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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.24a-12
FERRO CORPORATION
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FERRO CORPORATION
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(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
(4) Proposed maximum aggregate value of transaction:
(5) Total Fee paid:
/ / Fee previously paid with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
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PRELIMINARY COPY
FERRO CORPORATION
1000 LAKESIDE AVENUE
CLEVELAND, OHIO 44114
March 12, 1996
DEAR SHAREHOLDERS:
You are cordially invited to attend the annual meeting of shareholders of
Ferro Corporation which will be held on Friday, April 26, 1996, in the Erie Room
at One Cleveland Center, 1375 E. 9th Street, Cleveland, Ohio. The meeting will
begin at 10:00 A.M., Cleveland time, but we hope that you will be able to join
the officers and directors at 9:30 A.M. for coffee and informal conversation.
The matters to be considered are described in the following pages and include
information concerning each director and each nominee for director.
The items proposed for action by the shareholders at the meeting are the
election of directors, authorization of a decrease in the number of directors,
approval of amendments to the Ferro Employee Stock Option Plan, the designation
of auditors and such other business, if any, as may properly come before the
meeting. In addition, the officers will give current reports on the status of
the business of Ferro.
Shareholders of record at the close of business on February 27, 1996 are
entitled to vote at the meeting.
It is important to your interests that all shareholders participate in the
affairs of Ferro regardless of the number of shares owned. Accordingly, we urge
you promptly to fill out, sign and return the enclosed proxy even if you plan to
attend the meeting. You have the option to revoke it at any time prior to the
meeting, or to vote your shares personally on request if you attend the meeting.
Very truly yours,
ALBERT C. BERSTICKER, Chairman
and Chief Executive Officer
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PROXY STATEMENT
ELECTION OF DIRECTORS
The Board of Directors of Ferro presently consists of twelve members,
divided into three classes. The directors in each class are elected for terms of
three years so that at each annual meeting the term of office of one class of
directors expires. The terms of office of four directors of Ferro will expire on
the day of the 1996 annual meeting, upon election of successors.
Proxies solicited hereunder granting authority to vote on the election of
directors will be voted for the election of Sandra Harden Austin, Werner F.
Bush, Rex A. Sebastian and Dennis W. Sullivan to serve for three year terms and
until their successors are elected; provided, however, that if the election of
directors is by cumulative voting (see page 29 of this Proxy Statement) the
persons appointed by the accompanying proxy intend to cumulate the votes
represented by proxies they receive and distribute such votes in accordance with
their best judgment. All of the candidates for election as directors are
directors whose present terms of office will expire at the meeting.
Adolph Posnick whose term expires at the 1996 annual meeting, will retire
as a member of the Board of Directors, after 20 years of service as a director,
pursuant to Ferro's mandatory retirement age policy for directors. The size of
the Board will be reduced to eleven at that time.
If any nominee is not available at the time of the election, proxies will
be voted to decrease the authorized number of directors. However, Ferro has no
reason to believe that any of the nominees will not be available.
Information is set forth below regarding the principal occupation and the
number of shares of Ferro Stock owned on February 27, 1996 by each nominee and
each of the other directors who will continue in office after the meeting.
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NOMINEES FOR ELECTION
SANDRA HARDEN AUSTIN, age 48, President of
Caremark Physician Services, a division of
Caremark, Inc. which provides physician practice
management services. Between 1981 and 1988, Ms.
Austin was employed by the Huron Road Hospital in
Cleveland, and during that time served as the
Director of Planning, Vice President and
President. In 1988, she was appointed Senior Vice
President and General Manager of the
Medical/Surgical and Psychiatry Management
Centers of University Hospitals of Cleveland and
served in that capacity until 1990. Ms. Austin
was named the Executive Vice President and Chief
Operating Officer of The University of Chicago
Hospitals in 1990 and served in that capacity
until 1994, at which time she was appointed
President of Caremark Clinical Management
Services, a division of Caremark, Inc. Ms. Austin
assumed her present position in 1995. Ms. Austin
also serves as a director of National City
Corporation and South Shore Bank (bank holding
companies).
DIRECTOR SINCE 1994 Common Shares owned 100 Nominee for term
expiring in 1999
WERNER F. BUSH, age 56, Executive Vice President
and Chief Operating Officer of Ferro. Mr. Bush
joined Ferro in 1964 as a Research Engineer. He
was appointed Refractory Division Manager of
Ferro Mexico in 1966; was named Operations
Manager of Ferro France in 1970; was named
Operations Manager of Ferro Brazil in 1971; and
in 1975 was named President of Ferro Brazil. Mr.
Bush returned to Cleveland in 1981 when he was
named Vice President -- International for Latin
America, Canada, Australia and South Africa.
Subsequently, he was named Group Vice
President -- International in 1985; Group Vice
President -- Coatings, Colors and Electronic
Materials in 1988; and Senior Vice
President -- Coatings, Colors and Ceramics in
1991. Mr. Bush assumed his present position in
1993. He is also a member of the Board of
Directors of National City Bank.
Common Shares owned 88,613(1) Nominee for term
expiring in 1999
ESOP Convertible Preferred Shares beneficially
DIRECTOR SINCE 1993 owned 2,216
REX A. SEBASTIAN, age 66, Private Investor. Mr.
Sebastian began his career with Procter and
Gamble. In 1955, he joined Cummins Engine
Company, Inc. where he held several positions
including Vice-President -- International and
Managing Director of Cummins Engine Company,
Ltd., in Scotland. In 1966, Mr. Sebastian joined
Dresser Industries, Inc. (energy and
industrial-related products and services) as Vice
President -- International Operations and was
named Vice President -- Operations in 1971. In
1975, he was named Senior Vice President --
Operations, a position he held until his
retirement in 1985. Mr. Sebastian is a member of
the Board of Directors of Texas Commerce Bank
National Association, Phoenix Resource Companies,
Inc. (oil and gas exploration and production,
essentially in Egypt) and Hallwood Energy
Corporation (oil and gas exploration and
production).
Common Shares owned 5,500 Nominee for term
DIRECTOR SINCE 1986 expiring in 1999
<PAGE> 5
NOMINEE FOR ELECTION
DENNIS W. SULLIVAN, age 57, Executive Vice
President and President, Industrial and
Automotive, of Parker-Hannifin Corporation
(manufacturer of fluid power products). Mr.
Sullivan began his career with Parker-Hannifin
Corporation in 1960 as a Sales Engineer, and
after serving in various assignments, was named
Group Vice President in 1972; President of the
Fluid Connectors Group in 1976; Corporate Vice
President in 1978; President of the Fluidpower
Group in 1979; President of the Industrial Sector
in 1980; and he assumed his present position in
1981. Mr. Sullivan is also a Director of
Parker-Hannifin and KeyCorp (bank holding
DIRECTOR SINCE 1992 company).
DIRECTORS WHOSE TERMS
OF OFFICE WILL CONTINUE Common Shares owned 2,711 Nominee for term
AFTER THE MEETING expiring in 1999
ALBERT C. BERSTICKER, age 61, Chairman and Chief
Executive Officer of Ferro. Mr. Bersticker began
his career as a Research Engineer with Ferro in
1958. Following various assignments with the
International Division, he became Plant Manager
of the Company's Spanish subsidiary and was named
Managing Director of Ferro Spain in 1969.
Returning to the United States in 1973, Mr.
Bersticker was named Assistant to the Group Vice
President -- International Operations. In 1974 he
was appointed Group Vice President --
International; was named Executive Vice
President, Operations in 1976; was named
Executive Vice President and Chief Operating
Officer in 1986; was named President and Chief
Operating Officer in 1988; was named Chief
Executive Officer in 1991; and was named Chairman
in 1996. Mr. Bersticker is also a Director of
Centerior Energy Corporation (electric utility
holding company), KeyCorp (bank holding company),
Oglebay Norton Company (minerals and shipping)
and Brush Wellman Inc. (manufacturer of beryllium
alloy parts).
Common Shares owned 293,339(1) Term expires 1998
ESOP Convertible Preferred Shares beneficially
DIRECTOR SINCE 1978 owned 2,284
PAUL S. BRENTLINGER, age 68, a Partner of
Morgenthaler Ventures, a venture capital
partnership which invests in and provides
management advisory services to emerging growth
companies. Mr. Brentlinger joined Harris
Corporation (manufacturer of advanced information
processing, communication and microelectronics
products) in 1951 and, after serving in various
assignments, was named Vice President --
Corporate Development in 1969; Vice President --
Finance in 1975 and Senior Vice President --
Finance in 1982. He retired from Harris
Corporation and joined Morgenthaler in 1984. He
is a Director of Allegheny Ludlum Corporation
(manufacturer of specialty metals).
DIRECTOR SINCE 1984 Common Shares owned 5,922(1) Term expires 1998
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DIRECTORS WHOSE TERMS OF OFFICE
WILL CONTINUE AFTER THE MEETING
GLENN R. BROWN, age 65, Retired Senior Vice
President and Director Standard Oil Company (now
BP America). Dr. Brown joined The Standard Oil
Company (Ohio) in 1953 as an Engineer in the
Chemical and Physical Research Department. After
ten years of research experience, he undertook
assignments in managerial roles in operations
research, management systems, and chemical
operations, including Manager of all research
activities for Standard Oil and later, Vice
President for Research and Engineering. In 1979,
Dr. Brown was elected a Senior Vice President of
Standard Oil in charge of the technology, patent
and license, strategic planning, and business
operating groups. He also served as a director of
Standard Oil from 1981 until his retirement in
1986. Following his retirement from Standard Oil,
Dr. Brown served at Case Western Reserve
University as Director of Strategic Planning,
Dean of the Colleges and from 1990-1993 as Vice
Provost for Corporate Research and Technology
Transfer. He is also a Director of Nordson
Corporation (manufacturer of industrial
application equipment).
DIRECTOR SINCE 1988 Common Shares owned 1,412 Term expires 1997
WILLIAM E. BUTLER, age 64, Retired Chairman of
the Board and Chief Executive Officer, Eaton
Corporation (engineered products for automotive,
industrial, commercial and military markets). Mr.
Butler was employed by Eaton from 1957 through
1995, serving as President and Chief Executive
Officer prior to his election as Chairman in
1991. Mr. Butler is a director of Bearings, Inc.
(bearings distributor), Pitney Bowes Inc.
