<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Check the appropriate box:
/ / 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 Section 240.14a-11(c) or Section
240.14a-12
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
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14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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<PAGE>
May 6, 1996
DEAR STOCKHOLDERS:
The 1996 Annual Meeting of Stockholders of Schuller Corporation (formerly
known as Manville Corporation) will be held in Denver, Colorado, on Friday,
June 7, 1996.
The only business scheduled for the Annual Meeting is the election of
Directors, the approval of the Schuller Corporation 1996 Executive Incentive
Compensation Plan, and the ratification of the appointment of Coopers & Lybrand
L.L.P. as independent accountants of Schuller Corporation. The Board of
Directors recommends a vote FOR the election of the Board's nominees for
Directors, FOR approval of the Schuller Corporation 1996 Executive Incentive
Compensation Plan, and FOR ratification of the appointment of Coopers & Lybrand
L.L.P. No business presentations will be made at the Annual Meeting.
WE URGE YOU TO FILL IN, DATE AND SIGN THE ENCLOSED PROXY CARD AND PROMPTLY
RETURN IT IN THE ENCLOSED ENVELOPE SO THAT AS MANY SHARES AS POSSIBLE MAY BE
REPRESENTED AT THE MEETING. NO POSTAGE IS NEEDED IF THE PROXY CARD IS MAILED IN
THE UNITED STATES.
If you plan to attend the meeting in Denver, please check the appropriate
box on your proxy card.
Sincerely,
W. T. STEPHENS
Chairman of the Board, Chief Executive Officer
and President
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Holders of Schuller Corporation Common Stock:
The Annual Meeting of Stockholders of Schuller Corporation will be held on
Friday, June 7, 1996 at 8:00 a.m., at the Westin Hotel, 1672 Lawrence Street,
Denver, Colorado, to:
(i) elect Directors of Schuller Corporation to hold office
until the next Annual Meeting of Stockholders and until
their respective successors are elected and qualified;
(ii) approve the proposed Schuller Corporation 1996 Executive
Incentive Compensation Plan;
(iii) ratify the appointment of the firm of Coopers & Lybrand
L.L.P. as independent accountants of Schuller Corporation
for the year 1996; and
(iv) transact such other business as may properly come before
the Annual Meeting or any adjournment thereof.
Only holders of record of the Common Stock at the close of business on
April 9, 1996, the record date, will be entitled to vote at the Annual Meeting.
This Notice, Proxy Statement and the enclosed proxy card are sent to you by
order of the Board of Directors.
May 6, 1996
Richard B. Von Wald
Executive Vice President,
General Counsel and Secretary
Schuller Corporation
P. O. Box 5108
Denver, CO 80217-5108
IT IS IMPORTANT THAT STOCKHOLDERS, WHETHER OR NOT THEY EXPECT TO ATTEND THE
ANNUAL MEETING, FILL IN, DATE AND SIGN THE ENCLOSED PROXY CARD AND PROMPTLY
RETURN IT IN THE ENCLOSED ENVELOPE. NO POSTAGE IS NEEDED IF THE PROXY CARD IS
MAILED IN THE UNITED STATES.
<PAGE>
TABLE OF CONTENTS
PAGE
----
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Election of Directors (Proxy Item No. 1) . . . . . . . . . . . . . . . 2
Executive Officers of the Company . . . . . . . . . . . . . . . . . 9
Board Attendance. . . . . . . . . . . . . . . . . . . . . . . . . . 9
Committees of the Board of Directors. . . . . . . . . . . . . . . . 9
Certain Relationships and Related Transactions. . . . . . . . . . . 11
Compensation of Directors . . . . . . . . . . . . . . . . . . . . . 11
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . 13
Report of the Compensation Committee. . . . . . . . . . . . . . . . 13
Compensation Summary. . . . . . . . . . . . . . . . . . . . . . . . 17
Option/SAR Grants in Last Fiscal Year . . . . . . . . . . . . . . . 18
Aggregated Option/SAR Exercises in Last Fiscal Year and Year-End
Option/SAR Values . . . . . . . . . . . . . . . . . . . . . . . . 19
Long-Term Incentive Plans - Awards in Last Fiscal Year. . . . . . . 20
Pension Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Employment Agreements and Other Arrangements. . . . . . . . . . . . 22
Compensation Committee Interlocks and Insider Participation . . . . 24
Performance Graph . . . . . . . . . . . . . . . . . . . . . . . . . 25
Security Ownership of Certain Beneficial Owners and Management . . . . 26
Security Ownership of Certain Beneficial Owners . . . . . . . . . . 26
Security Ownership of Management. . . . . . . . . . . . . . . . . . 27
Approval of 1996 Executive Incentive Compensation Plan
(Proxy Item No. 2). . . . . . . . . . . . . . . . . . . . . . . . . 28
Ratification of Appointment of Independent Accountants
(Proxy Item No. 3). . . . . . . . . . . . . . . . . . . . . . . . . 34
Other Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Voting Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Stockholder Proposals for 1997 Annual Meeting. . . . . . . . . . . . . 35
Exhibit:
1996 Executive Incentive Compensation Plan
The "Company" when used in this Proxy Statement refers to Schuller Corporation
(formerly known as Manville Corporation), incorporated in the State of Delaware
in 1981, as well as, where applicable, its consolidated subsidiaries, including
Schuller International Group, Inc. ("Schuller").
i
<PAGE>
SCHULLER CORPORATION
P. O. BOX 5108
717 17TH STREET (80202)
DENVER, CO 80217-5108
--------------------------
PROXY STATEMENT
--------------------------
INTRODUCTION
The enclosed proxy is solicited by the Board of Directors of Schuller
Corporation (formerly known as Manville Corporation) (the "Company") for use at
the Company's Annual Meeting of Stockholders, and is revocable at any time by
the person giving it prior to its use at the Annual Meeting. If signed and
returned, it will authorize the persons named as proxy to vote on the matters
referred to therein. The authority conferred by all properly executed proxies
will be exercised by such persons as specified therein.
Only holders of the Company's common stock, $.01 par value ("Common Stock"),
of record at the close of business on April 9, 1996, the record date for the
Annual Meeting, are entitled to notice of, and to vote at, the Annual Meeting.
At the close of business on that date, 161,213,679 shares of Common Stock were
outstanding, which constituted the only outstanding class of voting securities
of the Company. Each share of Common Stock is entitled to one vote. Shares may
not be voted on a cumulative basis.
Any stockholder giving a proxy in the form accompanying this Proxy Statement
has the power to revoke the proxy prior to its use at the Annual Meeting. A
stockholder may revoke a proxy by (i) delivering an instrument of revocation
before the Annual Meeting to the Secretary of the Company at the Company's
principal offices; (ii) duly executing a proxy bearing a later date or time than
the date or time of the proxy being revoked; or (iii) voting in person at the
Annual Meeting. A stockholder's attendance at the Annual Meeting will not by
itself revoke a proxy given by such stockholder.
The cost of soliciting proxies will be borne by the Company. In addition to
solicitation of proxies by mail, proxies may be solicited by the Company's
Directors, officers and other employees by personal interview, telephone and
telegram. Such persons will receive no additional compensation for such
services. The Company requests that brokerage houses and other custodians,
nominees and fiduciaries forward solicitation materials to the beneficial owners
of shares of Common Stock held of record by such persons and will reimburse such
brokers and other fiduciaries for their reasonable out-of-pocket expenses
incurred when the solicitation materials are forwarded.
This Proxy Statement and the enclosed proxy card are first being sent to
holders of Common Stock on or about May 6, 1996.
1
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ELECTION OF DIRECTORS
(PROXY ITEM NO. 1)
Unless marked specifically to the contrary, proxies will be voted FOR the
election as Directors of the persons named below. Directors shall be elected by
a plurality of the votes cast at the Annual Meeting by the holders of shares
entitled to vote in the election. Each Director of the Company shall hold
office until the next Annual Meeting and until his or her successor is elected
and duly qualified. If any nominee should be unable to serve as Director, an
event not now anticipated, proxies may be voted in favor of substitute nominees
designated by the Board of Directors. All nominees have indicated their
willingness to serve.
Effective November 28, 1988, the Company consummated its Second Amended and
Restated Plan of Reorganization (the "Plan") under Chapter 11 of the United
States Bankruptcy Code. A copy of such Plan is available upon request from the
Company. In connection with the Plan, Manville Personal Injury Settlement Trust
(the "Trust"), formed to implement certain portions of the Plan, in particular,
those relating to the settlement of asbestos health claims against the Company
and certain of its affiliates, is entitled to approve two of the Company's
nominees for Director. Robert A. Falise, Chairman and Managing Trustee of the
Trust, and Louis Klein, Jr. and Christian E. Markey, Jr., Trustees of the Trust,
who are presently members of the Company's Board, and Frank J. Macchiarola,
Trustee of the Trust, are all nominees for election to the Board at the Annual
Meeting.
Two of the nominees for Director, Mr. Benatar and Mr. Mayer, previously
served on the Board of Directors of Riverwood International Corporation, which
prior to March 1996 was an 81.3 percent owned subsidiary of the Company.
2
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Your Board of Directors, by a vote of seven to six, approved the following
nominees for Director and recommends a vote FOR such nominees. Of the twelve
non-management Directors, six (including the three Trustee Directors) voted for
and six voted against the slate of nominees. All but one of the current
Directors who are listed below as nominees voted for approval of such slate of
nominees.
Leo Benatar Mr. Benatar is a Director of Sonoco Products
DIRECTOR, Company and recently retired as Chairman of
SONOCO PRODUCTS COMPANY Engraph, Inc., a wholly owned subsidiary of
Director Nominee Sonoco Products Company that designs and custom
Age: 66 manufactures packaging, product identification
and promotional materials for a broad variety of
consumer and industrial markets. He has been a
Director of Engraph, Inc. since October 1975, and
was a Senior Vice President of Sonoco Products
Company. Before joining Engraph, Inc. in February
1981, Mr. Benatar was President of Mead
Packaging, a division of Mead Corporation, for
nine years. Mr. Benatar also serves on the Boards
of Directors of Aaron Rents, Inc., Interstate
Bakeries Corporation, Mohawk Industries, Inc.,
Paxar Corporation, and Sonoco Products Company,
and is past Chairman of the Federal Reserve Bank
of Atlanta. In 1980, he received the First Annual
Achievement Award for significant progress in race
relations from the Atlanta Community Relations
Council. In the same year, the Greek Orthodox
Church recognized him with the St. Paul Medal,
which is awarded every 25 years, for efforts in
the area of free enterprise and international
business development. Mr. Benatar received his
bachelor's degree in Industrial Engineering from
Georgia Institute of Technology in 1951 and served
in the U.S. Navy from 1951 to 1953. He also
graduated from Harvard Business School's Program
for Management Development.
3
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Robert A. Falise Mr. Falise was elected a Trustee of the Manville
CHAIRMAN AND MANAGING Personal Injury Settlement Trust in December 1991,
TRUSTEE, and became its Chairman and Managing Trustee in
MANVILLE PERSONAL INJURY January 1992. From 1989 through December 1991,
SETTLEMENT TRUST Mr. Falise was engaged in the private practice
Director since 1992 of law specializing in corporate restructuring
Age: 63 and the enhancement of shareholder value. From
1987 to 1989, he served as Executive Vice
President and Group Executive of Irving Bank
Corporation and Irving Trust Company of New York.
From 1980 to 1987, he was Vice President and
General Attorney of RCA Corporation. From 1966 to
1980, he was Vice President, General Counsel and
Secretary of Dictaphone Corporation. Prior to
that, Mr. Falise was in the private practice of
corporate law in New York City. In 1960-61, he
served as Assistant Director of the U.S.
Commission on Civil Rights in Washington, D.C.,
and, earlier, as an Army Judge Advocate Officer
specializing in international law in the Pentagon.
A graduate of Columbia College, Mr. Falise
received his J.D. degree from Columbia University
School of Law. Mr. Falise is also a Director of
the Caramoor Museum and Center for the Performing
Arts, Westchester County, New York. Mr. Falise is
Chairman of the Committee on Board Organization
and Operation and is a member of the Audit,
Compensation and Executive Committees.
Todd Goodwin Mr. Goodwin is a General Partner of the
GENERAL PARTNER, New York investment banking firm Gibbons,
GIBBONS, GOODWIN, Goodwin, van Amerongen ("GGvA"). Prior to
VAN AMERONGEN joining GGvA in 1984, he was a managing director
Director since 1991 of Merrill Lynch and a partner of White Weld.
Age: 64 Mr. Goodwin is a Director of Rival Company, Schult
Homes and Wells Aluminum. He received his A.B.
degree from Harvard College in 1954. Mr. Goodwin
is Chairman of the Compensation Committee and is a
member of the Committee on Board Organization and
Operation and Executive Committee.
4
<PAGE>
Michael N. Hammes Mr. Hammes is Chairman of the Board and
CHAIRMAN AND Chief Executive Officer of The Coleman
CHIEF EXECUTIVE OFFICER, Company, Inc., a global marketer and
THE COLEMAN COMPANY, INC. manufacturer of products used in the
Director since 1993 outdoor recreation and hardware industries.
