<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:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE> 2
ELCOR CORPORATION LOGO
14643 DALLAS PARKWAY, SUITE 1000
DALLAS, TEXAS 75240-8871
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Elcor Corporation will hold its Annual Meeting of Shareholders at the
Lalique Ballroom II, Hotel Intercontinental Dallas, 15201 Dallas Parkway,
Addison, Texas 75001 on TUESDAY, OCTOBER 24, 2000, AT 10:00 A.M. local time. The
purpose of the meeting will be to vote on the following proposals and any other
business that is properly presented at the meeting or any adjournment of the
meeting:
Proposal 1. To elect two directors for a three-year term; and
Proposal 2. To ratify the appointment of independent auditors for
fiscal 2001.
The record date for the Annual Meeting is Tuesday, September 5, 2000. Only
shareholders of record at the close of business on that date can vote at the
meeting.
For at least ten days prior to the meeting, Elcor will maintain, at its
address above, an alphabetical list of the names and addresses of shareholders
eligible to vote at the meeting. The list will also contain the number of shares
registered in the names of those shareholders.
Please review the attached proxy statement for further information relevant
to the Annual Meeting.
David G. Sisler
Vice President,
General Counsel and Secretary
Dated: September 20, 2000
IMPORTANT
PLEASE VOTE. YOU MAY VOTE BY:
- SIGNING AND RETURNING THE ACCOMPANYING PROXY CARD.
- VOTING BY TELEPHONE. See the proxy card for instructions.
OR - VOTING IN PERSON AT THE MEETING (if you are a shareholder of record).
Any shareholder having a disability requiring special assistance who would like
to attend
the Annual Meeting may call Elcor at (972) 851-0535.
<PAGE> 3
ELCOR CORPORATION
PROXY STATEMENT -- 2000 ANNUAL MEETING OF SHAREHOLDERS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
- ABOUT THE MEETING......................................... 1
- Who Can Vote............................................ 1
- How You Can Vote........................................ 1
- Revoking Your Proxy..................................... 2
- Required Votes.......................................... 2
- Other Matters to be Acted Upon at the Meeting........... 2
- Expenses of Solicitation................................ 2
- ELCOR STOCK OWNERSHIP..................................... 3
- BOARD OF DIRECTORS........................................ 4
- Committees Established by the Board..................... 4
- Executive Committee.................................. 4
- Audit Committee...................................... 4
- Compensation Committee............................... 5
- Compensation Committee Interlocks and Insider
Participation......................................... 5
- Compensation of Directors............................... 5
- PROPOSALS................................................. 5
- Proposal 1: Election of Two Directors for a Three-year
Term................................................... 5
- Election of Directors................................ 5
- Directors Nominated for Election this Year........... 6
- Directors Continuing in Office....................... 6
- Proposal 2: Ratification of Appointment of Auditors for
Fiscal 2001............................................ 7
- EXECUTIVE COMPENSATION.................................... 7
- Compensation Committee Report........................... 8
- Our Philosophy....................................... 8
- Comprehensive Evaluation Completed Last Year......... 8
- Key Elements of Executive Compensation............... 8
- Base Salary........................................ 9
- Incentive Cash Bonus............................... 9
- Equity-based Incentive Compensation................ 9
- Other Compensation................................... 10
- Summary of Factors Influencing Compensation.......... 10
- CEO Compensation..................................... 10
- Tax Deductibility of Executive Compensation.......... 11
- Performance Graphs...................................... 11
- Summary Compensation Table.............................. 13
- Option Grants in Fiscal 2000............................ 14
- Aggregated Option Exercises During Fiscal 2000 and
Values at June 30, 2000................................ 15
- Stock/Loan Balances..................................... 15
- Change-in-Control (Severance) Agreements................ 15
- OTHER MATTERS............................................. 16
- Section 16(a) Beneficial Ownership Reporting
Compliance............................................. 16
- Next Year's Annual Meeting.............................. 16
</TABLE>
<PAGE> 4
ELCOR CORPORATION LOGO
14643 DALLAS PARKWAY, SUITE 1000
DALLAS, TEXAS 75240-8871
PROXY STATEMENT
ABOUT THE MEETING
- Who Can Vote
- How You Can Vote
- Revoking Your Proxy
- Required Votes
- Other Matters to be Acted Upon at the Meeting
- Expenses of Solicitation
With this proxy statement, the Board of Directors of Elcor Corporation is
soliciting proxies for the 2000 Annual Meeting of Shareholders to be held on
Tuesday, October 24, 2000. The proxy will also apply to any adjournment of that
meeting. Elcor is mailing this proxy statement and the form of proxy to
shareholders beginning September 20, 2000. At this year's Annual Meeting,
shareholders will vote on a proposal to elect two directors for a three-year
term, and a proposal to ratify the appointment of independent auditors for
fiscal 2001.
WHO CAN VOTE
If you are a record holder of Elcor Common Stock at the close of business
on September 5, 2000, you may vote at the Annual Meeting. On that record date,
19,522,684 shares of Common Stock were outstanding and entitled to vote. Each
share is entitled to cast one vote on each proposal.
HOW YOU CAN VOTE
If you return your signed proxy card or vote by telephone before the Annual
Meeting, we will vote your shares as you direct. You may specify whether your
shares should be voted for both, one or neither of the nominees for director.
You may also specify whether you approve, disapprove or abstain from the
proposal to ratify independent auditors. If you vote by telephone, you are
granting a proxy to vote all shares corresponding to your control number to the
persons listed on the proxy card, and you are authorizing the Company's
tabulation agent to confirm your vote to those persons.
