<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 17, 1999
DEAR SHAREHOLDERS:
You are cordially invited to attend the annual meeting of shareholders of
Ferro Corporation, which will be held on Friday, April 23, 1999, in the Great
Lakes Science Center, 601 Erieside Avenue, Cleveland, Ohio. The meeting will
begin at 9:00 a.m., Cleveland time, but we hope that you will be able to join
the officers and directors at 8:30 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, an amendment to the 1997 Performance Share Plan and the
designation of auditors. 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 23, 1999 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,
<TABLE>
<S> <C>
ALBERT C. BERSTICKER, HECTOR R. ORTINO,
Chairman President and Chief Executive Officer
</TABLE>
<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 three directors of Ferro will expire
on the day of the 1999 annual meeting, upon election of successors.
Proxies solicited hereunder granting authority to vote on the election of
directors will be voted for the election of Sandra Harden Austin, Rex A.
Sebastian and Dennis W. Sullivan to serve for three year terms and until their
successors are elected; provided, however, that if the election of directors is
by cumulative voting (see page 29 of this Proxy Statement) the persons appointed
by the accompanying proxy intend to cumulate the votes represented by proxies
they receive and distribute such votes in accordance with their best judgment.
All of the candidates for election as directors are directors whose present
terms of office will expire at the meeting.
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 23, 1999 by each nominee and
each of the other directors who will continue in office after the meeting.
1
<PAGE> 4
<TABLE>
<CAPTION>
NOMINEES FOR ELECTION
<C> <S>
SANDRA HARDEN AUSTIN, age 51, President and Chief Executive
AUSTIN PHOTO Officer, Austin & Associates since 1996. Between 1981 and
1988, Ms. Austin was employed by the Huron Road Hospital in
DIRECTOR SINCE 1994 Cleveland, and during that time served as the Director of
Planning, Vice President and President. In 1988, she was
appointed Senior Vice President and General Manager of the
Medical/Surgical and Psychiatry Management Centers of
University Hospitals of Cleveland and served in that
capacity until 1990. Ms. Austin was named the Executive Vice
President and Chief Operating Officer of The University of
Chicago Hospitals in 1990 and served in that capacity until
1994, at which time she was appointed President of Caremark
Clinical Management Services, a division of Caremark, Inc.
In 1995, Ms. Austin was named President of Caremark
Physician Services, a division of Caremark, Inc., which
provides physician practice management services. Between
1997 and 1999, Ms. Austin was President and Chief Executive
Officer of Sedona Health Care Group, Inc. 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 6,688 Nominee for term
expiring in 2002
REX A. SEBASTIAN, age 69, Private Investor. Mr. Sebastian
SEBASTIAN PHOTO began his career with Procter and Gamble. In 1955, he joined
Cummins Engine Company, Inc. where he held several positions
DIRECTOR SINCE 1986 including Vice-President -- International and Managing
Director of Cummins Engine Company, Ltd., in Scotland. In
1966, Mr. Sebastian joined Dresser Industries, Inc. (energy
and industrial-related products and services) as Vice
President -- International Operations and was named Vice
President -- Operations in 1971. In 1975, he was named
Senior Vice President -- Operations, a position he held
until his retirement in 1985. Mr. Sebastian is a member of
the Board of Directors of Hallwood Energy Corporation (oil
and gas exploration and production).
Common Shares owned 15,119 Nominee for term
expiring in 2002
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
<C> <S>
NOMINEE FOR ELECTION
DENNIS W. SULLIVAN, age 60, Executive Vice President of
DENNIS W. SULLIVAN PHOTO Parker Hannifin Corporation (producer of motion and control
components for industrial and aerospace markets). Mr.
DIRECTOR SINCE 1992 Sullivan began his career with Parker Hannifin Corporation
in 1960 as a Sales Engineer and, after serving in various
assignments, was named Group Vice President in 1972;
President of the Fluid Connectors Group in 1976; Corporate
Vice President in 1978; President of the Fluidpower Group in
1979; President of the Industrial Sector in 1980; and he
assumed his present position in 1981. Mr. Sullivan is also a
member of the Office of the President, responsible for four
of Parker Hannifin's eight groups as well as for worldwide
purchasing and worldwide marketing. Mr. Sullivan is a
director of Parker Hannifin and KeyCorp (bank holding
company).
Common Shares owned 13,679 Nominee for term
expiring in 2002
</TABLE>
<TABLE>
<CAPTION>
DIRECTOR WHOSE TERM
OF OFFICE WILL CONTINUE
AFTER THE MEETING
<C> <S>
ALBERT C. BERSTICKER, age 64, Chairman of Ferro. Mr.
ALBERT C. BERSTICKER PHOTO 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 retired as Chief
Executive Officer, effective January 1, 1999. Mr. Bersticker
is also a director of KeyCorp (bank holding company),
Oglebay Norton Company (minerals and shipping) and Brush
Wellman Inc. (manufacturer of beryllium alloy parts).
Common Shares owned (1) 619,517 Term expires in 2001
ESOP Convertible Preferred Shares
beneficially owned 3,625
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
DIRECTORS WHOSE TERMS
OF OFFICE WILL CONTINUE
AFTER THE MEETING
<C> <S>
GLENN R. BROWN, age 68, Science Advisor to the Governor of
BROWN PHOTO the State of Ohio. Retired Senior Vice President and
Director Standard Oil Company (now BP America). Dr. Brown
DIRECTOR SINCE 1988 joined The Standard Oil 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 1986-1993 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 12,641 Term expires in 2000
MICHAEL H. BULKIN, age 60, Private Investor. In 1965, Mr.
BULKIN PHOTO Bulkin joined McKinsey & Company, Inc. (international
management consulting firm). He became a principal in 1970
DIRECTOR SINCE 1998 and was elected a director in 1976. While serving with
McKinsey & Company, Mr. Bulkin held several leadership
positions including Managing Director of various offices,
Chairman of the Partner Evaluation and Compensation
Committee and member of the Shareholders Committee,
Executive Committee, Strategy Development Committee,
Professional Personnel Committee and Partner Election
Committee. Mr. Bulkin retired from McKinsey & Company in
1993. In 1994, Mr. Bulkin became a director of Bunge
International Ltd. (diversified company with businesses in
grain trading, the food industry and textiles) and became an
advisor to Three Cities Research (private investment
company) where he serves as a director of two portfolio
companies, including Pameco Holdings. Mr. Bulkin also serves
as a director of American Bridge Company, a privately held
construction company.