Age: 54 Mr. Hammes was Vice Chairman of The Black & Decker
Corporation, and prior to that was Vice
President-International Operations for Chrysler
Corporation, as well as serving in a number of
positions at Ford Motor Corporation, with which he
was affiliated for 20 years. He was a financial
analyst with Equitable Investments Company before
joining Ford Motor Corporation. He holds a
bachelor's degree from Georgetown University
School of Foreign Service in International
Economics/Foreign Trade and an M.B.A. degree in
Finance from New York University. Mr. Hammes is a
Director of International Technology Corporation,
is a member of the Development Board of the
College of Business of Eastern Michigan
University, and is a member of the Board of
Trustees of Center Stage Associates, a
professional regional theater based in Baltimore.
Mr. Hammes is a member of the Audit and
Compensation Committees.
John Nils Hanson Mr. Hanson has been Executive Vice President
EXECUTIVE VICE PRESIDENT AND and Chief Operating Officer of Harnischfeger
CHIEF OPERATING OFFICER, Industries, Inc. ("Harnischfeger") since
HARNISCHFEGER July 1995. He was President and Chief
INDUSTRIES, INC. Executive Officer of the Joy Mining Machinery
Director since 1993 unit of Harnischfeger following the 1994
Age: 54 merger of Joy Technologies, Inc. ("Joy") and
Harnischfeger. Prior to the merger, he was Chief
Operating Officer, President and a Director of
Joy. Harnischfeger is a manufacturer of
underground and surface mining machinery, paper
machinery and material handling equipment. From
1990 until he was elected President and a member
of the Board of Joy, he ran its Mining Machinery
Group. Prior to 1990, he served as Vice President
for Caterpillar, Inc., and President of Solar
Turbines Incorporated. From 1973 to 1980, Mr.
Hanson held various positions with Gould Inc. He
began his career with Westinghouse Electric
Corporation in 1965 and held various positions
with Westinghouse until 1973. From 1970 to 1971,
he was a White House Fellow and served as
Executive Assistant to the United States Secretary
of Labor. He received his bachelor's degree in
Chemical Engineering from Massachusetts Institute
of Technology in 1964. In 1965, he also earned a
master's degree in Nuclear Engineering from M.I.T.
His doctorate degree was obtained from Carnegie
Mellon University in Nuclear Science in 1969. Mr.
Hanson is a member of the Audit and the Health,
Safety and Environment Committees.
5
<PAGE>
Kathryn Rudie Harrigan Ms. Harrigan is the Henry R. Kravis Professor
HENRY R. KRAVIS PROFESSOR OF of Business Leadership at the Columbia
BUSINESS LEADERSHIP, University Graduate School of Business, where
COLUMBIA UNIVERSITY GRADUATE she has been a professor in the Management
SCHOOL OF BUSINESS and Organizations Division since 1981.
Director since 1995 Ms. Harrigan is also serving as the Faculty
Age: 45 Chair: Chazen International Institute and the Core
Course Coordinator for Strategic Management of the
Enterprise. Ms. Harrigan regularly performs
consulting projects on strategic alliances and
other strategic management issues, and has
authored several books and numerous publications
on these subjects. Ms. Harrigan received her B.A.
degree from Macalester College, her M.B.A. degree
from University of Texas at Austin and her D.B.A.
degree from Harvard Business School. Ms. Harrigan
is also a Director of Cambrex Corporation and
Technical Chemicals and Products, Inc. and is a
member of the Advisory Board of Ronin Development
and the Editorial Boards of several business and
technical journals. She served as External
Member, Strategic Planning Committee of the
Panasonic Industrial Controls Division, Matsushita
Corporation from 1989 to 1992 and is a member of
the Board of Governors, Academy of Management from
1986 to 1988. She was inducted into the Fellows
of the Academy of Management in 1989. Ms.
Harrigan is a member of the Audit and Health,
Safety and Environment Committees.
Louis Klein, Jr. Mr. Klein, a financial consultant in New York
TRUSTEE, City, was elected a Trustee of the Manville
MANVILLE PERSONAL INJURY Personal Injury Settlement Trust in
SETTLEMENT TRUST December 1991. Previous positions included
Director since 1992 Chairman and Chief Executive Officer of
Age: 60 Stendig Inc., an importer and national marketer of
prestige contract and residential furniture and
textiles from 1989 to 1990; Chairman and Chief
Executive Officer of Victoreen Inc., a
manufacturer and international marketer of
radiation detection and measurement equipment;
Managing Director-Corporate Finance of Neuberger &
Berman; and Managing Director of Ardshiel
Associates Inc. Mr. Klein also has been a
court-appointed trustee in the divestiture of
several businesses pursuant to consent decrees or
final orders involving the U.S. Department of
Justice and the Federal Trade Commission. Mr.
Klein received his A.B. degree from Harvard
College and J.D. degree from Columbia Law School.
Mr. Klein serves on the Board of Directors of
CliniCorp., Inc. and The CRM Funds. Mr. Klein is
a member of the Audit and Compensation Committees.
6
<PAGE>
Frank J. Macchiarola Mr. Macchiarola is currently Dean and Professor
DEAN AND PROFESSOR, of the Benjamin N. Cardozo School of Law,
BENJAMIN N. CARDOZO SCHOOL OF Yeshiva University. He will assume the
LAW, YESHIVA UNIVERSITY, Presidency of St. Francis College in New York
AND TRUSTEE, in July 1996. He has also been a Trustee of the
MANVILLE PERSONAL INJURY Manville Personal Injury Settlement Trust since
SETTLEMENT TRUST 1992. For 32 years, Mr. Macchiarola has taught
Director Nominee in the law, business, political science
Age: 55 and public administration areas at the
undergraduate and graduate levels. In addition
to teaching duties, he has served from 1973 to
1974 as Assistant Vice President for Academic
Affairs at Columbia University and from 1975 to
1978 as Vice President for Institutional
Advancement at the Graduate School of City
University of New York. From 1983 to 1988 he
was President and Chief Executive Officer of
The New York City Partnership, Inc., a company
devoted to improving the economic and social
conditions in New York City. From 1978 to
1983, Mr. Macchiarola served as Chancellor of
the New York Public School System, supervising
the educational program of almost 1,000,000
students from kindergarten through high school,
the largest in the nation.
Christian E. Markey, Jr. A graduate of U.C.L.A. School of Law and a
TRUSTEE, veteran of the United States Marine Corps,
MANVILLE PERSONAL INJURY Judge Markey served as Vice President and
SETTLEMENT TRUST General Counsel of the University of Southern
Director since 1992 California from 1988 until his retirement
Age: 66 in 1993. A Trustee of the Manville Personal
Injury Settlement Trust since its inception,
Judge Markey served as a Superior Court judge
from 1974 to 1988, following his appointment by
Ronald Reagan, then-governor of California.
Prior to 1974, he was engaged in the private
practice of law in California. For the past 20
years, Judge Markey has lectured and taught at
the Whittier College School of Law, the
University of Southern California Law Center
and at various national and international
institutes. He is a former member of the Board
of Regents of the University of California. In
addition, Judge Markey has been appointed to
the Commission on Judicial Performance by the
California Supreme Court. Judge Markey was
founding Chairman of the Board of the Southern
California Center for Law in the Public
Interest. He received the Chief Justice Roger
Traynor Award from the Los Angeles Trial
Lawyers for his extraordinary devotion to
justice. Judge Markey is a member of the
Committee on Board Organization and Operation,
the Compensation and the Health, Safety and
Environment Committees.
7
<PAGE>
William E. Mayer Since October 1992, Mr. Mayer has been Dean of
DEAN the College of Business and Management of the
COLLEGE OF BUSINESS AND University of Maryland at College Park.
MANAGEMENT, UNIVERSITY OF He was Dean of the William E. Simon Graduate
MARYLAND School of Business Administration at the
Director Nominee University of Rochester (New York) from
Age: 55 September 1991 to July 1992. From January 1990
to January 1991, he was Chairman and Chief
Executive Officer of CS First Boston Merchant
Bank, and from December 1988 to January 1990,
Mr. Mayer was President and Chief Executive
Officer of the First Boston Corporation. From
1977 to 1988 he was a Managing Director of the
First Boston Corporation. Mr. Mayer received
his bachelor's and master's of Business
Administration degrees from the University of
Maryland, College Park. He serves as a
Director on the Boards of American Trading and
Production Corporation, Chart House
Enterprises, Inc. and Hambrecht & Quist, Inc.,
and as Trustee for the Aspen Institute, the
Cancer Research Institute and Colonial Group of
Mutual Funds. Mr. Mayer also serves on the
Board of TechnoServe, an organization providing
business help to developing nations. Mr. Mayer
serves on the Boards of Administrators of
Tulane University and the University of
Maryland Foundation.
W. Thomas Stephens Mr. Stephens was appointed Chief Executive
CHAIRMAN OF THE BOARD, Officer and President of Schuller Corporation
CHIEF EXECUTIVE OFFICER in 1986 and appointed Chairman of the Board of
AND PRESIDENT, Directors of the Company on June 1, 1990.
SCHULLER CORPORATION Prior to that time, he held the position of
Director since 1986 Executive Vice President and Chief Financial
Age: 53 Officer of the Company from 1984 to 1986. Mr.
Stephens earned his B.S. and M.S. degrees in
Industrial Engineering from the University of
Arkansas in 1965 and 1966, respectively. Mr.
Stephens joined Olinkraft, Inc., the
predecessor to Riverwood International
Corporation's primary operating subsidiary in
1963. Mr. Stephens also is a Director of Ball
Corp., Mail-Well, Inc., Public Service Company
of Colorado Inc. and Stillwater Mining Company.
Mr. Stephens is Chairman of the Executive
Committee and is a member of the Committee on
Board Organization and Operation.
8
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The names, ages and offices of the Chief Executive Officer and other
executive officers of the Company are listed below. Of such named executive
officers, only Messrs. Stephens and Von Wald were executive officers of the
Company at the end of 1995. Each of the named executive officers holds office
until the Board of Directors meeting following the Annual Meeting of
Stockholders unless previously removed by the Board of Directors. Mr. Stephens
will resign as Chairman of the Board effective June 7, 1996. It is intended
that he will also resign as Chief Executive Officer and President when a
suitable successor is found, but not later than April 12, 1997.
Officer Age Office
------- --- -------
Kenneth L. Jensen 45 Senior Vice President, Finance of
Schuller since 1994; Vice
President, Finance and
Administration of Schuller from
1990 to 1994.
Harvey L. Perry, Jr. 42 Vice President and General Manager,
Performance Materials of Schuller
since 1995; Vice President and
General Manager, Filtration and
Manufacturing of Schuller from 1994
to 1995; Vice President,
Manufacturing of Schuller from 1992
to 1994.
W. Thomas Stephens 53 Chairman of the Board, Chief
Executive Officer and President
since 1986.
Richard B. Von Wald 53 Executive Vice President, General
Counsel and Secretary since March
1996; Senior Vice President,
General Counsel and Secretary from
1991 to March 1996.
Dixon R. Walker 45 Senior Vice President, Roofing,
Building Insulation and Information
Technology of Schuller since 1993;
Vice President and General Manager,
Roofing Systems of Schuller from
1991 to 1993.
BOARD ATTENDANCE
During 1995, the Board of Directors of the Company had twenty regular
meetings and three special meetings. In 1995, each Director attended a minimum
of 75 percent of the meetings of the Board of Directors and of the Committees of
which the Director was a member.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has five standing Committees: Audit,
Board Organization and Operation, Compensation, Executive and Health, Safety and
Environment. Messrs. John C. Burton, Robert E. Fowler, Jr., Stanley J. Levy,
Will M. Storey and Raymond S. Troubh, each of whom currently serves on one or
more Committees, are not nominees for reelection.
9
<PAGE>
AUDIT COMMITTEE
The Audit Committee is currently comprised of Messrs. Burton, Falise,
Hammes, Hanson, Klein, Storey (Chairman) and Troubh and Ms. Harrigan. The Audit
Committee met five times during 1995 and meets regularly with the Company's
internal auditor, independent public accountants and operating and financial
management. The principal functions of the Audit Committee are to review and
report to the Board with respect to: (i) the annual financial statements and
filings with the Securities and Exchange Commission; (ii) accounting issues
significant to the Company; (iii) internal auditing, accounting and financial
controls; (iv) the appointment of independent public accountants, the annual
audit by the independent public accountants, including the scope of the audit,
and the compensation of the independent public accountants for both audit and
non-audit services; (v) the Company's policies governing compliance with laws
and regulations, ethics and conflicts of interest and any significant instances
of employee misconduct; and (vi) travel and entertainment expenses of all
officers of the Company.
COMMITTEE ON BOARD ORGANIZATION AND OPERATION
The Committee on Board Organization and Operation is currently comprised of
Messrs. Falise (Chairman), Fowler, Goodwin, Levy, Markey and Stephens. The
Committee on Board Organization and Operation met three times during 1995. The
Committee on Board Organization and Operation considers and makes
recommendations to the Board with respect to the composition of the Board and
matters relating to the organization, operation, function, compensation and
procedures of the Board and its Committees.
Persons recommended by stockholders of the Company as suitable nominees for
the position of Director are referred to the Committee on Board Organization and
Operation for its consideration. Stockholders wishing to recommend to the Board
persons for nomination to the position of Director should send their
recommendations to the Secretary of the Company.