(manufacturer of mailing, copying and voice
processing systems), Zurn Industries, Inc.
(manufacturer of environmental quality control
and energy conversion systems and leisure
products) and Goodyear Tire & Rubber Company
(manufacturer of tires and other products).
DIRECTOR SINCE 1992 Common Shares owned 600 Term expires 1997
A. JAMES FREEMAN, age 67, Retired Vice Chairman
and Chief Executive Officer of Lord Corporation
(manufacturer of bonded rubber specialty products
for the automotive industry, adhesives and
chemical coatings). Mr. Freeman began his career
with General Mills. In 1960 he joined Lord
Corporation as Manager of the Development
Department. He was appointed Corporate Group Vice
President in 1970, Executive Vice President in
1975, President in 1982 and Vice Chairman and
Chief Executive Officer in 1991. He retired in
1994. Mr. Freeman is also a Director of Lord,
Eriez Magnetics (manufacturer of magnetic
devices), EFCO, Inc. (manufacturer of forming
presses), Keypro Inc. (medical peer review
organization) and a member of the Advisory Board
of Liberty Mutual Insurance Company.
DIRECTOR SINCE 1986 Common Shares owned 11,831(1) Term expires 1998
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DIRECTORS WHOSE TERMS OF OFFICE
WILL CONTINUE AFTER THE MEETING
JOHN C. MORLEY, age 64, Retired President and
Chief Executive Officer of Reliance Electric
Company (manufacturer of industrial motors and
controls, mechanical power transmission products
and specialty telecommunication products and
systems). Mr. Morley began his career with Exxon
Corporation in 1958 and served as President of
Exxon Chemical Company, USA and Senior Vice
President of Exxon USA before joining Reliance in
1980 as President and Chief Executive Officer. In
December, 1986, Mr. Morley led an investor group
in the leveraged acquisition of Reliance Electric
Company from Exxon. In January of 1995, Rockwell
International Corporation acquired Reliance
Electric Company. Mr. Morley serves as a Director
of AMP Incorporated (manufacturer of electrical
and electronic components), Cleveland-Cliffs,
Inc. (a full service iron-ore company) and
KeyCorp (bank holding company).
DIRECTOR SINCE 1987 Common Shares owned 2,163 Term expires 1997
HECTOR R. ORTINO, age 53, President of Ferro. He
began his career as Treasurer of Ferro Argentina
in 1971 and subsequently became Financial
Director in 1973. In 1976, Mr. Ortino was
promoted to Managing Director of operations in
Argentina. Mr. Ortino was named Managing Director
of Ferro Mexico in 1982. In 1983, he was
appointed Assistant to the Executive Vice
President -- Finance and relocated to Cleveland.
He was named Vice President -- Finance in 1984;
was named Vice President -- Finance and Chief
Financial Officer in 1987; was named Senior Vice
President and Chief Financial Officer in 1991;
was named Executive Vice President and Chief
Financial -- Administrative Officer in 1993; and
was named President in 1996. Prior to joining
Ferro, Mr. Ortino served as Treasurer of Columbia
Broadcasting Systems, Argentina and Assistant to
the Treasurer of Pfizer, Inc., Argentina. Mr.
Ortino is also a director of Defiance, Inc.
(manufacturer of automotive parts) and Bunge
International, Inc. (holding company of the Bunge
Group).
Common Shares owned 80,941(1) Term expires 1997
ESOP Convertible Preferred Shares beneficially
DIRECTOR SINCE 1993 owned 2,280
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(1) The shares reported as owned by Messrs. Bersticker, Brentlinger, Freeman and
Ortino include shares that they do not own of record but of which they are
beneficial owners. An individual is deemed to be the beneficial owner of
shares as to which he exercises or influences voting power or investment
power. The number of shares (included in those reported above) as to which
Messrs. Bersticker, Brentlinger, Freeman and Ortino are not owners of record
but as to which they exercise or influence voting control or investment
decisions are as follows: Mr. Bersticker -- 2,287 shares, Mr. Brentlinger --
150 shares, Mr. Freeman -- 2,000 shares and Mr. Ortino -- 3,602 shares. The
number of shares reported above for Messrs. Bersticker, Bush and Ortino
include 12,800, 5,800 and 5,800 shares, respectively, issued to them under
the Performance Share Plan which are subject to risk of forfeiture based
upon the terms of that plan. The number of shares which may be acquired by
Messrs. Bersticker, Bush and Ortino pursuant to exercisable stock options as
of May 1, 1996 are as follows: Mr. Bersticker -- 149,250 shares; Mr. Bush --
62,250 shares and Mr. Ortino -- 55,875 shares (included in the number of
shares reported above).
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SECURITY OWNERSHIP OF DIRECTORS, OFFICERS AND CERTAIN BENEFICIAL OWNERS
Based on information supplied by them as of February 27, 1996, no
individual director beneficially owns as much as 1% of the outstanding Common
Stock, except Mr. Bersticker, who owns approximately 1.1% of the outstanding
Common Stock, and all directors and officers of Ferro as a group beneficially
own 901,504 shares of Ferro Common Stock, representing approximately 3% of its
outstanding shares and 20,865 shares of ESOP Convertible Preferred Stock,
representing approximately 1.5% of the outstanding shares of that series.
Included in the number of shares beneficially owned by officers and directors as
a group are 408,231 shares of Common Stock which could be acquired through
exercisable stock options as of May 1, 1996 and 49,750 shares issued under the
Ferro Performance Share Plan which are subject to the risk of forfeiture under
the terms of that Plan. The beneficial ownership of Messrs. Bersticker, Bush and
Ortino are set forth below their biographies on pages 2, 3 and 5 of this Proxy
Statement. With respect to the other officers named in the Summary Compensation
Table on page 20 of this Proxy Statement, Mr. Fisher beneficially owns 70,043
shares of Common Stock and 2,287 shares of ESOP Convertible Preferred Stock; Mr.
Friederichsen beneficially owns 5,300 shares of Common Stock and 236 shares of
ESOP Convertible Preferred Stock; Mr. Finch beneficially owns 13,550 shares of
Common Stock and 1,241 shares of ESOP Convertible Preferred Stock; and Mr.
Oudersluys beneficially owns 38,193 shares of Common Stock and 2,280 shares of
ESOP Convertible Preferred Stock. The shares reported for Messrs. Fisher,
Friederichsen, Finch and Oudersluys include 37,000, 2,500, 9,250 and 21,625
shares which may be acquired through exercisable stock options as of May 1, 1996
and 3,500, 2,800, 2,800 and 2,500 shares issued under the Performance Share Plan
which are subject to risk of forfeiture based upon the terms of that plan.
The following table sets forth information concerning each person known by
Ferro to be the beneficial owner of more than 5% of its outstanding Common Stock
or stock convertible into Common Stock.
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<TABLE>
<CAPTION>
AMOUNT AND PERCENT
NAME AND ADDRESS NATURE OF BENEFICIAL OF
OF BENEFICIAL OWNER OWNERSHIP CLASS
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<S> <C> <C>
FMR Corporation................................ 4,089,800(1) 15%
82 Devonshire Road
Boston, Massachusetts 02109
Mario J. Gabelli and related entities.......... 2,094,400(2) 7.7%
One Corporate Center
Rye, New York 10017
Prudential Insurance Company of America........ 1,790,215(3) 6.6%
Prudential Plaza
Newark, New Jersey 07102-3777
National City Bank, Trustee.................... 1,380,491(4) 100%
under the Ferro Corporation
Savings and Stock Ownership Plan
1900 East 9th Street
Cleveland, Ohio 44114
<FN>
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(1) Information regarding share ownership was obtained from Schedule 13G filed
February 14, 1996 by FMR Corporation.
(2) Information regarding share ownership was obtained from Schedule 13D filed
December 7, 1995 by The Gabelli Group, Inc. Mario J. Gabelli is deemed to be
the beneficial owner of all entities jointly filing such Schedule 13D.
(3) Information regarding share ownership was obtained from Schedule 13G filed
February 9, 1996 by Prudential Insurance Company of America.
(4) The beneficial owners of the Savings and Stock Ownership Plan are
participating employees of the Company. The 1,380,491 shares of Convertible
Preferred Stock are convertible into 2,391,701 shares of Common Stock,
representing approximately 8.9% of the outstanding Common Stock. The
Preferred Stock is nontransferable and, upon distribution of an account
balance to a plan participant, such participant receives Common Stock
issuable upon conversion of the Preferred Stock or cash payable upon
redemption of the Preferred Stock. Each share of Preferred Stock carries one
vote, voting together with the Common Stock on most matters. The Trustee
votes in accordance with the instructions of plan participants.
</TABLE>
Section 16(a) of the Securities Exchange Act of 1934 requires Ferro's
officers and directors, and persons who own more than ten percent of a
registered class of Ferro's equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. Officers,
directors and greater than ten-percent shareholders are required by SEC
regulation to furnish Ferro with copies of all Section 16(a) forms they file.
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Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to Ferro during 1995 and Forms 5 and amendments thereto furnished to
Ferro with respect to 1995, no director, officer, beneficial owner of more than
10% of its outstanding Common Stock or stock convertible into Common Stock or
any other person subject to Section 16 of the Exchange Act, failed to file on a
timely basis during 1995 or prior fiscal years any reports required by Section
16(a) of the Exchange Act, except that Mr. Posnick was inadvertently three
months late in filing a Form 4 with respect to a sale of 110 shares of Common
Stock in connection with the establishment of a charitable trust.
CERTAIN MATTERS PERTAINING TO THE BOARD OF DIRECTORS
During 1995, the Board held seven regularly scheduled monthly meetings and
committees of the Board met from time to time upon call of the Chief Executive
Officer (or in the case of the Audit Committee, upon call of its Chairman).
During 1995, each director attended at least 75% of the aggregate of the total
number of meetings of the Board and the committees on which he or she served.
Each director who is not an employee of Ferro is paid an annual retainer
fee of $15,000. In addition, directors (other than employee directors) are paid
an attendance fee of $1,500 for meetings of the Board and $1,000 for meetings of
its committees. The Chairman of the Audit Committee and the Chairman of the
Compensation and Organization Committee are each paid an additional annual
retainer of $2,000. The directors have the right to defer their fees into a
Ferro Common Stock account. Amounts so deferred will be invested in Ferro Common
Stock, together with dividends thereon which will be reinvested in Ferro Common
Stock. The deferred account will be distributed after retirement of the
director.
