<PAGE> 1
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SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
FERRO CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FERRO CORPORATION
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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<PAGE> 2
FERRO CORPORATION
1000 LAKESIDE AVENUE
CLEVELAND, OHIO 44114
March 13, 1997
DEAR SHAREHOLDERS:
You are cordially invited to attend the annual meeting of shareholders of
Ferro Corporation which will be held on Friday, April 25, 1997, 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, the adoption of the 1997 Performance Share Plan, the
designation of auditors, the consideration of a shareholder proposal concerning
compensation of non-employee directors, the consideration of a shareholder
proposal concerning declassification of the Board of Directors 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 26, 1997 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
<PAGE> 3
PROXY STATEMENT
ELECTION OF DIRECTORS
The Board of Directors of Ferro presently consists of ten 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 1997 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 Glenn R. Brown, William E. Butler,
John C. Morley and Hector R. Ortino 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 pages 32 and 33 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.
Werner F. Bush resigned as a member of the Board of Directors on September
30, 1996.
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 26, 1997 by each nominee and
each of the other directors who will continue in office after the meeting.
1
<PAGE> 4
<TABLE>
<CAPTION>
NOMINEE FOR ELECTION
<C> <S>
GLENN R. BROWN, age 66, Science Advisor to the Governor of the
BROWN PHOTO State of Ohio. Retired Senior Vice President and Director Standard
Oil Company (now BP America). Dr. Brown joined The Standard Oil
DIRECTOR SINCE 1988 Company (Ohio) in 1953 and, after serving in various assignments,
was elected a Senior Vice President in 1979. 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).
Common Shares owned 3,428 Nominee for term expiring in 2000
WILLIAM E. BUTLER, age 65, Retired Chairman of the Board and Chief
BUTLER PHOTO Executive Officer, Eaton Corporation (engineered products for
automotive, industrial, commercial and military markets). Mr.
DIRECTOR SINCE 1992 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 Applied Industrial
Technologies, Inc. (industrial products 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).
Common Shares owned 1,725 Nominee for term expiring in 2000
JOHN C. MORLEY, age 65, President of Evergreen Ventures, Ltd.
MORLEY PHOTO (private investment company). Retired President and Chief
Executive Officer of Reliance Electric Company (manufacturer of
DIRECTOR SINCE 1987 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 Lamson and Sessions, Inc.
(manufacturer and marketer of consumer and commercial electrical
and polymeric products).
Common Shares owned 4,109 Nominee for term expiring in 2000
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
NOMINEE FOR ELECTION
<C> <S>
HECTOR R. ORTINO, age 54, President and Chief Operating Officer of
ORTINO PHOTO Ferro. He began his career as Treasurer of Ferro Argentina in 1971
and subsequently became Financial Director in 1973. In 1976, Mr.
DIRECTOR SINCE 1993 Ortino was promoted to Managing Director of Ferro 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 and Chief Operating Officer 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), Bunge
International, Inc. (diversified company with businesses in grain
trading, the food industry, chemicals and textiles) and Parker
Hannifin Corporation (producer of motion and control components
for industrial and aerospace markets).
Common Shares owned 113,268 (1) Nominee for term expiring in 2000
ESOP Convertible Preferred Shares beneficially owned 2,708
</TABLE>
<TABLE>
<CAPTION>
DIRECTORS WHOSE TERMS
OF OFFICE WILL CONTINUE
AFTER THE MEETING
<C> <S>
SANDRA HARDEN AUSTIN, age 49, President, Austin & Associates
AUSTIN PHOTO (management consulting firm). Between 1981 and 1988, Ms. Austin
was employed by the Huron Road Hospital in Cleveland, and during
DIRECTOR SINCE 1994 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. In 1995, Ms. Austin was
named President of Caremark Physician Services, a division of
Caremark, Inc. which provides physician practice management
services. Ms. Austin also serves as a director of National City
Corporation and South Shore Bank (bank holding companies) and
Atria Communities, Inc. (provider of assisted and independent
living communities for the elderly).
Common Shares owned 725 Term expires 1999
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
DIRECTORS WHOSE TERMS
OF OFFICE WILL CONTINUE
AFTER THE MEETING
<C> <S>
ALBERT C. BERSTICKER, age 62, Chairman and Chief Executive Officer
BERSTICKER PHOTO of Ferro. Mr. Bersticker began his career as a Research Engineer
with Ferro in 1958. Following various assignments with the
DIRECTOR SINCE 1978 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 348,599 (1) Term expires 1998
ESOP Convertible Preferred Shares beneficially owned 2,712
PAUL S. BRENTLINGER, age 69, a Partner of Morgenthaler Ventures, a
BRENTLINGER PHOTO venture capital partnership which invests in and provides
management advisory services to emerging growth companies. Mr.
DIRECTOR SINCE 1984 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 Teledyne, Inc.
(manufacturer of specialty metals, aerospace and electronic
products and specialized consumer and industrial products).
Common Shares owned 7,829 (1) Term expires 1998
A. JAMES FREEMAN, age 68, Retired Vice Chairman and Chief
FREEMAN PHOTO Executive Officer of Lord Corporation (manufacturer of bonded
rubber specialty products for the automotive industry, adhesives
DIRECTOR SINCE 1986 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), KePRO Inc. (medical peer review
organization) and a member of the Advisory Board of Liberty Mutual
Insurance Company.
Common Shares owned 13,782 (1) Term expires 1998
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
DIRECTORS WHOSE TERMS
OF OFFICE WILL CONTINUE
AFTER THE MEETING
<C> <S>
REX A. SEBASTIAN, age 67, Private Investor. Mr. Sebastian began
SEBASTIAN PHOTO his career with Procter and Gamble. In 1955, he joined Cummins
Engine Company, Inc. where he held several positions including
DIRECTOR SINCE 1988 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 and
Hallwood Energy Corporation (oil and gas exploration and
production).
Common Shares owned 7,164 Term expires 1999
DENNIS W. SULLIVAN, age 58, Executive Vice President, Industrial,
SULLIVAN PHOTO of Parker-Hannifin Corporation (manufacturer of fluid power
products). Mr. Sullivan began his career with Parker-Hannifin
DIRECTOR SINCE 1992 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 company).
Common Shares owned 4,428 Term expires 1999
</TABLE>
- ---------------
(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 -- 101,398 shares, Mr. Brentlinger
-- 150 shares, Mr. Freeman -- 2,000 shares and Mr. Ortino -- 7,252 shares.
The number of shares reported above for Messrs. Bersticker and Ortino
include 29,400 and 15,800 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 and Ortino pursuant to exercisable stock options as of
May 1, 1997 are as follows: Mr. Bersticker 183,750 shares; and Mr. Ortino --
73,125 shares (included in the number of shares reported above).
5
<PAGE> 8
SECURITY OWNERSHIP OF DIRECTORS, OFFICERS AND CERTAIN BENEFICIAL OWNERS
Based on information supplied by them as of February 26, 1997, no
individual director beneficially owns as much as 1% of the outstanding Common
Stock, except Mr. Bersticker, who owns approximately 1.3% of the outstanding
Common Stock, and all directors and officers of Ferro as a group beneficially
own 811,412 shares of Ferro Common Stock, representing approximately 3.1% of its
outstanding shares and 22,181 shares of ESOP Convertible Preferred Stock,
representing approximately 1.7% of the outstanding shares of that series.