COMPENSATION COMMITTEE
The Compensation Committee is currently comprised of Messrs. Falise,
Goodwin (Chairman), Hammes, Klein, Markey, Storey and Troubh. The Compensation
Committee met seven times during 1995. The principal functions of the
Compensation Committee are to: (i) approve and report to the Board with respect
to executive compensation, subject to the approval of the full Board in the case
of compensation of the Chief Executive Officer; (ii) review employee benefit
programs and approve or recommend changes therein to the Board; and (iii) review
with the Chief Executive Officer matters with respect to management development
and succession.
EXECUTIVE COMMITTEE
The Executive Committee is currently comprised of Messrs. Falise, Fowler,
Goodwin, Stephens (Chairman), Storey and Troubh. The Executive Committee did
not meet in 1995. The Executive Committee is delegated the authority of the
full Board during the intervals between Board meetings insofar as may be lawful,
except for actions relating to the declaration or payment of dividends. The
Executive Committee has the responsibility to report actions taken by it to the
full Board at the next meeting of the Board.
10
<PAGE>
HEALTH, SAFETY AND ENVIRONMENT COMMITTEE
The Health, Safety and Environment Committee is currently comprised of Ms.
Harrigan, and Messrs. Burton, Fowler (Chairman), Hanson, Levy and Markey. The
Health, Safety and Environment Committee met three times during 1995. The
principal functions of the Health, Safety and Environment Committee are to
provide oversight and to report and make recommendations to the Board with
respect to the Company's activities relating to health, safety and environmental
issues and product safety.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Trust owns approximately 79 percent of the Common Stock and by virtue
of such stock ownership is able to nominate and elect Directors of the Company
as the Trust determines. Three of the Company's current Directors, Messrs.
Falise, Klein and Markey, are Trustees of the Trust, and Frank J. Macchiarola,
the remaining Trustee of the Trust, is a nominee for Director. Under the Plan,
the Trust was funded with assets, including (i) fifty percent of the Common
Stock and convertible preferred stock entitling the Trust to increase its Common
Stock holdings to approximately eighty percent (which increase took place in
December 1992), (ii) bonds, and (iii) the right to receive up to 20 percent of
the Company's annual profits (as defined). The Company completed prepayment of
substantially all of the bonds in 1994. On April 5, 1996, the Company issued
32,527,110 shares of Common Stock to the Trust in exchange for the elimination
of the Trust's right to receive 20 percent of the Company's annual profits
(the "Exchange"). For further discussion of the Plan and the Exchange see Notes
2, 3, and 23 to the Company's Financial Statements contained in the Schuller
Corporation 1995 Annual Report previously mailed to securityholders.
COMPENSATION OF DIRECTORS
W. Thomas Stephens is the only Director who is employed by the Company. He
receives no fees for serving as a Director in addition to his regular
compensation.
Except for Messrs. Falise, Klein and Markey, all non-employee Directors
receive an annual retainer of $25,000, $1,000 for each Board meeting attended,
$1,000 for each Committee of the Board meeting attended, and reimbursement for
travel expenses related to attendance of Board and Committee meetings. Each
Director (other than Messrs. Falise and Stephens) who serves as a Committee
Chairman is paid an additional $2,500 per year. Director's fees earned by the
Company's Directors who are Trustees of the Trust are paid directly to the Trust
pursuant to the Manville Personal Injury Settlement Trust Agreement, as amended
(the "Trust Agreement").
In 1988, the Company adopted a retirement program for non-employee
Directors of the Company which provides for continued payment of the annual
retainer in effect at the time of the Director's retirement. If the retiring
Director has served as a Director of the Company for five or more years and has
attained age 70, continued payment of the retainer is for life. If the retiring
Director has served as a Director for five or more years but has not attained
age 70, the retainer continues for a period of years equal to the number of
years of service or for life, whichever is less. No retirement benefits are
paid to any Director retiring with less than five years service.
11
<PAGE>
In 1995, following their retirement as Directors of the Company, the
Company made lump-sum payments to Bette B. Anderson and Ernest H. Drew of
$115,521 and $121,726, respectively, representing payment in full for the
present value of the amounts to be paid to such retired Directors under the
Company's retirement plan for non-employee Directors described above.
In November 1992, the Company entered into an irrevocable trust arrangement
with an independent financial institution to fund the retirement benefits
expected to be paid to retiring Directors. The irrevocable trust was funded with
$1,500,000, an amount determined by an independent actuary to be sufficient as
of October 27, 1992 to fund the anticipated retirement benefits payable to
retired or retiring Directors. In August 1993, an aggregate of $275,000 of
supplemental funding was contributed to the irrevocable trust based on the
calculations of an independent actuary.
12
<PAGE>
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors (the "Committee") is
composed entirely of Directors who are not employees of the Company. The Board
of Directors has delegated to the Committee the responsibility for establishing
and administering the Company's executive compensation plans subject to the
Board's final approval of major new compensation systems and the Chief Executive
Officer's compensation. The Committee consults with outside compensation
consultants, attorneys and other specialists. The Committee's unanimous
approval of the Company's executive compensation programs in 1995 was based on
each Committee member's judgment and evaluation of the various factors
underlying the overall compensation philosophy described below.
A primary objective of the Committee is to work with management to design
and implement compensation systems that both attract and retain a top quality
management team and motivate that team to create long-term stockholder value.
The guiding principle of the Company's compensation system is "Pay for
Performance," with an emphasis on variable pay tied to the attainment of
performance goals. Under the Pay for Performance philosophy used throughout the
organization, if the Company achieves its performance goals, the combination of
annual incentive bonuses, which are dependent on performance, equity related
long-term awards and base salary, offers the opportunity for executives' average
total compensation from all sources over a number of years to reach "competitive
levels" of total compensation of Comparable Companies, as defined below. If the
Company surpasses its earnings objectives, this combination of incentives,
equity and salary may result in total compensation reaching the upper third of
total compensation at Comparable Companies.
The design of the compensation system is intended to align the interests of
the executives with the interests of stockholders. Base salary and annual
incentive compensation are tied to the achievement of goals approved by the
Board of Directors for corporate, subsidiary and business unit performance and
are designed to encourage employees to anticipate and respond to business
challenges and opportunities while avoiding an entitlement attitude.
Together with its outside experts, the Committee evaluates compensation
practices of other companies and the prevailing salary and total compensation
levels for various levels of performance. Comparisons are made with compensation
levels for most of the companies that are included in the Standard & Poor's
Paper and Forest Products Index and the Standard & Poor's Building Materials
Index, which historically have reflected the Company's two principal lines of
business, as well as compensation levels for companies of the Company's size in
general industry (collectively, "Comparable Companies"). Future direct
comparisons to companies included in the Standard & Poor's Paper and Forest
Products Index will cease to be made as a result of the Company's disposition on
March 27, 1996 of the shares of Common Stock of Riverwood International
Corporation ("Riverwood") held by the Company (the "Riverwood Disposition") and
a new peer group will be developed that reflects the Company's size and
competitive universe for executive talent. "Competitive levels" are determined
based upon the average of the median levels of compensation among companies in
the various surveys utilized. The Company's mix of businesses, its unique stock
ownership, its commitments to the Trust and its strategic and tactical
objectives are considered by the Committee when compensation policies are
established.
13
<PAGE>
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally limits the corporate deduction for compensation paid to the
executive officers of the Company named herein in the Summary Compensation Table
to $1 million, unless certain requirements are met. To the extent consistent
with the Company's compensation policies and the Committee's assessment of the
interests of stockholders, the Company intends to comply with the requirements
for deductibility of executive compensation under Section 162(m). However, the
Committee will balance the costs and burdens involved in such compliance against
the value of the tax benefits to be obtained by the Company thereby, and may in
certain instances, as with Mr. Stephens' 1995 compensation, pay compensation
that is not fully deductible if it determines such costs and burdens outweigh
such benefits.
COMPENSATION PHILOSOPHY
This section outlines the Committee's philosophy for administering the
three major components of executive pay: base salary, annual incentive and
long-term incentive.
BASE SALARIES. The Committee determines base salaries of executives in
accordance with the following factors listed in order of importance: the
significance of the executive's position to the Company, the executive's
experience and expertise in his or her position, and competitive marketplace
salaries for similar positions. Individual salary increases are based on each
person's performance as evaluated and approved by the Committee. There were no
increases in base salaries for executive officers in 1995 after increasing an
average of 13 percent in 1994 and decreasing an average of 2 percent in 1993.
The Committee's policy is to position base salaries at or below competitive
levels for similarly qualified executives in comparable positions.
ANNUAL INCENTIVE BONUS. Since 1987, the Company has utilized an annual
incentive pay plan that provides above average bonus opportunities when Company
performance exceeds targets approved by the Committee and severely reduces or
eliminates bonuses when the Company fails to achieve such targets.
Specifically, this plan is designed to offer significant awards when actual
performance reaches or exceeds a level significantly above targeted performance
levels. Conversely, under the formula in the plan, executives would be entitled
to minimal or no awards when actual performance fails to reach minimum
performance levels. Target bonuses for executive officers, which are payable
when the Company achieves or approaches 100 percent of its performance targets,
range from 68 percent to 80 percent of their respective base salaries.
For 1995, the maximum bonus potential, according to the formula in the
plan, would be triggered at achievement of 130 percent of targeted income from
operations, and the minimum bonus award required the achievement of 70 percent
of targeted income from operations. Achievements in excess of 130 percent of
income from operations targets could result in bonuses in excess of 200 percent
of target bonuses. The annual performance target and maximum and minimum
performance levels are reviewed and approved by the Committee at the beginning
of each year. The Committee has authority to, and does when appropriate,
override the annual bonus formula based on assessments of overall and individual
performance.
In 1995, the Committee weighted 75 percent of the bonus on financial goals
and 25 percent of the bonus on the Committee's assessment of an individual
executive's performance. In considering individual awards, the Committee used
its business judgment, and considered the following criteria: 1) record levels
of income from operations at Schuller which exceeded the income from operations
targets; 2) the execution of a definitive merger agreement in connection with
the Riverwood Disposition; 3) the restructuring of the Company's capital
structure, particularly in light of the Exchange; and 4) the
14
<PAGE>
successful implementation of new growth initiatives at Schuller. The Committee
also took into account the Chief Executive Officer's appraisal of each senior
officer. The Committee made its decision regarding individual awards without
expressly weighting any of the foregoing criteria higher than any other of such
criteria. For 1995, the Company's various business divisions (excluding
Riverwood) achieved between 72 percent and 198 percent of their respective
income from operations targets while the Company as a whole (excluding
Riverwood) achieved 113 percent of its income from operations target. Because
of the Riverwood sales process, Riverwood's income from operations performance
was not considered for bonus calculation purposes. Based on the achievements
described above, aggregate annual incentive compensation for executive officers
in 1995 was 142 percent of target bonuses.
LONG-TERM INCENTIVE PLANS. To attract and retain top quality management,
the Company uses several types of long-term, equity-related incentives for the
Company's executive officers: stock options, stock appreciation rights
("SARs"), restricted stock, and cash payments based on dividends and other
distributions on its Common Stock.
In 1991, the Company adopted the Manville Corporation Stock Incentive Plan
(the "Stock Plan"). Long-term incentive grants have historically been made
under the Stock Plan in multi-year cycles, with the cycles ranging from three to
five years. In 1995, the Company granted ten-year stock options (the "1995
Options") to certain of the executive officers in amounts based on the
discounted present value of long-term compensation paid by Comparable Companies.
The exercise price of the 1995 Options was established at $10.00 per share, the
market price of the Common Stock on the date of grant. The 1995 Options vest
and become exercisable in three equal installments on each of the first, second
and third anniversaries of the grant date. Pursuant to the terms of the 1995
Options, the exercise price has been reduced to $4.00 to reflect the $6.00
dividend declared on March 27, 1996 and paid on April 12, 1996. Other than the
1995 Options, substantially all other awards made under the Stock Plan have
vested.
In 1995, Schuller made additional grants to Schuller executive officers of
awards under the Schuller International Group, Inc. 1994 Long Term Cash
Incentive Compensation Plan (the "Schuller Plan"). Awards under the Schuller
Plan are in the form of performance units. The value of performance units
granted in 1995 will be determined based on Schuller's performance over the
1995-1997 period against a financial goal based on earnings before interest,
taxes, depreciation and amortization or "EBITDA." The Committee established
EBITDA performance minimums, targets and maximums corresponding with the 50th
percentile, 75th percentile and 90th percentile, respectively, of the historical
performance of the companies that comprise the Standard & Poor's Building
Materials Index. Consistent with this range of performance, the 1995 awards are
intended to provide target long-term incentive opportunities at the 75th
percentile of the long-term compensation paid by Comparable Companies. None of
the current executive officers of the Company who received 1995 Options received
awards under the Schuller Plan.
On April 12, 1996, the Board of Directors of the Company adopted the
Schuller Corporation 1996 Executive Incentive Compensation Plan (the "1996
EICP") and recommended that it be submitted to stockholders for their approval
at the Annual Meeting. The 1996 EICP is intended to supersede the Stock Plan.
If the 1996 EICP is approved by the Company's stockholders, authority to make
future grants under the Stock Plan will be terminated, although previously
granted awards will remain outstanding in accordance with their terms and the
terms of the plans. See "Approval of 1996 Executive Incentive Compensation
Plan."