If you participate in the Elcor Employee Stock Ownership Plan (ESOP), your
proxy card will serve as voting direction for the ESOP trustee, who is the
record owner of all ESOP shares. If an ESOP participant votes by telephone, the
participant is authorizing the Company's tabulation agent to confirm the
participant's voting direction to the ESOP trustee. The ESOP trustee will vote
all unvoted ESOP shares, whether or not allocated to participants' accounts, in
proportion to voting on shares that are voted by ESOP participants.
IF YOU SIGN AND RETURN YOUR PROXY, BUT DO NOT SPECIFY HOW YOU WANT TO VOTE
YOUR SHARES, WE WILL VOTE THEM "FOR" BOTH PROPOSALS.
<PAGE> 5
REVOKING YOUR PROXY
You may revoke your proxy at any time before it is exercised in any of the
following three ways:
- by submitting written notice of revocation to the Secretary of Elcor;
- by submitting another proxy that is properly signed and dated after your
previously submitted proxy;
or - by voting in person at the Meeting.
REQUIRED VOTES
Shareholders of 51% of the Common Stock must be present in person or
represented by proxy at the Meeting to be a quorum for the transaction of
business. The affirmative vote of a majority of the votes cast at the Meeting is
required for a proposal to pass.
An abstention, vote to withhold authority, or broker non-vote with respect
to any such proposal will not be voted, although it will be counted for purposes
of determining whether there is a quorum. Accordingly, an abstention, a vote to
withhold authority, and a broker non-vote each will have no effect on the
outcome of the election of directors or the vote on the other proposal.
A broker non-vote occurs when a broker holds shares in nominee form, or
"street name," and is unable to vote the shares on a matter because it is
"nondiscretionary" under New York Stock Exchange (NYSE) Rules or the broker's
agreement with the beneficial owner of the shares. For this year's meeting,
under NYSE rules, if you hold your shares in "street name" through a broker or
other nominee, your broker or nominee may be permitted to exercise voting
discretion with respect to the matters to be acted upon at the Meeting. Thus, if
you do not give your broker or nominee specific instructions, depending on your
agreement with your broker, your shares may be voted on those matters.
OTHER MATTERS TO BE ACTED UPON AT THE MEETING
We do not know of any other matters to be presented or acted upon at the
Meeting. Under our Bylaws and Delaware law, no substantive business other than
election of directors and ratification of independent auditors can be conducted
at this year's Meeting. If any other matter (e.g., a procedural matter) is
presented at the Meeting on which a vote may properly be taken, the shares
represented by proxies will be voted in accordance with the judgment of the
proxies listed on the proxy card.
EXPENSES OF SOLICITATION
Our Board of Directors is soliciting proxies with this proxy statement.
Elcor will pay the costs of this solicitation. Our officers and employees may
solicit proxies by further mailing or personal conversations, or by telephone,
facsimile or e-mail. If they do so, Elcor will not pay them extra compensation
for their solicitation efforts (other than their regular compensation). We will,
upon request, reimburse brokerage firms and others at rates prescribed by the
Securities and Exchange Commission (SEC) for forwarding proxy materials to
beneficial owners of our Common Stock.
2
<PAGE> 6
ELCOR STOCK OWNERSHIP
The following table contains certain information about the beneficial
ownership of Common Stock as of September 1, 2000, of each director and nominee
for director, the executive officers named in the Summary Compensation Table in
this proxy statement, and all current directors and executive officers as a
group. Each of the individuals marked with an asterisk below is the owner of
less than one percent of the Company's outstanding Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME OWNERSHIP(1) CLASS
---- ------------ ----------
<S> <C> <C>
James E. Hall............................................... 294,325(2) 1.51
Thomas D. Karol............................................. 12,000(3) *
Dale V. Kesler.............................................. 15,000(4) *
David W. Quinn.............................................. 27,000(2) *
Richard J. Rosebery......................................... 329,871(5) 1.68
Harold K. Work.............................................. 382,519(6) 1.95
Leonard R. Harral........................................... 26,433(7) *
David G. Sisler............................................. 14,058(8) *
James J. Waibel............................................. 40,816(9) *
All directors and executive officers as a group (12
persons).................................................. 1,170,784(10) 5.90
</TABLE>
---------------
(1) The listed persons have direct ownership and sole voting and investment
power with respect to all shares in the table, 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 their spouses, minor
or resident children, family partnerships, or by such persons as trustee or
custodian.
(2) Includes options currently exercisable for 22,500 shares.
(3) Includes options currently exercisable for 9,000 shares.
(4) Includes options currently exercisable for 13,500 shares.
(5) Includes options currently exercisable or exercisable within sixty days for
98,250 shares.
(6) Includes options currently exercisable or exercisable within sixty days for
123,723 shares.
(7) Includes options currently exercisable or exercisable within sixty days for
8,926 shares.
(8) Includes options currently exercisable or exercisable within sixty days for
7,298 shares.
(9) Includes options currently exercisable or exercisable within sixty days for
9,299 shares.
(10) Includes options currently exercisable or exercisable within sixty days for
323,365 shares.
3
<PAGE> 7
The following table contains certain information as of September 1, 2000,
or such other date indicated below, about beneficial owners who are known to own
more than 5 percent of the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
SHARES OF
NAME AND ADDRESS OF COMMON PERCENT
BENEFICIAL OWNER STOCK OF CLASS
------------------- --------- --------
<S> <C> <C>
Capital Research and Management Company(1).................. 2,275,000 11.65
333 South Hope Street, 55th Floor
Los Angeles, CA 90071
David L. Babson & Co., Inc.(2).............................. 1,447,050 7.41
1 Memorial Drive, 11th Floor
Cambridge, MA 02142
Trustees for the Elcor Corporation Employee Stock Ownership
Plan...................................................... 1,439,515 7.37
c/o Elcor Corporation
14643 Dallas Parkway, Suite 1000
Dallas, TX 75240-8871
</TABLE>
---------------
Sources: (1) Amendment No. 1 to Schedule 13G (dated May 9, 2000) (filed as
investment advisor to various investment companies; has sole
voting and investment power as to all such shares).