Common Shares owned 1,407 Term expires in 2001
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
DIRECTORS WHOSE TERMS
OF OFFICE WILL CONTINUE
AFTER THE MEETING
<C> <S>
WILLIAM E. BUTLER, age 67, Retired Chairman of the Board and
BUTLER PHOTO Chief Executive Officer, Eaton Corporation (engineered
products for automotive, industrial, commercial and military
DIRECTOR SINCE 1992 markets). Mr. Butler was employed by Eaton from 1957 through
1995, serving as President and Chief Executive Officer prior
to his election as Chairman in 1991. Mr. Butler is a
director of Applied Industrial Technologies, Inc.
(industrial products distributor), Pitney Bowes Inc.
(manufacturer of mailing, copying and facsimile systems),
U.S. Industries (manufacturer of plumbing and bath products,
industrial and residential lighting systems, and consumer
hardware and garden products), Goodyear Tire & Rubber
Company (manufacturer of tires and other products) and
Borg-Warner Automotive Corporation (power train automotive
systems).
Common Shares owned 8,262 Term expires in 2000
JOHN C. MORLEY, age 67, President of Evergreen Ventures,
MORLEY PHOTO Ltd. (private investment company). Retired Director,
President and Chief Executive Officer of Reliance Electric
DIRECTOR SINCE 1987 Company (manufacturer of industrial motors and controls,
mechanical power transmission products and specialty
telecommunication products and systems). Mr. Morley began
his career with Exxon Corporation in 1958 and served as
President of Exxon Chemical Company, USA and Senior Vice
President of Exxon USA before joining Reliance in 1980 as
President and Chief Executive Officer. In December of 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 Lamson and Sessions, Inc. (manufacturer and marketer of
consumer and commercial electrical and polymeric products)
and as a director and non-executive Chairman of the Board of
Cleveland-Cliffs, Inc. (a full service iron-ore company).
Common Shares owned 13,786 Term expires in 2000
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
<S> <C>
DIRECTORS WHOSE TERMS
OF OFFICE WILL CONTINUE
AFTER THE MEETING
HECTOR R. ORTINO, age 56, President and Chief Executive
ORTINO PHOTO Officer of Ferro. He began his career as Treasurer of Ferro
Argentina in 1971 and subsequently became Financial Director
DIRECTOR SINCE 1993 in 1973. In 1976, Mr. 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; was named
President and Chief Operating Officer in 1996; and was named
Chief Executive Officer in 1999. 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 Bunge
International Ltd. (diversified company with businesses in
grain trading, the food industry and textiles) and Parker
Hannifin Corporation (producer of motion and control
components for industrial and aerospace markets).
Common Shares owned (1) 249,431 Term expires in 2000
ESOP Convertible Preferred Shares
beneficially owned 3,620
WILLIAM J. SHARP, age 57, President Goodyear Global Support
SHARP PHOTO Operations (tire, engineered products and chemicals
manufacturer). Mr. Sharp began his career with The Goodyear
DIRECTOR SINCE 1998 Tire & Rubber Company in 1964. Following various assignments
in the United States and abroad, Mr. Sharp was named
Director of European Tire Production in 1984. He then was
appointed Vice President of Tire Manufacturing in 1987 and
later Executive Vice President of Product Supply in 1991. In
1992, he became President and General Manager of Goodyear's
European Regional Operations.
Common Shares owned 2,081 Term expires 2001
</TABLE>
- ---------------
(1) The shares reported as owned by Messrs. Bersticker 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 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 -- 151,651 shares and Mr. Ortino -- 7,101 shares. The number of
shares reported above for Messrs. Bersticker and Ortino include 82,500 and
50,000 shares, respectively, issued to them under the Performance Share Plan
that are subject to risk of forfeiture based upon the terms of that plan.
The number of shares that may be acquired by Messrs. Bersticker and Ortino
pursuant to exercisable stock options as of May 1, 1999 are as follows: Mr.
Bersticker -- 302,350 shares; and Mr. Ortino -- 156,875 shares (included in
the number of shares reported above).
6
<PAGE> 9
STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
Information is set forth below regarding beneficial ownership of Common
Stock of the Company by (i) each person who is a director; (ii) each executive
officer named in the Summary Compensation Table on page 20; and (iii) all
directors and executive officers as a group. Except as otherwise noted, each
person has sole voting and investment power as to his or her shares. The
information set forth below is as of February 23, 1999.
<TABLE>
<CAPTION>
SHARES
SHARES OF UNDERLYING
COMMON STOCK OPTIONS ESOP
OWNED DIRECTLY EXERCISABLE TOTAL CONVERTIBLE
OR INDIRECTLY WITHIN 60 COMMON PREFERRED
NAME (a)(b) DAYS(c) STOCK STOCK
---- -------------- ----------- --------- -----------
<S> <C> <C> <C> <C>
DIRECTORS
Sandra H. Austin......... 2,313 4,375 6,688
Albert C. Bersticker..... 317,167 302,350 619,517 3,625
Glenn R. Brown........... 7,329 5,312 12,641
Michael H. Bulkin........ 782 625 1,407
William E. Butler........ 2,950 5,312 8,262
John C. Morley........... 8,474 5,312 13,786
Hector R. Ortino......... 92,556 156,875 249,431 3,620
Rex A. Sebastin.......... 9,807 5,312 15,119
William J. Sharp......... 1,456 625 2,081
Dennis W. Sullivan....... 8,367 5,312 13,679
FOUR OTHER OFFICERS NAMED IN SUMMARY COMPENSATION TABLE
R. Jay Finch............. 22,463 45,686 68,149 2,337
James F. Fisher.......... 57,575 64,999 122,574 3,607
J. Larry Jameson......... 25,633 26,437 52,070 515
Gary H. Ritondaro........ 45,448 55,012 100,460 2,986
TWENTY-ONE DIRECTORS AND
EXECUTIVE OFFICERS AS A
GROUP.................. 689,449 817,409 1,506,858 29,715
</TABLE>
7
<PAGE> 10
- ---------------
(a) The beneficial ownership of Messrs. Bersticker and Ortino are set forth
below their biographies on pages 3 and 6 and further in a footnote on page 6
of this Proxy Statement. With respect to other officers named in the Summary
Compensation Table on page 20 of this Proxy Statement, the shares reported
for Messrs. Fisher, Finch, Ritondaro and Jameson include 22,000, 16,500,
24,000, and 16,500 shares issued under the Performance Share Plan that are
subject to risk of forfeiture based upon the terms of that plan.