15
<PAGE>
CEO COMPENSATION. Mr. Stephens' total compensation has been determined in
accordance with the principles described above which are applicable to all
executive officers of the Company. Mr. Stephens' 1995 base salary of $600,000
was well below the average of annual salaries for chief executive officers of
Comparable Companies. Based on the formula used to determine bonuses under the
Company's annual incentive plan described above, including the Committee's
review of 1995 Company performance and its subjective evaluation of his
individual performance, the Committee approved an award to Mr. Stephens of
$680,000 with respect to 1995.
The Committee believes the design of its total compensation system
accomplishes the Company's goals of attracting new management talent, retaining
the Company's existing quality management team and aligning the interests of
executives with those of stockholders. The Committee however, has undertaken a
study of the Company's compensation structure following the Riverwood
Disposition and may make certain adjustments where it believes changes are
appropriate in view of the Company's new strategy for future growth and the
creation of stockholder value.
1995 COMPENSATION COMMITTEE
Todd Goodwin, Chairman
Robert A. Falise
Michael N. Hammes
Louis Klein, Jr.
Christian E. Markey, Jr.
Will M. Storey
Raymond S. Troubh
16
<PAGE>
COMPENSATION SUMMARY
The following Summary Compensation Table sets forth the compensation earned
during 1993 through 1995 by W. Thomas Stephens, the Company's Chief Executive
Officer, and by each of the other individuals who were executive officers of the
Company during 1995 (the "Named Executive Officers"). Bonuses are shown for the
year earned, although these are generally paid at the beginning of the
subsequent year.
SCHULLER CORPORATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------------------- ------------------------------------------------
AWARDS PAYOUTS
--------------------------------- ----------
ALL
OTHER RESTRICTED SECURITIES OTHER
NAME AND ANNUAL STOCK UNDERLYING LTCIP COMP.
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMP.($)(1) AWARD(S)($)(2) OPTIONS/SARS(#) PAYOUTS($) ($)(4)
- --------------------- ----- --------- -------- ----------- -------------- --------------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
W. Thomas Stephens 1995 600,000 680,000 26,991 -0- 100,000 -0- 9,000
Chairman of the Board, 1994 600,000 650,000 2,506 (3) -0- -0- 9,000
CEO & President 1993 500,000 300,000 3,419 -0- -0- -0- 83,994
Richard A. Kashnow 1995 281,250 -0- 8,594 -0- -0- -0- 9,000
President, 1994 300,000 408,000 2,324 -0- -0- -0- 9,000
Schuller International 1993 265,000 320,114 3,259 -0- -0- -0- 8,994
Group, Inc. (5)
Richard B. Von Wald 1995 275,000 300,000 4,809 -0- 75,000 -0- 9,000
Executive Vice 1994 245,833 275,000 4,625 (3) -0- -0- 9,000
President, General 1993 225,000 150,000 930 -0- -0- -0- 8,994
Counsel & Secretary
Robert E. Cole 1995 275,000 230,259 4,080 -0- 75,000 -0- 9,000
Senior Vice President 1994 225,000 275,000 4,625 -0- -0- -0- 9,000
& Chief Financial 1993 200,000 150,000 -0- -0- -0- -0- 8,994
Officer (6)
</TABLE>
(1) Other Annual Compensation represents tax reimbursed by the Company to
the Named Executive Officers in respect of the taxable value of
perquisites provided to such officers.
(2) The number and value of aggregate restricted Common Stock holdings for
each of the Named Executive Officers at the end of 1995, based on the
net fair market value of the Common Stock on December 29, 1995, are as
follows: Mr. Stephens - 305,034 shares with a value of $3,965,442 and
Mr. Von Wald - 120,000 shares with a value of $1,560,000. Upon the
termination of his employment with the Company, Mr. Kashnow forfeited
the 20,000 shares of restricted stock which he owned but which had not
yet vested. The restricted shares of Common Stock held by
Mr. Stephens and Mr. Von Wald were awarded in 1994 and related to
certain retirement benefits. See note 3 below. As a result of the
Riverwood Disposition (which constituted a Change in Control for
purposes of the Stock Plan), all unvested outstanding shares of
restricted stock held by Messrs. Stephens and Von Wald vested on March
27, 1996.
(3) Messrs. Stephens and Von Wald received restricted stock awards, as
well as cash payments, in 1994 as a partial offset to certain
supplemental retirement benefits. See "Employment Agreements and
Other Arrangements."
(4) Amounts in this column represent the Company's contribution to each of
the Named Executive Officers' accounts in the Schuller Corporation
Thrift Plan. The amount shown for Mr. Stephens for 1993 also includes
the Company's $75,000 contribution to a secular trust to fund Mr.
Stephens' supplemental pension plan benefits.
(5) Mr. Kashnow resigned from Schuller effective September 29, 1995.
(6) Mr. Cole resigned from the Company effective April 11, 1996.
17
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information concerning options granted to the
Named Executive Officers during 1995. The hypothetical present value on date of
grant shown in the last column below for stock options granted in 1995 are
presented pursuant to the rules of the Securities and Exchange Commission and
are calculated under the modified Black-Scholes model for pricing options. The
Company is not aware of any model or formula that will determine with reasonable
accuracy a present value for stock options. The actual before-tax amount, if
any, realized upon the exercise of stock options will depend upon the excess, if
any, of the market price of the Common Stock over the exercise price of the
stock option at the time the stock option is exercised. There is no assurance
that the hypothetical present values of the stock options reflected in the
following table will be realized.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
SCHULLER CORPORATION
OPTION/SAR GRANTS IN LAST FISCAL YEAR
- ----------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
- ----------------------------------------------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEE IN BASE PRICE EXPIRATION GRANT DATE
NAME GRANTED (1) FISCAL YEAR (2) DATE PRESENT VALUE (3)
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
W. Thomas Stephens (4) 100,000 30.77% $10/share April 6, 2005 $368,000
- ----------------------------------------------------------------------------------------------------------------
Richard A. Kashnow (5) -0- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------
Richard B. Von Wald 75,000 23.08% $10/share April 6, 2005 $276,000
- ----------------------------------------------------------------------------------------------------------------
Robert E. Cole (6) 75,000 23.08% $10/share April 6, 2005 $276,000
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The options granted in 1995 to the Named Executive Officers (the "1995
Options") vest and become exercisable in three equal installments on
each of the first, second and third anniversaries of the grant date.
(2) The exercise price of the 1995 Options was established at $10.00 per
share, the market price of the Common Stock on the date of grant.
Pursuant to the terms of the 1995 Options, the exercise price was
reduced to $4.00 per share to reflect the $6.00 per share dividend
declared on March 27, 1996 and payable on April 12, 1996.
(3) The hypothetical present values on grant date are calculated under the
modified Black-Scholes model, which is a mathematical formula used to
value options traded on stock exchanges. This formula considers a
number of factors in hypothesizing an option's present value. Factors
used to value options granted which expire April 6, 2005 include the
stock's expected volatility rate (31 percent), risk-free rate of
return (7 percent), dividend yield (0 percent), projected time of
exercise (5 years) and rate of projected risk of forfeiture for
vesting period (5 percent per annum).
(4) On April 12, 1996, in connection with the termination of his
employment, Mr. Stephens agreed to the cancellation of his 1995
Options.
(5) Mr. Kashnow resigned from Schuller effective September 29, 1995.
(6) Mr. Cole resigned from the Company effective April 11, 1996.
18
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION/SAR
VALUES
The following table provides information concerning the exercise of stock
options and SARs by the Named Executive Officers during 1995 and the value of
unexercised options and SARs.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
SCHULLER CORPORATION
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND YEAR-END OPTION/SAR VALUES
YEAR ENDED DECEMBER 31, 1995
- ----------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AND SARS AT IN-THE-MONEY OPTIONS/SARS
SHARES FY-END (#) (1) AT FY-END ($) (2)
ACQUIRED ON VALUE
NAME EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
W. Thomas Stephens None None 208,000/100,000 1,118,000/300,000
Richard A. Kashnow (3) 42,400 217,125 (4) 0/0 0/0
Richard B. Von Wald None None 42,400/75,000 227,900/225,000
Robert E. Cole (5) None None 56,400/75,000 303,150/225,000
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) On December 31, 1995, Messrs. Stephens and Cole each held options and
freestanding SARs related to the Common Stock, which were exercisable,
in the aggregate amounts set forth above equally divided between
options and SARs. On December 31, 1995, Mr. Von Wald held 42,400
options which were exercisable. Messrs. Stephens, Von Wald and Cole
each held options (but no SARs) which were unexercisable at year end.
(2) Based upon the closing price of the Common Stock of $13.00 on December
29, 1995, less (i) an exercise price of $7.625 per share for all
exercisable options and SARs, and (ii) an exercise price of $10.00 per
share for all unexercisable options.
(3) Mr. Kashnow resigned from Schuller effective September 29, 1995.
(4) In December 1995, Mr. Kashnow exercised 42,400 options with a weighted
exercise price of $7.29 per share at a weighted sales price of $12.92
per share.
(5) Mr. Cole resigned from the Company effective April 11, 1996.
19
<PAGE>
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
- -----------------------------------------------------------------------------------------------------------------
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE-BASED PLANS
-----------------------------------
NUMBER OF SHARES, PERFORMANCE OR OTHER
UNITS OR OTHER PERIOD UNTIL MATURATION THRESHOLD TARGET MAXIMUM
NAME RIGHTS (#) (1) OR PAYOUT (2) ($) (3) ($) (4) ($) (5)
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
W. Thomas Stephens -0- N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------
Richard A. Kashnow (6) 674 -- -- -- --
- -----------------------------------------------------------------------------------------------------------------
Richard B. Von Wald -0- N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------
Robert E. Cole (7) -0- N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Units were granted under the Schuller Plan, which was adopted in 1994
by Schuller. The Schuller Plan provides for units to be granted to
participants which entitle participants to receive cash payments. The
cash payments are determined based upon Schuller's EBITDA (as defined
in the Schuller Plan) over a three-year determination period.
(2) Cash payments under the Schuller Plan are made at the end of the
three-year determination period for each grant. Upon certain events
that constitute a "change in control" (as defined in the Schuller
Plan), the value of outstanding units (determined as if the target
level of cumulative EBITDA for the applicable determination period was
met) is payable in cash to the participants.
(3) No payments would have been made on Mr. Kashnow's units unless
Schuller's EBITDA over the three-year determination period were $600
million, at which point Mr. Kashnow would have been entitled to
receive $500 per unit.
(4) The target payment of $1,000 per unit would have been made to Mr.
Kashnow if Schuller's EBITDA over the three-year determination period
were $800 million.
(5) The maximum payment of $3,000 per unit would have been made to Mr.
Kashnow if Schuller's EBITDA over the three-year determination period
were more than $1 billion.
(6) Mr. Kashnow resigned from Schuller effective September 29, 1995,
thereby forfeiting all rights to cash payments under the Schuller
Plan.
(7) Mr. Cole resigned from the Company effective April 11, 1996.
20
<PAGE>
PENSION PLAN
Salaried employees and employees at designated non-union locations of the
Company and its subsidiaries are participants in the Schuller International
Employees Retirement Plan (the "Retirement Plan"). Pension benefits under the
Retirement Plan are limited to the amounts allowed by the provisions of the
Code. The Company has adopted a Supplemental Pension Plan ("Supplemental Plan")
that provides for payment of the difference between the benefits earned pursuant
to the Retirement Plan, without regard to Code limits, and the amounts actually
available from the Retirement Plan. Former and current executive officers
(other than Messrs. Stephens and Von Wald), and other employees, are eligible to
participate in the Supplemental Plan. Messrs. Stephens and Von Wald are parties
to individual supplemental retirement arrangements adopted in 1994 in connection
with which they received restricted stock awards and cash payments in 1994 as a
partial offset to certain supplemental retirement benefits. See "Employment
Agreements and Other Arrangements." The Supplemental Plan may be funded by
contributions to an irrevocable Supplemental Pension Plan Trust ("Pension
Trust") for the accounts of participants. No contributions were made to the
Pension Trust in 1995. Contributions, if any, to the Pension Trust to fund the
Supplemental Plan and earnings thereon are fully taxable to the individual,
deductible by the Company and are reduced by applicable withholding taxes.
The following Pension Plan Table sets forth the estimated annual benefits
payable upon retirement, including amounts attributable to the Supplemental
Plan, for specified remuneration levels and years of service.
<TABLE>
<CAPTION>
Years of Service
---------------------------------------------------------------------------
Remuneration 15 20 25 30 35
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 125,000 $ 24,955 $ 33,274 $ 41,592 $ 49,910 $ 58,229
150,000 30,206 40,274 50,343 60,412 70,480
175,000 35,455 47,273 59,091 70,909 82,727
200,000 40,705 54,274 67,842 81,410 94,979
250,000 51,205 68,273 85,341 102,409 119,477
300,000 61,706 82,274 102,843 123,412 143,980
400,000 82,705 110,273 137,841 165,409 192,977
500,000 103,705 138,274 172,842 207,410 241,979
600,000 124,706 166,274 207,843 249,412 290,980
700,000 145,705 194,273 242,841 291,409 339,977
800,000 166,705 222,274 277,842 333,410 388,979
900,000 187,706 250,274 312,843 375,412 437,980
1,000,000 208,705 278,273 347,841 417,409 486,977
</TABLE>
- ------------------------------
NOTES:
A. Had the Named Executive Officers retired as of December 31, 1995, their
respective five-year average salaries plus bonus, for purposes of the table
set forth above, would have been as follows: Mr. Stephens, $904,681;
Mr. Kashnow, $496,540; Mr. Von Wald, $392,667; and Mr. Cole, $361,000.