The Audit Committee of the Board of Directors engages in the functions
usual to an audit committee of a publicly held corporation, including
recommendations as to the engagement of independent accountants; review with the
independent accountants of the proposed scope of and plans for annual audits and
review of audit results; review of the adequacy of internal financial controls
and internal audit functions; and review of any problems identified by either
the internal or external audit functions. During 1995, the Audit Committee met
twice. Messrs. Brown, Brentlinger, Freeman and Morley are the current members of
the Audit Committee, with Mr. Brentlinger serving as Chairman.
The Compensation and Organization Committee considers and formulates
recommendations with respect to the compensation of Ferro's officers and
performs func-
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tions delegated by the Board with respect to the Stock Option Plan, the
Performance Share Plan and the Incentive Compensation Plan. Included among its
functions is the review of recommendations (including written recommendations
made by any shareholder) as to new members of the Board of Directors.
Shareholder recommendations for members of the Board of Directors should be
submitted in writing to the Secretary of Ferro. During 1995, the Committee met
four times. A report of the Compensation and Organization Committee is set forth
on pages 14 through 17 of this Proxy Statement.
AUTHORIZATION TO FIX NUMBER OF DIRECTORS AT ELEVEN
Ferro's Code of Regulations provides for a Board of Directors of not fewer
than nine members nor more than fifteen members. The Board size was most
recently set by the shareholders at fourteen. Unless otherwise indicated, the
accompanying proxy will be voted in favor of fixing the number of directors at
eleven. For adoption, this proposal requires the affirmative vote of a majority
of the shares voting on the proposal. Upon adoption of this proposal, the size
of the Board will be eleven in recognition of the retirement of Mr. Posnick.
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AMENDMENTS TO THE STOCK OPTION PLAN
The amended and restated 1985 Employee Stock Option Plan (the "Plan") was
approved by the shareholders of the Company at the 1991 Annual Meeting of
Shareholders. As a result of certain changes in federal income tax laws, the
Board of Directors recommended in 1995, and the shareholders approved, an
amendment to the Plan which established a limit of 100,000 shares on the number
of shares that could be awarded to any individual under the Plan during any
consecutive 11 month period. At its January 26, 1996 meeting, the Board of
Directors, subject to the approval of the shareholders, adopted two additional
amendments to the Plan.
DESCRIPTION OF AMENDMENTS
The first amendment would increase the number of shares as to which stock
options may be granted under the Plan. Shareholders previously set the number of
shares reserved for issuance at 800,000, plus the number of shares remaining
available for grant on the date immediately prior to the 1991 Annual Meeting of
Shareholders. The proposed amendment would increase the number of shares
available for issuance to 1,500,000, together with the number of shares
remaining available for issuance on the date immediately prior to the 1996
Annual Meeting. As of February 27, 1996, 279,068 shares of common stock remained
available for the grant of stock options and the closing price of the common
stock on the New York Stock Exchange was $26.00. As of that date options to
purchase 1,490,703 shares of common stock were outstanding under the Plan. The
Board believes that stock options align the interests of management with the
interests of shareholders in seeking growth in the value of the shares awarded
through options and that increasing the number of shares reserved for issuance
under the Plan is necessary so that the Company can continue to provide such
incentives in the future. The Plan has been amended so that the first sentence
of Section 2 would read as follows:
The aggregate number of shares of the Corporation for which options
may be granted under this Plan shall be that number of shares
remaining available for grant under the Plan on the close of business
on the date immediately prior to the 1996 Annual Meeting of
Shareholders plus 1,500,000; provided, however, that whatever number
of said shares shall remain reserved for issuance pursuant to this
Plan at the time of any stock split, stock dividend or other change in
the Corporation's capitalization, shall be appropriately adjusted to
reflect such stock dividend, stock split or other change in
capitalization.
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The second amendment would permit the Company to grant stock options under
the Plan to non-employee directors of the Company. The text of the proposed
amendment to the Plan is set forth in Exhibit A to this Proxy Statement. The
purpose of the amendment is to promote the interest of the Company and its
shareholders by encouraging non-employee directors to have a direct and personal
stake in the performance of the Company's common stock through stock options.
The proposed amendment provides that an option to purchase 2,500 shares of the
Company's common stock is automatically granted annually under the Plan to each
non-employee director beginning on the date of the 1996 Annual Shareholders'
Meeting and on the date of each annual shareholders' meeting thereafter. Stock
options would not be granted on an annual meeting date to a director who would
not continue as a director after such annual meeting or to a director whose
normal retirement under a plan or policy of the Company would occur prior to the
date of the next annual meeting. The option exercise price for the options will
be the per share fair market value of the Company's outstanding shares of common
stock on the date the options are granted.
The following is a summary of the material terms of the Plan.
THE PLAN
The Plan provides for the granting of stock options to purchase shares of
common stock of the Company. Options may be intended to qualify as "incentive
stock options" under the Internal Revenue Code or options which do not so
qualify ("non-statutory stock options"). Except to the extent the Board of
Directors reserves to itself authority to administer the Plan, the Plan is
administered by a stock option committee (the "Committee") consisting of not
less than three directors of the Company appointed by the Board of Directors.
The practice of the Company has been that the Compensation and Organization
Committee of the Board (consisting of outside directors) acts as the stock
option committee.
Persons who are eligible to participate in the Plan ("optionees") are
officers of the Company, other employees designated by the Committee, employees
of any subsidiary of the Company or any corporation at least twenty percent
(20%) of whose voting securities are owned by the Company or a subsidiary of the
Company and non-employee directors if the second amendment to the Plan discussed
above is approved by shareholders.
Options and stock appreciation rights under the Plan are subject to the
restriction that such rights are nontransferable except by will or the laws of
descent and distribution and are exercisable during the employee's lifetime only
by the employee.
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The Plan provides that the exercise price of options granted under the Plan
shall be not less than the fair market value of the outstanding shares of the
Company on the day that the option is granted. Payment of the option price may
be made in common stock, cash or a combination of common stock and cash. The
Committee designates the period within which options may be exercised. However,
no option may be exercised later than ten years from the date of grant.
INCENTIVE STOCK OPTIONS
Incentive stock options continue to be subject to certain additional
limitations. The aggregate fair market value of common stock with respect to
which incentive stock options may become exercisable by an employee in any
calendar year may not exceed $100,000 as provided in Section 422 of the Code.
Any incentive stock option granted to an employee who, on the date of the grant,
owned shares of the Company possessing more than ten percent (10%) of the
combined voting power of all classes of shares of the Company shall have an
option price that is at least 110% of the fair market value of the shares and
shall not be exercisable after five years from date of grant.
STOCK APPRECIATION RIGHTS
The Plan continues to authorize the Committee in its discretion to grant
stock appreciation rights with respect to the shares covered by an option grant.
In general, a stock appreciation right permits the optionee (other than
non-employee directors), in lieu of exercising an option, to receive an amount
equal to the excess of (i) the market price of the common stock on the date that
the right is exercised over (ii) the option price. This spread may be paid in
cash or in common stock at its fair market value or in any combination of cash
and common stock as the Committee determines. A stock appreciation right may not
be exercisable sooner than six months after it is granted and thereafter may be
exercised at any time prior to its stated expiration date, but only to the
extent the related stock option right may be exercised.
FEDERAL INCOME TAX CONSEQUENCES
Counsel for the Company has advised that for federal income tax purposes,
under the existing statutes, regulations and authorities, an optionee does not
realize taxable income at the time of the grant of an incentive stock option, a
non-statutory stock option or a stock appreciation right. Upon the exercise of a
non-statutory stock option, the Company is entitled to a deduction and the
optionee realizes ordinary
12
<PAGE> 15
income in the amount by which the cash or fair market value of the shares he
receives exceeds the option price. Upon the exercise of a stock appreciation
right, the Company is also entitled to a deduction and the optionee realizes
ordinary income in the amount of cash or fair market value of the shares he
receives. On the subsequent sale of shares received upon the exercise of a
non-statutory option or stock appreciation rights, the difference between the
fair market value of the shares on the date of receipt and the amount realized
on the sale will be treated as a capital gain or loss, which will be short or
long term depending on the length of the period for which shares are held prior
to sale.
In the case of an incentive stock option, the optionee generally does not
realize taxable income until sale of the shares received upon exercise of the
option. (However, the difference between the option price and the fair market
value of the stock on the date of exercise is treated as a preference item for
purposes of the alternative minimum tax.) If a sale does not take place within
two years after grant and one year after exercise of the option, any gain or
loss realized will be treated as long term capital gain or loss. Under such
circumstances, the Company will not be entitled to a deduction for income tax
purposes in connection with the grant or the exercise of the option. If a
disposition occurs prior to two years after grant or one year after exercise,
then the difference between the option price and the fair market value of the
common stock on the date of exercise (or, in certain cases, the amount realized
on sale, if less than the market value on the date of exercise) is taxable as
ordinary income to the optionee and is deductible by the Company for federal
income tax purposes.
AMENDMENT, TERMINATION AND EXPIRATION OF THE PLAN
The Board of Directors or shareholders may amend, modify, suspend or
terminate the Plan at any time, except that no action by the Board of Directors
or shareholders may alter or impair an optionee's rights under any outstanding
option without the optionee's consent, and no action may be taken without
shareholders' consent (i) to increase the total number of shares as to which
options may be granted, (ii) to change the class of employee to whom options
granted may be granted under the Plan, (iii) to reduce the price at which
options may be granted, or (iv) to extend the expiration date of the Plan.
Options may be granted under the Plan through April 26, 2001 on which date
the Plan will expire. The expiration of the Plan will not affect the validity of
any outstanding options previously granted.
13
<PAGE> 16
RECOMMENDATION AND VOTE
The affirmative vote of a majority of the shares present and voting at the
meeting on this issue is necessary for approval of the amendments to the Plan.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENTS TO
THE PLAN.
DESIGNATION OF AUDITORS
Unless otherwise indicated, the accompanying proxy will be voted in favor
of ratifying the selection of KPMG Peat Marwick LLP to audit the books and
accounts of Ferro for the current year ending December 31, 1996. KPMG Peat
Marwick LLP have been acting as the auditors of Ferro for many years. On
recommendation of the Audit Committee, the Board of Directors has appointed such
firm to continue as Ferro's auditors for the current year, subject to the
approval thereof by the shareholders.