(b) The shares reported for Mr. Fisher include 20,859 shares that he does not
own of record but of which he is beneficial owner.
(c) Exercisable stock options as of May 1, 1999.
The percentage of shares of outstanding common stock, including options
exercisable within 60 days of February 23, 1999, the record date, beneficially
owned by all directors and executive officers as a group is 4.2%. The percentage
of such shares beneficially owned by any director does not exceed 1%, except Mr.
Bersticker, who owns 1.7% of the outstanding Common Stock.
With regard to ESOP Convertible Preferred Stock, directors and executive
officers as a group own 2.5% of the outstanding shares of that series.
The following table sets forth information about 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.
<TABLE>
<CAPTION>
PERCENT OF CLASS
--------------------
ESOP
AMOUNT AND CONVERTIBLE
NAME AND ADDRESS NATURE OF BENEFICIAL COMMON PREFERRED
OF BENEFICIAL OWNER OWNERSHIP STOCK STOCK
------------------- -------------------- ------ -----------
<S> <C> <C> <C>
FMR Corp................................ 5,303,912(1) 15.2% --
82 Devonshire Street
Boston, Massachusetts 02109
Mario J. Gabelli and related entities... 2,869,521(2) 8.2% --
One Corporate Center
Rye, New York 10580
National City Bank, Trustee............. 1,208,834(3) -- 100%
under the Ferro Corporation
Savings and Stock Ownership Plan
1900 East 9th Street
Cleveland, Ohio 44114
</TABLE>
8
<PAGE> 11
- ---------------
(1) Information regarding share ownership was obtained from Schedule 13G filed
by FMR Corp. on February 12, 1999. FMR Corp. reported sole voting power as
to 1,494,862 shares and sole investment power as to 5,303,912 shares.
(2) Information regarding share ownership was obtained from Schedule 13D filed
May 6, 1998 by Mario J. Gabelli and related entities. Such reporting persons
reported sole voting power as to 2,838,021 shares and sole investment power
as to 2,869,521 shares.
(3) The beneficial owners of the Savings and Stock Ownership Plan are
participating employees of the Company. The 1,208,834 shares of Convertible
Preferred Stock are convertible into 3,141,518 shares of Common Stock,
representing approximately 9.0% 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.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Ferro's
officers and directors, and persons who own more than ten percent of a
registered class of Ferro's equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. Officers,
directors and greater than ten-percent shareholders are required by SEC
regulation to furnish Ferro with copies of all Section 16(a) forms they file.
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to Ferro during 1998 and Forms 5 and amendments thereto furnished to
Ferro with respect to 1998, 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 1998 or prior fiscal years any reports required by Section
16(a) of the Exchange Act.
CERTAIN MATTERS PERTAINING TO THE BOARD OF DIRECTORS
During 1998, the Board held six regularly scheduled monthly meetings, and
committees of the Board met from time to time upon call of the Chairman (or in
the
9
<PAGE> 12
case of the Audit Committee, upon call of its Chairman). During 1998, 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 $30,000. 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 Chairs of the Audit Committee, the Finance Committee and the
Compensation and Organization Committee are each paid an additional annual
retainer of $4,000. 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 that will be reinvested in Ferro Common
Stock. The deferred account will be distributed after the retirement of the
director.
Pursuant to the Employee Stock Option Plan, on the date of each annual
shareholders meeting, each non-employee Director who continues as a Director
after that annual meeting is automatically granted an option to purchase 2,500
shares of Common Stock.
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 1998, the Audit Committee met
twice. Messrs. Brown, Morley and Sharp are the current members of the Audit
Committee, with Mr. Morley 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 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 1998, the
Committee met once. A report of the Compensation and Organization Committee is
set forth on pages 15 through 18 of this Proxy Statement. Ms. Austin and Messrs.
Brown, Bulkin and Butler are the
10
<PAGE> 13
current members of the Compensation and Organization Committee with Mr. Butler
serving as Chairman.
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 worldwide
financing requirements and its plans to meet such requirements. Included among
its responsibilities is the review of projected worldwide 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 1998, the Committee met once. Ms. Austin and Messrs. Sebastian, Sharp and
Sullivan are the current members of the Finance Committee, with Ms. Austin
serving as Chairperson.
APPROVAL OF AMENDMENT TO THE
1997 PERFORMANCE SHARE PLAN
Ferro has maintained a Performance Share Plan since 1982. Most recently the
1997 Performance Share Plan was approved by shareholders in 1997.
Management continues to believe that the Company's compensation philosophy
should emphasize incentive-based compensation and that long-term incentive
compensation should include a heavy weighing toward the Performance Share Plan.
Performance Shares complement stock options by rewarding achievement in the
specific performance parameters judged most important to enhancing the Company's
overall performance. The Plan currently provides for awards determined on the
basis of performance in five specific categories of measurement, 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. These five categories, which have been in place since 1995, are not broad
enough for management to tailor long-term compensation awards to the particular
responsibilities of individual plan participants. Thus, it has been proposed
that the Plan be amended to include additional categories for measuring
performance and establishing targets, in order to provide increased flexibility
in structuring awards that are tailored to a particular participant's
responsibilities and management's overall objectives.