B. On December 31, 1995, the Named Executive Officers had the following years
of credited service under the Retirement Plan: Mr. Stephens - 29;
Mr. Kashnow - 8; Mr. Von Wald - 22; and Mr. Cole - 22.
C. The Retirement Plan provides for payment of a retirement allowance based on
1.02 percent of the participant's five-year average final salary up to
Covered Compensation (as defined in the Retirement Plan) plus 1.4 percent
of the participant's average final salary over Covered Compensation
multiplied by the participant's years of benefit service up to a maximum of
35 years plus 1.33 percent of the participant's average final salary
multiplied by the participant's years of service over 35 plus 2.5 percent
of the value of the participant's refunded contributions and interest
compounded at 5.0 percent until normal retirement age. Covered
Compensation in 1995 was $24,312 and will be $25,920 in 1996. Salary, as
defined in the Retirement Plan, includes payments under the Annual
Incentive Compensation Plan, but excludes payments under the Company's
Long-Term Cash Incentive Plan. The benefits are determined by using
straight-life annuity amounts and are not subject to reduction for Social
Security benefits.
21
<PAGE>
EMPLOYMENT AGREEMENTS AND OTHER ARRANGEMENTS
Each of the Named Executive Officers and certain other salaried executives
of the Company have entered into three-year employment agreements that provide
for lump sum separation payments upon any termination of employment other than
termination for cause, voluntary resignation without "good reason" as defined in
the employment agreements, or termination as a result of death, disability or
retirement. Mr. Kashnow resigned effective September 29, 1995, and his
employment agreement was terminated. For the Named Executive Officers, prior to
a Change in Control, as defined below, separation payments under such contracts
generally would have equaled a total of two times the annual salary, the full
year bonus at target levels of performance under the Annual Incentive
Compensation Plan and certain other benefits. Following a Change in Control,
which occurred for the Named Executive Officers as a result of the Riverwood
Disposition, the definitions of "cause" and "good reason" are liberalized and
benefits payable are enhanced. Following a Change in Control, upon a
termination of employment other than (i) for cause, (ii) a voluntary resignation
without "good reason," or (iii) as a result of death, disability or retirement,
benefits include two years' annual salary, two years' target annual bonus, two
years' additional credit in certain cases under the Supplemental Plan, a
pro-rata portion of the target annual bonus for the year of termination, a
payment equal to the cost of 36 months welfare benefits and 24 months of
continued perquisites. Change in Control is defined in the employment
agreements to include a variety of events, including significant changes in the
Company's stock ownership or board of directors, its dissolution, sales of
significant assets by the Company, and significant reductions in the Company's
work force. In the case of Mr. Cole and certain other salaried executives, such
benefits are subject to a cap to limit any loss of tax deductions by the Company
as a result of the "golden parachute" tax rules.
The Company has entered into supplemental retirement agreements with
Messrs. Stephens and Von Wald in replacement of prior supplemental retirement
arrangements. The supplemental retirement agreement for each of them provides
for the Company to pay each upon his termination of employment a lump sum
benefit (the "Supplemental Benefit") equal to the present value of a single life
annuity commencing at the time of such termination ranging from 30 percent to 60
percent of his highest average base salary plus cash bonus for three consecutive
years during the preceding ten years ("Average Pay"), offset by amounts payable
under the Retirement Plan plus certain other amounts, including the restricted
stock awards granted in 1994 of 340,000 shares and 150,000 shares, respectively,
and cash payments made during 1994 of $1,300,000 and $500,000, respectively, and
other payments previously made and to be made in connection with the executives'
retirement arrangements. The 1994 restricted stock awards have a five-year
vesting schedule, subject to acceleration on a Change in Control, and had a fair
market value on the date of grant of $3,099,100 and $1,367,250, respectively.
The vesting of the restricted stock and payment of dividends thereon are subject
to a cap related to the supplemental retirement arrangements. If termination
were to occur (i) after attaining age 62, (ii) without cause, (iii) for "good
reason," (iv) for death or "disability," or (v) after the occurrence of a Change
in Control, the Supplemental Benefit would be 60 percent of Average Pay, and
would be increased to compensate for the impact of the timing of taxation of the
Supplemental Benefit (and the offsets thereto) as compared with the tax
treatment of a single life annuity. The Riverwood Disposition constituted a
Change in Control for the foregoing purposes, resulting in the vesting of both
the 1994 restricted stock awards and the full Supplemental Benefits described
above.
The Company is also a party to a key man supplemental retirement agreement
(the "Cole Retirement Agreement") with Mr. Cole providing for a benefit in the
event of termination of employment or death prior to age 55 and prior to the
completion of 25 years of employment with the Company.
22
<PAGE>
The Company's 1991 Long-Term Cash Incentive Plan (the "Cash Plan") provided
rights to participants to receive cash payments equal to certain dividends paid
by the Company. The Cash Plan was scheduled to terminate on December 31, 1995;
however, it was contemplated that a dividend of a portion of proceeds from the
Riverwood Disposition might be made prior to the end of 1995, and there was
uncertainty as to how such a dividend (the "Disposition Dividend") would be
treated under the Cash Plan. Consequently, on October 3, 1995, the Company
entered into a Payment and Termination Agreement (the "Termination Agreement")
with all participants in the Cash Plan, including Messrs. Stephens, Cole and Von
Wald. Pursuant to the Termination Agreement, the holders of performance units
("Units") awarded under the Cash Plan agreed to forfeit their Units in exchange
for receiving a cash payment of up to $0.84 per Unit upon payment to
stockholders of the Disposition Dividend. Such cash payments were paid on April
12, 1996.
Effective April 11, 1996, Mr. Cole voluntarily terminated his employment
with the Company as a result of "good reason" under his employment agreement.
Consequently, Mr. Cole received the separation payments described above as
payable upon a voluntary termination for "good reason" following a Change in
Control. In addition, Mr. Cole received a payment of $483,000 in lieu of all
payments owed him under the Supplemental Plan and the Cole Retirement Agreement.
On April 12, 1996, Mr. Stephens announced that effective June 7, 1996, he
would resign as Chairman of the Board of the Company and would resign as Chief
Executive Officer and President upon notice from the Board but no later than
April 12, 1997 (the "Resignation Date"). On the same date, Mr. Stephens and the
Company entered into an agreement with respect to such resignation and providing
for the terms and conditions of Mr. Stephens' future employment with the
Company. Pursuant to the agreement, the Company agreed to provide Mr. Stephens
with an immediate cash payment of $2,725,416 in payment of the balance of his
Supplemental Benefit, as well as an immediate cash payment of $2,912,000 which
included all amounts that would have been payable under his employment agreement
upon termination for "good reason" following a Change in Control, and to provide
the benefits and perquisites provided under his employment agreement (except
that perquisites would be continued for 36 months rather than 24 months). Mr.
Stephens agreed to continue his employment with the Company and to cooperate
with the Board in the search for his successor through the Resignation Date and
thereafter to provide certain transition services through December 31, 1997, or
any earlier time upon which either Mr. Stephens or the Company has provided
notice to the other. The Company agreed to continue to compensate Mr. Stephens
for such services at the rate of $50,000 per month through the earliest of (i)
December 31, 1997, (ii) the date on which Mr. Stephens effects the termination
of his employment, and (iii) any material breach by Mr. Stephens of the
separation agreement. In addition, the Company agreed to pay Mr. Stephens the
sum of $1,250,000 upon the earliest to occur of (i) employment of a new Chief
Executive Officer and President, (ii) the Resignation Date, or (iii) January 3,
1997, provided that Mr. Stephens has substantially performed his material
obligations under the separation agreement. The Company also agreed that if Mr.
Stephens is determined to be subject to any excise tax under Code Section 4999
and related interest and penalties ("Excise Tax") as a result of any payments
made to him, the Company shall pay Mr. Stephens an amount which, after taking
into account any federal, state and local income taxes and excise taxes upon
such amount, is equal to the amount of the Excise Tax.
Pursuant to an agreement dated April 12, 1996, the Company granted to Mr.
Von Wald 42,997 shares of restricted stock. The restricted stock will vest in
three equal installments on the first, second and third anniversaries of the
grant date subject to acceleration upon a Change in Control occurring after
April 12, 1996 or termination of employment without cause, for "good reason" or
by reason of death or disability. In addition, the Company agreed that the
Riverwood Disposition would constitute both a
23
<PAGE>
Change in Control and an event of "good reason" for purposes of Mr. Von Wald's
previously existing compensation arrangements. The Company and Mr. Von Wald
also entered into an amendment to his employment agreement pursuant to which the
Company agreed that if Mr. Von Wald is determined to be subject to any Excise
Tax as a result of any payments made to him following termination of his
employment by the Company other than for cause or voluntary termination for
"good reason" (other than the Riverwood Disposition), or following a Change in
Control occurring after March 27, 1996, the Company shall pay Mr. Von Wald an
amount which, after taking into account any federal, state and local income
taxes and excise taxes upon such amount, is equal to the amount of the Excise
Tax.
From time to time, the Company repurchases up to 45 percent of the Common
Stock that certain key executives receive under the Stock Plan upon the vesting
of such stock in order to provide such executives with funds for related income
tax obligations. Pursuant to a repurchase program approved by the Company's
Board of Directors in September 1995, in connection with the Riverwood
Disposition and the related transactions, the Company repurchased 191,265 shares
of Common Stock from Messrs. Stephens and Von Wald on April 8, 1996, at a price
of $14.175 per share. The closing sales price for the Common Stock on the New
York Stock Exchange, Inc. on April 8, 1996 was $14.50 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is currently comprised of Messrs. Falise,
Goodwin (Chairman), Hammes, Klein, Markey, Storey and Troubh. Messrs. Storey
and Troubh are not standing for reelection. No interlocks existed and no insider
participation occurred during 1995 between the Compensation Committee and the
officers or employees of the Company.
24
<PAGE>
PERFORMANCE GRAPH
Presented below is a graph comparing the total stockholder return on Common
Stock, assuming full dividend reinvestment, with the Standard & Poor's 500 Index
(S&P 500), the Standard & Poor's Paper & Forest Products Index (S&P 375) (which
reflects the business conducted by Riverwood which, prior to the Riverwood
Disposition, was one of the Company's two primary operating subsidiaries) and
the Standard & Poor's Building Materials Index (S&P 150) (which reflects the
business conducted by the Company's primary operating subsidiary, Schuller
International Group, Inc.). The graph compares the Company's performance to the
other indices for the five-year period ended December 31, 1995.
Cumulative Return at Fiscal Year End
<TABLE>
<CAPTION>
AVG. SCHULLER S&P 500 S&P 375 S&P 150
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1991 111.411 112.598 111.997 116.269
- --------------------------------------------------------------------------
1992 146.417 126.897 130.46 143.379
- --------------------------------------------------------------------------
1993 183.25 141.949 138.871 175.046
- --------------------------------------------------------------------------
1994 209.206 148.288 153.228 157.753
- --------------------------------------------------------------------------
1995 297.125 181.015 176.851 168.868
- --------------------------------------------------------------------------
</TABLE>
25
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the identity of beneficial owners believed by
the Company to own more than five percent of the outstanding shares of Common
Stock as of April 9, 1996.
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL PERCENT OF
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS
- -------------- ------------------------------------ -------------------- ----------
<S> <C> <C> <C>
Common Stock Manville Personal Injury Settlement Trust(1) 128,527,110 shares 79.7%
8260 Willow Oaks Corporate Drive
Sixth Floor
P. O. Box 10415
Fairfax, Virginia 22031
</TABLE>
- --------------------------
(1) At April 9, 1996, the Trustees of the Trust were; Robert Falise, Chairman
and Managing Trustee, Louis Klien, Jr., Frank J. Macchiarola and Christian
E. Markey, Jr. Messers. Falise, Klein and Markey serve on the Company's
Board of Directors and Mr. Macchiarola is a nominee for Director.
26
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the number of shares of Common Stock
beneficially owned by all Directors, nominees for Director and Named Executive
Officers, and all Directors, nominees for Director and executive officers as a
group as of May 1, 1996. With respect to executive officers of the Company, the
number of shares beneficially owned includes shares owned as of May 1, 1996
pursuant to the Schuller Employees Thrift Plan. As of May 1, 1996, the
percentage of Common Stock beneficially owned by any Director, nominee for
Director, Named Executive Officer or by all Directors, nominees for Director,
and executive officers as a group, did not exceed 1.0 percent of the outstanding
shares of the Common Stock, excluding the 128,527,110 shares of Common Stock
owned by the Trust and attributed to certain directors who disclaim beneficial
ownership of such shares.