Included in the number of shares beneficially owned by officers and directors as
a group are 454,044 shares of Common Stock which could be acquired through
exercisable stock options as of May 1, 1997 and 102,600 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 and
Ortino are set forth below their biographies on pages 4 and 3 of this Proxy
Statement. With respect to the other officers named in the Summary Compensation
Table on page 19 of this Proxy Statement, Mr. Bush beneficially owns 112,002
shares of Common Stock and 2,638 shares of ESOP Convertible Preferred Stock; Mr.
Finch beneficially owns 21,725 shares of Common Stock and 1,588 shares of ESOP
Convertible Preferred Stock; Mr. Friederichsen beneficially owns 14,575 shares
of Common Stock and 516 shares of ESOP Convertible Preferred Stock; and Mr.
Ritondaro beneficially owns 39,842 shares of Common Stock and 2,158 shares of
ESOP Convertible Preferred Stock. The shares reported for Messrs. Bush, Finch,
Friederichsen, and Ritondaro include 76,875, 7,375, 14,125, and 25,375 shares
which may be acquired through exercisable stock options as of May 1, 1997 and
12,600, 7,200, 6,100, and 6,600, 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.
6
<PAGE> 9
<TABLE>
<CAPTION>
AMOUNT AND PERCENT
NAME AND ADDRESS NATURE OF BENEFICIAL OF
OF BENEFICIAL OWNER OWNERSHIP CLASS
- ----------------------------------------------- -------------------- -------
<S> <C> <C>
FMR Corporation................................ 2,531,000(1) 9.9%
82 Devonshire Road
Boston, Massachusetts 02109
Mario J. Gabelli and related entities.......... 2,371,750(2) 9.3%
One Corporate Center
Rye, New York 10017
Prudential Insurance Company of America........ 1,664,900(3) 6.5%
Prudential Plaza
Newark, New Jersey 07102-3777
National City Bank, Trustee.................... 1,338,909(4) 100%
under the Ferro Corporation
Savings and Stock Ownership Plan
1900 East 9th Street
Cleveland, Ohio 44114
<FN>
- ---------------
(1) Information regarding share ownership was obtained from Schedule 13G filed
January 10, 1997, by FMR Corporation.
(2) Information regarding share ownership was obtained from Schedule 13D filed
March 5, 1996 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 10, 1997 by Prudential Insurance Company of America.
(4) The beneficial owners of the Savings and Stock Ownership Plan are
participating employees of the Company. The 1,338,909 shares of Convertible
Preferred Stock are convertible into 2,319,660 shares of Common Stock,
representing approximately 9.1% 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
regulations to furnish Ferro with copies of all Section 16(a) forms they file.
7
<PAGE> 10
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 1996, 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 1996 or prior fiscal years any reports required by Section
16(a) of the Exchange Act.
CERTAIN MATTERS PERTAINING TO THE BOARD OF DIRECTORS
During 1996, 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 1996, 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 1996, 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 functions 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
8
<PAGE> 11
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 1996, 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.
The Finance Committee reviews the Company's financial plans and recommends
actions to management and/or the Board of Directors as the Committee deems
appropriate. The Finance Committee reviews the Company's identified world-wide
financing requirements and its plans to meet such requirements. Included among
its responsibilities is the review of projected world-wide cash flow, the
Company's financial objectives and strategies, major acquisitions, and
investment performance of the Company's pension plans. In addition, the
committee must review and approve the annual capital appropriation budget.
During 1996, the Committee met twice. Ms. Austin and Messrs. Brentlinger,
Sebastian and Sullivan are the current members of the Finance Committee, with
Ms. Austin serving as Chairperson.
9
<PAGE> 12
APPROVAL OF THE 1997 PERFORMANCE SHARE PLAN
Ferro has maintained a Performance Share Plan since 1982. Most recently the
1995 Performance Share Plan was approved by shareholders in 1995.
During the last three years Ferro has introduced a shift in its
compensation philosophy to emphasize incentive-based compensation for its
officers and other senior executives. The proposed revisions to the Performance
Share Plan are necessary to support this shift in emphasis.
Three characteristics of the Performance Share Plan support the Company's
compensation objectives:
a. Payment under the Plan is based wholly on performance.
b. The Plan requires, not just performance in a single year, but
sustained performance over a three-year period.
c. Unlike stock options, awards under the Performance Share Plan can
be (and are) tailored to performance parameters designed for the
characteristics of each of Ferro's business units.
Management believes that long-term incentive compensation should be
weighted more heavily toward the Performance Share Plan than past practice,
which emphasized stock options. Performance shares complement stock options by
rewarding achievement in the specific performance parameters judged most
important to enhancing the Company's overall performance. The award limitations
in the Performance Share Plan, as it was approved by the shareholders in 1995,
are too restrictive for management to realize its goal of emphasizing sustained
performance measured against parameters tailored to the individual business
units. Thus, it has been proposed that the maximum award limitation and
achievement levels be increased to emphasize long-term incentive compensation.
For that reason, the Board of Directors recommends a vote for the approval
of the 1997 Performance Share Plan.
SUMMARY OF CHANGES
The principal changes in the Plan, as compared to the Performance Share
Plan as previously in effect, are:
a. Increasing the maximum degree of attainment applicable to
performance goals (200%); and
10
<PAGE> 13
b. Increasing the maximum award levels to any individual participant
(100,000 shares per award year).
SUMMARY OF THE 1997 PLAN
The purpose of the Plan is to promote the long-term financial interests of
the Company by attracting and retaining executive personnel possessing
outstanding ability and motivating such personnel by means of performance
related incentives to achieve long-range goals. The shares to be issued under
the Plan will be shares of Common Stock. On February 26, 1997, the closing price
of Common Stock on the New York Stock Exchange was $31.50.
The Plan provides for the award, pursuant to written agreements, of
"Performance Shares" to Plan participants. Participants in the Plan are officers
or other key executives of the Company or any subsidiary or affiliate of the
Company selected by a Committee (composed of not less than three directors of
the Company selected by the Board of Directors) to participate in the Plan.
Performance Shares are interests which will be converted into a specific number
of shares of Common Stock at the end of the Performance Period if established
Performance Targets are met, or are shares of Common Stock, which are subject to
the risk of forfeiture, depending upon the degree of achievement of Performance
Targets during the Performance Period. Performance Targets may be established in
terms of Return on Equity, Operating Income as a Return on Net Assets, Operating
Income as a Return on Average Assets Employed, Operating Income Growth Rate, Net
Income Growth Rate, or various combinations of the foregoing. If the Performance
Target has not been fully met at the end of the Performance Period, conversion
or nonforfeiture will occur only to the extent, if any, provided at the time of
the award of such Performance Shares, for the conversion or nonforfeiture of a
portion of Performance Shares based on partial attainment of the Performance
Target; and under such circumstances the balance of any Performance Shares, or
forfeiture shares of Common Stock, for such Performance Period will be
forfeited.