Representatives of KPMG Peat Marwick LLP will be at the annual meeting of
shareholders, will have an opportunity to make a statement if they desire to do
so and will be available to respond to appropriate questions.
INFORMATION CONCERNING EXECUTIVE OFFICERS
REPORT OF THE COMPENSATION AND ORGANIZATION COMMITTEE
The principal components of senior executive officer compensation at Ferro,
and the role of the Compensation and Organization Committee of the Board of
Directors as to each component in 1995, were as follows:
1. Annual salary level for Messrs. Bersticker, Bush and Ortino
recommended by the Committee and approved by the Board, and annual salary
level for other executive officers approved by the Committee.
2. Annual Incentive Compensation Plan (a cash bonus plan) under which
achievement is measured primarily by attainment of mathematical targets,
and, to a lesser extent, by non-mathematical determinations. The Committee
adopts such a plan each year, including the placement of senior executives
in the plan, determination of the applicable percentage of salary to be
used for bonus measurement, and determination of the mathematical targets
by which the level of bonus achievement will be measured. With respect to
non-mathematical bonus matters in the case of the Chief Executive Officer,
the Committee recommends,
14
<PAGE> 17
and the Board approves, the non-mathematical performance goals for the year
ahead, and the actual achievement of goals and discretionary bonus award
for the completed year. The Committee approves the personal performance
goals and the actual non-mathematical bonus awards to senior executive
officers other than the Chief Executive Officer.
3. Performance Share Plan (a long term incentive plan) under which
shares of common stock are issued, subject to risk of forfeiture, based
upon the degree of achievement of Performance Targets during the
Performance Period. The Committee determines the Performance Targets which
will be applicable to determine the degree of vesting, or the degree of
forfeiture, of Performance Shares and the awards of Performance Shares
under the Performance Share Plan.
4. Stock Options under the Stock Option Plan. The Committee determines
the award of Stock Options under the Stock Option Plan.
For several years TPF&C, a Towers Perrin Company, has served as executive
compensation consultants to Ferro. The TPF&C advice is based on a variety of
competitive data maintained by, or available to, TPF&C. From these data banks
TPF&C derives standards for compensation levels at Ferro, based upon competitive
levels in the market place. These competitive levels are averages derived from
multiple salary surveys, and therefore, in effect, they are averages of
averages.
Applying this data to Ferro, and to Mr. Bersticker, Ferro's Chief Executive
Officer, the Committee recommended (and the Board approved), for 1995:
1. A salary level of $549,000, which is in the third quartile of
competitive market salary data as reported by TPF&C;
2. An annual incentive plan cash bonus target amount equal to 55% of
salary. Eighty-two percent of such cash bonus target amount is based upon
the degree of achievement of mathematical targets, with the target bonus
achieved if the Company earns a 15% return on equity, 200% of target bonus
achieved if the Company earns a 19% return on equity, and no mathematical
bonus achieved if return on equity is less than 10%. Eighteen percent of
target bonus amount is based upon non-mathematical factors. Such annual
incentive target amounts reflected competitive levels of other companies in
the market place for 1995 as reported by TPF&C.
3. An award of options for 30,000 shares under the Ferro Stock Option
Plan.
4. A Performance Share award of 6,400 shares.
15
<PAGE> 18
The stock option award level and the performance share award level are in
the third quartile of long term incentive programs of comparable companies in
the market place as reported by TPF&C.
The future value of stock option awards will, of course, be a function of
the market value for Ferro stock in the future. The future value of Performance
Shares awards will be a function both of the future market value of Ferro stock
and of the degree of achievement of the Performance Targets by which the degree
of vesting, or the degree of forfeiture, of such Performance Shares is measured.
In recommending Mr. Bersticker's non-mathematical (personal performance)
level of bonus achievement, the Committee considered the degree of achievement
of specific objectives that had been agreed upon with the Board for Mr.
Bersticker at the beginning of 1995. The determination of the actual award was
made in January, 1996. The award was fixed at 100% of target, or $54,900.
The recommendations of the Committee represented satisfaction with the
manner in which Mr. Bersticker has performed his responsibilities as Chief
Executive Officer and his maturity, leadership, judgment and experience in the
business of Ferro. The recommendations and actions of the Committee included
consideration of TPF&C's data as to competitive standards of compensation in the
market place. TPF&C advises the Company as to competitive levels of salary
(fixed annual compensation), short term incentive compensation (Ferro's annual
cash bonus plan) and long term incentive compensation (Ferro's Stock Option and
Performance Share Plans). The Committee's policy is to attain competitive levels
of executive compensation in each of these areas (salary, short term incentive
and long term incentive).
Mr. Bersticker strongly advocates, and the Committee concurs, that a
substantial portion of executive compensation should be variable, based upon
performance of the Company and results achieved by each member of management.
Application of this principle resulted in 1995 long term incentive compensation
levels for senior executive officers in the third quartile of competitive market
data as reported by TPF&C.
In 1995, Ferro's attainment of profitability performance improved over 1994
resulting in higher levels of executive bonuses, but did not reflect attainment
in full of the target levels of profitability performance. Unless target levels
of profitability performance are achieved, realization of values by the senior
executives under the Performance Share Plan will be significantly below values
reflected at the time of awards, because non-achievement of Performance Targets
will result in significant forfeiture of Performance Shares previously awarded.
16
<PAGE> 19
In making its determinations and recommendations with respect to Messrs.
Bush, Ortino, Friederichsen, Finch and Oudersluys, the Committee considered and
discussed those same materials and information that were considered with respect
to Mr. Bersticker, as well as the advice and recommendations of Mr. Bersticker
as to such individuals. The Committee also considered its evaluation of the
individual performance of those individuals. In the case of Messrs.
Friederichsen, Finch and Oudersluys who have direct responsibilities with
respect to Company operations, their levels of achievement under the Cash Bonus
Plan and Performance Share Plan are materially impacted by the performance of
those specific operations which are in their respective areas of responsibility.
No discretionary determinations were made with respect to Mr. Fisher during the
year because his compensation rights were determined under an agreement entered
into with him in 1995.
During 1995 the percentage of achievement of the mathematical portion of
bonus was: Mr. Bersticker, 46.4%; Mr. Bush, 42.2%; Mr. Ortino, 46.4%; Mr.
Friederichsen, 93.3%; Mr. Finch, 42.1%; and Mr. Oudersluys, 41.8%.
In 1993, the Internal Revenue Code was amended to add Section 162(m), which
generally provides that certain compensation in excess of $1 million per year
paid to a company's chief executive officer and any of its four highest paid
executive officers is no longer deductible to the Company unless the
compensation qualifies for an exception. Section 162(m) provides an exception
for performance based compensation if certain procedural requirements, including
shareholder approval of the material terms of the performance goals, are
satisfied. In 1994, the Committee recommended, and the shareholders approved,
certain changes to the Company's Performance Share Plan and Employee Stock
Option Plan which would qualify such plans under the Section 162(m) exception
and preserve the tax deductibility to the Company of compensation paid to
executives under these plans in the future. None of Ferro's executive officers
received compensation in excess of $1 million in 1995.
G. R. Brown, W. E. Butler, J. C. Morley, D. W. Sullivan
17
<PAGE> 20
PERFORMANCE COMPARED TO CERTAIN STANDARDS
The chart set forth below compares Ferro's cumulative total shareholder
return for the five years ended December 31, 1995 to (a) that of the Standard &
Poor's 500 Index and (b) that of a designated group of companies deemed to have
a peer group relationship to Ferro. In all cases, the information is presented
on a dividend reinvested basis.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
FERRO CORPORATION, S&P 500 INDEX AND S&P SPECIALTY CHEMICALS INDEX(1)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD FERRO CORPO- S&P SPECIALTY
(FISCAL YEAR COVERED) RATION S&P 500 INDEX CHEMICALS INDEX
<S> <C> <C> <C>
1990 100 100 100
1991 216 130 132
1992 235 140 150
1993 282 154 172
1994 215 156 148
1995 215 215 195
<FN>
Note:
(1) Assumes $100 invested on December 31, 1990 in Ferro Common Stock, S&P 500
Index and S&P Specialty Chemicals Index.
</TABLE>
18
<PAGE> 21
SUMMARY COMPENSATION TABLE
The following table shows on an accrual basis the elements of compensation
paid or awarded during each of the three years ended December 31, 1995 to the
Chief Executive Officer, each of the other five highest paid executive officers
of Ferro who continue to serve as officers and James F. Fisher. With the
exception of Mr. Fisher, the principal positions set forth below each officer's
name in the following table are the positions occupied by such officer as of
December 31, 1995. In early 1996, Messrs. Bersticker and Ortino assumed the
positions of Chairman and President, respectively. Mr. Fisher ceased to be an
executive officer of the Company on March 31, 1995 when he stepped down as
Senior Vice President -- Powder Coatings, Specialty Ceramics & Electronic
Materials.
Mr. Fisher's 1995 compensation was determined under an agreement entered
into with him in 1995, which superseded the executive employment agreement to
which he was previously a party. See page 27 of this Proxy Statement for a
description of the 1995 agreement.