For that reason, the Board of Directors recommends a vote for the approval
of the following amendment to the 1997 Performance Share Plan.
11
<PAGE> 14
SUMMARY OF THE PROPOSED CHANGE
The principal change in the Plan, as compared to the Performance Share Plan
as previously in effect, is the addition of the following measures for
Performance Share Targets:
- Stock Price
- Cash Flow
- Sales
- Sales Growth Rate
- Market Share
- Gross Profit
- Gross Profit as a Percent of Sales
- Operating Income as a Percent of Sales
- Return on Capital Employed
- Sales per Employee
- Operating Profit per Employee
- Operating Profit as a Percent of Sales
- Operating Profit
- Total Shareholder Return
- Earnings Per Share
- Earnings Before Interest and Taxes
- Earnings Before Interest, Taxes, Depreciation and Amortization
Additionally, the attainment of levels of performance of the Company under
one or more of the measures described above relative to the performance of other
businesses may be considered as well as various combinations or changes in any
of the forgoing measures.
SUMMARY OF THE 1997 PLAN, AS AMENDED
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
12
<PAGE> 15
Common Stock. On February 23, 1999, the closing price of Common Stock on the New
York Stock Exchange was $20.625.
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 to participate by a Committee of not less than three directors
or, in certain limited circumstance, by the Chief Executive Officer. Performance
Shares are interests that 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 that are subject to the risk of
forfeiture, depending upon the degree of achievement of Performance Targets
during the Performance Period.
Currently, 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. Upon the approval of the
amendment presented to this meeting of shareholders, the Performance Targets
will also include Stock Price, Cash Flow, Sales, Sales Growth Rate, Market
Share, Gross Profit, Gross Profit as a Percent of Sales, Operating Income as a
Percent of Sales, Return on Capital Employed, Sales per Employee, Operating
Profit per Employee, Operating Profit as a Percent of Sales, Operating Profit,
Total Shareholder Return, Earnings Per Share, Earnings Before Interest and
Taxes, and Earnings Before Interest, Taxes, Depreciation and Amortization.
Additionally, the attainment of levels of performance of the Company under one
or more of the measures described above relative to the performance of other
businesses may be considered as well as various combinations or changes in any
of the foregoing measures. 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 the initial award of such Performance Shares had provided for
partial 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
13
<PAGE> 16
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 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), 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 that have been completed at the time of such cessation of employment.
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 that 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 that would
impair the rights of any participant to whom an award of Performance Shares has
been made without the consent of the 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. However, the Board of Directors may
not, without the approval of the shareholders, make any amendment that would
materially increase the benefits accruing to participants under the Plan,
materially increase the aggregate number of shares that may be issued (other
than an increase reflecting a change in the capitalization of the Company) or
change the class of employees eligible to participate in the Plan.
14
<PAGE> 17
AWARDS UNDER THE PLAN
The compensation disclosure provisions contained in this Proxy Statement
reflect the award experience of the Company under the Performance Share Plan as
currently in effect. The amendment is not expected to materially modify in the
future the award experience under the Performance Share Plan.
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 amendment to the 1997
Performance Share Plan.
THE BOARD OF DIRECTORS URGES YOU
TO VOTE "FOR" APPROVAL OF THE
AMENDMENT TO 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 LLP to audit the books and accounts of Ferro
for the current year ending December 31, 1999. KPMG LLP have been acting as the
auditors of Ferro for many years. On recommendation of the Audit Committee, the
Board of Directors has appointed such firm to continue as Ferro's auditors for
the current year, subject to the approval thereof by the shareholders.
Representatives of KPMG 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 1998, were as follows:
1. Annual salary level for Messrs. Bersticker and Ortino recommended
by the Committee and approved by the Board, and annual salary level for
other executive officers approved by the Committee.
15
<PAGE> 18
2. Annual Incentive Compensation Plan (a cash bonus plan) under which
achievement is measured primarily by attainment of mathematical targets
and, for officers other than the Chairman and Chief Executive Officer and
the President and Chief Operating Officer, to a lesser extent by
nonmathematical 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. The Committee approves the actual
nonmathematical bonus awards to senior executive officers other than the
Chairman and Chief Executive Officer and the President and Chief Operating
Officer (for whom the entire bonus award is based on mathematical
determinations).
3. Performance Share Plan (a long term incentive plan) under which
annual performance share grants may be converted into shares of Common
Stock based upon the degree of achievement of Performance Targets during
the Performance Period. The Committee determines the award of performance
shares and establishes the Performance Targets that will be applicable to
determine the degree of conversion of performance share grants into Common
Stock 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.
Ferro retains independent executive compensation consultants for the
benefit of both management and the Committee. Currently, Ferro's executive
compensation consultant is Buck Consultants. Buck's advice is based on a variety
of competitive data maintained by, or available to, Buck. From these data banks,
Buck derives recommended standards for compensation levels at Ferro based upon
competitive levels at peer group companies.
Applying this data to Ferro, and to Mr. Bersticker, Ferro's Chairman and
Chief Executive Officer during 1998, the Committee recommended (and the Board
approved), for 1998:
1. A salary level of $660,000, which is in the second quartile of
competitive market salary data as reported by Buck.
2. An annual incentive plan cash bonus target amount equal to 75% of
salary, all of which was based on the mathematical application of
performance factors. Payment on the bonus is based on the degree of
achievement of a matrix of
16
<PAGE> 19
mathematical targets combining return on equity and earnings per share
growth. The threshold, target and maximum bonus achievement levels for
return on equity were 13%, 16% and 18%, respectively, while the threshold,
target and maximum bonus achievement levels for earnings per share growth
were 8%, 12% and 14%, respectively. The target bonus amount is payable upon
achievement at the "target" level on the matrix, while the maximum bonus
amount payable upon "maximum" achievement is 200% of the target bonus. Such
aggregate annual incentive target amounts were in the second quartile of
other companies in the market place for 1998 as reported by Buck.
3. An award of stock options for 70,000 shares under the Ferro Stock
Option Plan.