<TABLE>
<CAPTION>
COMMON STOCK
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED
<S> <C>
Leo Benatar 4,500
John C. Burton 1,000
Robert A. Falise 128,527,110(1)
Robert E. Fowler, Jr. 4,000
Todd Goodwin 19,100
Michael N. Hammes 0
John N. Hanson 2,000
Kathryn R. Harrigan 0
Louis Klein, Jr. 128,527,110(1)
Stanley J. Levy 1,000
Frank J. Macchiarola 128,527,110(1)
Christian E. Markey, Jr. 128,527,110(1)
William E. Mayer 5,000
W. Thomas Stephens 0
Will M. Storey 2,000
Raymond S. Troubh 5,000
Richard B. Von Wald 68,541(2)
All Directors, Director nominees and executive officers
as a group (21 persons) 128,639,251(1)(2)
</TABLE>
(1) All of these 128,527,110 shares of Common Stock are owned by the Trust, of
which Mr. Falise is the Chairman and Managing Trustee, and Messrs. Klein,
Macchiarola and Markey are Trustees. Voting power with respect to such
shares is shared by all four Trustees of the Trust, and none of Messrs.
Falise, Klein, Macchiarola or Markey can vote the shares alone. Each of
Messrs. Falise, Klein, Macchiarola and Markey disclaims beneficial
ownership of any shares of Common Stock. Pursuant to the Trust Agreement,
no Trustee may individually own any securities of the Company or its
affiliates or have any other direct or indirect financial interest in the
Company or its affiliates.
(2) Includes options to purchase 25,500 shares of Common Stock and 42,977
shares that are restricted as to transfer pursuant to the Schuller
Corporation Stock Incentive Plan.
27
<PAGE>
APPROVAL OF 1996 EXECUTIVE
INCENTIVE COMPENSATION PLAN
(PROXY ITEM NO. 2)
On April 12, 1996, the Board of Directors of the Company adopted the
Schuller Corporation 1996 Executive Incentive Compensation Plan (the "1996
EICP") and recommended that it be submitted to stockholders for their approval
at the Annual Meeting. The 1996 EICP is intended to supersede the Stock Plan.
If the 1996 EICP is approved by the Company's stockholders, authority to make
future grants under the Stock Plan will be terminated, although previously
granted awards will remain outstanding in accordance with their terms and the
terms of the Stock Plan.
The Company's Board of Directors believes that attracting and retaining key
employees of high quality is essential to the Company's growth and success. In
addition, the Board believes that the long-term success of the Company is
enhanced by a competitive and comprehensive compensation program, which may
include tailored types of incentives designed to motivate executives and reward
key employees for outstanding service, including awards that link compensation
to applicable measures of the Company's performance and the creation of
stockholder value. In this regard, the Board is of the view that stock options
and other stock-related awards will continue to be an important element of
compensation for key employees. Such awards enable the Company to attract and
retain executives and key employees and enable such persons to acquire and/or
increase their proprietary interest in the Company and thereby align their
interests with the interests of the Company's stockholders. In addition, the
Board has concluded that the Compensation Committee of the Board (the
"Committee") should be given as much flexibility as possible to provide for
annual and long-term incentive awards contingent on performance.
The following is a brief description of the material features of the 1996
EICP. Such description is qualified in its entirety by reference to the full
text of the 1996 EICP, which is attached as an exhibit to this Proxy Statement.
TYPES OF AWARDS. The terms of the 1996 EICP provide for grants of stock
options, stock appreciation rights ("SARs"), dividend equivalents, restricted
stock, deferred stock, bonus stock, other stock-related awards, and performance
or annual incentive awards that may be settled in cash, stock, or other property
("Awards").
SHARES SUBJECT TO THE 1996 EICP; ANNUAL PER PERSON LIMITATIONS. Under the
1996 EICP, the total number of shares of Common Stock reserved and available for
delivery to participants in connection with Awards is 6.9 million, plus up to
2.395 million shares authorized but unissued under the Stock Plan. Shares of
Common Stock subject to an Award that is cancelled, expired, forfeited, settled
in cash, or otherwise terminated without a delivery of shares to the
participant, including Common Stock withheld or surrendered in payment of any
exercise or purchase price of an Award or taxes relating to an Award, will again
be available for Awards under the 1996 EICP, except that, if any such shares
could not again be available for Awards to a particular participant under any
applicable law or regulation, such shares shall be available exclusively for
Awards to participants who are not subject to such limitation. Common Stock
issued under the 1996 EICP may be either newly issued shares or treasury shares.
In addition, the 1996 EICP imposes individual limitations on the amount of
certain Awards in order to comply with Code Section 162(m). Under these
limitations, during any fiscal year the number of options, SARs, shares of
restricted stock, shares of deferred stock, shares of Common Stock issued as
28
<PAGE>
a bonus or in lieu of other Company obligations, and other stock-based Awards
granted to any one participant shall not exceed three million shares of Common
Stock for each type of such Award, subject to adjustment in certain
circumstances. The maximum cash amount under the 1996 EICP that may be earned
as a final annual incentive award or other annual cash Award in any fiscal year
by any one participant is $4 million, and the maximum cash amount under the 1996
EICP that may be earned as a final performance award or other cash Award in
respect of a performance period by any one participant is $6 million.
The Committee is authorized to adjust the number and kind of shares of
Common Stock subject to the aggregate share limitations and annual limitations
under the 1996 EICP and subject to outstanding Awards (including adjustments to
exercise prices and number of shares of options and other affected terms of
Awards) in the event that a dividend or other distribution (whether in cash,
shares of Common Stock, or other property), recapitalization, forward or reverse
split, reorganization, merger, consolidation, spin-off, combination, repurchase,
share exchange, liquidation or dissolution or other similar corporate
transaction or event affects the Common Stock so that an adjustment is deemed
appropriate by the Committee. The Committee is also authorized to adjust
performance conditions and other terms of Awards in response to unusual or non-
recurring events, including those listed above, or in response to changes in
applicable laws, regulations, or accounting principles or other circumstances
deemed relevant by the Committee.
ELIGIBILITY. Executive officers and other officers and employees of the
Company or any subsidiary, including any such person who may also be a director
of the Company, are eligible to be granted Awards under the 1996 EICP. The
Committee has not yet determined the number of persons who will be granted
awards under the 1996 EICP. No benefits or amounts have been allocated under
the 1996 EICP and any such benefits or amounts are not now determinable.
ADMINISTRATION. The 1996 EICP will be administered by the Committee, each
member of which currently must be a "disinterested person" as defined under Rule
16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and an "outside director" for purposes of Code Section 162(m). Subject
to the terms and conditions of the 1996 EICP, the Committee is authorized to
select participants, determine the type and number of Awards to be granted and
the number of shares of Common Stock to which Awards will relate, specify times
at which Awards will be exercisable or settleable (including performance
conditions that may be required as a condition thereof), set other terms and
conditions of such Awards, prescribe forms of Award agreements, interpret and
specify rules and regulations relating to the 1996 EICP, and make all other
determinations that may be necessary or advisable for the administration of the
1996 EICP.
STOCK OPTIONS AND SARS. The Committee is authorized to grant stock
options, including both incentive stock options ("ISOs") that can result in
potentially favorable tax treatment to the participant and non-qualified stock
options (i.e., options not qualifying as ISOs), and SARs entitling the
participant to receive the excess of the fair market value of a share of Common
Stock on the date of exercise (or defined "change in control price," if
applicable, following a change in control) over the grant price of the SAR. The
exercise price per share subject to an option and the grant price of an SAR is
determined by the Committee, but must not be less than the fair market value of
a share of Common Stock on the date of grant (except to the extent of in-the-
money awards or cash obligations surrendered by the participant at the time of
grant). The maximum term of each option or SAR, the times at which each option
or SAR will be exercisable, and provisions requiring forfeiture of unexercised
options or SARs at or following termination of employment generally is fixed by
the Committee, except no option or SAR may have a term exceeding ten years. In
the discretion of the Committee, options may be exercised by payment of
29
<PAGE>
the exercise price in cash, shares of Common Stock, outstanding Awards, or other
property (possibly including notes or obligations to make payment on a deferred
basis) having a fair market value equal to the exercise price, as the Committee
may determine from time to time. Methods of exercise and settlement and other
terms of the SARs are determined by the Committee. SARs granted under the 1996
EICP may include "limited SARs" exercisable for a stated period of time
following a "change in control" of the Company, as discussed below.
RESTRICTED AND DEFERRED STOCK. The Committee is authorized to grant
restricted stock and deferred stock. Restricted stock is a grant of Common
Stock which may not be sold or disposed of, and which may be forfeited in the
event of termination of employment in certain circumstances and/or the failure
to meet certain performance requirements, prior to the end of a restricted
period specified by the Committee. A participant granted restricted stock
generally has all of the rights of a stockholder of the Company, including the
right to vote the shares of Common Stock and to receive dividends thereon,
unless otherwise determined by the Committee. An Award of deferred stock
confers upon a participant the right to receive shares of Common Stock, cash or
a combination thereof at the end of a specified deferral period, subject to
possible forfeiture of the Award in the event of termination of employment in
certain circumstances and/or the failure to meet certain performance
requirements prior to the end of a specified restricted period (which restricted
period need not extend for the entire duration of the deferral period). Prior
to settlement, an Award of deferred stock carries no voting or dividend rights
or other rights associated with share ownership, although dividend equivalents
may be granted, as discussed below.
DIVIDEND EQUIVALENTS. The Committee is authorized to grant dividend
equivalents conferring on participants the right to receive, currently or on a
deferred basis, cash, shares of Common Stock, other Awards, or other property
equal in value to dividends paid on a specific number of shares of Common Stock
or other periodic payments. Dividend equivalents may be granted on a free-
standing basis or in connection with another Award, will be paid currently or on
a deferred basis, and, if deferred, may be deemed to have been reinvested in
additional shares of Common Stock, Awards, or other investment vehicles
specified by the Committee.
BONUS STOCK AND AWARDS IN LIEU OF CASH OBLIGATIONS. The Committee is
authorized to grant shares of Common Stock as a bonus, free of restrictions, or
to grant shares or other Awards in lieu of Company obligations to pay cash under
the 196 EICP or other plans or compensatory arrangements, subject to such terms
as the Committee may specify.
OTHER STOCK-BASED AWARDS. The 1996 EICP authorizes the Committee to grant
Awards that are denominated or payable in, valued by reference to, or otherwise
based on or related to shares of Common Stock. Such Awards might include
convertible or exchangeable debt securities, other rights convertible or
exchangeable into shares of Common Stock, purchase rights for shares of Common
Stock, Awards with value and payment contingent upon performance of the Company
or any other factors designated by the Committee, and Awards valued by reference
to the book value of shares of Common Stock or the value of securities of or the
performance of specified subsidiaries. The Committee determines the terms and
conditions of such Awards, including consideration to be paid to exercise Awards
in the nature of purchase rights, the form and timing of payment of such
consideration, the period during which Awards will be outstanding, and
forfeiture conditions and restrictions on Awards.
PERFORMANCE AWARDS, INCLUDING ANNUAL INCENTIVE AWARDS. The right of a
participant to exercise or receive a grant or settlement of an Award, and the
timing thereof, may be subject to such performance conditions as may be
specified by the Committee. In addition, the 1996 EICP authorizes
30
<PAGE>
specific annual incentive awards, which represent a conditional right to receive
cash, shares of Common Stock or other Awards upon achievement of preestablished
performance goals during a specified one-year period. Performance awards and
annual incentive awards granted to persons the Committee expects will, for the
year in which a deduction arises, be among the Named Executive Officers, will,
if so intended by the Committee, be subject to provisions that should qualify
such Awards as "performance-based compensation" not subject to the limitation on
tax deductibility by the Company under Code Section 162(m).
The performance goals to be achieved as a condition of payment or
settlement of a performance award or annual incentive award will consist of (i)
one or more business criteria and (ii) a targeted level or levels of performance
with respect to each such business criteria. In the case of performance awards
intended to meet the requirements of Code Section 162(m), the business criteria
used must be one of those specified in the 1996 EICP, although for other awards
the Committee may specify any other criteria. The business criteria specified
in the 1996 EICP are: (1) earnings per share; (2) revenues; (3) cash flow; (4)
cash flow return on investment; (5) return on assets, return on investment,
return on capital, return on equity; (6) economic value added; (7) operating
margin; (8) net income; pretax earnings; pretax earnings before interest,
depreciation and amortization; pretax operating earnings after interest expense
and before incentives, service fees, and extraordinary or special items;
operating earnings; (9) total stockholder return; and (10) any of the above
goals as compared to the performance of a published or special index deemed
applicable by the Committee including, but not limited to, the Standard & Poor's
500 Stock Index or the Standard & Poor's Building Materials Index. In granting
annual incentive or performance awards, the Committee may establish unfunded
award "pools," the amounts of which will be based upon the achievement of a
performance goal or goals using one or more of the business criteria described
above.
During the first 90 days of a fiscal year or performance period, the
Committee will determine who will potentially receive annual incentive or
performance awards intended to qualify as "performance-based compensation" for
that fiscal year or performance period, either out of a pool or otherwise, as
well as other terms and conditions of such awards. After the end of each fiscal
year or performance period, the Committee will determine the amount, if any, of
the pool, the maximum amount of potential annual incentive or performance awards
payable to each participant in the pool, and the amount of any potential annual
incentive or performance award otherwise payable to a participant. The
Committee may, in its discretion, determine that the amount payable as a final
annual incentive or performance award will be increased or reduced from the
amount of any potential Award, but may not exercise discretion to increase any
such amount designated to qualify under Code Section 162(m).