(2) Schedule 13G (dated September 11, 2000) (filed as investment
advisor to various investment counseling clients; has sole
voting and investment power as to all such shares).
As far as is known to management of the Company, including our review of
public reports under section 13(d), (g) and (f) of the Securities Exchange Act
of 1934, no other single person beneficially owns more than five percent of the
outstanding shares of Common Stock. The information in the table may not be
current due to time lags inherent in the reporting process.
BOARD OF DIRECTORS
- Committees Established by the Board
- Compensation Committee Interlocks and Insider Participation
- Compensation of Directors
The Board of Directors provides guidance and strategic oversight to the
Company's management with the objective of optimizing shareholders' returns on
their investment in Elcor. The Board intends to ensure that there is independent
review and oversight of management, as well as approval of significant strategic
and management decisions affecting the Company. Regular meetings of the Board
are scheduled throughout the year, and special meetings are held when required.
The Board held seven meetings in fiscal 2000. All directors attended at least
75% of such meetings and fiscal 2000 meetings of committees of which they are
members.
COMMITTEES ESTABLISHED BY THE BOARD
The Board of Directors has established the following committees to assist
it in discharging its responsibilities:
Executive Committee. The Board established the Executive Committee to
act upon matters, within specific guidelines, when the Board is not in
session. The committee promptly reports to the full Board any actions it
takes for Board review. In fiscal 2000, the Executive Committee did not
formally meet, because no special situations arose which required
accelerated Board action when the full Board was unavailable. The Executive
Committee currently consists of Messrs. Work, Rosebery and Hall.
Audit Committee. The Audit Committee, which met three times in fiscal
2000, is composed of David W. Quinn (Chairman), James E. Hall and Dale V.
Kesler. The Board of Directors has chartered the Audit Committee to assist
the Board in fulfilling its oversight responsibilities as to auditing,
4
<PAGE> 8
accounting and financial information Elcor provides to any governmental
body or the public. The Audit Committee also reviews the systems of
internal controls regarding finance, accounting, legal compliance and
ethics that management and the Board have established for the Company. In
addition, the committee reviews the Company's auditing, accounting and
financial reporting process generally. The Audit Committee also discusses
with independent auditors their quarterly reviews and the Company's interim
financial statements. The Board has determined that the committee will meet
at least three times per year.
Compensation Committee. The Compensation Committee, which met four
times in fiscal 2000, is composed of Dale V. Kesler (Chairman), James E.
Hall and Thomas D. Karol. The committee reviews and recommends to the Board
the compensation of the Company's executive officers and, subject to
ratification by the Board, makes grants of stock options under Elcor's
Incentive Stock Option Plan. It describes its philosophy and determinations
in the Compensation Committee Report beginning on page 8.
Compensation Committee Interlocks and Insider Participation. During
fiscal 2000, no member of the Compensation Committee was an officer or
employee of Elcor or its subsidiary. Mr. William Ortloff, who served on the
committee prior to his death in October 1999, was a former officer of Elcor
and certain subsidiaries. No Elcor director or executive officer had a
relationship with Elcor or any other company during fiscal 2000 that the
SEC defines as a compensation committee interlock.
Compensation of Directors. A director who is also an employee of Elcor
is not entitled to any additional compensation for serving as a director.
Each non-employee director receives annual cash compensation of $20,000, as
well as $1,400 per committee meeting for serving as a committee chairman
and generally receives $1,000 for attendance at each meeting of the Board
or a Board committee at which such director does not serve as chairman. In
lieu of a committee meeting fee, non-employees who serve on the Executive
Committee receive an annual fee of $6,000. In addition, each non-employee
director currently receives, on an annual basis, options to purchase 4,500
shares of Common Stock at an exercise price equal to the fair market value
of the shares at the date of grant. Such options generally are immediately
exercisable and have a ten-year term.
Under a new Deferred Compensation Plan, beginning in January 2001, a
director will be able to elect annually to defer all or a portion of his or
her director's fees and to have such deferred fees treated as if they had
been invested in certain investment alternatives. The Company is in the
process of implementing the specifics of this Plan.
PROPOSALS
Proposal 1: Election of two directors for a three-year term;
Proposal 2: Ratification of the appointment of Arthur Andersen LLP as
independent auditors.
PROPOSAL 1: ELECTION OF TWO DIRECTORS FOR A THREE-YEAR TERM
- Election of Directors
- Directors Nominated for Election this Year
- Directors Continuing in Office
ELECTION OF DIRECTORS
Our certificate of incorporation provides for three classes of directors as
equal in number as possible. Each class serves for a three-year term, with one
class elected each year. Currently, the Board of Directors is composed of six
members. The two directors whose terms expire at this year's Annual Meeting are
Thomas D. Karol and Dale V. Kesler. The Board of Directors has nominated Messrs.
Karol and Kesler for reelection as directors. If elected, each director will
serve until the annual meeting in 2003 or until he is succeeded by another
qualified director who has been elected. All other directors will continue in
office until the expiration of the terms of their classes at the annual
shareholders meeting in 2001 or 2002, as applicable.
5
<PAGE> 9
If a nominee becomes unavailable for election due to unforeseen
circumstances (such as death or disability), the Board may either reduce the
number of directors or substitute another person for the nominee, in which event
the shares voted for the nominee will be voted for the substitute nominee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES FOR
DIRECTOR.
The following information about the nominees for director and each current
director continuing in office is as of September 5, 2000.
DIRECTORS NOMINATED FOR ELECTION THIS YEAR
THOMAS D. KAROL, 41 -- President of the Brinkman Hard Surfaces Division of
Beaulieu of America.
