as a director of its 62% 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
4
<PAGE> 7
Finance Committee of Zale Lipshy University Hospital in Dallas, Texas. Mr.
Quinn has served as a director of the Company since 1996 and his current
term expires in 1999. He serves on the Company's Audit Committee.
RICHARD J. ROSEBERY, 64 -- 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 in August 1997, having served as Executive Vice President since
1993. He has served as an officer of the Company for 24 years. In addition
to his position with the Company, he serves as director and officer of all
of Elcor's subsidiaries and is Chairman of the Board or President of all
Elcor Industrial Products subsidiaries. Mr. Rosebery served as a Vice
President in various capacities with Elcor Corporation from 1975 until his
election as Vice Chairman. He also serves as a director of the Dallas
Chapter of the Financial Executives Institute. Mr. Rosebery's current term
as a director of the Company expires in 1999. He has served as a director
of the Company since 1996.
CONTINUING DIRECTORS
JAMES E. HALL, 64 -- Officer and Director of Chaparral Cars, Inc. and Partner of
Condor Operating Company.
Since 1965, 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. He is Manager of Condor Operating Company,
independent oil and gas operators, and a director and officer of Condor
Aviation Company, Inc. Mr. Hall is also a former director and officer of
Hall Racing, Inc. Mr. Hall is a member of the Audit Committee, the
Executive Committee, and the Compensation Committee. He has served as a
director since 1974 and his current term expires in 2001.
THOMAS D. KAROL, 40 -- Chief Executive Officer of Pro Group Holdings, Inc.
Mr. Karol has served as Chief Executive Officer of Pro Group Holdings, Inc.
for more than five years. Pro Group Holdings is a privately owned company
that manufactures carpet and distributes various flooring products through
its Hollytex and LDBrinkman subsidiaries. He was appointed to fill a
vacancy, created when Mr. Robert M. Leibrock retired from the Board in
November 1998. Mr. Karol was appointed to the Board effective November 5,
1998 for a term expiring in 2000.
DALE V. KESLER, 60 -- 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, Cellstar Corporation, Triad Hospitals,
Inc., and Resource Services, Inc., and serves on 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. He serves on the Company's
Compensation Committee.
W. F. ORTLOFF, 76 -- 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.
5
<PAGE> 8
HAROLD K. WORK, 66 -- Chairman of the Board, President and Chief Executive
Officer of Elcor Corporation; Chairman of the Board 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 served
as President and Chief Executive Officer of Elk Corporation of Dallas from
1979 until December 1998. Mr. Work continues to serve as Chairman of the
Board and a director of each of the Elk subsidiaries of the Company and
Elcor Management Corporation. He is a member of the Board of Directors of
Centex Construction Products, Inc. and of the Asphalt Roofing Manufacturers
Association. His current term expires in 2001.
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 the Company's Chief Executive
Officer and each of the Company's four other most highly compensated executive
officers (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>
Harold K. Work.................... 1999 $348,333 $204,898 37,500 $81,240
1998 317,033 149,001 37,500 64,297
1997 272,800 60,505 22,500 64,479
Richard J. Rosebery............... 1999 $291,667 $149,660 30,000 $55,823
1998 266,933 117,261 30,000 42,627
1997 219,733 46,485 22,500 33,723
Leonard R. Harral................. 1999 $110,300 $ 31,502 2,310 $14,491
1998 106,150 27,096 2,940 10,960
1997 102,167 13,930 2,790 9,242
Raul G. Holguin................... 1999 $131,333 $ 21,862 4,065 $16,811
1998 115,583 35,301 4,642 12,629
1997 105,750 25,388 2,351 9,261
David G. Sisler................... 1999 $133,000 $ 49,563 4,027 $15,209
1998 120,367 34,134 4,522 8,328
1997 114,106 11,665 3,836 2,650
</TABLE>
- ---------------
(a) Capacities in which person served during the fiscal year ending June 30,
1999:
<TABLE>
<S> <C> <C>
Harold K. Work Chairman of the Board, Chief Executive Officer and
President.
Richard J. Rosebery Vice Chairman, Chief Financial and Administrative Officer
and Treasurer.