If a participant ceases to be employed by the Company or one of its
subsidiaries because of the participant's death, disability or retirement
pursuant to the applicable established retirement policies, the participant will
be eligible to receive a pro-rata proportion of the Performance Shares awarded,
or a pro-rata portion of the Common Stock awarded shall become nonforfeitable,
following the end of the Performance Period and the determination of the degree
of achievement of the applicable Performance Targets. The pro-rata share shall
be measured by a fraction of which the
11
<PAGE> 14
numerator is the portion of the Performance Period during which the
participant's employment continued and the denominator is the Performance
Period. Except as otherwise provided in the case of a "change in control" (see
discussion below) or in the case of participants who have executive employment
agreements with the Company, if a participant ceases to be employed by either
the Company or one of its subsidiaries for any reason other than death,
disability or retirement pursuant to the applicable established retirement
policies, then the participant will forfeit all Performance Shares and Common
Stock awarded to him other than those Performance Shares or Common Stock
applicable to Performance Periods which have been completed at the time of such
cessation of employment. In the case of those participants who are parties to
executive employment agreements with the Company, employment is deemed to have
continued through the end of the contract term provided for in the employment
agreement unless terminated by the Company for cause or by the participant
without good reason as determined under the terms of the employment agreement.
Currently, there are 11 officers and 10 key executives who are participants in
the Plan.
In the event of a "change in control" of the Company, each participant in
the Plan shall be entitled to receive a pro-rata proportion of the shares of
Common Stock and cash which would have been issued to such participant at the
end of the Performance Period, or if applicable, a pro-rata portion of the
Common Stock shall become nonforfeitable. The pro-rata proportion shall be
measured by a fraction of which the numerator is the portion of the Performance
Period prior to such change in control and the denominator is the Performance
Period. In lieu of issuing shares of Common Stock of the Company upon conversion
of Performance Shares, the Company shall make payment to the participants in
cash based on the "fair market value of the Common Stock," as defined in the
Plan, that would have been issued under the Plan.
The Board of Directors may terminate the Plan at any time. No Performance
Shares will be awarded under the Plan after December 31, 2004. The Board of
Directors may also amend the Plan provided that no change may be made which
would impair the rights of any participant to whom an award of Performance
Shares has been made without the consent of such participant. The Board may
amend the Plan to permit assignment, encumbrance and transfer of the rights and
interests of participants if and to the extent that such amendment would not
produce adverse consequences under tax or securities laws. Moreover, the Board
of Directors may not, without the approval of the shareholders, make any
amendment which would materially increase the benefits accruing to participants
under the Plan, materially increase the aggregate number of shares which may be
issued (other than an increase
12
<PAGE> 15
reflecting a change in the capitalization of the Company) or change the class of
employees eligible to participate in the Plan.
AWARDS UNDER THE PLAN
The following table sets forth information regarding the number of
Performance Shares that would have been paid out for the 1994 to 1996 period if
the 1997 Performance Share Plan had been in effect.
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES PAID OUT
- --------------------------------------------------------- -------------------------
<S> <C>
A.C. Bersticker
Chairman and Chief Executive
Officer................................................ 1,779 shares
H.R. Ortino
President and Chief
Operating Officer...................................... 806 shares
W.F. Bush(1)
Executive Vice President and
Chief Operating Officer................................ 806 shares
R.J. Finch
Vice President, Specialty
Plastics............................................... 511 shares
J.B. Friederichsen
Vice President, Specialty
Chemicals.............................................. 0 shares
G.H. Ritondaro
Vice President and Chief
Financial Officer...................................... 305 shares
Executive Group.......................................... 5,042 shares
Non-Executive Officer Employee Group..................... 3,560 shares
<FN>
- ---------------
NOTE:
(1) Mr. Bush ceased to be an executive officer of the Company on September 30,
1996 when he stepped down as Executive Vice President and Chief Operating
Officer.
</TABLE>
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 the adoption of the 1997 Performance
Share Plan.
THE BOARD OF DIRECTORS URGES YOU
TO VOTE "FOR" APPROVAL OF THE 1997 PERFORMANCE SHARE 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, 1997. KPMG Peat
Marwick LLP has acted 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 1996, were as follows:
1. Annual salary level for Messrs. Bersticker, Ortino and Bush
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 1996:
1. A salary level of $580,000, which is at the midpoint of competitive
market salary data as reported by TPF&C;
2. An annual incentive plan cash bonus target amount equal to 65% of
salary. Fifty-five 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%. Ten 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 1996 as reported by TPF&C.
3. An award of options for 48,000 shares under the Ferro Stock Option
Plan.
4. A Performance Share award of 16,600 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
Share 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 1996. The determination of the actual award was
made in January, 1997. The award was fixed at 105% of target, or $60,900.
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 1996 long term incentive compensation
levels for senior executive officers in the third quartile of competitive market
data as reported by TPF&C.
In 1996, Ferro's attainment of profitability performance improved over 1995
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.
Ortino, Finch, Friederichsen, and Ritondaro, 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. Finch,
Friederichsen, and Ritondaro 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.
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 1996.
S. Harden Austin, G. R. Brown, W. E. Butler, J. C. Morley
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, 1996 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 S&P SPECIALTY
(FISCAL YEAR COVERED) FERRO CORPORATION S&P 500 INDEX CHEMICALS INDEX
<S> <C> <C> <C>
1991 100 100 100
1992 109 108 106
1993 131 118 121
1994 99 120 105
1995 99 165 139
1996 123 203 142
<FN>
Note:
(1) Assumes $100 invested on December 31, 1991 in Ferro Common Stock, S&P 500
Index and S&P Specialty Chemicals Index.
</TABLE>
18
<PAGE> 21
SUMMARY COMPENSATION TABLE
The following table shows on an accrual basis the elements of compensation
paid or awarded during each of the three years ended December 31, 1996 to the
Chief Executive Officer, each of the other four highest paid executive officers
of Ferro and Werner F. Bush. Mr. Bush ceased to be an executive officer of the
Company on September 30, 1996 when he stepped down as Executive Vice President
and Chief Operating Officer.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
AWARDS
--------------------------
ANNUAL COMPENSATION PERFORMANCE ALL OTHER
- ------------------------------------------------------------- SHARE PLAN OPTIONS COMPEN-
NAME AND SALARY BONUS AWARD(1) (NO. OF SATION
PRINCIPAL POSITION YEAR ($) ($) ($) SHARES)(2) ($)(3)
- ---------------------------- ----- -------- -------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
A.C. Bersticker............. 1996 580,000 291,508 392,175 48,000 39,913
Chairman and Chief 1995 549,000 169,531 153,600 30,000 26,025
Executive Officer 1994 530,000 160,749 217,600 30,000 22,435
H.R. Ortino................. 1996 388,000 159,129 236,250 30,000 30,242
President and Chief 1995 311,000 86,306 69,600 15,000 23,714
Operating Officer 1994 251,334 96,692 98,600 9,000 23,264
W.F. Bush(4)................ 1996 375,000 123,248 160,650 19,500 25,112
Executive Vice President 1995 362,000 87,896 69,600 15,000 21,538
and Chief Operating 1994 350,000 82,852 98,600 15,000 17,991
Officer
R.J. Finch.................. 1996 210,900 102,613 77,963 9,500 13,024
Vice President, Specialty 1995 191,700 38,416 33,600 4,000 10,322
Plastics 1994 191,700 16,093 47,600 3,000 9,317
J.B. Friederichsen.......... 1996 227,500 73,164 103,950 12,500 14,692
Vice President, Specialty 1995 182,000 67,042 33,600 4,000 18,069
Chemicals 1994 146,504 15,156 47,600 3,000 87,987
G.H. Ritondaro.............. 1996 200,000 60,920 103,950 12,500 18,730
Vice President and Chief 1995 155,300 32,735 26,400 2,500 14,664
Financial Officer 1994 150,000 24,874 37,400 2,500 14,029
</TABLE>
- ---------------
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. 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, 1996, the persons listed
above hold the following number of Performance Shares, valued at the value
of the underlying shares at December 31, 1996, applicable to performance
periods not yet completed: Mr. Bersticker, 23,000 shares, valued at
$652,625; Mr. Ortino,
19
<PAGE> 22
12,900 shares, valued at $366,038; Mr. Bush, 9,700 shares, valued at
$275,238; Mr. Finch, 4,700 shares, valued at $133,363; Mr. Friederichsen,
5,800 shares, valued at $164,575; and Mr. Ritondaro, 5,500 shares, valued at
$156,063. 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.