Subject to the requirements of the 1996 EICP, the Committee will determine
other performance award and annual incentive award terms, including the required
levels of performance with respect to the business criteria, the corresponding
amounts payable upon achievement of such levels of performance, termination and
forfeiture provisions, and the form of settlement.
OTHER TERMS OF AWARDS. Awards may be settled in the form of cash, shares
of Common Stock, other Awards, or other property, in the discretion of the
Committee. The Committee may permit participants to defer the settlement of all
or part of an Award in accordance with such terms and conditions as the
Committee may establish, including payment or crediting of interest or dividend
equivalents on deferred amounts, and the crediting of earnings, gains, and
losses based on deemed investment of deferred amounts in specified investment
vehicles. The Committee is authorized to place cash, shares of Common Stock, or
other property in trusts or make other arrangements to provide for payment of
the Company's obligations under the 1996 EICP. The Committee may condition any
31
<PAGE>
payment relating to an Award on the withholding of taxes and may provide that a
portion of any shares of Common Stock or other property to be distributed will
be withheld (or previously acquired shares or other property surrendered by the
participant) to satisfy withholding and other tax obligations. Awards granted
under the 1996 EICP generally may not be pledged or otherwise encumbered and are
not transferable except by will or by the laws of descent and distribution, or
to a designated beneficiary upon the participant's death, except that the
Committee may, in its discretion, permit transfers for estate planning or other
purposes.
Awards under the 1996 EICP are generally granted without a requirement that
the participant pay consideration in the form of cash or property for the grant
(as distinguished from the exercise), except to the extent required by law. The
Committee may, however, grant Awards in exchange for other Awards under the 1996
EICP, awards under other Company plans, or other rights to payment from the
Company, and may grant Awards in addition to and in tandem with such other
Awards, awards, or rights.
ACCELERATION OF VESTING. The Committee may, in its discretion, accelerate
the exercisability, the lapsing of restrictions, or the expiration of deferral
or vesting periods of any Award, and such accelerated exercisability, lapse,
expiration and vesting shall occur automatically in the case of a "change in
control" of the Company except to the extent otherwise determined by the
Committee at the date of grant. In addition, the Committee may provide that the
performance goals relating to any performance-based award will be deemed to have
been met upon the occurrence of any change in control. Upon the occurrence of a
change in control, except to the extent otherwise determined by the Committee at
the date of grant, options may at the election of the optionee be cashed out
based on a defined "change in control price," which will be the higher of (i)
the cash and fair market value of property that is the highest price per share
of Common Stock paid (including extraordinary dividends) in any change in
control or liquidation of shares of Common Stock following a sale of
substantially all of the assets of the Company, or (ii) the highest fair market
value per share of Common Stock (generally based on market prices) at any time
during the 60 days before and 60 days after a change in control. Change in
control is defined in the 1996 EICP to include a variety of events, including
significant changes in the Company's stock ownership of the Company or a
significant subsidiary, changes in the Company's board of directors, certain
mergers and consolidations of the Company or a significant subsidiary, and the
sale or disposition of all or substantially all the consolidated assets of the
Company.
AMENDMENT AND TERMINATION OF THE 1996 EICP. The Board of Directors may
amend, alter, suspend, discontinue, or terminate the 1996 EICP or the
Committee's authority to grant Awards without further stockholder approval,
except stockholder approval must be obtained for any amendment or alteration if
required by law or regulation or under the rules of any stock exchange or
automated quotation system on which the shares of Common Stock are then listed
or quoted. Stockholder approval will not be deemed to be required under laws or
regulations, such as those relating to ISOs, that condition favorable treatment
of participants on such approval, although the Board may, in its discretion,
seek stockholder approval in any circumstance in which it deems such approval
advisable. Thus, stockholder approval will not necessarily be required for
amendments that might increase the cost of the 1996 EICP or broaden eligibility.
Unless earlier terminated by the Board, the 1996 EICP will terminate at such
time as no shares remain available for issuance under the 1996 EICP and the
Company has no further rights or obligations with respect to outstanding Awards
under the 1996 EICP.
NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by the Board
nor its submission to the stockholders of the Company for approval shall be
construed as creating any limitations on the power of the Board or a committee
thereof to adopt such other incentive arrangements as it may deem desirable
including incentive arrangements and awards which do not qualify under Code
Section 162(m).
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FEDERAL INCOME TAX IMPLICATIONS OF THE 1996 EICP. The following is a brief
description of the federal income tax consequences generally arising with
respect to Awards under the 1996 EICP.
The grant of an option or SAR will create no tax consequences for the
participant or the Company. A participant will not recognize taxable income
upon exercising an ISO (except that the alternative minimum tax may apply).
Upon exercising an option other than an ISO, the participant must generally
recognize ordinary income equal to the difference between the exercise price and
the fair market value of the freely transferable and nonforfeitable shares of
Common Stock acquired on the date of exercise. Upon exercising an SAR, the
participant must generally recognize ordinary income equal to the cash or the
fair market value of the freely transferable and nonforfeitable shares of Common
Stock received.
Upon a disposition of shares of Common Stock acquired upon exercise of an
ISO before the end of the applicable ISO holding periods, the participant must
generally recognize ordinary income equal to the lesser of (i) the fair market
value of the shares at the date of exercise of the ISO minus the exercise price,
or (ii) the amount realized upon the disposition of the ISO shares minus the
exercise price. Otherwise, a participant's disposition of shares of Common Stock
acquired upon the exercise of an option (including an ISO for which the ISO
holding periods are met) or SAR generally will result in short-term or long-term
capital gain or loss measured by the difference between the sale price and the
participant's tax basis in such shares (the tax basis generally being the
exercise price plus any amount previously recognized as ordinary income in
connection with the exercise of the option or SAR).
The Company generally will be entitled to a tax deduction equal to the
amount recognized as ordinary income by the participant in connection with an
option or SAR. The Company generally is not entitled to a tax deduction
relating to amounts that represent a capital gain to a participant.
Accordingly, the Company will not be entitled to any tax deduction with respect
to an ISO if the participant holds the shares of Common Stock for the ISO
holding periods prior to disposition of the shares.
With respect to Awards granted under the 1996 EICP that result in the
payment or issuance of cash or shares of Common Stock or other property that is
either not restricted as to transferability or not subject to a substantial risk
of forfeiture, the participant must generally recognize ordinary income equal to
the cash or the fair market value of shares of Common Stock or other property
received. Deferral of the time of payment or issuance will generally result in
the deferral of the time the participant will be liable for income taxes with
respect to such payment or issuance. The Company generally will be entitled to
a deduction in an amount equal to the ordinary income recognized by the
participant.
With respect to Awards involving the issuance of shares of Common Stock or
other property that is restricted as to transferability and subject to a
substantial risk of forfeiture, the participant must generally recognize
ordinary income equal to the fair market value of the shares or other property
received at the first time the shares or other property becomes transferable or
is not subject to a substantial risk of forfeiture, whichever occurs earlier. A
participant may elect to be taxed at the time of receipt of shares of Common
Stock or other property rather than upon lapse of restrictions on
transferability or substantial risk of forfeiture, but if the participant
subsequently forfeits such shares or property, the participant would not be
entitled to any tax deduction, including as a capital loss, for the value of the
shares or property on which he previously paid tax. The participant must file
such election with the Internal Revenue Service within 30 days of the receipt of
the shares of Common Stock or other property. The Company generally will be
entitled to a deduction in an amount equal to the ordinary income recognized by
the participant.
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Awards that are granted, accelerated or enhanced upon the occurrence of a
change in control may give rise, in whole or in part, to "excess parachute
payments" within the meaning of Code Section 280G and, to such extent, will be
non-deductible by the Company and subject to a 20 percent excise tax by the
participant.
The foregoing summary of the federal income tax consequences in respect of
the 1996 EICP is for general information only. Interested parties should
consult their own advisors as to specific tax consequences, including the
application and effect of foreign, state and local tax laws.
Your Board of Directors recommends a vote FOR approval of the 1996 EICP.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(PROXY ITEM NO. 3)
The Board of Directors, acting upon the recommendation of the Audit
Committee, has appointed, subject to ratification by the stockholders at the
forthcoming Annual Meeting, the firm of Coopers & Lybrand L.L.P. as independent
accountants of the Company for the year 1996. Coopers & Lybrand L.L.P. has
acted as the independent accountants of the Company for more than fifty years
and, the Company is advised, has had no financial interest, direct or indirect,
in the Company or any affiliate thereof, nor, other than providing certain
non-audit services, any other connection with the Company during the past three
years. Representatives of Coopers & Lybrand L.L.P. will be present at the
Annual Meeting to answer appropriate questions from stockholders and will have
an opportunity to make a statement to stockholders.
During 1995, the Company paid Coopers & Lybrand L.L.P. approximately
$1,665,000 for audit services, and approximately $230,000 for non-audit
services. Audit services rendered in 1995 included services related to
recurring audit activities and non-recurring audit activities for debt and
equity offerings. Non-audit services consisted primarily of tax consultation.
Although the submission of this proposal to a vote of the stockholders is
not legally required, the Board of Directors believes that such action follows
sound corporate practice and is in the best interest of the stockholders, to
whom the independent accountants are ultimately responsible. In the event of a
negative vote on this proposal by a majority of the votes cast at the meeting by
the holders of shares entitled to vote thereon, or the termination of the
appointment of Coopers & Lybrand L.L.P. during the year by the Board of
Directors, management will recommend a different firm of independent accountants
for approval by the Board of Directors.
Your Board of Directors recommends a vote FOR ratification of the
appointment of Coopers & Lybrand L.L.P. as independent accountants of the
Company.
OTHER BUSINESS
Management knows of no business that will be presented for consideration
other than the matters described in the Notice of Annual Meeting. If other
matters are presented, it is the intention of the persons designated as Proxies
to vote in accordance with their judgment on such matters.
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VOTING PROCEDURES
The affirmative vote of the holders of a plurality of the shares of the
Common Stock present or represented by proxy at the Annual Meeting and entitled
to vote is required for the election of each Director nominee. The approval of
the 1996 EICP and ratification of the appointment of Coopers & Lybrand L.L.P.
may be authorized by a majority of the votes cast in person or by proxy at the
Annual Meeting by holders of shares of Common Stock entitled to vote thereon.
On all matters presented to stockholders, votes may be cast in favor or against
such matter, or a stockholder may abstain from voting. Abstentions are counted
for the purpose of determining the presence of a quorum for the transaction of
business. Abstentions are also counted in the tabulation of the total number of
shares entitled to vote on matters presented to stockholders, and thus have the
effect of a vote against the proposal. Brokers who hold shares in street name
for beneficial owners have the authority to vote on certain routine matters,
including without limitation, the election of Directors and ratification of the
appointment of accountants, when brokers have not received voting instructions
from the beneficial owners. As to other matters, brokers may not vote shares
held for beneficial owners without specific instructions from such beneficial
owners ("broker non-votes"). Broker non-votes are counted for determining the
presence of a quorum. Broker non-votes are not counted, however, in the
tabulation of the total number of shares entitled to vote on matters presented
to stockholders. The inspectors of election appointed by the Company will count
all votes cast, in person or by submission of a properly executed proxy, before
the closing of the polls at the Annual Meeting.
STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Proposals of stockholders intended to be presented at the Company's 1997
Annual Meeting must be received by the Secretary of the Company no later than
January 7, 1997. Proposals received after that date may be excluded from the
Company's proxy materials. No stockholder proposals have been received by the
Secretary of the Company for presentation at the Company's 1996 Annual Meeting.
By Order of the Board of Directors
Richard B. Von Wald
Executive Vice President,
General Counsel and Secretary
May 6, 1996
A copy of the Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission for the fiscal year ended December 31, 1995, without
exhibits, may be obtained by a stockholder of the Company, without charge, by
writing to Schuller Corporation, c/o Investor Relations, P. O. Box 5108, Denver,
Colorado 80217-5108.