4. A Performance Share award of 33,000 shares.
The stock option award level and the performance share award level are in
the second quartile of long term incentive programs of comparable companies in
the market place as reported by Buck.
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 grants 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
conversion of such performance share grants is determined.
The recommendations of the Committee represented satisfaction with the
manner in which Mr. Bersticker has performed his responsibilities as Chairman
and 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 Buck's data as to competitive standards of
compensation in the market place. Buck advised 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 1998 long term incentive compensation
levels for senior
17
<PAGE> 20
executive officers in the third quartile of competitive market data as reported
by Buck.
In 1998, Ferro's attainment of profitability performance standards improved
over 1997 resulting in higher levels of executive bonuses at the corporate
level, reflecting attainment of 200% of the target bonus levels. 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.
In making its determinations and recommendations with respect to Messrs.
Ortino, Fisher, Finch, Ritondaro and Jameson 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. Fisher,
Finch, and Jameson, who have direct responsibilities with respect to Company
operations, their levels of achievement under the Annual Incentive Compensation
Plan and Performance Share Plan are materially impacted by the performance of
those specific operations that 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 1995 and 1997, the Committee recommended, and the shareholders
approved, certain changes to the Company's Performance Share Plan and Employee
Stock Option Plan that 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. Messrs. Bersticker and Ortino
received compensation in excess of $1 million in 1998.
S. H. Austin, G. R. Brown, M. H. Bulkin and W. E. Butler
18
<PAGE> 21
PERFORMANCE COMPARED TO CERTAIN STANDARDS
The chart set forth below compares Ferro's cumulative total shareholder
return for the five years ended December 31, 1998 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>
S&P SPECIALTY
FERRO CORPORATION S&P 500 INDEX CHEMICALS INDEX
----------------- ------------- ---------------
<S> <C> <C> <C>
1993 100.00 100.00 100.00
1994 76.12 101.36 87.35
1995 76.10 139.31 114.76
1996 94.37 171.19 124.28
1997 123.52 228.23 153.04
1998 134.62 293.32 124.61
</TABLE>
NOTE: (1) Assumes $100 invested on December 31, 1993 in Ferro Common Stock, S&P
500 Index and S&P Specialty Chemicals Index.
19
<PAGE> 22
SUMMARY COMPENSATION TABLE
The following table shows on an accrual basis the elements of compensation
paid or awarded during each of the last three calendar years to the Chief
Executive Officer and each of the other five highest paid executive officers of
Ferro.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
AWARDS
--------------------------
ANNUAL COMPENSATION PERFORMANCE ALL OTHER
- ---------------------------------------------------- SHARE PLAN OPTIONS COMPEN-
NAME AND SALARY BONUS AWARD(1) (NO. OF SATION
PRINCIPAL POSITION YEAR ($) ($) ($) SHARES)(2) (3)($)
- ---------------------------- ---- ------- ------- ------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
A.C. Bersticker(4).......... 1998 660,000 990,000 756,938 70,000 77,975
Chairman 1997 605,000 677,020 965,250 90,000 60,996
1996 580,000 312,910 392,175 72,000 39,913
H.R. Ortino(4).............. 1998 435,000 522,000 458,750 50,000 49,734
President and Chief 1997 405,000 340,538 585,000 57,000 58,971
Executive Officer 1996 388,000 167,044 236,250 45,000 30,242
G.H. Ritondaro.............. 1998 236,000 205,353 220,200 18,000 30,307
Vice President and 1997 225,000 147,184 280,800 24,150 26,371
Chief Financial Officer 1996 200,000 64,400 103,950 18,750 18,730
R.J. Finch.................. 1998 240,000 189,556 151,388 23,000 20,817
Vice President 1997 221,000 161,050 193,050 15,000 17,445
Specialty Plastics 1996 210,900 92,786 77,963 14,250 13,024
J.L. Jameson................ 1998 225,000 134,156 151,388 18,000 42,939
Vice President 1997 202,000 125,399 193,050 22,500 23,923
Industrial Coatings 1996 168,446 71,372 77,963 14,250 31,986
J.F. Fisher................. 1998 260,000 68,950 201,850 23,000 25,102
Senior Vice President 1997 250,000 142,029 257,400 18,000 14,975
Ceramics and Colorants 1996 319,200 0 0 0 19,128
</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. 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% for shares awarded in 1996 and up to 100% for shares
awarded in 1997 and 1998. At December 31, 1998, the persons listed above
hold the following number of Performance Shares, valued at the value of the
underlying shares at December 31, 1998, applicable to performance periods
not yet completed: Mr. Bersticker, 82,500 shares, valued at $2,145,000; Mr.
Ortino, 50,000 shares, valued at $1,300,000; Mr. Fisher, 22,000 shares
valued at $572,000; Mr. Finch, 16,500 shares, valued at $429,000; Mr.
Ritondaro, 24,000 shares, valued at $624,000; and Mr. Jameson, 16,500
shares, valued at $429,000. 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 January 17, 1996, January 17, 1997 and
January 13, 1998.
20
<PAGE> 23
(3) In the year ended December 31, 1998, All Other Compensation includes company
matching payments under the Ferro ESOP, as follows: Mr. Bersticker, $6,429,
Mr. Ortino, $6,429, Mr. Fisher, $6,429, Mr. Finch, $6,429, Mr. Ritondaro,
$6,429, and Mr. Jameson $6,429; personal use of leased automobiles, as
follows: Mr. Bersticker, $3,874, Mr. Ortino, $5,499, Mr. Finch, $3,770, and
Mr. Ritondaro, $5,127; taxable portion of benefits under health,
hospitalization, and life insurance programs, as follows: Mr. Bersticker,
$8,784, Mr. Ortino, $5,631, Mr. Fisher, $6,308, Mr. Ritondaro, $3,604, and
Mr. Jameson $2,931; individual tax services, as follows: Mr. Bersticker,
$5,725, Mr. Fisher $1,475, and Mr. Jameson $2,500; and in the case of Mr.
Jameson, moving expenses of $20,461. In addition, dividends received from
restricted stock granted under Performance Share Plans were as follows: Mr.