(2) Stock Option grants were awarded on the following dates: January 28, 1994,
January 18, 1995, and January 17, 1996.
(3) In the year ended December 31, 1996, All Other Compensation includes company
matching payments under the Ferro ESOP, as follows: Mr. Bersticker, $6,107,
Mr. Ortino, $6,107, Mr. Bush, $6,107, Mr. Finch, $6,107, Mr. Friederichsen,
$5,937, and Mr. Ritondaro, $5,937; personal use of leased automobiles, as
follows: Mr. Bersticker, $4,115, Mr. Ortino, $4,303, Mr. Bush, $5,467, Mr.
Finch, $4,191, Mr. Friederichsen, $1,881, and Mr. Ritondaro, $5,935; taxable
portion of benefits under health, hospitalization, and life insurance
programs, as follows: Mr. Bersticker, $9,126, Mr. Ortino, $3,744, Mr. Bush,
$4,587, Mr. Friederichsen, $3,510, and Mr. Ritondaro, $3,668; individual tax
services, as follows: Mr. Bersticker, $7,225, Mr. Ortino, $4,500, Mr. Bush,
$3,325; and in the case of Mr. Ortino, home leave benefits of $4,106. In
addition, dividends received from restricted stock granted under Performance
Share Plans were as follows: Mr. Bersticker, $13,340, Mr. Ortino, $7,482,
Mr. Bush, $5,626, Mr. Finch, $2,726, Mr. Friederichsen, $3,364, and Mr.
Ritondaro, $3,190.
(4) Mr. Bush ceased to be an executive officer of the Company on September 30,
1996 when he stepped down as Executive Vice President and Chief Operating
Officer.
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
under Ferro's stock option plan during the fiscal year ended December 31, 1996.
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.
20
<PAGE> 23
OPTION GRANTS IN 1996
<TABLE>
<CAPTION>
% OF
TOTAL
OPTIONS
GRANTED GRANT DATE
TO PRESENT
OPTIONS EMPLOYEES EXERCISE EXPIRATION VALUE(1)
NAME GRANTED IN 1996 PRICE DATE $
- ---------------------------------- ------- --------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C>
A.C. Bersticker
Chairman and Chief Executive
Officer........................... 48,000 12.3% $23.625 1/17/2006 $408,960
H.R. Ortino
President and Chief Operating
Officer........................... 30,000 7.7% $23.625 1/17/2006 $255,600
W.F. Bush(2)
Executive Vice President and Chief
Operating Officer................. 19,500 5.0% $23.625 1/17/2006 $166,140
R.J. Finch
Vice President, Specialty
Plastics.......................... 9,500 2.4% $23.625 1/17/2006 $ 80,940
J.B. Friederichsen
Vice President, Specialty
Chemicals......................... 12,500 3.2% $23.625 1/17/2006 $106,500
G.H. Ritondaro
Vice President and Chief Financial
Officer........................... 12,500 3.2% $23.625 1/17/2006 $106,500
<FN>
- ---------------
Notes:
(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 using month-end stock prices for the
past three years prior to grant date; and (d) the stock's annualized
dividend yield also over the past three years.
(2) Mr. Bush ceased to be an executive officer of the Company on September 30,
1996 when he stepped down as Executive Vice President and Chief Operating
Officer.
</TABLE> 21
<PAGE> 24
The following table shows information regarding stock option exercises
during 1996 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 1996 1996(1)
ACQUIRED -------------- -------------
ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- --------------------------------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C>
A.C. Bersticker N/A N/A 149,250/93,000 $1,250,441/
Chairman and Chief Executive $326,438
Officer
H.R. Ortino N/A N/A 55,875/51,000 $ 458,716/
President and Chief Operating $191,719
Officer
W.F. Bush (2) N/A N/A 62,250/40,500 $ 587,287/
Executive Vice President and $141,844
Chief Operating Officer
R.J. Finch N/A N/A 9,250/14,750 $ 35,313/
Vice President, Specialty $58,250
Plastics
J.B. Friederichsen N/A N/A 2,500/17,000 $ 4,375/
Vice President, Specialty $72,500
Chemicals
G.H. Ritondaro N/A N/A 20,250/16,375 $ 216,223/
Vice President and Chief $67,579
Financial Officer
<FN>
- ---------------
Notes:
(1) Value of unexercised in-the-money options is based on Ferro's NYSE closing
common stock price on December 31, 1996, of $28.375.
(2) Mr. Bush ceased to be an executive officer of the Company on September 30,
1996 when he stepped down as Executive Vice President and Chief Operating
Officer.
</TABLE>
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. The Plan has a three year performance cycle ending on
December 31, 1998. 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
22
<PAGE> 25
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 1996
<TABLE>
<CAPTION>
ESTIMATED FUTURE SHARE PAYOUTS
NUMBER OF -------------------------------------------
NAME SHARES(a) THRESHOLD(b) TARGET(c) MAXIMUM(d)
- --------------------------------- --------- ------------ ----------- ----------
(IN SHARES)
<S> <C> <C> <C> <C>
A.C. Bersticker 16,600 4,150 16,600 20,750
Chairman and Chief Executive
Officer
H.R. Ortino 10,000 2,500 10,000 12,500
President and Chief
Operating Officer
W.F. Bush(e) 6,800 1,700 6,800 8,500
Executive Vice President and
Chief Operating Officer
R.J. Finch 3,300 825 3,300 4,125
Vice President, Specialty
Plastics
J.B. Friederichsen 4,400 1,100 4,400 5,500
Vice President, Specialty
Chemicals
G.H. Ritondaro 4,400 1,100 4,400 5,500
Vice President and Chief
Financial Officer
<FN>
- ---------------
Notes:
(a) The Plan has a three year performance cycle ending December 31, 1998.
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, Ortino and Bush. For Messrs. Finch,
Friederichsen, and Ritondaro, 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. Bush ceased to be an executive officer of the Company on September 30,
1996 when he stepped down as Executive Vice President and Chief Operating
Officer.
</TABLE>
23
<PAGE> 26
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 1996). 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 and if the officer signs a non-competition agreement. 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 their covered compensation
was the highest would be as indicated. As of December 31, 1996, Messrs.
Bersticker, Ortino,
24
<PAGE> 27
Bush, Finch, Friederichsen, and Ritondaro had 38, 25, 32, 5, 2, and 10 years of
service, respectively.