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 (until June 30, 1999);
President and Chief Operating Officer of Cybershield, Inc.
(effective June 30, 1999).
David G. Sisler Vice President, General Counsel and Secretary.
</TABLE>
(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 Compensation Committee
Report included with this Proxy Statement.
(c) Number of shares has been adjusted for the 3-for-2 stock split declared by
the Company's Board of Directors on June 28, 1999 in the form of a 50% stock
dividend distributed to shareholders on August 11, 1999. See the table below
entitled "Option Grants During Fiscal 1999" for information concerning the
grant of options in fiscal 1999 for shares of Elcor Common Stock.
7
<PAGE> 10
(d) Represents contributions by the Company 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:
Company Contributions to Employees' 401(k) Savings Plan and Employee Stock
Ownership Plan:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Harold K. Work............................................ $11,200 $8,000 $6,900
Richard J. Rosebery....................................... 11,200 8,000 6,900
Leonard R. Harral......................................... 9,742 6,369 5,203
Raul G. Holguin........................................... 11,064 7,504 5,282
David G. Sisler........................................... 11,144 6,987 1,807
</TABLE>
Loans Forgiven Under the Stock/Loan Plan:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------
1999 1998 1997
------ ------- -------
<S> <C> <C> <C>
Harold K. Work............................................ $39,003 $39,421 $44,353
Richard J. Rosebery....................................... 23,160 22,349 19,453
Leonard R. Harral......................................... 4,749 4,591 4,039
Raul G. Holguin........................................... 5,747 5,125 3,979
David G. Sisler........................................... 3,806 1,341 843
</TABLE>
Supplemental Retirement Benefits Contributed:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------
1999 1998 1997
------ ------- -------
<S> <C> <C> <C>
Harold K. Work............................................ $31,037 $16,876 $13,226
Richard J. Rosebery....................................... 21,463 12,278 7,370
Leonard R. Harral......................................... 0 0 0
Raul G. Holguin........................................... 0 0 0
David G. Sisler........................................... 259 0 0
</TABLE>
AGGREGATED OPTION EXERCISES DURING FISCAL 1999 AND FISCAL YEAR END OPTION VALUES
The following table provides information related to options exercised
during fiscal 1999 and options held under the Company's Incentive Stock Option
Plan at June 30, 1999 by or to the Named Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES(A) VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(C)
ACQUIRED ON VALUE --------------------------- ---------------------------
EXERCISE(A) REALIZED(B) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Harold K. Work............. 16,875 $190,781 66,375 116,625 $1,439,795 $1,675,454
Richard J. Rosebery........ 31,500 389,375 51,750 101,625 1,070,718 1,507,866
Leonard R. Harral.......... 1,488 25,924 4,363 10,096 91,784 157,015
Raul G. Holguin............ 2,176 30,880 2,844 12,685 55,628 177,897
David G. Sisler............ 766 9,358 900 12,968 17,263 186,128
</TABLE>
- ---------------
(a) Number of shares has been adjusted for the 3-for-2 stock split declared by
the Company's Board of Directors on June 28, 1999 in the form of a 50%
stock dividend distributed to shareholders on August 11, 1999.
(b) Market value of underlying securities at exercise date minus the exercise
price, not reduced for taxes, if any, payable upon exercise.
(c) 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, 1999 and the applicable exercise prices. These
differences accumulate over what may be, in many cases, several years.
8
<PAGE> 11
OPTION GRANTS DURING FISCAL 1999
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, 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
- ---------------------------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS EXERCISE PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERMS(c)(d)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ---------------------------
GRANTED(a) FISCAL 1999 SHARE(b) DATE 5% 10%
NAME ------------------- ---------- ------------ --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Harold K. Work.......... 37,500 22.42% $19.7917 10/26/2008 $ 466,759 $ 1,182,858
Richard J. Rosebery..... 30,000 17.93% 19.7917 10/26/2008 373,407 946,286
Leonard R. Harral....... 2,310 1.38% 19.7917 10/26/2008 28,752 72,864
Raul G. Holguin......... 4,065 2.43% 19.7917 10/26/2008 50,597 128,222
David G. Sisler......... 4,027 2.41% 19.7917 10/26/2008 50,124 127,023
All Shareholders........ N/A N/A N/A N/A $243,003,260 $615,817,969
</TABLE>
- ---------------
(a) Options become exercisable 20% per year on the second through the sixth
anniversary dates of the grant. Options granted were 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 62, or a Change in Control (as
defined in the agreement) of the Company, all options reflected in this
table would 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. Exercise prices have been adjusted for the
3-for-2 stock split declared by the Company's Board of Directors on June
28, 1999 in the form of a 50% stock dividend distributed to shareholders on
August 11, 1999.