Bersticker, $53,163, Mr. Ortino, $32,175, Mr. Fisher, $10,890, Mr. Finch,
$10,618, Mr. Ritondaro, $15,147, and Mr. Jameson $10,618.
(4) On September 25, 1998, the Board of Directors elected Hector R. Ortino to
succeed Albert C. Bersticker as Chief Executive Officer effective as of
January 1, 1999. Mr. Bersticker will remain Chairman of the Board of
Directors until his retirement at the Annual Meeting.
STOCK OPTION GRANTS, EXERCISES AND YEAR END VALUES
The following table sets forth information regarding grants of stock
options to each of the six highest paid executive officers of Ferro under
Ferro's stock option plan during the fiscal year ended December 31, 1998. The
exercisability of the stock options vests at the rate of 25% per year. In the
case of death, retirement, disability or change in control, the options become
100% exercisable.
21
<PAGE> 24
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
% OF TOTAL
OPTIONS
GRANTED TO GRANT DATE
OPTIONS EMPLOYEES EXERCISE EXPIRATION PRESENT
NAME GRANTED IN 1998 PRICE DATE VALUE(1)
---- ------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
A.C. Bersticker
Chairman..................... 70,000 10.9% $22.9375 1/13/2008 $656,250
H.R. Ortino
President and Chief
Executive Officer............ 50,000 7.8% $22.9375 1/13/2008 $468,750
G.H. Ritondaro
Vice President
and Chief Financial
Officer...................... 18,000 2.8% $22.9375 1/13/2008 $168,750
R.J. Finch
Vice President,
Specialty Plastics........... 23,000 3.6% $22.9375 1/13/2008 $215,625
J.L. Jameson
Vice President
Industrial Coatings.......... 18,000 2.8% $22.9375 1/13/2008 $168,750
J.F. Fisher
Senior Vice President
Ceramics and Colorants....... 23,000 3.6% $22.9375 1/13/2008 $215,625
</TABLE>
- ---------------
(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 30 year maturity; (c) volatility calculated
using month-end stock prices for the past six years prior to grant date; and
(d) the stock's annualized dividend yield also over the past six years.
22
<PAGE> 25
The following table shows information regarding stock option exercises
during 1998 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 1998 1998(1)
ACQUIRED ------------- -------------
ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
---- -------- -------- ------------- -------------
<S> <C> <C> <C> <C>
A.C. Bersticker 58,275 $937,019 233,100/ $1,780,260/
Chairman 184,750 $1,134,625
H.R. Ortino 7,875 $129,127 113,250/ $943,491/
President and Chief Executive 120,875 $717,875
Officer
G.H. Ritondaro 6,750 $129,088 38,849/ $381,769/
Vice President and Chief 46,426 $278,333
Financial Officer
R.J. Finch -- $ -- 31,125/ $264,656/
Vice President, Specialty 42,875 $231,594
Plastics
J.L. Jameson -- $ -- 12,750/ $109,594/
Vice President Industrial 42,000 $237,843
Coatings
J.F. Fisher 8,437 $152,914 52,500/ $450,984/
Senior Vice President 38,750 $180,688
Ceramics and Colorants
</TABLE>
- ---------------
(1) Value of unexercised in-the-money options is based on Ferro's NYSE closing
Common Stock price on December 31, 1998, of $26.00.
23
<PAGE> 26
PERFORMANCE SHARE PLAN AWARDS
The following table sets forth information relating to Performance Share
Plan ("Plan") awards during 1998 to each of the six highest paid executive
officers of Ferro. Each such award under the Plan has a three year performance
cycle ending on December 31, 2000. A condition to vesting includes the continued
employment of the Plan participant to the end of the Performance Period.
However, in the case of death, disability or retirement, there is a pro rata
payment at the end of the Performance Period based upon the portion of the
Performance Period during which employment continued. Also, in the case of a
change in 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 in control.
PERFORMANCE SHARE PLAN AWARDS IN 1998
<TABLE>
<CAPTION>
ESTIMATED FUTURE SHARE PAYOUTS(a)
NUMBER OF ---------------------------------------
NAME SHARES THRESHOLD(b) TARGET(c) MAXIMUM(d)
---- --------- ------------ ----------- ----------
(IN SHARES)
<S> <C> <C> <C> <C>
A.C. Bersticker 33,000 16,500 33,000 66,000
Chairman
H.R. Ortino 20,000 10,000 20,000 40,000
President and Chief Executive
Officer
G.H. Ritondaro 9,600 4,800 9,600 19,200
Vice President and Chief
Financial Officer
R.J. Finch 6,600 3,300 6,600 13,200
Vice President Specialty
Plastics
J.L. Jameson 6,600 3,300 6,600 13,200
Vice President Industrial
Coatings
J.F. Fisher 8,800 4,400 8,800 17,600
Senior Vice President
Ceramics and Colorants
</TABLE>
- ---------------
(a) Performance measurements are based on return on average common equity and
net income growth. Mr. Fisher, Mr. Finch and Mr. Jameson have measurements
based on their respective operating group return on net assets and growth in
operating income.
(b) Threshold is 50% of Award.
(c) Target is 100% of Award.
(d) Maximum is 200% of Award.
24
<PAGE> 27
RETIREMENT PLAN
Ferro maintains a noncontributory 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 $130,000 per year for 1998). 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, 1998, Messrs.
Bersticker, Ortino,
25
<PAGE> 28
Fisher, Finch, Ritondaro and Jameson had 40, 27, 39, 7, 12 and 3 years of
service, respectively.