<TABLE>
<CAPTION>
YEARS OF SERVICE AT AGE 65
ASSUMED RETIREMENT IN 1996
REGULAR -----------------------------------------------------------------
COMPENSATION 15 20 25 30 35
- --------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$ 200,000 $ 46,256 $ 61,675 $ 77,093 $ 92,512 $ 92,512
300,000 71,256 95,008 118,760 142,512 142,512
400,000 96,256 128,341 160,427 192,512 192,512
500,000 121,256 161,675 202,093 242,512 242,512
600,000 146,256 195,008 243,760 292,512 292,512
700,000 171,256 228,341 285,427 342,512 342,512
800,000 196,256 261,675 327,093 392,512 392,512
900,000 221,256 295,008 368,760 442,512 442,512
1,000,000 246,256 328,341 410,427 492,512 492,512
1,100,000 271,256 361,675 452,093 542,512 542,512
1,200,000 296,256 395,008 493,760 592,512 592,512
</TABLE>
- ---------------
The five year average covered compensation for the individuals listed in
the Summary Compensation Table was: Mr. Bersticker, $957,146; Mr. Ortino,
$492,228; Mr. Bush, $531,957; Mr. Finch, $233,865; Mr. Friederichsen, $218,432;
and Mr. Ritondaro, $244,797. See page 26 of this Proxy Statement for a
description of an agreement entered into with Mr. Bush pertaining to his
retirement.
EXECUTIVE EMPLOYMENT AGREEMENTS
Ferro is a party to executive employment agreements (the "Executive
Employment Agreements") with 10 of its officers, including each of the
individuals named in the summary compensation table on page 19 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.
Benefits are payable under the Executive Employment Agreements if the
officer's employment is terminated for reasons other than for cause, disability,
death or
25
<PAGE> 28
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, Ortino, and Bush 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 1996, Ferro entered into an agreement with Mr. Bush which provides for
his compensation as an employee of the Company after he stepped down as
Executive Vice President and Chief Operating Officer on September 30, 1996. The
agreement supersedes his executive employment agreement and provides that Mr.
Bush would continue to be paid his existing salary through December 31, 1996 and
will be entitled
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to bonus participation for 1996 as if he had remained employed in his executive
capacity for the full year.
Beginning January 1, 1997 through January 3, 2000, Mr. Bush will be
retained on the payroll and will be paid an annual salary of $543,750 in return
for his services. In addition, Mr. Bush will be entitled to continued
participation in certain employee benefit plans through January 3, 2000.
Mr. Bush will be deemed to have retired as of February 1, 2000 with respect
to his rights under the Ferro Stock Option Plan and Performance Share Plan. Also
commencing February 1, 2000, Mr. Bush will be eligible to participate as a
retiree in the Ferro Salaried Retiree Medical Program and will be entitled to
receive a monthly pension in an amount determined in accordance with the
provisions of the Ferro Corporation Retirement Plan and the Ferro Corporation
Excess Benefits Plan. See page 24 of this Proxy Statement for a description of
the retirement plans.
SHAREHOLDER PROPOSALS
PROPOSAL NO. 1
Mr. Kenneth Steiner, of 16 Stoner Avenue, Great Neck, New York 11021, who
states that he is the beneficial owner of 945 shares of common stock of Ferro
Corporation and that he has held such shares continuously for at least one year,
has notified the Company in writing that he intends to present a resolution for
action by the shareholders at the Annual Meeting. The text of the resolution and
supporting statement, as presented to the Company, is as follows:
STOCK COMPENSATION PROPOSAL
"RESOLVED, that the shareholders recommend that the Board of Directors take
the necessary steps to ensure that from here forward all non-employee
directors should receive a minimum of fifty percent (50%) of their total
compensation in the form of Company stock which cannot be sold for three
years."
SUPPORTING STATEMENT
A significant equity ownership by non-employee directors is probably the
best motivator for enhancing shareholder value and facilitating
identification with shareholders.
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Traditionally, non-employee directors were routinely compensated with a
fixed fee, regardless of corporate performance. In today's competitive
global economy, outside directors must exercise critical oversight of
management's performance in fostering corporate profitability and
shareholder value.
What is being recommended in this proposal is neither novel nor untried. A
number of corporations have already established versions of such practices,
namely, Alexander & Alexander, Baxter International, Hartford Steam Boiler,
James River, McGraw Hill, NYNEX, RJR Nabisco, Sunbeam Corporation, The
Travelers, Westinghouse, Woolworth, and Zurn Industries.
In June, 1995, the National Association of Corporate Directors' (NACD) Blue
Ribbon Commission on Director Compensation issued a report urging that
directors of public companies be paid their annual fees primarily in
company stock to more closely align their interests with those of
shareholders. Several widelyreported empirical studies have confirmed the
potential efficacy of this approach. Research conducted by Professor
Charles M. Elson of the Stetson University Law School found that those
companies whose outside directors held substantial amounts of company stock
tended both to compensate their executives more reasonably, and outperform
those businesses where the directors held little or no equity, suggesting a
link between director stock ownership and better corporate oversight and
performance.
It can be argued that awarding stock options to outside directors
accomplishes the same purpose of insuring director's allegiance to a
company's profitability as paying them in stock. However, it is my
contention that stock options entail no downside risk, i.e., while stock
options offer rewards should the stock increase, if the stock price
decreases, no penalties ensue. There are few strategies that are more
likely to align the interests of outside directors with those of
shareholders than one which results in their sharing of the same bottom
line. I urge your support. Vote for this resolution.
BOARD OF DIRECTORS' STATEMENT IN OPPOSITION
THE BOARD OF DIRECTORS, FOR THE REASONS STATED BELOW, RECOMMENDS A VOTE
"AGAINST" PROPOSAL NO. 1.
The Board of Directors and the management of the Company support the view
that non-employee directors should have an economic interest in the Company.
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Nevertheless, there are at least three reasons why shareholders should vote
against Proposal No. 1.
First, the Company's compensation package for non-employee directors
already includes two elements of Company stock. At the 1996 Annual Meeting the
shareholders approved an annual, automatic grant of options to directors. Thus,
each director receives 2,500 options per year, which become exercisable over a
period of four years. In addition, since 1995, Company directors have had the
opportunity to receive a portion of their fees in the form of Company stock.
During 1996, five of our eight non-employee directors received their
remuneration in this manner.
Second, the Company's current approach of a voluntary program to acquire
additional stock is preferable to an inflexible requirement that directors
receive at least half of their remuneration in restricted stock. The stock
provided to the directors would constitute taxable income for which the
directors would not be given cash in order to pay the taxes. Because the
directors would be prohibited from selling any of that stock for three years,
the Company would be offering a highly unattractive form of director
remuneration. It is essential that the Company be able to attract and retain
directors of the highest quality, individuals whose services are in demand. The
Company must have the ability to offer a competitive remuneration package, as
well as the flexibility to adjust to changing trends in director compensation
and to the unique circumstances of each potential candidate for the Board.
Third, it is unfair and inaccurate to suggest that directors will be more
dedicated to the Company or make higher quality judgments if they are obligated
to receive half of their remuneration in restricted stock. The Company's
directors understand their responsibilities and are completely dedicated to
fulfilling them. The form of remuneration does not affect the quality of a
director's performance.