19
<PAGE> 22
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
LONG TERM COMPENSATION
AWARDS
--------------------------
ANNUAL COMPENSATION PERFORMANCE ALL OTHER
- ------------------------------------------------------------- SHARE PLAN OPTIONS COMPEN-
NAME AND SALARY BONUS AWARD(1) (NO. OF SATION
PRINCIPAL POSITION YEAR ($) ($) ($) SHARES)(2) ($)(3)
- ---------------------------- ----- -------- -------- ----------- ---------- ---------
A.C. Bersticker 1995 549,000 169,531 153,600 30,000 26,025
President and Chief 1994 530,000 160,749 217,600 30,000 22,435
Executive Officer 1993 490,000 224,719 0 30,000 19,597
W.F. Bush 1995 362,000 87,896 69,600 15,000 21,538
Executive Vice President 1994 350,000 82,852 98,600 15,000 17,991
and Chief Operating 1993 290,666 102,816 0 9,000 15,545
Officer
H.R. Ortino 1995 311,000 86,306 69,600 15,000 23,714
Executive Vice President 1994 300,000 76,770 98,600 15,000 31,050
and Chief Financial -- 1993 251,334 96,692 0 9,000 23,264
Administrative Officer
J.F. Fisher(4) 1995 250,800 39,987 36,000 6,000 21,292
Senior Vice President -- 1994 228,000 54,279 68,000 8,000 13,370
Powder Coatings, Specialty 1993 202,002 67,233 0 6,000 14,268
Ceramics & Electronic
Materials
J.B. Friederichsen 1995 182,000 67,042 33,600 4,000 18,069
Vice President, Specialty 1994 146,504 15,156 47,600 3,000 87,987
Chemicals 1993 N/A N/A N/A N/A N/A
R.J. Finch 1995 191,700 38,416 33,600 4,000 10,322
Vice President, Specialty 1994 191,700 16,093 47,600 3,000 9,317
Plastics 1993 180,000 23,339 0 3,000 10,633
R.C. Oudersluys 1995 188,700 36,500 33,600 4,000 14,684
Vice President, Inorganic 1994 170,419 58,837 37,400 3,000 16,041
Coatings & Colorants 1993 138,000 69,338 0 3,000 12,648
<FN>
- ---------------
Notes:
(1) The values reported are based upon the number of Performance Shares awarded,
valued at the market price of the Common Stock on the date of the award.
Such reported values are based upon achievement of target levels of
performance by Ferro during the performance period. Realization of such
values will be a function of Ferro's performance during the performance
periods. The performance period is three years. No Performance Shares were
awarded in 1993 pursuant to Ferro's then practice of granting awards every
other year, instead of annually. Prior to the 1995 awards, Performance
Shares issued to executive officers did not carry dividend rights until the
expiration of the performance period. Performance is measured in relation to
standards tied to return on average common equity, net income growth, return
on average net assets employed and operating income growth. If Ferro's
performance exceeds target levels, the number of shares can increase by up
to 25%. At December 31, 1995, the persons listed above hold the following
number of Performance Shares, valued at the value of the underlying shares
at December 31, 1995, applicable to performance periods not yet completed:
Mr. Bersticker, 12,800 shares, valued at $299,200; Mr. Bush, 5,800 shares,
valued at $135,575; Mr. Ortino, 5,800 shares, valued at $135,575; Mr.
Fisher, 3,500 shares, valued at $81,813; Mr. Friederichsen, 2,800 shares,
valued at $65,450; Mr. Finch, 2,800 shares, valued at $65,450; and Mr.
Oudersluys, 2,500 shares, valued at $58,438. Such values are also based upon
achievement of target levels of performance by Ferro during the performance
period and realization of values will be a function of Ferro's performance
during the performance period.
20
<PAGE> 23
(2) Stock Option grants were awarded on the following dates:
January 22, 1993
January 28, 1994
January 18, 1995
(3) In the year ended December 31, 1995, All Other Compensation includes company
matching payments under the Ferro ESOP, as follows: Mr. Bersticker, $5,940,
Mr. Bush, $5,940, Mr. Ortino, $5,940, Mr. Fisher, $5,775, Mr. Friederichsen,
$5,775, Mr. Finch, $5,250, and Mr. Oudersluys, $5,940; personal use of
leased automobiles, as follows: Mr. Bersticker, $3,778, Mr. Bush, $4,857,
Mr. Ortino, $5,379, Mr. Fisher, $7,455, Mr. Friederichsen, $4,479, Mr.
Finch, $4,316, and Mr. Oudersluys, $4,102; taxable portion of benefits under
health, hospitalization, and life insurance programs, as follows: Mr.
Bersticker, $9,126, Mr. Bush, $5,850, Mr. Ortino, $3,744, Mr. Fisher,
$1,739, Mr. Friederichsen, $2,795, and Mr. Oudersluys, $1,561; individual
tax services, as follows: Mr. Bersticker, $3,725, Mr. Bush, $3,325, Mr.
Ortino, $3,500, Mr. Fisher, $5,175, Mr. Oudersluys, $2,325; and in the case
of Mr. Ortino, home leave benefits of $3,585; and in the case of Mr.
Friederichsen, moving expenses of $4,264. In addition, dividends received
from restricted stock granted under Performance Share Plans were as follows:
Mr. Bersticker, $3456, Mr. Bush, $1,566, Mr. Ortino, $1,566, Mr. Fisher,
$1,148, Mr. Friederichsen, $756, Mr. Finch, $756 and Mr. Oudersluys, $756.
(4) Mr. Fisher ceased to be an executive officer of the Company on March 31,
1995 when he stepped down as Senior Vice President -- Powder Coatings,
Specialty Ceramics & Electronic Materials.
</TABLE>
21
<PAGE> 24
STOCK OPTION GRANTS, EXERCISES AND YEAR END VALUES
The following table sets forth information regarding grants of stock
options to each of the continuing six highest paid executive officers of Ferro
and Mr. Fisher under Ferro's stock option plan during the fiscal year ended
December 31, 1995. The exercisability of the stock options vests at the rate of
25% per year. In the case of death, retirement, disability or change of control,
the options become 100% exercisable.
OPTION GRANTS IN 1995
<TABLE>
<CAPTION>
% OF
TOTAL
OPTIONS
GRANTED GRANT DATE
TO PRESENT
OPTIONS EMPLOYEES EXERCISE EXPIRATION VALUE(1)
NAME GRANTED IN 1995 PRICE DATE $
- ---------------------------------- ------- --------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C>
A.C. Bersticker
President and Chief Executive
Officer........................... 30,000 14.9% $24.00 1/18/2005 $274,800
W.F. Bush
Executive Vice President and Chief
Operating Officer............... 15,000 7.4% $24.00 1/18/2005 $137,400
H.R. Ortino
Executive Vice President and Chief
Financial -- Administrative
Officer........................... 15,000 7.4% $24.00 1/18/2005 $137,400
J.F. Fisher(2)
Senior Vice President,
Powder Coatings, Specialty
Ceramics & Electronic Materials... 6,000 3.0% $24.00 1/18/2005 $ 55,000
J.B. Friederichsen
Vice President, Specialty
Chemicals......................... 4,000 2.0% $24.00 1/18/2005 $ 36,600
R.J. Finch
Vice President, Specialty
Plastics.......................... 4,000 2.0% $24.00 1/18/2005 $ 36,600
R.C. Oudersluys
Vice President, Inorganic Coatings
& Colorants....................... 4,000 2.0% $24.00 1/18/2005 $ 36,600
<FN>
- ---------------
Note:
(1) The grant date present value has been calculated using the Black-Scholes
method of option valuation. The model assumes the following: (a) an option
term of ten years; (b) an interest rate that represents the interest rate on
a U.S. Treasury bond with a maturity date corresponding to the ten year
option term; (c) volatility calculated
</TABLE>
22
<PAGE> 25
using quarter-end stock prices for the past five years (20 quarters) prior to
grant date; and (d) the stock's annualized dividend yield also over the past
five years (20 quarters).
(2) Mr. Fisher ceased to be an executive officer of the Company on March 31,
1995 when he stepped down as Senior Vice President -- Powder Coatings,
Specialty Ceramics & Electronic Materials.
The following table shows information regarding stock option exercises
during 1995 and information regarding options held at year end.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, DECEMBER 31,
SHARES 1995 1995(1)
ACQUIRED -------------- -------------
ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- --------------------------------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C>
A.C. Bersticker 15,750 359,100 119,250/75,000 $ 772,729/
President and Chief Executive $0
Officer
W.F. Bush N/A N/A 50,250/33,000 $ 372,536/
Executive Vice President and $0
Chief Operating Officer
H.R. Ortino N/A N/A 43,875/33,000 $ 275,840/
Executive Vice President and $0
Chief Financial --
Administrative Officer
J.F. Fisher(2) N/A N/A 30,500/16,500 $ 213,442/
Senior Vice President, Powder $0
Coatings, Specialty Ceramics &
Electronic Materials
J.B. Friederichsen N/A N/A 750/6,250 $ 0/
Vice President, Specialty $0
Chemicals
R.J. Finch N/A N/A 6,750/7,750 $ 8,438/
Vice President, Specialty $0
Plastics
R.C. Oudersluys 4,500 76,444 19,125/7,750 $ 153,736/
Vice President, Inorganic $0
Coatings & Colorants
</TABLE>
- ---------------
Note:
(1) Value of unexercised in-the-money options is based on Ferro's NYSE closing
common stock price on December 31, 1995, of $23.375.
(2) Mr. Fisher ceased to be an executive officer of the Company on March 31,
1995 when he stepped down as Senior Vice President -- Powder Coatings,
Specialty Ceramics & Electronic Materials.
23
<PAGE> 26
PERFORMANCE SHARE PLAN AWARDS
The following table sets forth information relating to Performance Share
Plan ("Plan") awards to each of the continuing six highest paid executive
officers of Ferro and Mr. Fisher. The Plan has a three year performance cycle
ending on December 31, 1997. A condition to vesting includes the continued
employment of the Plan participant to the end of the Performance Period.
However, in the case of death, disability or retirement, there is a pro rata
payment at the end of the Performance Period based upon the portion of the
Performance Period during which employment continued. Also, in the case of a
change of control, a cash payment equal to (1) the aggregate value of
Performance Share awards based on the remaining term in the executive's
employment agreement and the portion of the Performance Period that expired
prior to the change in control, minus (2) the value of payments made under the
Plan, is paid at the time of the change of control.
PERFORMANCE SHARE PLAN AWARDS IN 1995
<TABLE>
<CAPTION>
ESTIMATED FUTURE SHARE PAYOUTS
-------------------------------------------
NUMBER OF TARGET(C)
NAME SHARES(A) THRESHOLD(B) ----------- MAXIMUM(D)
- --------------------------------- --------- ------------ (IN SHARES) ----------
<S> <C> <C> <C> <C>
A.C. Bersticker 6,400 1,600 6,400 8,000
President and Chief Executive
Officer
W.F. Bush 2,900 725 2,900 3,625
Executive Vice President and
Chief Operating Officer
H.R. Ortino 2,900 725 2,900 3,625
Executive Vice President and
Chief Financial --
Administrative Officer
J.F. Fisher(e) 1,500 375 1,500 1,875
Senior Vice President, Powder
Coatings, Specialty Ceramics &
Electronic Materials
J.B. Friederichsen 1,400 350 1,400 1,750
Vice President, Specialty
Chemicals
R.J. Finch 1,400 350 1,400 1,750
Vice President, Specialty
Plastics
R.C. Oudersluys 1,400 350 1,400 1,750
Vice President, Inorganic
Coatings & Colorants
</TABLE>
24
<PAGE> 27
- ---------------
Notes:
(a) The Plan has a three year performance cycle ending December 31, 1997.