(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 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 on Common Stock is
calculated over a period of ten years from October 27, 1998, the grant date
of the above options, based on (i) a beginning stock price of $19.7917, the
exercise price of such options, and (ii) the number of outstanding shares
on October 27, 1998, adjusted, like the number of options and exercise
price, for split shares issued in August 1999. The amounts reflected in the
"All Shareholders" row may not be achieved.
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, 1999
are reflected in the table below.
<TABLE>
<CAPTION>
LOANS UNDER STOCK/LOAN PLAN
----------------------------------------------------
HIGHEST OUTSTANDING OUTSTANDING
NAME BALANCE IN FISCAL 1999 BALANCE AT JUNE 30, 1999
---- ---------------------- ------------------------
<S> <C> <C>
Harold K. Work............................. $180,905 $176,597
Richard J. Rosebery........................ 126,157 123,755
Leonard R. Harral.......................... * *
Raul G. Holguin............................ * *
David G. Sisler............................ * *
</TABLE>
- ---------------
* Balances of not more than $60,000 have been omitted.
9
<PAGE> 12
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 (described 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.
In addition, the Company's Incentive Stock Option Plan, as approved by
shareholders in 1998, 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 are not parties
to any other employment, severance or other change-in-control agreements with
the Company.
COMPANY STOCK PERFORMANCE
The following graphs set forth comparisons 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 and
ten-year periods ending June 30, 1999. Cumulative total return assumes
reinvestment of dividends.
10
<PAGE> 13
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG ELCOR CORPORATION, THE RUSSELL 2000 INDEX
AND THE DOW JONES BUILDING MATERIALS INDEX
<TABLE>
<CAPTION>
DOW JONES BUILDING
ELCOR CORPORATION RUSSELL 2000 MATERIALS
----------------- ------------ -------------
<S> <C> <C> <C> <C>
6/94 100.00 100.00 100.00
6/95 91.00 120.00 116.00
6/96 75.00 149.00 137.00
6/97 116.00 173.00 177.00
6/98 160.00 206.00 225.00
6/99 279.00 206.00 224.00
</TABLE>
* $100 INVESTED ON 06/30/94 IN STOCK OR INDEX-INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING JUNE 30.
COMPARISON OF TEN YEAR CUMULATIVE TOTAL RETURN**
AMONG ELCOR CORPORATION, THE RUSSELL 2000 INDEX
AND THE DOW JONES BUILDING MATERIALS INDEX
<TABLE>
<CAPTION>
ELCOR CORPORATION RUSSELL 2000 DOW JONES BUILDING MAT.
----------------- ------------ -----------------------
<S> <C> <C> <C>
6/89 100.00 100.00 100.00
6/90 95.00 103.00 95.00
6/91 66.00 104.00 92.00
6/92 88.00 119.00 107.00
6/93 264.00 151.00 123.00
6/94 250.00 157.00 121.00
6/95 227.00 189.00 140.00
6/96 187.00 234.00 166.00
6/97 290.00 272.00 215.00
6/98 398.00 323.00 274.00
6/99 696.00 323.00 272.00
</TABLE>
** $100 INVESTED ON 06/30/89 IN STOCK OR INDEX-INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING JUNE 30.
11
<PAGE> 14
DIRECTORS' COMPENSATION
Nonemployee directors receive $20,000 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 Incentive
Stock Option Plan (ISOP), on August 22, 1996, the directors approved the initial
grant and subsequent annual grants of options to buy 2,000 (4,500 as adjusted
for subsequent stock splits) shares of Common Stock to each nonemployee director
serving after each Annual Meeting of Shareholders through October 1999. 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. Under an
initiative adopted June 28, 1999, directors will continue to receive annual
option grants generally equivalent to those set forth above; however, future
option grants will extend the period for exercise of the option in the event of
the director's death, disability, or retirement after age 62 by the lesser of
(i) five years, or (ii) the remainder of the ordinary term of the option.