<TABLE>
<CAPTION>
YEARS OF SERVICE AT AGE 65
ASSUMED RETIREMENT IN 1998
REGULAR --------------------------------------------------
COMPENSATION 15 20 25 30 35
- ------------ ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 300,000 $70,974 $94,632 $118,290 $141,948 $141,948
400,000 95,974 127,965 159,957 191,948 191,948
500,000 120,974 161,299 201,623 241,948 241,948
600,000 145,974 194,632 243,290 291,948 291,948
700,000 170,974 227,965 284,957 341,948 341,948
800,000 195,974 261,299 326,623 391,948 391,948
900,000 220,974 294,632 368,290 441,948 441,948
1,000,000 245,974 327,965 409,957 491,948 491,948
1,100,000 270,974 361,299 451,623 541,948 541,948
1,200,000 295,974 394,632 493,290 591,948 591,948
1,300,000 320,974 427,965 534,957 641,948 641,948
1,400,000 345,974 461,299 576,623 691,948 691,948
1,500,000 370,974 494,632 618,290 741,948 741,948
1,600,000 395,974 527,965 659,957 791,948 791,948
</TABLE>
- ---------------
The five year average covered compensation for the individuals listed in
the Summary Compensation Table was: Mr. Bersticker, $1,344,854; Mr. Ortino,
$760,487; Mr. Fisher, $363,872; Mr. Finch, $349,810; Mr. Ritondaro, $359,593;
and Mr. Jameson $277,607.
EXECUTIVE EMPLOYMENT AGREEMENTS
Ferro is a party to executive employment agreements (the "Executive
Employment Agreements") with 13 of its officers, including each of the
individuals named in the summary compensation table on page 20 of this Proxy
Statement. The purpose of the Executive Employment Agreements is to reinforce
and encourage the continued attention and dedication of these officers to their
assigned duties without distraction in the face of (i) solicitations by other
employers and (ii) the potentially disturbing circumstances arising from the
possibility of a change in control of Ferro and to limit the right of an officer
to compete against Ferro after the termination of that officer's employment. To
that end, the Executive Employment Agreements obligate Ferro to
26
<PAGE> 29
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 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, following a change in control, 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 and Ortino, and multiplied by two in the case
of the other officers with whom Executive Employment Agreements were signed,
(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 that
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.
27
<PAGE> 30
SHAREHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
Any shareholder who intends to present a proposal at the 2000 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 at its
executive offices, 1000 Lakeside Avenue, Cleveland, Ohio 44114, not later than
November 18, 1999.
Any shareholder who intends to present a proposal at the 2000 annual
meeting other than for inclusion in Ferro's proxy statement and form of proxy
must deliver the proposal to Ferro at its executive offices, 1000 Lakeside
Avenue, Cleveland, Ohio 44114, not later than February 1, 2000 or such proposal
will be untimely. If a shareholder fails to submit the proposal by February 1,
2000, Ferro reserves the right to exercise discretionary voting authority on the
proposal.
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 or her 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. This proxy statement and the
accompanying proxy will be sent to shareholders by mail on or about March 17,
1999.
The record date for determination of shareholders entitled to vote at the
1999 annual meeting is February 23, 1999. On that date the outstanding voting
securities of Ferro were 34,996,126 shares of Common Stock, having a par value
of $1 each and 1,208,834 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.
28
<PAGE> 31
Under the General Corporation Law of Ohio, if notice in writing is given by
any shareholder to the President or any Vice President or the Secretary of
Ferro, not less than forty-eight hours before the time fixed for holding the
meeting, that the shareholder desires that the voting for election of directors
shall be cumulative, and if an announcement of the giving of such notice is made
upon the convening of the meeting, each shareholder will have cumulative voting
rights. Cumulative voting means that each shareholder is entitled to that number
of votes equal to the number of shares that he or she owns multiplied by the
number of directors to be elected. Each shareholder may cast all of his or her
votes for a single nominee or may distribute his or her votes among as many
nominees as he or she 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.
FERRO CORPORATION
MARK A. CUSICK, Secretary
March 17, 1999
29
<PAGE> 32
EXHIBIT A
FERRO CORPORATION
AMENDED AND RESTATED 1997 PERFORMANCE SHARE PLAN
1. Purpose. The purpose of the Amended and Restated 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
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<PAGE> 33
average of the individual year growth rates as calculated above to
determine the applicable growth rate for the Performance Period.
(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 Amended and Restated 1997 Ferro Corporation
Performance Share Plan, as amended and restated on February 26, 1999 and as
the same may be amended from time to time.
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<PAGE> 34
(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.
(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, Net Income Growth Rate,
Stock Price, Cash Flow, Sales, Sales Growth Rate, Market Share, Gross Profit,
Gross Profit as a Percent of Sales, Operating Income as a Percent of Sales,
Return on Capital Employed, Sales per Employee, Operating Profit per Employee,
Operating Profit as a Percent of Sales, Operating Profit, Total Shareholder
Return, Earnings Per Share, Earnings Before
A-3
<PAGE> 35
Interest and Taxes, and Earnings Before Interest, Taxes, Depreciation and
Amortization, or the attainment of levels of performance of the Corporation
under one or more of the measures described above relative to the performance of
other businesses, or various combinations of the foregoing, or changes in any 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
(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.
A-4
<PAGE> 36
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. The
Committee may also delegate to the Chief Executive Officer of the Corporation,
with such directions or reservations as the Committee shall determine, the
authority to select certain of the Participants (other than officers of the
Corporation) and to determine the number of Performance Shares to be awarded to
each such Participant.
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 cessation of
employment, shall be forfeited except as otherwise provided herein in the
case of a Change in Control. A Participant who is a party to an executive
employment contract with the Company (a "Contract Participant") shall not
have any right to Performance Shares or Common Stock awarded to the
Contract Participant by reason of such employment contract beyond the
rights set forth in this Plan. A Contract Participant shall cease to be an
employee for purposes of this Section 6(a) when the Contract Participant's
right and obligation to perform service for the Company terminates, even if
(i) the Contract Participant continues to be entitled to any benefits or
compensation under the executive employment contract or otherwise (whether
or not such benefits or compensation are measured by any period of time
after the termination of employment) or (ii) the duration of the contract
or the "Contract Term" (as defined in such contract) is deemed to continue
for any purpose after the termination of the Contract Participant's right
and obligation to perform service for the Company.
(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-forfeita-
A-5
<PAGE> 37
ble, 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 in 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 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 in 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 in 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
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<PAGE> 38
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 in
Control of the Corporation occurs or (y) the highest price per share of
Ferro Corporation Common Stock actually paid in connection with such
Change in 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 in 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 in 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 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:
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<PAGE> 39
(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.