Performance measurements are based on a matrix that is a function of return
on average common equity (target -- 15%) and net income growth
(target -- 15%) for Messrs. Bersticker, Bush, Fisher and Ortino. For Messrs.
Friederichsen, Finch and Oudersluys the performance factors are a function
of return on average net assets employed and operating income growth for the
operations in their respective groups.
(b) Threshold is 25% of Award.
(c) Target is 100% of Award.
(d) Maximum is 125% of Award.
(e) Mr. Fisher ceased to be an executive officer of the Company on March 31,
1995 when he stepped down as Senior Vice President -- Powder Coatings,
Specialty Ceramics & Electronic Materials.
RETIREMENT PLAN
Ferro maintains a non-contributory defined benefit retirement program for
eligible salaried employees, including officers. In general, as applied to the
senior officer group of Ferro the retirement program provides a monthly pension
at age 60 payable for life with a guarantee of 120 monthly payments. The monthly
retirement benefit payable to a participating officer who retires on or after
age 60 with 30 or more years of service is 50% of the monthly average of the
participant's covered compensation during the five consecutive calendar years in
which his covered compensation was the highest, reduced by 50% of his primary
Social Security benefit. If the participating employee has less than 30 years of
service, the monthly pension net benefit is reduced proportionately. Generally,
for purposes of the retirement program, covered compensation means basic salary
plus bonus plus values earned under the Performance Share Plan. Section 415 of
the Internal Revenue Code limits the annual benefits payable from the Ferro
Qualified Retirement Plan (to $120,000 per year for 1995). In addition, the
amount of covered compensation used to compute the Ferro Qualified Retirement
Plan benefit is limited by the Internal Revenue Code. In response to such
limitations and for certain other purposes, Ferro has adopted an Excess Benefits
Plan. The Excess Benefits Plan will pay retirement program benefits to
participants in the Ferro Qualified Retirement Plan in excess of those payable
from the Ferro Qualified Retirement Plan. Ferro's established normal retirement
age is 65, but in the case of officers, retirement benefits are not subject to
reduction if the officer retires after attainment of age 60 with 30 years of
service. The following table shows estimated annual benefits payable upon
retirement under both the Ferro Qualified Retirement Plan and the Excess
Benefits Plan to officers with the specified years of service and whose average
annual covered compensation during the five consecutive calendar years in which
25
<PAGE> 28
their covered compensation was the highest would be as indicated. As of December
31, 1995, Messrs. Bersticker, Bush, Ortino, Friederichsen, Finch and Oudersluys
had 37, 31, 24, 1, 4 and 17 years of service, respectively. Mr. Fisher had 35
years of service as of December 31, 1994.
<TABLE>
<CAPTION>
YEARS OF SERVICE AT AGE 65
ASSUMED RETIREMENT IN 1995
REGULAR ------------------------------------------------------------------
COMPENSATION 15 20 25 30 35
- --------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 200,000 $ 46,400 $ 61,867 $ 77,333 $ 92,800 $ 92,800
300,000 71,400 95,200 119,000 142,800 142,800
400,000 96,400 128,533 160,667 192,800 192,800
500,000 121,400 161,867 202,333 242,800 242,800
600,000 146,400 195,200 244,000 292,800 292,800
700,000 171,400 228,533 285,667 342,800 342,800
800,000 196,400 261,867 327,333 392,800 392,800
900,000 221,400 295,200 369,000 442,800 442,800
1,000,000 246,400 328,533 410,667 492,800 492,800
1,100,000 271,400 361,867 452,333 542,800 542,800
</TABLE>
- ---------------
The five year average covered compensation for the individuals listed in
the Summary Compensation Table was: Mr. Bersticker, $896,139; Mr. Bush,
$496,484; Mr. Ortino, $433,083; Mr. Fisher, $326,401; Mr. Friederichsen,
$187,954; Mr. Finch, $202,864; and Mr. Oudersluys, $248,284. See page 27 of this
Proxy Statement for a description of an agreement entered into with Mr. Fisher
pertaining to his retirement.
EXECUTIVE EMPLOYMENT AGREEMENTS
Ferro is a party to executive employment agreements (the "Executive
Employment Agreements") with 12 of its officers, including each of the
individuals named in the summary compensation table on page 20 of this Proxy
Statement. The purpose of the Executive Employment Agreements is to reinforce
and encourage the continued attention and dedication of these officers to their
assigned duties without distraction in the face of (i) solicitations by other
employers and (ii) the potentially disturbing circumstances arising from the
possibility of a change in control of Ferro. To that end, the Executive
Employment Agreements obligate Ferro to provide certain severance benefits,
described below, to any of these officers whose employment is terminated under
certain circumstances.
26
<PAGE> 29
Benefits are payable under the Executive Employment Agreements if the
officer's employment is terminated for reasons other than for cause, disability,
death or normal retirement or if the officer terminates his employment for "Good
Reason." Good Reason will exist if (1) Ferro fails to honor any of its
obligations or responsibilities under certain designated sections of the
Executive Employment Agreement or (2) if the officer receives a notice of
termination from the Company for the purposes of preventing extension of the
term of the officer's employment agreement or (3) if the officer voluntarily
resigned at any time during the three month period following the first
anniversary of a change in control. Benefits are also payable if a successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of Ferro fails to
expressly assume the Executive Employment Agreements. The principal benefits to
be provided to the officers under the Executive Employment Agreements are (i) a
lump sum severance payment equal to a full year's compensation (base salary and
incentive compensation) multiplied by three in the cases of Messrs. Bersticker,
Bush and Ortino and multiplied by two in the case of the other officers with
whom Executive Employment Agreements were made, (ii) a lump sum calculated to
approximate the present value of the additional retirement benefits to which the
officer would have become entitled had he remained in the employment of Ferro
for the same number of years used in computing the lump sum severance payment,
(iii) continued participation in Ferro's employee benefit programs such as group
life, health and medical insurance coverage for the same number of years used in
computing the lump sum severance payment, and (iv) a cash payment in an amount
to reimburse on an after tax basis that portion of any excise tax attributable
to payments or benefits required to be made to the executive.
As security for its payment of the benefits provided for in the Executive
Employment Agreements, Ferro has established, in accordance with its obligation
under the Executive Employment Agreements, an escrow account at National City
Bank and deposited into that escrow account a percentage of the amount which
would be payable to each of the officers under the Executive Employment
Agreements. No officer has a right to receive any amount in the escrow account
until Ferro has defaulted in its obligations to that officer under the Executive
Employment Agreement to which he is a party. Interest earned on the escrow
account is paid to the Company.
In 1995, Ferro entered into an agreement with Mr. Fisher which provides for
his compensation as an employee of the Company after he stepped down as Senior
Vice President, Powder Coatings, Specialty Ceramics & Electronic Materials on
March 31, 1995. The agreement supersedes his executive employment agreement and
provides
27
<PAGE> 30
that Mr. Fisher would continue to be paid his existing salary through September
30, 1995 and will be paid a bonus for 1995 equal to 75% of the bonus that would
otherwise be payable if he had remained an officer for the full year. Mr. Fisher
will be entitled to continued participation in certain employee benefit plans
through September 30, 1997 and, for the period beginning October 1, 1995 through
September 30, 1997, will receive an annual salary of $319,200 in return for his
services. Mr. Fisher will be deemed to have retired as of October 1, 1997 with
respect to his rights under the Ferro Stock Option Plan and Performance Share
Plan. Commencing October 1, 1997, Mr. Fisher will be eligible to participate as
a retiree under the Ferro Salaried Retiree Medical Program and will be entitled
to receive a monthly pension of approximately $10,152.
SHAREHOLDER PROPOSALS FOR THE 1997 ANNUAL MEETING
Any shareholder who intends to present a proposal at the 1997 annual
meeting and who wishes to have the proposal included in Ferro's proxy statement
and form of proxy for that meeting must deliver the proposal to Ferro not later
than November 18, 1996.
MISCELLANEOUS
The accompanying proxy is solicited by the Board of Directors of Ferro and
will be voted in accordance with the instructions thereon if it is returned duly
executed and is not revoked. A shareholder may revoke his proxy without
affecting any vote previously taken, by giving notice to the Company in writing
or in open meeting.
Ferro will bear the cost of preparing and mailing this statement, with the
accompanying proxy and other instruments. Ferro will also pay the standard
charges and expenses of brokerage houses, or other nominees or fiduciaries, for
forwarding such instruments to and obtaining proxies from securities holders and
beneficiaries for whose account they hold registered title to shares of the
Company. In addition to using the mails, directors, officers and other employees
of Ferro, acting on its behalf, may also solicit proxies, and Georgeson & Co.,
New York, New York, has been retained, at an estimated cost of $10,000 plus
expenses, to aid in the solicitation of proxies from brokers, institutional
holders and individuals who own a large number of shares. Proxies may be
solicited personally, by telephone, or by telegram.
The record date for determination of shareholders entitled to vote at the
1996 annual meeting is February 27, 1996. On that date the outstanding voting
securities of
28
<PAGE> 31
Ferro were 26,773,241 shares of Common Stock, having a par value of $1 each and
1,372,230 shares of Series A ESOP Convertible Preferred Stock. Each share has
one vote and the Common Stock and the Series A ESOP Convertible Preferred Stock
vote together as a single class.
Under the General Corporation Law of Ohio, if notice in writing is given by
any shareholder to the President or any Vice President or the Secretary of
Ferro, not less than forty-eight hours before the time fixed for holding the
meeting, that the shareholder desires that the voting for election of directors
shall be cumulative, and if an announcement of the giving of such notice is made
upon the convening of the meeting, each shareholder will have cumulative voting
rights. Cumulative voting means that each shareholder is entitled to that number
of votes equal to the number of shares that he owns multiplied by the number of
directors to be elected. Each shareholder may cast all of his votes for a single
nominee or may distribute his votes among as many nominees as he sees fit. As
indicated on page 1 of this Proxy Statement, if the election of directors is by
cumulative voting the persons appointed by the accompanying proxy intend to
cumulate the votes represented by the proxies they receive and distribute such
votes in accordance with their best judgment. Those nominees receiving the
largest number of votes for the director positions to be filled will be elected
to those positions. Abstentions will be deemed to be present for the purpose of
determining a quorum for the meeting, but will be deemed not voting on the
issues or matters as to which the abstention is applicable.