Thomas D. Karol assumed his current position at Beaulieu of America when it
purchased control of Pro Group Holdings, Inc. in December 1999. Mr. Karol had
served as Chief Executive Officer of Pro Group Holdings, Inc. for more than five
years. The Brinkman Hard Surfaces Division of Beaulieu manufactures and
distributes various flooring products. Mr. Karol is a graduate of the Wharton
School of Business and is a former Chairman for the Dallas Chapter of the Young
Presidents Organization. He was appointed as a director of the Company to fill a
vacancy, created when Mr. Robert M. Leibrock retired from the Board in November
1998, for a term expiring in 2000. Mr. Karol serves on Elcor's Compensation
Committee.
DALE V. KESLER, 61 -- Retired former Managing Partner, Arthur Andersen LLP,
Dallas/Fort Worth.
Dale V. 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. Effective August 22, 2000, Mr.
Kesler accepted an assignment to serve as interim President and Chief Executive
Officer of American Homestar Corporation during its search for a new CEO. He
currently serves on the boards of directors of American Homestar, New Millennium
Homes, Triad Hospitals, Inc., Cellstar Corporation and Resource Services, Inc.,
and serves on several committees and boards of various charitable and civic
organizations. Mr. Kesler was appointed as a director of the Company to fill a
vacancy, created when the number of directors on the Board of the Company was
increased in December 1997, for a term beginning January 2, 1998 and expiring in
2000. He serves on the Company's Compensation Committee (Chairman) and Audit
Committee.
DIRECTORS CONTINUING IN OFFICE
Term Expiring in 2001
JAMES E. HALL, 65 -- Officer and Director of Chaparral Cars, Inc. and
Partner of Condor Operating Company.
For more than 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 Partner 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, the Compensation Committee and the Executive
Committee. He has served as a director since 1974.
HAROLD K. WORK, 67 -- 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 had served as Vice Chairman or
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.
6
<PAGE> 10
Term Expiring in 2002
DAVID W. QUINN, 58 -- Vice Chairman of Centex Corporation.
Prior to his 1996 appointment to his current position as Vice Chairman of
Centex Corporation, Mr. Quinn served as its Executive Vice President since 1987.
In addition, Mr. Quinn served as Chief Financial Officer of Centex from 1987 to
June 1997 and from October 1997 through May 2000. He has served on Centex's
Board of Directors since 1989, and also serves as a director of its 65% 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. Mr. Quinn has
served as a director of the Company since 1996. He serves as Chairman of the
Company's Audit Committee.
RICHARD J. ROSEBERY, 65 -- Vice Chairman, Chief Financial and
Administrative Officer 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 25 years. In addition to his
position with the Company, he serves as director and officer of all but one of
Elcor's subsidiaries and is Chairman of the Board or President of all Elcor
Industrial Products and Electronics Manufacturing Services 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 and as a Southwestern Area director of the Financial
Executives Institute. He has served as a director of the Company since 1996.
PROPOSAL 2: RATIFICATION OF APPOINTMENT OF AUDITORS FOR FISCAL 2001
The Board of Directors, upon the recommendation of the Audit Committee, has
appointed Arthur Andersen LLP as Elcor's independent auditors for the year
ending June 30, 2001. That firm has been Elcor's auditors since 1966. Although
not required to do so, the Board of Directors is submitting the appointment of
the firm for ratification at the Meeting. In the past, our shareholders have
ratified the appointment of Arthur Andersen LLP as independent auditors each
year by an overwhelming majority. If shareholders do not ratify the appointment
for fiscal 2001, however, the Board of Directors will reconsider the
appointment. A representative of Arthur Andersen LLP is expected to be present
at the Meeting, will be available to respond to questions and will have the
opportunity to make a statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS FOR FISCAL 2001.
EXECUTIVE COMPENSATION
- Compensation Committee Report
- Our Philosophy
- Comprehensive Evaluation Completed Last Year
- Key Elements of Executive Compensation
- Other Compensation
- Summary of Factors Influencing Compensation
- CEO Compensation
- Tax Deductibility of Executive Compensation
- Performance Graphs
- Summary Compensation Table
- Option Grants in Fiscal 2000
- Aggregated Option Exercises During Fiscal 2000 and Values at June 30,
2000
- Change-in-Control (Severance) Agreements
7
<PAGE> 11
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors is responsible for
providing advice and recommendations to the Board and administering the policies
which govern executive compensation programs of the Company. The Committee
consists entirely of non-employee directors.
Our Philosophy
Our philosophy, and the Board's philosophy, is to offer key executive
officers a competitive compensation package that is tied to the performance and
contribution of the executive, as well as the overall success of the Company.
The Company directly links executive and shareholder interests through equity
based plans and plans that reward the executive when the Company achieves
specific operating results. We intend to motivate and reward executives for
performance that enhances shareholder value, and to retain executives who are
critical to the long-term success of the Company. The Committee and Board seek
an appropriate balance between short-term and long-term incentives in reviewing
and approving compensation programs and individual compensation awards.
Comprehensive Evaluation Completed Last Year
Prior to the beginning of fiscal 2000, we engaged an independent consulting
firm, Towers Perrin, to conduct a comprehensive evaluation of the Company's
overall compensation program. Towers Perrin reviewed all key elements of
compensation for corporate and subsidiary officers. In commissioning this
evaluation, the Committee's primary goal was to determine whether the Company's
existing compensation program was competitive and provided appropriate
incentives to attract, motivate and retain high quality executive talent.
In part, Towers Perrin concluded that the Company should revise the
compensation peer group from which it gathers the competitive data it uses to
benchmark all elements of executive compensation. Towers Perrin found that the
compensation peer group should include a greater proportion of small
capitalization public companies to better represent the organizations with which
the Company competes for executive talent. Based on its updated competitive
data, the consultant found that the Company's long-term compensation had fallen
behind the market.