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.
A-8
<PAGE> 40
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 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
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<PAGE> 41
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 and April 23, 1999. 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.
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<PAGE> 42
FERRO CORPORATION THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Ferro Corporation hereby appoints H. R.
Ortino and M. A. Cusick, the proxies of the undersigned, to vote the shares of
the undersigned at the 1999 Annual Meeting of Shareholders of the Corporation
and any adjournment thereof upon the following matters:
The Board of Directors recommends votes be cast FOR proposals 1, 2, and 3.
(1) ELECTION OF DIRECTORS: Sandra Harden Austin, Rex A. Sebastian and Dennis W.
Sullivan for terms expiring in 2002.
[ ]FOR all nominees [ ] WITHHOLD AUTHORITY to vote for all nominees
(except as marked to the contrary)
(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 AMEND THE 1997 FERRO PERFORMANCE SHARE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) RATIFICATION OF THE DESIGNATION OF KPMG LLP AS INDEPENDENT AUDITORS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.
(Continued, and to be signed on other side)
(Continued from other side)
PROXY NO. SHARES
WHEN PROPERLY EXECUTED, THESE INSTRUCTIONS WILL BE VOTED IN THE MANNER
DIRECTED. IF NO INSTRUCTION IS MADE, AUTHORITY IS GRANTED TO CAST THE VOTE OF
THE UNDERSIGNED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR AND FOR PROPOSALS
2 AND 3.
Dated_______________, 1999
----------------------------
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> 43
CONFIDENTIAL VOTING INSTRUCTIONS
REGARDING PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FERRO CORPORATION
TO: THE TRUSTEE OF THE FERRO CORPORATION SAVINGS AND STOCK OWNERSHIP PLAN (THE
"SSOP")
Pursuant to the terms of the Ferro Corporation Savings and Stock Ownership
Master Trust Agreement and the SSOP, I the undersigned, as a participant or a
beneficiary and a named fiduciary under the SSOP, hereby direct the Trustee to
vote:
(i) the shares of Ferro Corporation Stock ("Company Stock") allocated to
my accounts under the SSOP on the record date; and
(ii) the proportionate amount of Company Stock that is held in the
Suspense Fund or that is allocated to the accounts of other participants and
beneficiaries for which no voting instructions are received in a timely
fashion,
at the Annual Meeting of Shareholders of Ferro Corporation on April 23, 1999,
and at any adjournment thereof, in the manner specified below.
The Board of Directors recommends votes be cast FOR proposals 1, 2 and 3.
(1) ELECTION OF DIRECTORS: Sandra Harden Austin, Rex A. Sebastian and Dennis W.
Sullivan for terms expiring in 2002.
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY to vote for all nominees
(except as marked to the contrary)
(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.)
(CONTINUED, AND TO BE SIGNED ON OTHER SIDE)
(Continued from other side)
(2) PROPOSAL TO AMEND THE 1997 FERRO PERFORMANCE SHARE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) RATIFICATION OF THE DESIGNATION OF KPMG L.L.P. AS INDEPENDENT AUDITORS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<TABLE>
<S> <C>
Unless otherwise instructed on this card, the Trustee will,
upon receipt of a properly executed instruction card, vote
for the election of directors, and for the approval of Dated -----------------------, 1999
issues 2 and 3. See accompanying participant notice for ------------------------------------
explanation of the confidentiality, timing deadlines and Signature
other details concerning this instruction.
PLEASE MARK, SIGN, DATE AND RETURN
THE VOTING INSTRUCTIONS PROMPTLY
USING THE ENCLOSED ENVELOPE.
</TABLE>
Confidential Voting Instructions
<PAGE> 44
PARTICIPANT NOTICE
FERRO CORPORATION SAVINGS AND STOCK OWNERSHIP PLAN
March 17, 1999
Dear Plan Participant:
The enclosed Proxy Statement and Confidential Voting Instructions have been
furnished by Ferro Corporation in conjunction with the Annual Meeting of
Shareholders of Ferro Corporation to be held on April 23, 1999, to elect
directors and to conduct other business.
While only the Trustee of the Ferro Corporation Savings and Stock Ownership
Plan (the "SSOP") can actually vote the shares of Ferro Corporation stock
("Company Stock") held in the SSOP, you, as a participant or a beneficiary with
Company Stock credited to your SSOP accounts as of February 23, 1999, (the
record date for the annual meeting) and a named fiduciary under the SSOP, are
entitled to instruct the Trustee of the SSOP with respect to the following:
(1) The voting of Company Stock allocated to your SSOP accounts on the
record date (Side A);
(2) The voting of a pro-rata portion of Company Stock (based upon the
ratio of the amount of Company Stock in your accounts and the total amount
of Company Stock in the SSOP) allocated to the SSOP accounts of other
participants and beneficiaries for which no instructions are received (Side
B); and
(3) The voting of a pro-rata portion of Company Stock held in the
Suspense Fund of the SSOP (Side B).
Accordingly, please review the enclosed information carefully and complete
the Voting Instruction Form and return it to the Trustee by April 20, 1999.
If your voting instructions are not timely received, the Trustee will vote
the Company Stock allocated to your SSOP accounts, uninstructed Company Stock,
and unallocated Company Stock, in the aggregate in accordance with timely
instructions received from other SSOP participants acting as named fiduciaries
under the Plan. If the Voting Instruction Form is received after the close of
business on April 20, 1999, the Trustee cannot ensure that your voting
instructions will be followed.
It should be noted that your instructions to the Trustee are strictly
confidential. Under no circumstances will the Trustee or any of its agents
disclose to Ferro Corporation or any other party how, or if, you voted. The
Trustee or its agents will supervise and control the mailing of all materials to
SSOP participants and the receipt of all Voting Instruction Forms and will not
disclose to any outside party the name and address of any SSOP participant. You
may, therefore, feel completely free to instruct the Trustee to vote these
shares in the manner you think best.
TRUSTEE OF THE FERRO CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