So far as the management is aware, no matters other than those outlined in
this Proxy Statement will be presented to the meeting for action on the part of
the shareholders. If any other matters are properly brought before the meeting,
it is the intention of the persons named in the accompanying proxy to vote
thereon the shares to which the proxy relates, in accordance with their best
judgment.
FERRO CORPORATION
MARK A. CUSICK, Secretary
March 12, 1996
29
<PAGE> 32
EXHIBIT A
The following provisions shall be inserted as Section 17 to the Employee
Stock Option Plan:
17. Directors' Stock Options
(a) Grants. Stock options may be granted to non-employee Directors only in
accordance with the requirements of this Section 17. On the date of the 1996
Annual Meeting of Shareholders and on the date of each annual shareholders'
meeting thereafter, there shall automatically be granted to each non-employee
Director who continues as a Director after the annual meeting an option to
purchase 2,500 shares of Common Stock. Notwithstanding the foregoing, no stock
options shall be granted to a director whose normal retirement under a plan or
policy of the Corporation would occur prior to the date of the next annual
shareholders' meeting.
(b) Option Price. The option exercise price shall be the per share fair
market value of the outstanding shares of the Common Stock on the date such
options are granted. The Committee shall be authorized to determine such price
per share. Payment of the option price may be made in cash or in shares of
Common Stock or any combination of cash and Common Stock.
(c) Administration. Subject to the express provisions of this Section 17,
the Committee shall have conclusive authority to construe and interpret any
stock option granted under this Section 17 and to adopt administrative policies
with respect thereto; provided, however, that no action shall be taken which
would prevent the options granted under this Section 17 from meeting the
requirements for exemption from Section 16(b) of the Exchange Act, or subsequent
comparable statute, as set forth in Rule 16(b)-3 of the Exchange Act or any
subsequent comparable rule.
(d) Option Agreement. The options granted hereunder shall be evidenced by
an option agreement, dated as of the date of the grant, which agreement shall be
in such form, consistent with the terms and requirements of this Section 17, as
shall be approved by the Committee from time to time and executed on behalf of
the Corporation by the Chief Executive Officer.
(e) Option Period. Options granted under this Section 17 shall not be
exercisable later than 10 years from the date of grant.
(f) Transferability. No option shall be transferable by the non-employee
director except by will or the laws of descent and distribution, and during the
director's
A-1
<PAGE> 33
lifetime options may be exercised only by such director or his or her guardian
or legal representative.
(g) Limitations on Exercise. Directors' stock options shall become
exercisable to the extent of 25% of the optioned shares after the first
anniversary of the date of grant, 50% after the second anniversary, 75% after
the third anniversary and 100% after the fourth anniversary of the date of
grant. To the extent an option is not otherwise exercisable at the date of the
Director's retirement under a retirement plan or policy of the Corporation, it
shall become fully exercisable upon such retirement; provided, however, that
Director stock options shall not become exercisable under this sentence prior to
the expiration of six months from the date of grant. Options not otherwise
exercisable at the time of the death of a Director during continued service with
the Corporation shall become fully exercisable upon his death. Upon the death of
a Director such options shall remain exercisable for a period of one year after
the date of death. To the extent an option is exercisable on the date a Director
ceases to be a director (other than by reason of death or retirement as
described above), the option shall continue to be exercisable (subject to the
original term of the option) for a period of ninety (90) days thereafter.
A-2
<PAGE> 34
FERRO CORPORATION THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Ferro Corporation hereby appoints A. C.
Bersticker, H. R. Ortino, and M. A. Cusick, the Proxies of the undersigned to
vote the shares of the undersigned at the 1996 annual meeting of shareholders of
said Corporation and any adjournment thereof upon the following:
THE BOARD OF DIRECTORS RECOMMENDS VOTES BE CAST FOR PROPOSALS 1, 2, 3 AND 4.
(1) ELECTION OF DIRECTORS: Sandra Harden Austin, Werner F. Bush, Rex A.
Sebastian and Dennis W. Sullivan for terms expiring in 1999.
/ / FOR all nominees / / WITHHOLD AUTHORITY
(except as marked to the contrary) to vote for all nominees
(INSTRUCTION: If you wish to withhold authority to vote for any
individual nominee, strike a line through the nominee's
name in the list above.)
(2) PROPOSAL TO FIX THE NUMBER OF DIRECTORS AT ELEVEN.
/ / FOR / / AGAINST / / ABSTAIN
(3) PROPOSAL TO ADOPT AMENDMENTS TO THE EMPLOYEE STOCK OPTION PLAN.
/ / FOR / / AGAINST / / ABSTAIN
(4) RATIFICATION OF THE DESIGNATION OF KPMG PEAT MARWICK LLP AS INDEPENDENT
AUDITORS.
/ / FOR / / AGAINST / / ABSTAIN
(5) In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.
(Continued, and to be signed on other side)
PROXY NO. (Continued from other side) SHARES
IF NO INSTRUCTION IS INDICATED, AUTHORITY IS GRANTED TO CAST THE VOTE OF THE
UNDERSIGNED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR AND FOR PROPOSALS 2, 3
AND 4.
Dated................., 1996
............................
Signature
............................
Signature if held jointly
NOTICE: When signing as
attorney, executor,
administrator, trustee or
guardian, please give your
full title as such. A proxy
given by a corporation
should be signed in the
corporate name by the
chairman of its board of
directors, its president,
vice president, secretary,
or treasurer.
PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
Proxy Card
<PAGE> 35
FERRO CORPORATION THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
TO: NATIONAL CITY BANK, CLEVELAND, OHIO
TRUSTEE UNDER THE FERRO CORPORATION SAVINGS AND STOCK OWNERSHIP PLAN
I hereby direct that the voting rights pertaining to shares of stock of
Ferro Corporation held by you, as Trustee, and allocated to my account shall be
exercised at the 1996 annual meeting of shareholders of said Corporation and any
adjournment thereof to vote:
THE BOARD OF DIRECTORS RECOMMENDS VOTES BE CAST FOR PROPOSALS 1, 2, 3 AND 4.
(1) ELECTION OF DIRECTORS: Sandra Harden Austin, Werner F. Bush, Rex A.
Sebastian and Dennis W. Sullivan for terms expiring in 1999.
/ / FOR all nominees / / WITHHOLD AUTHORITY
(except as marked to the contrary) to vote for all nominees
(INSTRUCTION: If you wish to withhold authority to vote for any
individual nominee, strike a line through the nominee's
name in the list above.)
(2) PROPOSAL TO FIX THE NUMBER OF DIRECTORS AT ELEVEN.
/ / FOR / / AGAINST / / ABSTAIN
(3) PROPOSAL TO ADOPT AMENDMENTS TO THE EMPLOYEE STOCK OPTION PLAN.
/ / FOR / / AGAINST / / ABSTAIN
(4) RATIFICATION OF THE DESIGNATION OF KPMG PEAT MARWICK LLP AS INDEPENDENT
AUDITORS.
/ / FOR / / AGAINST / / ABSTAIN
(Continued, and to be signed on other side)
(Continued from other side)
(5) In its discretion, the Trustee is authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.
IF NO INSTRUCTION IS INDICATED, AUTHORITY IS GRANTED TO CAST THE VOTE OF THE
UNDERSIGNED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR AND FOR PROPOSALS 2, 3
AND 4. THE TRUSTEE IS ALSO DIRECTED TO VOTE THE UNDERSIGNED'S PRORATA PORTION OF
ALL OF THE TRUSTEE'S UNALLOCATED AND/OR UNVOTED SHARES IN THE SAME MANNER AS THE
UNDERSIGNED HAS DIRECTED ON THE REVERSE SIDE HEREOF.
Dated................., 1996
............................
Signature
NOTICE: When signing as
attorney, executor,
administrator, trustee or
guardian, please give your
full title as such.
PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
Proxy Card
<PAGE> 36
APPENDIX B
FERRO CORPORATION
1985 EMPLOYEE STOCK OPTION PLAN
(AMENDED AND RESTATED 4/26/91)
1. Purpose of Plan. The purpose of this Plan is to advance the interests
of Ferro Corporation (hereinafter called the "Corporation") and its
shareholders by providing a means whereby officers and key employees of the
Corporation and its subsidiaries may be given an opportunity to purchase
Common Stock, $1.00 par value (hereinafter called "shares") of the
Corporation under options and stock appreciation rights granted under the
Plan, to the end that the Corporation may retain present personnel upon
whose judgment, initiative and efforts the successful conduct of the
business of the Corporation largely depends, and may attract new personnel.
Some of the options granted under this Plan may be options which are
intended to qualify as "incentive stock options" under Section 422A of the
Internal Revenue Code of 1986, as amended (the "Code"), or any successor
provision and are hereinafter sometimes called "incentive stock options."
2. Shares Subject to the Plan. The aggregate number of shares of
the Corporation for which options may be granted under this Plan shall be
that number of shares remaining available for grant under the Plan on the
close of business on the date immediately prior to the 1991 Annual
Meeting of Shareholders plus 800,000, provided, however, that whatever
number of said shares shall remain reserved for issuance pursuant to this
Plan at the time of any stock split, stock dividend or other change in
the Corporation's capitalization shall be appropriately adjusted to reflect
such stock dividend, stock split or other change in capitalization. Shares
issued pursuant to the exercise of options granted hereunder shall be made
available from authorized but unissued shares of the Corporation or shares
held by the Corporation as treasury shares. Any shares for which an option
is granted hereunder that are released from such option for any reason
other than the exercise of stock appreciation rights granted hereunder
shall become available for other options to be granted under this Plan.