Nonemployee members of the Executive Committee receive $6,000 per year for
service on such Committee. The employee directors are 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 1999, 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 1999 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 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 ISOP,
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. Should
the compensation level of any executive officer approach the $1 million level,
the Committee will reevaluate how compensation is structured and paid.
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. Historically, the incentive plan year for Elcor
differed from the Company's fiscal year due to seasonality considerations.
Effective October 1, 1998, the incentive plan year for Elcor and Elk was 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 performance. The bonus plans for other
business units have historically corresponded to the Company's fiscal year, and
will continue to do so in the future.
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. 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
13
<PAGE> 16
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
ranged in fiscal 1999 from 26% to 50% of base salary for the Named Executive
Officers. Should earnings exceed the upper end of the target range, which
occurred in fiscal 1999, a premium bonus is awarded. Premium bonuses for the
fiscal year were 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 right 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 for fiscal 1999 were granted at 37 1/2% to
50% of amounts earned under the Incentive Cash Bonus Plan, and bear interest at
the applicable federal rate. Loans granted before July 1, 1998 were non
interest-bearing.
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 forgiven principal and
interest 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 ISOP, which the Company's shareholders approved in
1998, 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 1999 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 ranging in
fiscal 1999 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 1999, 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. The Company currently contributes a percentage
(2.5% in fiscal 1999) of each participant's annual compensation, subject to
limitations imposed by the Internal Revenue Service. Amounts contributed to the
ESOP in fiscal 1999 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).
14
<PAGE> 17
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 1999) 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 made in fiscal 1999 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 (as defined in the
agreements) of the Company. Change in Control events under the severance
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 be entitled to
receive a lump-sum severance payment equal to two times (except for payments to
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.
In addition, under the ISOP, all options held by optionees under that Plan,
including the Named Executive Officers, would become immediately exercisable
upon a Change in Control.
15
<PAGE> 18
CEO COMPENSATION
The Chief Executive Officer of Elcor, Harold K. Work, participated during
fiscal 1999 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
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 1999, 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.
RECENT COMPREHENSIVE EVALUATION
During fiscal 1999, the Compensation Committee engaged an independent
consulting firm, Towers Perrin, to conduct a comprehensive evaluation of the
Company's overall compensation program, including all key elements of
compensation for corporate and subsidiary officers: base salaries, incentive
cash bonuses and stock option awards. The primary objective of this independent
evaluation was to provide reasonable assurance that the compensation opportunity
to such officers is competitive and provides appropriate incentive to attract,
motivate and retain the best possible executive talent for the benefit of the
Company's shareholders.
Based on the results of this comprehensive evaluation, the Compensation
Committee made its recommendations, which were adopted by the Board of Directors
on June 28, 1999. In part, the Committee's consultant found that the competitive
data the Company uses should be revised to include more small capitalization
public companies and fewer small private organizations. These changes provide a
data base which better represents the organizations with which the Company
competes for executive talent. Based on updated competitive data, the consultant
found that the Company's long-term compensation had fallen behind the market. As
a result, the Committee recommended and the Board approved the adoption of
initiatives to continue current practices for base salary and target bonus, but
to provide increased opportunities for premium bonus and long-term incentive
compensation in line with corporate performance and the creation of shareholder
value. The modifications to the Company's compensation program were made within
the framework of the Company's existing compensation, benefit and welfare plans.
Dated: September 9, 1999 Dale V. Kesler, Chairman
James E. Hall, Member
W. F. Ortloff, Member
PROPOSAL TWO
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, 2000. 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.
Shares represented by properly executed proxies will be voted, in the absence of
contrary indication therein or revocation thereof by the shareholder granting
such proxy, in favor of the ratification of the appointment of Arthur Andersen
LLP as independent auditors of the Company for the fiscal year ending June 30,
2000. 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.