Based on the results of this comprehensive evaluation, the Compensation
Committee made its recommendations, which the Board adopted on June 28, 1999.
The Committee recommended and the Board approved the adoption of initiatives to:
- continue current practices for base salary
- continue current practices for bonuses the Company or subsidiary pays
when it achieves its target operating results
- provide increased opportunities for bonus the Company or its subsidiary
pays when it achieves above-target operating results
- provide competitive opportunities for long-term incentive compensation
directly linked to the creation of shareholder value
The Board approved the above modifications to the Company's compensation
program within the framework of the Company's existing compensation, benefit and
welfare plans. Fiscal 2000 compensation levels the Company will show on the
proxy statement for this year's Annual Meeting will reflect the modifications.
Key Elements of Executive Compensation
The key elements of compensation the Company pays to its executives are
generally base salary, incentive cash bonus, stock loans and stock options. The
Company intends for each element of compensation to provide a distinct set of
incentives to the executive.
8
<PAGE> 12
- Base Salary
Prior to recommending approval of salaries to the Board, we review a survey
of competitive salaries paid by other companies in the Company's compensation
peer group. An independent consulting firm develops the survey. The Company uses
the survey data to establish the range of compensation for each executive, with
the mid-point in that range being close to the median salary for the executive's
position within the compensation peer group.
We also review the Company's annual performance evaluations for its
executive officers. The executive officer's immediate superior completes this
annual performance review based on their evaluation of the executive's
individual skills and abilities, achievement of individual strategic goals, and
fulfillment of established position requirements and expectations. The outside
directors on the Board conduct the chief executive officer's evaluation. The
evaluations do not contain specific weighting of factors for determining overall
job performance.
The Committee makes an annual recommendation to the Board as to what base
salary the Company will pay to each of its executive officers. We base our
recommendation on our subjective evaluation of whether the proposed base salary
is appropriate based on the above competitive salary review and performance
evaluations. The executive's progress in the applicable salary rate range
generally depends upon their individual skills, abilities and performance.
- Incentive Cash Bonus
We believe that a significant portion of annual compensation for each
executive officer should be linked solely to the Company's short-term financial
performance. The Company pays quarterly incentive cash bonuses if it achieves
modified operating earnings within a range that is subjectively established as
part of the Company's strategic planning for that fiscal year. The Company
establishes threshold and target levels of operating earnings for purposes of
incentive cash bonuses. Target operating earnings are equal to the level of
operating income the Company establishes in the annual strategic plan reviewed
by the Board. If the Company achieves its target operating earnings, then it
pays the executive a bonus in the range of the 50th percentile of bonuses for
the executive's job position within the Company's compensation peer group. The
Company pays bonuses greater or lesser than the target level in proportion to
its achievement of operating earnings greater or lesser than target. The
Company, however, must achieve the established threshold operating earnings or
it will not pay a bonus. Bonuses are also subject to a cap, or maximum, of 200%
of the target bonus.
- Equity-based Incentive Compensation
With the Company's equity-based incentive compensation programs, we intend
to align executive officers' interests directly with the interests of its
shareholders. The Company provides equity-based incentive compensation in the
form of stock loans and stock options. Stock loans and stock options provide
incentives that are primarily long-term. The Company sets the executive's total
annual opportunity for stock loans and option awards, collectively, at a
valuation approximating the 75th percentile for the Company's compensation peer
group as to the value of total long-term compensation paid at the executive's
salary level.
- - Stock Loans
Under the Company's Stock/Loan Plan, the Company may grant to the
executive the right to obtain a loan from the Company, the proceeds of
which must be used to purchase Elcor Common Stock or applied to previous
Elcor stock purchases. The Company calculates stock loan grants by formula,
based on a preset percentage of the executive's incentive cash bonuses.
Percentages for the formula calculation vary by the executive's job
position. Loans granted under the Stock/Loan Plan are forgiven at a rate of
20% for each year of continuous service subsequent to the date of the loan.
Like incentive cash bonuses, stock loan grant amounts depend upon the
Company's achievement of modified operating earnings. By operation of its
stock loan formula, the Company makes larger stock loan grants the better
its short-term operating earnings. Unlike the case with incentive cash
bonuses, however, the executive realizes a benefit that also varies
according to long term factors -- continued service to the
9
<PAGE> 13
Company and increases in shareholder value over the period the executive
holds the Company stock they acquire with stock loans.
- - Stock Options
Under the Incentive Stock Option Plan, which was approved by
shareholders in 1998, we make, subject to ratification by the Board, awards
of incentive and nonqualified stock options to Company executives. Stock
options we award to executives will generally have a ten-year term and
become exercisable ratably over five years, with an option price equal to
market value on date of grant.
In most cases, we determine by formula the number of option shares for
which we make a grant. This formula uses the Black-Scholes option pricing
model as part of a calculation of the number of option shares with a total
value that will bring total long-term compensation, including stock loan
opportunities, to its intended level. In recognition of unique performance
or circumstances, however, we may make some awards that vary from the
formula calculation. In fiscal 2000, the Company made a stock option award
to Mr. Rosebery in an amount above the formula calculation based on a
subjective evaluation of his performance.
Other Compensation
We also believe that to retain high quality executive talent, the Company
must maintain a competitive package of employee benefit and welfare plans. The
Company's executives currently are eligible to participate in the Company's
401(k) plan, employee stock ownership plan and other employee benefit and
welfare programs. Executives will become eligible for a new deferred
compensation plan beginning in January 2001. The Company establishes these
programs based primarily on its subjective evaluation of competitive practices
at similar companies who compete for personnel with the Company.