In conclusion, the Board of Directors believes that the current
non-employee directors compensation package is competitive with industry
standards, and that implementation of this proposal would not benefit the
Company, and indeed would significantly impair its ability to attract and retain
qualified candidates to serve as directors.
THE BOARD OF DIRECTORS URGES YOU
TO VOTE "AGAINST" PROPOSAL NO. 1.
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PROPOSAL NO. 2
Mr. Charles Miller, of 23 Park Circle, Great Neck, New York 11024, who
states that he is the beneficial owner of 200 shares of common stock of Ferro
Corporation and that he has held such shares continuously for at least one year,
has notified the Company in writing that he intends to present a resolution for
action by the shareholders at the Annual Meeting. The text of the resolution and
supporting statement, as presented to the Company, is as follows:
ELIMINATE CLASSIFIED BOARD OF DIRECTORS RESOLUTION
"RESOLVED, that the stockholders of the Company request that the Board of
Directors take the necessary steps, in accordance with state law, to
declassify the Board of Directors so that all directors are elected
annually, such declassification to be effected in a manner that does not
affect the unexpired terms of the directors previously elected."
SUPPORTING STATEMENT
The election of directors is the primary avenue for stockholders to
influence corporate governance policies and to hold management accountable
for implementation of those policies. I believe that the classification of
the Board of Directors, which results in only a portion of the Board being
elected annually, is not in the best interests of the Company and its
stockholders.
The Board of Directors of the Company is divided into three classes serving
staggered three-year terms. I believe that a Company's classified Board of
Directors maintains the incumbency of the current Board and therefore of
current management, which in turn limits management's accountability to
shareholders.
The elimination of the Company's classified board would require each new
director to stand for election annually and allow the stockholders an
opportunity to register their views on the performance of the Board
collectively and each director individually. I believe that this is one of
the best methods available to the stockholder to insure that the Company
will be managed in a manner that is in the best interests of the
stockholders.
A classified board might also be seen as an impediment to a potential
takeover of the Company's stock at a premium price. With the inability to
replace the majority of the Board at one annual meeting, an outside suitor
might be reluctant to make an offer in the first place.
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I am a founding member of the Investors Rights Association of America and I
believe that the concerns expressed by companies with classified boards
that the annual election of all directors could leave companies without
experienced directors in the event that all incumbents are voted out by
stockholders, are unfounded. In my view, in the unlikely event that the
stockholders vote to replace all directors, this decision would express
stockholder dissatisfaction with the incumbent directors and reflect the
need for change. I urge your support. Vote for this resolution.
BOARD OF DIRECTORS' STATEMENT IN OPPOSITION
THE BOARD OF DIRECTORS, FOR THE REASONS STATED BELOW, RECOMMENDS A VOTE
"AGAINST" PROPOSAL NO. 2.
The Company's Board has been classified since the 1969 Annual Meeting, when
less than 1% of the shares were voted against classification. Since that time,
shareholder resolutions to declassify the Board have been proposed seven times
and the proposals have never received more than 20% support.
We believe that a classified Board is in the shareholders' best interest
for two reasons. First, as cited in past Company proxy statements, a classified
Board facilitates the continuity of director input into strategic planning and
other management oversight and thereby enables the Company to develop and carry
out long-range plans. The experience of the holdover directors serves to
minimize disruptions to the Company's leadership, and the holdover directors can
provide invaluable insight into the rationale and historical consequences of
past decisions.
Second, a classified Board makes it more likely that a potential acquiror
of the Company would offer a full and fair price to the shareholders, because a
classified Board makes it more difficult for the acquiror to use a proxy contest
in order to achieve its objectives without fairly compensating the Company's
existing shareholders. In other words, a classified Board strengthens the
ability of the directors to fulfill their obligations to the shareholders.
Moreover, the Board is not aware of any offer to acquire the Company that would
have been made had the Company not had a classified Board.
In conclusion, the Board of Directors believes that classification is
critical in providing the highest quality of management and that a classified
Board is particularly important in the current Merger and Acquisition
environment where some
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takeover artists are acquiring control of public companies, not for dollars, but
with votes and proxy contests.
THE BOARD OF DIRECTORS URGES YOU
TO VOTE "AGAINST" PROPOSAL NO. 2.
SHAREHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
Any shareholder who intends to present a proposal at the 1998 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 11, 1997.
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
1997 annual meeting is February 26, 1997. On that date the outstanding voting
securities of Ferro were 25,631,708 shares of Common Stock, having a par value
of $1 each and 1,334,400 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
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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 13, 1997
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EXHIBIT A
FERRO CORPORATION
1997 PERFORMANCE SHARE PLAN
1. Purpose. The purpose of the 1997 Ferro Corporation Performance Share Plan
is to promote the long-term financial interests and growth of the Corporation,
by (i) attracting and retaining executive personnel possessing outstanding
ability; (ii) motivating executive personnel, by means of performance-related
incentives, to achieve long-range performance goals; (iii) providing incentive
compensation opportunities competitive with those of other major corporations;
and (iv) furthering the identity of interests of Participants with those of the
stockholders of Ferro Corporation through opportunities for increased stock
ownership in the Corporation.
2. Definitions. The following definitions are applicable to this Plan:
(a) "Committee" means the committee of the Board of Directors referred to
in Section 4.
(b) "Common Stock" means shares of the Corporation as specified in
Section 7.
(c) "Corporation" means Ferro Corporation.
(d) "Equity" means with respect to any fiscal year the average
stockholders' equity of the Corporation (less any portion thereof attributable
to preferred stock), as determined by the Corporation's Independent Auditors.
(e) "Growth Rate" shall mean the growth rate determined by measuring the
specific performance being measured during the first year of the Performance
Period as compared to such performance during the fiscal year immediately
preceding the commencement of the Performance Period; the growth rate determined
by measuring such performance during the second year of the Performance Period
as compared to such performance during the first year of the Performance Period;
the growth rate determined by measuring such performance during the third year
of the Performance Period as compared to such performance during the second year
of the Performance Period; and continuing the foregoing procedure for each year
of the Performance Period; and then calculating a simple arithmetic average of
the individual year growth rates as calculated above to determine the applicable
growth rate for the Performance Period.
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(f) "Independent Auditors" means with respect to any fiscal year the
independent public accountants appointed by the Board of Directors of the
Corporation to audit the consolidated financial statements of the Corporation on
behalf of the Shareholders and the Board of Directors of the Corporation.
(g) "Net Income" means with respect to any fiscal year the consolidated net
income of the Corporation for such year after provision for all costs and
expenses including the expenses incurred by the Plan, and federal, state, local
and foreign income taxes, and provision for dividends on preferred stock; all as
determined by the Corporation and audited by the Corporation's Independent
Auditors.
(h) "Operating Income" means operating income of the applicable business
unit or units of the Corporation adjusted, if appropriate, to exclude the effect
of extraordinary items, as determined by the internal accounting records of the
Corporation prepared in the ordinary course of its business.
(i) "Participant" means an officer or other key executive of the
Corporation or of any subsidiary or affiliate of the Corporation, selected by
the Committee to participate in this Plan.
(j) "Performance Period" refers to the period during which the Performance
Target is measured.
(k) "Performance Shares" means interests in this Plan which will be
represented by or converted into shares of Common Stock or cash or a combination
of Common Stock and cash, and distributed to Participants or, in the case of
shares of Common Stock, become non-forfeitable, after the end of the Performance
Period based upon the level of achievement of the Performance Targets.