3. Administration of the Plan. Except to the extent the Board of
Directors reserves to itself the authority with respect thereto, this
Plan shall be administered under the supervision of a committee
(hereinafter called the "Committee") composed of not less than three
directors of the Corporation appointed by the Board of Directors. The
members of the Committee shall not, pursuant to the exercise of discretion,
be eligible, and shall not have been so eligible for a period of at least
one year prior to their appointment, to participate in this Plan or to have
been selected to participate in any other plan of the Corporation or any
affiliate (as defined under the Securities Exchange Act of 1934) of the
Corporation entitling the participants herein to acquire stock, stock
options or stock appreciation rights of the Corporation or any affiliate of
the Corporation. Members of the Committee shall serve at the pleasure of the
Board of Directors, and may resign by written notice filed with the Chairman
of the Board or the Secretary of the Corporation. A vacancy in the membership
of the Committee shall be filled by the appointment of a successor member by
the Board of Directors. Until such vacancy is filled, the remaining members
shall constitute a quorum and the action at any meeting of a majority of the
entire Committee, or an action unanimously approved in writing, shall
constitute action of the Committee. Subject to the express provisions of
this Plan, the Committee shall have conclusive authority to construe and
interpret the Plan, any stock option agreement entered into hereunder,
and any stock appreciation right granted hereunder, to adopt and amend
forms of Option Agreements and Grants of Stock Appreciation Rights and to
establish, amend, and rescind rules and regulations for the administration of
this Plan and shall have such additional authority as the Board of
Directors may from time to time determine to be necessary or desirable.
<PAGE> 37
In addition, with respect to Key Employees who are foreign nationals
or employed outside the United States, or both, there may be adopted in the
manner provided herein such rules and regulations, policies, subplans or the
like as are necessary or advisable in order to effectuate the purposes of the
Plan.
4. Granting of Options. The Committee from time to time shall
designate from among the full-time employees of the Corporation and its
subsidiaries and any corporation at least 20% of the voting securities of
which is owned by the Corporation or a subsidiary of the Corporation to
whom options to purchase shares shall be granted under this Plan, the type
of option to be granted and the number of shares which shall be subject to each
option so granted; provided however, that incentive stock options may only be
granted to full-time employees of the Corporation and its subsidiaries, as
such term is defined in this Plan. Except to the extent the Board of
Directors reserves to itself the authority with respect thereto, all actions
of the Committee under this Paragraph shall be conclusive; provided, however,
that the aggregate fair market value (determined as of the date the option is
granted) of shares for which incentive stock options are granted to an
employee in any calendar year (under this Plan or any other plan of the
Corporation which provides for the granting of incentive stock options) may not
exceed $100,000 plus any unused limit carryover to such year permitted by
Section 422A of the Code, or any successor provision. Any incentive stock
option that is granted to any employee who is, at the time the option is
granted, deemed for purposes of Section 422A of the Code, or any
successor provision, to own shares of the Corporation possessing more than
ten percent (10%) of the total combined voting power of all classes of
shares of the Corporation or of a parent or subsidiary of the Corporation,
shall have an option price that is at least 110 percent (110 %) of the fair
market value of the shares and shall not be exercisable after the expiration of
5 years from the date it is granted. The maximum number of options
granted to any single executive during any period of eleven consecutive
months shall not exceed options for 100,000 shares, subject to adjustment
in accordance with Section 2 of the Plan.
5. Granting of Stock Appreciation Rights. Except to the extent the Board
of Directors reserves to itself the authority with respect thereto, the
Committee shall have the discretion to grant to optionees stock appreciation
rights in connection with options to purchase shares on such terms and
conditions as it deems appropriate. A stock appreciation right will allow
an optionee to surrender an option or portion thereof and to receive
payment from the Corporation in an amount equal to the excess of the
aggregate fair market value of the shares with respect to which options are
surrendered over the aggregate option price of such shares. A stock
appreciation right shall be exercisable no sooner than six months after it is
granted and thereafter at any time prior to its stated expiration date,
but only to the extent the related stock option right may be exercised.
Payment shall be made in shares, cash or a combination of shares and cash,
as provided in the Grant of Stock Appreciation Rights. Shares as to which
any option is so surrendered shall not be available for future option
grants hereunder. The Committee may grant stock appreciation rights
concurrently with the grant of an option or, in the case of an option which
is not an incentive stock option, with respect to an outstanding option.
6. Option Period. No option granted under this Plan may be exercised
later than ten years from the date of grant.
7. Option Price. The option price shall be set forth in the
Option Agreement, which price in no case shall be less than the per share
fair market value of the outstanding shares of the Corporation on the date
that the option is granted. The option price may be fixed in terms of a
formula and one or more officers of the Corporation may be authorized to
compute the price in accordance with that formula. Payment of the option price
may be made in cash, shares, or a combination of cash and shares, as provided
in the
- 2 -
<PAGE> 38
Option Agreement in effect from time to time. The date on which the granting
of an option is approved shall be deemed the date on which the option is
granted.
8. Option Agreement. The Option Agreement pursuant to which option
rights are granted to an employee shall be in the applicable form (consistent
with this Plan) from time to time approved in the manner provided herein
and shall be signed on behalf of the Corporation by the Chief Executive
Officer or any Vice President of the Corporation, other than the employee who
is a party thereto. The Option Agreement shall set forth the number of
shares which are subject to the option to purchase, the type of option
granted, the option price to be paid upon exercise, the manner in which the
option is to be exercised and the option price is to be paid, and the option
period, and may include such other terms not inconsistent with this Plan as
are from time to time approved in the manner provided herein.
9. Grant of Stock Appreciation Rights. The Grant of Stock
Appreciation Rights pursuant to which stock appreciation rights are granted
shall be in the applicable form (consistent with this Plan) from time to
time approved in the manner provided herein and shall be signed on behalf of
the Corporation by the Chief Executive Officer or any Vice President of the
Corporation, other than the employee to whom the grant is made. The Grant of
Stock Appreciation Rights shall set forth the option or options to which the
grant relates, the manner in which the stock appreciation rights are
exercisable, and may include such other terms not inconsistent with this Plan
as are from time to time approved in the manner provided herein.
10. Transferability. No option or stock appreciation right shall
be transferable by the optionee except by will or the laws of descent
and distribution, and options and stock appreciation rights may be exercised
during the employee's lifetime only by him or his guardian or legal
representative.
11. Extraordinary Distributions and Pro-Rata Repurchases. In the event
the Corporation shall at any time when a stock option is outstanding
make an Extraordinary Distribution (as hereinafter defined) in respect of
Common Stock or effect a Pro-Rata Repurchase of Common Stock (as hereinafter
defined), the Committee shall consider the economic impact of the
Extraordinary Distribution or Pro-Rata Repurchase on Participants and make
such adjustments as it deems equitable under the circumstances. The
determination of the Committee shall, subject to revision by the Board of
Directors, be final and binding upon all Participants.
As used herein, the term "Extraordinary Distribution" means any dividend
or other distribution of:
(a) cash, where the aggregate amount of such cash dividend
or distribution together with the amount of all cash dividends
and distributions made during the preceding twelve months, when combined
with the aggregate amount of all Pro Rata Repurchases (for this
purpose, including only that portion of the aggregate purchase price
of such Pro Rata Repurchases which is in excess of the Fair Market Value
of the Common Stock repurchased during such twelve month period),
exceeds ten percent (10%) of the aggregate Fair Market Value of all
shares of Common Stock outstanding on the record date for determining the
shareholders entitled to receive such Extraordinary Distribution, or
(b) any shares of capital stock of the Corporation (other than
shares of Common Stock), other securities of the Corporation,
evidences of indebtedness of the Corporation or any other person or any
other property
- 3 -
<PAGE> 39
(including shares of any subsidiary of the Corporation), or any
combination thereof.
As used herein "Pro Rata Repurchase" means any purchase of shares of
Common Stock by the Corporation or any subsidiary thereof, pursuant to any
tender offer or exchange offer subject to section 13(e) of the Exchange Act or
any successor provision of law, or pursuant to any other offer available to
substantially all holders of Common Stock; provided, however, that no
purchase of shares of the Corporation or any subsidiary thereof made in open
market transactions shall be deemed a Pro Rata Repurchase.
12. Amendment and Termination of the Plan. The Corporation, by action
of its Board of Directors, reserves the right to amend, modify or terminate at
any time this Plan, or, by action of the Committee with the consent of the
optionee, to amend, modify or terminate any outstanding Option Agreement or
Grant of Stock Appreciation Rights, except that the Corporation may not,
without further shareholder approval, increase the total number of shares as
to which options may be granted under this Plan (except increases attributable
to the adjustments authorized in Paragraph 2 hereof), change the employees
or class of employees eligible to receive options or materially increase the
benefits accruing to participants under this Plan. Moreover, no action
shall be taken by the Corporation which will impair the validity of any
option or stock appreciation right then outstanding, or which will prevent
the options issued and stock appreciation rights granted pursuant to this
Plan from meeting the requirements for exemption from Section 16(b) of the
Securities Exchange Act of 1934, or subsequent comparable statute, as set
forth in Rule 16b-3 under said Act or subsequent comparable rule, or which
will prevent any incentive stock option issued or to be issued under this
Plan from being an "incentive stock option" under Section 422A of the Code,
or any successor provision.
13. Subsidiary. The term "subsidiary" as used herein shall mean
any corporation in an unbroken chain of corporations beginning with the
Corporation and ending with the employer corporation if, at the time of the
granting of the option, each of the corporations other than the employer
corporation owns stock possessing 50 percent or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
Settlement of stock options or stock appreciation rights exercised
by employees of subsidiaries shall be made by and at the expense of
such subsidiary. Except as prohibited by law, the Corporation shall sell and
transfer to the subsidiary, and the subsidiary shall purchase, the number
of shares necessary to settle any stock option that is exercised.
14. Noncompetition Provision. Unless the Option Agreement
specifies otherwise, an optionee shall forfeit all unexercised stock
options and stock appreciation rights if, (i) in the opinion of the
Committee, such optionee, without the written consent of the Corporation,
engages directly or indirectly in any manner or capacity as principal,
agent, partner, officer, director, employee, or otherwise, in any
business or activity competitive with the business conducted by the
Corporation or any subsidiary; or (ii) the optionee performs any act or
engages in any activity which in the opinion of the Committee is inimical
to the best interests of the Corporation.
15. Effective Date of Plan. The Amended and Restated Plan shall be
effective upon approval by the shareholders at the 1991 annual meeting.
16. Expiration of Plan. Options may be granted under this Plan at any
time prior to April 26, 2001, on which date the Plan shall expire but
without affecting any options then outstanding.
- 4 -