Summary of Factors Influencing Compensation
The table below summarizes the performance and other factors directly
influencing the amounts of the Company's executive compensation:
<TABLE>
<CAPTION>
FACTORS DIRECTLY INCENTIVE
INFLUENCING AMOUNTS OF BASE CASH STOCK STOCK
EXECUTIVE COMPENSATION SALARY BONUSES LOANS OPTIONS OTHER
---------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Competitive Practices..................... X X X X X
Individual Short-term Performance......... X
Company Short-term Performance............ X X
Continued Service to the Company.......... X X X
Long-term Increases in Shareholder
Value................................... X X X
</TABLE>
CEO Compensation
Elcor's Chief Executive Officer, Harold K. Work, participated during fiscal
2000 in the same compensation programs as the other executives. We recommended
and the Board approved his compensation with each component determined according
to the same criteria described above. The Board increased Mr. Work's base salary
to $460,000 on July 1, 1999. The Board approved this increase based on its
overall assessment of his individual performance and the market level of
salaries within the Company's compensation peer group. We believe Mr. Work's
salary is competitive in relation to salaries of chief executive officers within
the Company's compensation peer group.
Mr. Work's incentive bonus for fiscal 2000 resulted from the Company's
application of a formula to a target amount as described above in the Incentive
Cash Bonus section of this report. The reduction in Mr. Work's cash bonus in
fiscal 2000 reflects the Company's not achieving its target earnings.
Similarly, the Company made stock loan awards to Mr. Work by applying the
formula described in the Stock/Loan Plan section of this report. His awards in
fiscal 2000 decreased from the previous year because the Company did not achieve
its target earnings. In accordance with its standard terms under the Stock/Loan
10
<PAGE> 14
Plan, the Company forgave a ratable portion of Mr. Work's outstanding stock
loans as he earned such forgiveness with his credited service with the Company.
In fiscal 2000, the Company awarded Mr. Work nonqualified stock options by
applying the formula grant described in the Stock Options section of this
report. The substantial increase in Mr. Work's stock option award in fiscal 2000
over prior years primarily reflects a competitive practices market adjustment.
The Company made this adjustment as a result of the independent consultant's
finding that prior to fiscal 2000, the Company's long-term compensation program
had fallen behind competitive practices for chief executive officers within the
Company's compensation peer group. We believe that Mr. Work's fiscal 2000 stock
option grant is competitive in relation to awards for chief executive officers
within the Company's compensation peer group.
Tax Deductibility of Executive Compensation
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 is
not taken into account for purposes of this limitation. The Company has informed
us that all compensation paid during fiscal year 2000, including amounts
associated with the Company's Incentive Stock Option Plan, is deductible for
federal income tax purposes. Should the compensation level of any executive
officer approach $1 million for purposes of Section 162(m), the Committee and
Board will determine whether such compensation is appropriate, but may be
influenced by factors other than full tax deductibility.
ELCOR COMPENSATION COMMITTEE
Dale V. Kesler, Chairman
James E. Hall
Thomas D. Karol
Dated: July 31, 2000
PERFORMANCE GRAPHS
The following graphs compare the cumulative total shareholder return on
Common Stock, including reinvestment of dividends, for the last five fiscal
years and for the last eight fiscal years with the cumulative total return of
the Russell 2000 Stock Index and the Dow Jones Building Materials Index. The
Company selected the eight-year graph arbitrarily based on 1992's becoming the
new base year for Dow Jones indices.
These graphs are presented in accordance with SEC requirements. You are
cautioned against drawing any conclusions from this information, as past results
do not necessarily indicate future performance. The graphs in no way reflect a
forecast of future financial performance.
Despite any statement in any of our filings with the SEC that might
incorporate part or all of any future filings with the SEC by reference, the
Compensation Committee Report and performance graphs included with this proxy
statement are not incorporated by reference into any such filings.
11
<PAGE> 15
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG ELCOR CORPORATION, THE RUSSELL 2000 INDEX
AND THE DOW JONES BUILDING MATERIALS INDEX
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
6/95 6/96 6/97 6/98 6/99 6/00
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Elcor Corporation 100 83 128 176 307 244
Russell 2000 100 121 155 186 176 174
Dow Jones Building
Materials 100 116 150 189 188 133
</TABLE>
* $100 INVESTED ON 6/30/95 IN STOCK OR INDEX -- INCLUDING
REINVESTMENT OF DIVIDENDS. FISCAL YEAR ENDING JUNE 30.
COMPARISON OF 8 YEAR CUMULATIVE TOTAL RETURN**
AMONG ELCOR CORPORATION, THE RUSSELL 2000 INDEX,
AND THE DOW JONES BUILDING MATERIALS INDEX
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
6/92 6/93 6/94 6/95 6/96 6/97 6/98 6/99 6/00
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Elcor Corporation 100.00 300.00 284.06 257.97 213.38 330.22 453.13 791.90 629.80
Russell 2000 100.00 149.79 156.15 187.58 227.20 291.37 349.30 329.33 320.00
Dow Jones Building
Mat. 100.00 116.90 117.50 134.05 155.01 201.08 253.71 252.01 177.95
</TABLE>
** $100 INVESTED ON 6/30/92 IN STOCK OR INDEX -- INCLUDING
REINVESTMENT OF DIVIDENDS. FISCAL YEAR ENDING JUNE 30.