(l) "Performance Targets" means pre-determined goals established by the
Committee. The Performance Targets determine the extent to which Performance
Shares are converted into Common Stock and cash, or the extent to which Common
Stock previously issued hereunder shall be forfeited.
(m) "Plan" means the 1997 Ferro Corporation Performance Share Plan as the
same may be amended from time to time.
(n) "Return on Average Assets Employed" means the return on average assets
employed by the applicable business unit or units of the Corporation as
determined by the internal accounting records of the Corporation prepared in the
ordinary course of its business.
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(o) "Return on Equity" means with respect to any fiscal year Net Income for
the year divided by Equity.
(p) "Return on Net Assets" means the return on average assets employed, net
of average liabilities outstanding, by and of the applicable business unit or
units of the Corporation as determined by the internal accounting records of the
Corporation prepared in the ordinary course of its business.
(q) "Value of Common Stock" means the average closing price per share of
the Common Stock on the New York Stock Exchange for each day such shares are
traded during the first ten (10) calendar days of December.
(r) "1995 Plan" means the 1995 Performance Share Plan of the Corporation
heretofore in effect.
3. Operation of Plan. The Committee will authorize an award of a specific
number of Performance Shares to each Participant as of the first day of each
Performance Period. Performance Targets will be established at the beginning of
each Performance Period. If at the end of the Performance Period the Performance
Target is fully met, Performance Shares granted hereunder will be converted into
shares of Common Stock and cash, or Common Stock issued hereunder will in part
become non-forfeitable and in part be repurchased by the Company, all in the
manner determined by the Committee and set forth in the applicable Performance
Share Award Agreement. If the Performance Target has not been fully met,
conversion, or non-forfeiture, will occur only to the extent, if any, provided
at the time of the award of Performance Shares, for the partial attainment of
the Performance Target, and the balance of Performance Shares for such
Performance Period will be forfeited.
Performance Targets may be established in terms of Return on Equity,
Operating Income as a Return on Net Assets, Operating Income as a Return on
Average Assets Employed, Operating Income Growth Rate and Net Income Growth
Rate, or various combinations of the foregoing.
The award level shall be calculated as a percentage of salary by applying
such percentage to the Participant's salary and dividing such resulting number
by the Value of Common Stock during the fiscal year prior to the commencement of
the applicable Performance Period.
The maximum payout with respect to any award made for any Performance
Period commencing on or after January 1, 1997 shall be 200% of the Target Level
set with respect to the award, and the maximum payout for any Performance Period
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(doubled if bi-annual grants are utilized) with respect to any Participant shall
be 100,000 shares, or a combination of shares and cash equal to the dollar
equivalent thereof, subject to adjustment as provided in Section 8 hereof.
The Committee shall have the authority to make adjustments by reason of
special matters, such as acquisitions or special charges.
Extraordinary items, and the effect of extraordinary items, shall be
excluded, in the determination of standards used for the measurement of
Performance Targets, and the degree of achievement thereof, if and to the extent
so determined by the Committee.
The Corporation may adopt a practice of bi-annual grants, rather than
annual grants in which event the grant levels shall be double the normal annual
grant levels.
The standards reflected above are intended to preserve to the Committee
some degree of flexibility in responding to economic and competitive conditions,
individual situations, and the evaluation of individual performance and the
economic potential and business plans of various units of the Corporation.
4. Administration. This Plan shall be administered under the supervision of a
committee (herein 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 each be "disinterested persons" within the meaning of Rule
16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or any successor rule or statute.
5. Participation. The Committee will select Participants from time to time
from those employees of the Corporation and its subsidiaries and affiliates who,
in the opinion of the Committee, have the capacity for contributing in a
substantial measure to the successful performance of the Corporation.
6. Terms and Conditions of Performance Share Awards. All Performance Shares
awarded under the Plan shall be subject to the following terms and conditions
and to such other terms and conditions not inconsistent with the Plan as shall
be prescribed by the Committee:
(a) If a Participant ceases to be an employee of the Corporation, its
subsidiaries or affiliates (for reasons other than death, disability or
retirement pursuant to an established retirement plan or policy of the
Corporation, subsidiaries or affiliates), Performance Shares and Common Stock
awarded to the Participant other than those applicable to Performance Periods
which have been completed at the time of such
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cessation of employment, shall be forfeited except (i) as otherwise provided
herein in the case of a Change of Control and (ii) in the case of those
Participants who are parties to Employment Agreements with the Corporation, for
the purposes of this Plan, employment shall be deemed to have continued through
the end of the Contract Term provided for in such Employment Agreements unless
terminated by the Corporation for Cause or by the Participants without Good
Reason, all as determined under the terms of such Employment Agreements.
(b) If a Participant ceases to be an employee of the Corporation, its
subsidiaries or affiliates due to death, disability or retirement pursuant to a
retirement plan or policy of the Corporation, the subsidiary or affiliate, he
will be eligible to receive a pro-rata proportion of the Performance Shares
awarded or, if applicable, a pro-rata portion of the Common Stock awarded shall
become non-forfeitable, following the end of the Performance Period and the
determination of the degree of achievement of the applicable Performance
Targets, such pro-rata proportion or portion to be measured by a fraction of
which the numerator is the portion of the Performance Period during which the
Participant's employment continued and the denominator is the Performance
Period.
(c) In the case of a "Change in Control" of the Corporation all previously
established Performance Targets will be conclusively deemed to have been met.
For purposes hereof, a "Change in Control" of the Corporation shall mean a
Change in Control of the Corporation of a nature that would be required to be
reported (assuming such event has not been "previously reported") in response to
Item 6(e) of schedule 14A of Regulation 14A promulgated under the Exchange Act;
provided that, without limitation, a Change In Control shall be deemed to have
occurred at such time as (i) any "person" within the meaning of section 14(d) of
the Exchange Act, is or becomes the beneficial owner, directly or indirectly, of
securities of the Corporation representing 50% or more of the combined voting
power of the Corporation's then outstanding securities, or (ii) during any
period of two consecutive years, individuals who at the beginning of such period
constitute the Board of Directors of the Corporation cease for any reason to
constitute at least a majority thereof unless the election, or the nomination
for election by the Corporation's shareholders, of each new director was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of the period.
In the event of a Change of Control of the Corporation:
(i) Participants shall be entitled to receive a pro-rata proportion of
the shares of Common Stock and cash which would have been issued or
delivered to
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them at the end of the Performance Period or, if applicable, a pro-rata
portion of the Common Stock shall become non-forfeitable, (recognizing that
the Performance Targets are conclusively deemed to have been met by reason
of the Change of Control of the Corporation), such pro-rata proportion or
portion to be measured by a fraction of which the numerator is the portion
of the Performance Period prior to such Change of Control of the
Corporation, and the denominator is the Performance Period;
(ii) In lieu of issuing shares of Common Stock of the Corporation upon
such conversion of Performance Shares, the Corporation shall make payment
to the Participants in cash based on the fair market value of the Common
Stock that would have been issued under paragraph (i) above (but for this
paragraph (ii)), or, if applicable, Common Stock which has become
non-forfeitable under paragraph (i) above shall be repurchased by the
Corporation at the fair market value of the Common Stock;
(iii) The "fair market value of the Common Stock" for this purpose
shall be the higher of (x) the closing price on the New York Stock Exchange
for Ferro Corporation Common Stock on the date such Change of Control of
the Corporation occurs or (y) the highest price per share of Ferro
Corporation Common Stock actually paid in connection with such Change of
Control;
(iv) Cash payments to Participants shall be due and payable, and shall
be paid by the Corporation, immediately upon the occurrence of such Change
of Control of the Corporation; provided, however, no such payment shall be
due and payable with respect to any Performance Share award prior to the
expiration of seven months from the date of grant of such award; and
(v) After the payment provided for in (iv) above the Participants
shall have no further rights under awards of Performance Shares outstanding
at the time of such Change of Control of the Corporation.