16
<PAGE> 19
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 THIS PROPOSAL.
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 and 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.
SHAREHOLDER PROPOSALS
Proposals of shareholders with respect to matters to be voted upon at the
Company's 2000 Annual Meeting of Shareholders, now scheduled to be held on
October 24, 2000, must be received by the Company's Secretary on or before May
20, 2000, in order to be considered for inclusion in the Company's proxy
statement and proxy relating to that meeting. Although they may not be included
in the Company's proxy statement and proxy relating to that meeting, valid
proposals received after that date but on or before July 25, 2000, will
nevertheless be included in the meeting's agenda if proposed in accordance with
the bylaws of the Company.
As to the 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 90-day notice under
the Company's bylaws has not been received as to any such proposal.
ANNUAL REPORT AND FORM 10-K
The Annual Report of the Company for the year ending June 30, 1999,
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 1999 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, 1999. REQUESTS SHOULD BE ADDRESSED TO RICHARD J.
ROSEBERY, VICE CHAIRMAN, ELCOR CORPORATION, 14643 DALLAS PARKWAY, SUITE 1000,
DALLAS, TEXAS 75240-8871.
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 substantive action on the matters
voted upon at last year's meeting.
Dated: September 17, 1999 By Order of the Board of Directors
DAVID G. SISLER
Secretary
17
<PAGE> 20
[ELCOR LOGO]
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 26, 1999, 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 26, 1999 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 17, 1999, and (b) in their
discretion upon other matters which properly come before the Meeting.
PLEASE SEE REVERSE SIDE
- --------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
<PAGE> 21
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
UNLESS OTHERWISE INSTRUCTED HEREON, IT IS INTENDED THAT THE PROXIES WILL VOTE THE SHARES FOR ITEMS 1 AND 2. Please mark
your votes as [X]
indicated in
this example
1. ELECTION OF DIRECTORS NOMINEES: MESSRS. 01 DAVID W. QUINN AND 02 RICHARD J. ROSEBERY
FOR WITHHOLD To withhold authority to vote for any individual Nominee, write that Nominee's name on the line below.
all AUTHORITY
Nominees for all Nominees -----------------------------------------------------------------------------------------------------
[ ] [ ]
2. APPROVAL OF ARTHUR ANDERSEN
LLP AS AUDITORS FOR FISCAL 2000
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 , 1999
--------------------------------------------
--------------------------------------------------------
Signature of Shareholder
--------------------------------------------------------
Signature of Shareholder
- ------------------------------------------------------------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
[ VOTE BY TELEPHONE ]
[ QUICK *** EASY *** IMMEDIATE ]
YOUR VOTE IS IMPORTANT! - YOU CAN VOTE IN ONE OF TWO WAYS:
1. TO VOTE BY PHONE: CALL TOLL-FREE 1-800-840-1208 ON A TOUCH TONE TELEPHONE 24 HOURS A DAY - 7 DAYS A WEEK
THERE IS NO CHARGE TO YOU FOR THIS CALL. - HAVE YOUR PROXY CARD IN HAND.
YOU WILL BE ASKED TO ENTER A CONTROL NUMBER, WHICH IS LOCATED IN THE BOX IN THE LOWER RIGHT CORNER OF THIS FORM
- ------------------------------------------------------------------------------------------------------------------------------------
OPTION 1: To vote as the Board of Directors recommends on ALL proposals, press 1.
- ------------------------------------------------------------------------------------------------------------------------------------
WHEN ASKED, PLEASE CONFIRM BY PRESSING 1.
- ------------------------------------------------------------------------------------------------------------------------------------
OPTION 2: If you choose to vote on each Proposal separately, press 0. You will hear these instructions.
- ------------------------------------------------------------------------------------------------------------------------------------
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.
WHEN ASKED, PLEASE CONFIRM BY PRESSING 1.
OR
2. TO VOTE BY PROXY: Mark, sign and date your proxy card and return promptly in the enclosed envelope.
NOTE: If you vote by telephone, THERE IS NO NEED TO MAIL BACK your Proxy Card.
THANK YOU FOR VOTING.
</TABLE>