12
<PAGE> 16
SUMMARY COMPENSATION TABLE
The following table contains information about the compensation for the
last three fiscal years of the Chief Executive Officer and each of the four
other most highly compensated executive officers of Elcor (referred to below as
the named executive officers), based on salary and bonus for fiscal 2000.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
----------------
SECURITIES
ANNUAL UNDERLYING
COMPENSATION STOCK OPTIONS
NAME AND FISCAL ------------------- (# OF ALL OTHER
PRINCIPAL POSITION(A) YEAR SALARY BONUS(B) SHARES)(C) COMPENSATION(D)
--------------------- ------ -------- -------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Harold K. Work.................... 2000 $460,000 $144,953 106,740 $95,758
1999 348,333 204,898 37,500 81,240
1998 317,033 149,001 37,500 64,297
Richard J. Rosebery............... 2000 $368,000 $105,458 75,000 $70,203
1999 291,667 149,660 30,000 55,823
1998 266,933 117,261 30,000 42,627
Leonard R. Harral................. 2000 $135,000 $ 23,986 5,960 $17,390
1999 110,300 31,502 2,310 14,491
1998 106,150 27,096 2,940 10,960
David G. Sisler................... 2000 $180,000 $ 38,043 13,830 $22,271
1999 133,000 49,563 4,027 15,209
1998 120,367 34,134 4,522 8,328
James J. Waibel................... 2000 $145,000 $ 26,533 7,480 $17,101
1999 111,300 32,371 2,288 13,901
1998 105,067 23,838 2,903 9,771
</TABLE>
---------------
(a) Capacities in which each named executive officer served during the last
fiscal year:
<TABLE>
<S> <C>
Harold K. Work Chairman of the Board, Chief Executive Officer and President
Richard J. Rosebery Vice Chairman, Chief Financial and Administrative Officer;
Treasurer (through March 27, 2000)
Leonard R. Harral Vice President and Chief Accounting Officer
David G. Sisler Vice President, General Counsel and Secretary
James J. Waibel Vice President, Administration
</TABLE>
(b) Bonus amounts in the summary compensation table were paid under the
Company's Incentive Cash Bonus Plan.
(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 in Fiscal 2000" for information
concerning the grant of options in fiscal 2000 for shares of Elcor Common
Stock.
(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,
--------------------------
NAME 2000 1999 1998
---- ------- ------- ------
<S> <C> <C> <C>
Harold K. Work................................... $11,200 $11,200 $8,000
Richard J. Rosebery.............................. 11,200 11,200 8,000
Leonard R. Harral................................ 11,200 9,742 6,369
David G. Sisler.................................. 11,200 11,144 6,987
James J. Waibel.................................. 11,200 9,560 6,155
</TABLE>
13
<PAGE> 17
Loans Forgiven Under the Stock/Loan Plan:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------
NAME 2000 1999 1998
---- ------- ------- -------
<S> <C> <C> <C>
Harold K. Work.................................. $45,766 $39,003 $39,421
Richard J. Rosebery............................. 31,364 23,160 22,349
Leonard R. Harral............................... 5,980 4,749 4,591
David G. Sisler................................. 6,703 3,806 1,341
James J. Waibel................................. 5,064 4,341 3,616
</TABLE>
Supplemental Retirement Benefits Contributed:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------
NAME 2000 1999 1998
---- ------- ------- -------
<S> <C> <C> <C>
Harold K. Work.................................. $38,792 $31,037 $16,876
Richard J. Rosebery............................. 27,639 21,463 12,278
Leonard R. Harral............................... 210 0 0
David G. Sisler................................. 4,368 259 0
James J. Waibel................................. 837 0 0
</TABLE>
OPTION GRANTS IN FISCAL 2000
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE VALUE AT ASSUMED
SECURITIES OPTIONS ANNUAL RATES OF PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERMS(C)(D)
OPTIONS EMPLOYEES IN BASE PRICE PER EXPIRATION ---------------------------------------
NAME GRANTED(A) FISCAL 2000 SHARE(B) DATE 5% 10%
---- ---------- ------------ -------------- ---------- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Harold K. Work....... 106,740 24.72% $28.0417 7/25/2009 $ 1,882,389 $ 4,770,344
Richard J.
Rosebery........... 75,000 17.37% 28.0417 7/25/2009 1,322,646 3,351,844
Leonard R. Harral.... 5,960 1.38% 28.0417 7/25/2009 105,106 266,360
David G. Sisler...... 13,830 3.20% 28.0417 7/25/2009 243,896 618,080
James J. Waibel...... 7,480 1.73% 28.0417 7/25/2009 131,912 334,291
All Shareholders..... N/A N/A N/A N/A $344,292,230 $872,504,105
</TABLE>
---------------
(a) Options become exercisable 20% per year on the first through the fifth
anniversary dates of the grant. Options granted were for a term of ten
years, subject to earlier termination upon certain terminations of
employment. Upon the optionee's death, permanent and total disability,
retirement after age 62 or a change in control 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 cash and shares. Exercise price and number of shares were
adjusted for the 3:2 stock split paid in August 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 SEC for
disclosure purposes. Actual gains, if any, on stock option exercises are
dependent on the future performance of the Common Stock and overall stock
market conditions, as well as the option holder's 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, based on (i) a beginning stock price
of $28.0417, the exercise price of the options listed above, and (ii) the
number of outstanding shares on July 26, 1999, adjusted, like the number of
option shares and exercise price, for split shares issued in August 1999.
These gains may not be achieved.
14
<PAGE> 18
AGGREGATED OPTION EXERCISES DURING FISCAL 2000 AND VALUES AT JUNE 30, 2000
The following table contains information about Elcor stock options that the
named executive officers exercised during fiscal 2000, and the number and
aggregate dollar value of stock options that named executive officers held at
the end of fiscal 2000. In accordance with SEC rules, values are calculated by
subtracting the total exercise price from the fair market value of the
underlying Common Stock, which is deemed to be $23.00, the closing price of the
Common Stock on the New York Stock Exchange on June 30, 2000.
<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
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(A) REALIZED(B) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Harold K. Work........ 14,625 $291,383 75,000 200,115 $1,021,151 $693,726
Richard J. Rosebery... 14,625 185,352 58,875 154,875 753,258 628,343
Leonard R. Harral..... 1,425 17,624 5,210 13,745 67,601 67,503
David G. Sisler....... 1,418 20,621 1,605 24,677 15,368 83,347
James J. Waibel....... 2,645 64,799 5,426 14,938 69,945 63,606
</TABLE>
---------------
(a) Number of shares has been adjusted, as appropriate, for the stock splits
paid in November 1997 and August 1999.