(d) At the time of an award of Performance Shares the Participant shall
enter into a Performance Share Award Agreement with the Corporation in a form
specified by the Committee, agreeing to the terms and conditions of the award
and other such matters as the Committee shall in its sole discretion determine.
7. Shares Subject to the Plan. The shares to be issued under the Plan shall be
shares of Common Stock and may be authorized but unissued shares or issued
shares reacquired and held as treasury shares as the Committee may from time to
time determine. Subject to adjustment in the number and kind of shares as
provided in
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Section 8 hereof and, subject to the immediately following sentence of this
Section, the number of shares of Common Stock reserved for awards under the Plan
shall be equal to the number of shares remaining available for issuance under
the 1995 Plan at the time of adoption of this Plan by the Shareholders of the
Corporation increased by (i) 750,000 shares and (ii) by the number of
Performance Shares outstanding under the 1995 Plan, if any, which are canceled
or forfeited under the terms of the 1995 Plan.
The maximum number of shares which shall be available for new awards under
the Plan at any particular time shall be the maximum number obtained by
subtracting from the total number of shares reserved under the Plan the sum of
(a) the number of shares of Common Stock represented by Performance Share
awards outstanding under the Plan for unexpired Performance Periods, plus
(b) the number of shares of Common Stock represented by potentially
forfeitable Common Stock issued with respect to Performance Share awards
outstanding under the Plan for unexpired Performance Periods, plus
(c) the number of shares of Common Stock previously issued under the Plan
upon conversion of Performance Shares or which have become non-forfeitable under
the Plan, plus
(d) the number of Performance Shares under the Plan which settled by the
payment of cash, plus
(e) the number of shares of Common Stock previously issued under the Plan
which have been repurchased by the Corporation pursuant to the terms and
requirements of the Plan or a Performance Share Award Agreement;
with all of the foregoing (a) through (e) to be interpreted to avoid counting
the same shares twice.
8. Adjustments Upon Changes in Capitalization. In the event of any change in
the outstanding shares of Common Stock by reason of any reorganization,
recapitalization, stock split, stock dividend, combination or exchange of
shares, merger, consolidation or any change in the corporate structure or shares
of the Corporation, the maximum aggregate number and class of shares as to which
awards may be granted under the Plan and the shares issuable pursuant to then
outstanding Performance Shares shall be appropriately adjusted by the Committee,
whose determination shall be final.
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In the event the Corporation shall at any time when a Performance Share
award 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 of the
Corporation, 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 (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.
9. Assignment and Transfer. The rights and interests of a Participant under
the Plan may not be assigned, encumbered or transferred except, in the event of
the death of a Participant, by will or the laws of descent and distribution;
provided, however, that the Board of Directors of the Corporation is
specifically authorized to amend the
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Plan to permit assignment, encumbrance and transfer if and to the extent that
such amendment would not produce adverse consequences under tax or securities
laws.
10. Employee Rights Under the Plan. No employee or other person shall have any
claim or right to be granted Performance Shares under the Plan. Neither the Plan
nor any action taken thereunder shall be construed as giving any employee any
right to be retained in the employ of the Corporation.
Unless the Performance Share Award Agreement specifies otherwise, a
Participant shall forfeit all rights under any such Agreement if (i) in the
opinion of the Committee, the Participant, 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 Participant performs any act or engages in any
activity which in the opinion of the Committee is inimical to the best interests
of the Corporation.
11. Settlement by Subsidiaries. Settlement of Performance Share awards held by
employees of subsidiaries shall be made by and at the expense of such
subsidiary.
12. Amendment or Termination. The Board of Directors of the Corporation may
amend, suspend or terminate the Plan or any portion thereof at any time, but
(except as provided in Section 8 hereof) no amendment shall be made without
approval of the stockholders of the Corporation which shall (a) materially
increase the total number of shares which may be awarded under the Plan or (b)
materially change the class of employees eligible to participate in the Plan;
provided that no such amendment, suspension or termination shall impair the
rights of any Participant without his consent, in respect to any Performance
Shares theretofore awarded pursuant to the Plan.
13. Effective Date and Term of the Plan. The Plan was initially adopted as of
January 1, 1997 and was approved by action of the Shareholders of the
Corporation on April 25, 1997. No Performance Shares shall be awarded under the
Plan after December 31, 2004.
14. Termination of Grants under the 1995 Plan. Following approval of this Plan
by the Shareholders of the Corporation, no further grants of performance shares
shall be made under the 1995 Plan.
A-9
<PAGE> 45
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 1997 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, AND 3.
(1) ELECTION OF DIRECTORS: Glenn R. Brown, William E. Butler, John C. Morley and
Hector R. Ortino for terms expiring in 2000.
[ ] FOR all nominees (except as marked [ ] WITHHOLD AUTHORITY
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 ADOPT THE 1997 PERFORMANCE SHARE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) RATIFICATION OF THE DESIGNATION OF KPMG PEAT MARWICK LLP AS INDEPENDENT
AUDITORS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS VOTES BE CAST AGAINST PROPOSALS 4 AND 5.
(4) SHAREHOLDER PROPOSAL NO. 1 REGARDING COMPENSATION OF NON-EMPLOYEE DIRECTORS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(5) SHAREHOLDER PROPOSAL NO. 2 REGARDING DECLASSIFICATION OF THE BOARD OF
DIRECTORS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued, and to be signed on other side)
PROXY NO. (Continued from other side) SHARES
(6) In their discretion, the Proxies are 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, FOR PROPOSALS 2 AND
3, AND AGAINST PROPOSALS 4 AND 5.
Dated................., 1997
............................
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> 46
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 1997 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, AND 3.
(1) ELECTION OF DIRECTORS: Glenn R. Brown, William E. Butler, John C. Morley and
Hector R. Ortino for terms expiring in 2000.
[ ] FOR all nominees (except as marked [ ] WITHHOLD AUTHORITY
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 ADOPT THE 1997 PERFORMANCE SHARE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) RATIFICATION OF THE DESIGNATION OF KPMG PEAT MARWICK LLP AS INDEPENDENT
AUDITORS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS VOTES BE CAST AGAINST PROPOSALS 4 AND 5.
(4) SHAREHOLDER PROPOSAL NO. 1 REGARDING COMPENSATION OF NON-EMPLOYEE DIRECTORS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(5) SHAREHOLDER PROPOSAL NO. 2 REGARDING DECLASSIFICATION OF THE BOARD OF
DIRECTORS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued, and to be signed on other side)
(Continued from other side)
(6) In its discretion, the Proxies are 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
AND 3, AND AGAINST PROPOSALS 4 AND 5. 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................., 1997
............................
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