(b) Market value of underlying securities at exercise date minus the exercise
price, not reduced for taxes, if any, payable upon exercise.
STOCK/LOAN BALANCES
The named executive officers have outstanding loans from the Company under
the Stock/Loan Plan described in the Compensation Committee Report included with
this proxy statement. Loans made in fiscal 2000 bear interest at a rate equal to
the applicable mid-term federal rate established by the Internal Revenue
Service. The highest outstanding balance and ending outstanding balance for
stock loans during fiscal 2000 are reflected in the table below.
<TABLE>
<CAPTION>
LOANS UNDER STOCK/LOAN PLAN
-------------------------------------------------
HIGHEST OUTSTANDING OUTSTANDING BALANCE AT
NAME BALANCE IN FISCAL 2000 JUNE 30, 2000
---- ---------------------- ------------------------
<S> <C> <C>
Harold K. Work........................................ $214,691 $205,883
Richard J. Rosebery................................... 157,714 151,698
Leonard R. Harral..................................... * *
David G. Sisler....................................... * *
James J. Waibel....................................... * *
</TABLE>
---------------
* Balances of not more than $60,000 have been omitted.
CHANGE-IN-CONTROL (SEVERANCE) AGREEMENTS
Elcor has entered into severance agreements with certain officers and
employees, including each of the named executive officers. Elcor intended the
agreements 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.
15
<PAGE> 19
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:
- the acquisition of 40% or more of the Company's outstanding voting
securities
- certain mergers or consolidations
- the approval by the Company's shareholders of a plan of dissolution or
liquidation
or - 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 Messrs. Work
and Rosebery who would receive 2.99 times) the highest annual cash compensation
received in any calendar year during the three year period immediately preceding
termination, 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 Incentive Stock Option Plan, all options held by
optionees under that Plan, including the named executive officers, would become
immediately exercisable upon a change in control.
OTHER MATTERS
- Section 16(a) Beneficial Ownership Reporting Compliance
- Next Year's Annual Meeting
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Our directors and executive officers are required to file with the SEC and
the NYSE reports of ownership and changes in ownership in their holdings of
Common Stock. Based on an examination of these reports and on written
representations provided to Elcor, we believe that directors and executive
officers filed all such reports on time in fiscal 2000, except that three were
filed late, two of them because of clerical errors by the Company, which acts as
their filing agent. Thomas D. Karol, a director, did not timely report to the
SEC the indirect disposition of 3,750 shares of Common Stock held as portfolio
securities by ProGroup Holdings, Inc. on December 9, 1999, the date Mr. Karol
sold his controlling interest in ProGroup. Additionally, Thomas W. Cave, an
executive officer, did not timely report to the SEC the disposition of 520
shares of Common Stock on March 16, 2000. Also, W. Greg Orler, an executive
officer, did not timely report to the SEC his acquisition of 138 shares on March
15, 2000. The foregoing transactions have been reflected in subsequent filings
by such individuals.
NEXT YEAR'S ANNUAL MEETING
Our Bylaws provide for certain procedures that shareholders must follow to
nominate persons for election as directors or to introduce an item of business
at an annual meeting. These procedures are applicable whether or not the
proposed item of business or nomination is intended to be included in our proxy
materials for that meeting. Copies of the Bylaws are publicly available at the
SEC.
We currently expect that the 2001 Annual Meeting of Shareholders will be
held on October 23, 2001. If the meeting is held on that date, advance notice of
any nominations for directors and any other items of business must be given by a
proposing shareholder by July 25, 2001. Any such shareholder proposals intended
to be presented at the 2001 Annual Meeting and included in the proxy materials
for that meeting must be received by the Company no later than May 23, 2001, and
must comply with applicable SEC rules.
16
<PAGE> 20
<TABLE>
<S> <C>
UNLESS OTHERWISE INSTRUCTED HEREON, IT IS INTENDED THAT THE PROXIES WILL VOTE THE SHARES FOR ITEMS 1 AND 2. Please mark [X]
your votes as
indicated in
this example
1. ELECTION OF DIRECTORS Nominees: Messrs. 01 Thomas D. Karol and 02 Dale V. Kesler
FOR WITHHOLD To vote against any individual Nominee, write that Nominee's name on
all AUTHORITY the line below.
Nominees for all Nominees
---------------------------------------------------------------------------------------
[ ] [ ]
2. APPROVAL OF ARTHUR ANDERSEN
LLP AS AUDITORS FOR FISCAL 2001
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 , 2000
---------------------------------
--------------------------------------------------------
Signature of Shareholder
--------------------------------------------------------
Signature of Shareholder
</TABLE>
--------------------------------------------------------------------------------
o FOLD AND DETACH HERE o
[GRAPHIC] VOTE BY TELEPHONE [GRAPHIC]
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 HAND 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 VOTE AGAINST 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 postage prepaid envelope.
NOTE: IF YOU VOTE BY TELEPHONE, THERE IS NO NEED TO MAIL BACK YOUR PROXY CARD.
THANK YOU FOR VOTING.
<PAGE> 21
[ELCOR LOGO]
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 24, 2000, 10:00 A.M.
LALIQUE BALLROOM II, HOTEL INTERCONTINENTAL DALLAS,
15201 DALLAS PARKWAY, ADDISON, TEXAS 75001
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 24, 2000 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 20, 2000, and (b) in their
discretion upon other matters which properly come before the Meeting.
PLEASE SEE REVERSE SIDE
--------------------------------------------------------------------------------
o FOLD AND DETACH HERE o