35
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EXHIBIT A
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SCHULLER CORPORATION
1996 EXECUTIVE INCENTIVE COMPENSATION PLAN
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<PAGE>
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SCHULLER CORPORATION
1996 EXECUTIVE INCENTIVE COMPENSATION PLAN
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PAGE
1. Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. Administration. . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) Authority of the Committee . . . . . . . . . . . . . . . . . 4
(b) Manner of Exercise of Committee Authority. . . . . . . . . . 4
4. Stock Subject to Plan . . . . . . . . . . . . . . . . . . . . . . 5
(a) Overall Number of Shares Available for Delivery. . . . . . . 5
(b) Application of Limitation to Grants of Awards. . . . . . . . 5
(c) Availability of Shares Not Delivered under Awards . . . . . 5
5. Eligibility; Per-Person Award Limitations . . . . . . . . . . . . 6
6. Specific Terms of Awards. . . . . . . . . . . . . . . . . . . . . 6
(a) General. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(b) Options. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(c) Stock Appreciation Rights. . . . . . . . . . . . . . . . . . 7
(d) Restricted Stock . . . . . . . . . . . . . . . . . . . . . . 7
(e) Deferred Stock . . . . . . . . . . . . . . . . . . . . . . . 9
(f) Bonus Stock and Awards in Lieu of Obligations. . . . . . . . 10
(g) Dividend Equivalents . . . . . . . . . . . . . . . . . . . . 10
(h) Other Stock-Based Awards . . . . . . . . . . . . . . . . . . 10
7. Certain Provisions Applicable to Awards . . . . . . . . . . . . . 10
(a) Stand-Alone, Additional, Tandem, and Substitute Awards . . . 10
(b) Term of Awards . . . . . . . . . . . . . . . . . . . . . . . 11
(c) Form and Timing of Payment under Awards; Deferrals . . . . . 11
(d) Exemptions from Section 16(b) Liability. . . . . . . . . . . 11
8. Performance and Annual Incentive Awards . . . . . . . . . . . . . 12
(a) Performance Conditions . . . . . . . . . . . . . . . . . . . 12
(b) Performance Awards Granted to Designated Covered Employees . 12
(c) Annual Incentive Awards Granted to Designated Covered
Employees. . . . . . . . . . . . . . . . . . . . . . . . . . 14
(d) Written Determinations . . . . . . . . . . . . . . . . . . . 15
(e) Status of Section 8(b) and 8(c) Awards under Code Section
162(m) . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
i
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SCHULLER CORPORATION
1996 EXECUTIVE INCENTIVE COMPENSATION PLAN
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PAGE
9. Change in Control . . . . . . . . . . . . . . . . . . . . . . . . 16
(a) Effect of "Change in Control". . . . . . . . . . . . . . . . 16
(b) Definition of "Change in Control". . . . . . . . . . . . . . 17
(c) Definition of "Change in Control Price". . . . . . . . . . . 18
10. General Provisions. . . . . . . . . . . . . . . . . . . . . . . . 18
(a) Compliance with Legal and Other Requirements . . . . . . . . 18
(b) Limits on Transferability; Beneficiaries . . . . . . . . . . 19
(c) Adjustments. . . . . . . . . . . . . . . . . . . . . . . . . 19
(d) Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(e) Changes to the Plan and Awards . . . . . . . . . . . . . . . 20
(f) Limitation on Rights Conferred under Plan. . . . . . . . . . 21
(g) Unfunded Status of Awards; Creation of Trusts. . . . . . . . 21
(h) Nonexclusivity of the Plan . . . . . . . . . . . . . . . . . 22
(i) Payments in the Event of Forfeitures; Fractional Shares . . 22
(j) Governing Law. . . . . . . . . . . . . . . . . . . . . . . . 22
(k) Awards under Preexisting Plan. . . . . . . . . . . . . . . . 22
(l) Plan Effective Date and Stockholder Approval . . . . . . . . 22
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SCHULLER CORPORATION
1996 EXECUTIVE INCENTIVE COMPENSATION PLAN
1. PURPOSE. The purpose of this 1996 Executive Incentive Compensation
Plan (the "Plan") is to assist Schuller Corporation, a Delaware corporation (the
"Company"), and its subsidiaries in attracting, retaining, and rewarding high-
quality executives and other employees, enabling such persons to acquire or
increase a proprietary interest in the Company in order to strengthen the
mutuality of interests between such persons and the Company's stockholders, and
providing such persons with annual and long-term performance incentives to
expend their maximum efforts in the creation of shareholder value. The Plan is
also intended to qualify certain compensation awarded under the Plan for tax
deductibility under Code Section 162(m) (as hereafter defined) to the extent
deemed appropriate by the Committee (or any successor committee) of the Board of
Directors of the Company.
2. DEFINITIONS. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to such terms defined in Section 1
hereof:
(a) "Annual Incentive Award" means a conditional right granted to a
Participant under Section 8(c) hereof to receive a cash payment, Stock or
other Award, unless otherwise determined by the Committee, after the end of
a specified fiscal year.
(b) "Award" means any Option, SAR (including Limited SAR), Restricted
Stock, Deferred Stock, Stock granted as a bonus or in lieu of another
award, Dividend Equivalent, Other Stock-Based Award, Performance Award or
Annual Incentive Award, together with any other right or interest granted
to a Participant under the Plan.
(c) "Beneficiary" means the person, persons, trust or trusts which
have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or to which Awards
or other rights are transferred if and to the extent permitted under
Section 10(b) hereof. If, upon a Participant's death, there is no
designated Beneficiary or surviving designated Beneficiary, then the term
Beneficiary means person, persons, trust or trusts entitled by will or the
laws of descent and distribution to receive such benefits.
(d) "Beneficial Owner" shall have the meaning ascribed to such term
in Rule 13d-3 under the Exchange Act and any successor to such Rule.
(e) "Board" means the Company's Board of Directors.
(f) "Change in Control" means Change in Control as defined with
related terms in Section 9 of the Plan.
(g) "Change in Control Price" means the amount calculated in
accordance with Section 9(c) of the Plan.
(h) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, including regulations thereunder and successor provisions and
regulations thereto.
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(i) "Committee" means a committee designated by the Board to
administer the Plan; provided, however, that the Committee shall consist
solely of two or more directors, each of whom shall be (i) a "disinterested
person" within the meaning of Rule 16b-3 under the Exchange Act, unless
administration of the Plan by "disinterested persons" is not then required
in order for exemptions under Rule 16b-3 to apply to transactions under the
Plan, and (ii) an "outside director" as defined under Code Section 162(m),
unless administration of the Plan by "outside directors" is not then
required in order to qualify for tax deductibility under Code Section
162(m).
(j) "Covered Employee" means an Eligible Person who is a Covered
Employee as specified in Section 8(e) of the Plan.
(k) "Deferred Stock" means a right, granted to a Participant under
Section 6(e) hereof, to receive Stock, cash or a combination thereof at the
end of a specified deferral period.
(l) "Dividend Equivalent" means a right, granted to a Participant
under Section 6(g), to receive cash, Stock, other Awards or other property
equal in value to dividends paid with respect to a specified number of
shares of Stock, or other periodic payments.
(m) "Effective Date" means June 7, 1996, the effective date of the
Plan.
(n) "Eligible Person" means each Executive Officer and other officers
and employees of the Company or of any subsidiary, including such persons
who may also be directors of the Company. The foregoing notwithstanding,
no member of the Committee shall be an Eligible Person. An employee on
leave of absence may be considered as still in the employ of the Company or
a subsidiary for purposes of eligibility for participation in the Plan.
(o) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, including rules thereunder and successor
provisions and rules thereto.
(p) "Executive Officer" means an executive officer of the Company as
defined under the Exchange Act.
(q) "Fair Market Value" means the fair market value of Stock, Awards
or other property as determined by the Committee or under procedures
established by the Committee. Unless otherwise determined by the
Committee, the Fair Market Value of Stock as of any given date shall be the
closing sale price per share reported on a consolidated basis for stock
listed on the principal stock exchange or market on which Stock is traded
on the date as of which such value is being determined or, if there is no
sale on that date, then on the last previous day on which a sale was
reported.
(r) "Incentive Stock Option" or "ISO" means any Option intended to be
and designated as an incentive stock option within the meaning of Code
Section 422 or any successor provision thereto.
(s) "Limited SAR" means a right granted to a Participant under
Section 6(c) hereof.
(t) "Option" means a right, granted to a Participant under Section
6(b) hereof, to purchase Stock or other Awards at a specified price during
specified time periods.
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(u) "Other Stock Based Awards" means Awards granted to a Participant
under Section 6(h) hereof.
(v) "Participant" means a person who has been granted an Award under
the Plan which remains outstanding, including a person who is no longer an
Eligible Person.
(w) "Performance Award" means a right, granted to a Participant under
Section 8 hereof, to receive Awards based upon performance criteria
specified by the Committee.
(x) "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, and shall include a "group" as defined in Section 13(d) thereof.
(y) "Preexisting Plan" means the Manville Corporation Stock Incentive
Plan.
(z) "Restricted Stock" means Stock granted to a Participant under
Section 6(d) hereof, that is subject to certain restrictions and to a risk
of forfeiture.
(aa) "Rule 16b-3" and "Rule 16a-1(c)(3)" mean Rule 16b-3 and
Rule 16a-1(c)(3), as from time to time in effect and applicable to the Plan
and Participants, promulgated by the Securities and Exchange Commission
under Section 16 of the Exchange Act.
(bb) "Stock" means the Company's Common Stock, and such other
securities as may be substituted (or resubstituted) for Stock pursuant to
Section 10(c) hereof.
(cc) "Stock Appreciation Rights" or "SAR" means a right granted to a
Participant under Section 6(c) hereof.
3. ADMINISTRATION.
(a) AUTHORITY OF THE COMMITTEE. The Plan shall be administered by
the Committee. The Committee shall have full and final authority, in each
case subject to and consistent with the provisions of the Plan, to select
Eligible Persons to become Participants, grant Awards, determine the type,
number and other terms and conditions of, and all other matters relating
to, Awards, prescribe Award agreements (which need not be identical for
each Participant) and rules and regulations for the administration of the
Plan, construe and interpret the Plan and Award agreements and correct
defects, supply omissions or reconcile inconsistencies therein, and to make
all other decisions and determinations as the Committee may deem necessary
or advisable for the administration of the Plan.
(b) MANNER OF EXERCISE OF COMMITTEE AUTHORITY. The Committee shall
exercise sole and exclusive discretion on any matter relating to a
Participant then subject to Section 16 of the Exchange Act with respect to
the Company to the extent necessary in order that transactions by such
Participant shall be exempt under Rule 16b-3. Any action of the Committee
shall be final, conclusive and binding on all persons, including the
Company, its subsidiaries, Participants, Beneficiaries, transferees under
Section 10(b) hereof or other persons claiming rights from or through a
Participant, and stockholders. The express grant of any specific power to
the Committee, and the taking of any action by the Committee, shall not be
construed as limiting any power or authority of the Committee. The
Committee may delegate to officers or managers of the
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Company or any subsidiary, or committees thereof, the authority, subject to
such terms as the Committee shall determine, (i) to perform administrative
functions, (ii) with respect to Participants not subject to Section 16 of
the Exchange Act, to perform such other functions as the Committee may
determine, and (iii) with respect to Participants subject to Section 16, to
perform such other functions of the Committee as the Committee may
determine to the extent performance of such functions will not result in
the loss of an exemption under Rule 16b-3 otherwise available for
transactions by such persons, in each case to the extent permitted under
applicable law and subject to the requirements set forth in Section 8(d).
The Committee may appoint agents to assist it in administering the Plan.
4. STOCK SUBJECT TO PLAN.
(a) OVERALL NUMBER OF SHARES AVAILABLE FOR DELIVERY. Subject to
adjustment as provided in Section 10(c) hereof, the total number of shares
of Stock reserved and available for delivery in connection with Awards
under the Plan shall be (i) 6,900,000, plus (ii) the number of shares of
Stock remaining available under the Preexisting Plan at the effective date
of the Plan, plus (iii) shares subject to awards under the Preexisting Plan
which become available after the Plan effective date in accordance with
Section 4(c) hereof. Any shares of Stock delivered under the Plan may
consist, in whole or in part, of authorized and unissued shares or treasury
shares.
(b) APPLICATION OF LIMITATION TO GRANTS OF AWARDS. No Award may be
granted if the number of shares of Stock to be delivered in connection with
such Award or, in the case of an Award relating to shares of Stock but
settleable only in cash (such as cash-only SARs), the number of shares to
which such Award relates, exceeds the number of shares of Stock remaining
available under the Plan minus the number of shares of Stock issuable in
settlement of or relating to then-outstanding Awards. The Committee may
adopt reasonable counting procedures to ensure appropriate counting, avoid
double counting (as, for example, in the case of tandem or substitute
awards) and make adjustments if the number of shares of Stock actually
delivered differs from the number of shares previously counted in
connection with an Award.
(c) AVAILABILITY OF SHARES NOT DELIVERED UNDER AWARDS. Shares of
Stock subject to an Award under the Plan or award under a Preexisting Plan
that is cancelled, expired, forfeited, settled in cash or otherwise
terminated without a delivery of shares to the Participant, including
(i) the number of shares withheld in payment of any exercise or purchase
price of an Award or award or taxes relating to Awards or awards, and
(ii) the number of shares surrendered in payment of any exercise or
purchase price of an Award or award or taxes relating to any Award or
award, will again be available for Awards under the Plan, except that if
any such shares could not again be available for Awards to a particular
Participant under any applicable law or regulation, such shares shall be
available exclusively for Awards to Participants who are not subject to
such limitation.
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5. ELIGIBILITY; PER-PERSON AWARD LIMITATIONS. Awards may be granted
under the Plan only to Eligible Persons. In each fiscal year during any part of
which the Plan is in effect, an Eligible Person may not be granted Awards
relating to more than three million shares of Stock, subject to adjustment as
provided in Section 10(c), under each of Sections 6(b), 6(c), 6(d), 6(e), 6(f),
6(g), 6(h), 8(b) and 8(c). In addition, the maximum cash amount that may be
earned under the Plan as a final Annual Incentive Award or other cash annual
Award in respect of any fiscal year by any one Participant shall be $4,000,000,
and the maximum cash amount that may be earned under the Plan as a final
Performance Award or other cash Award in respect of a performance period by any
one Participant shall be $6,000,000.
6. SPECIFIC TERMS OF AWARDS.
(a) GENERAL. Awards may be granted on the terms and conditions set
forth in this Section 6. In addition, the Committee may impose on any
Award or the exercise thereof, at the date of grant or thereafter (subject
to Section 10(e)), such additional terms and conditions, not inconsistent
with the provisions of the Plan, as the Committee shall determine,
including terms requiring forfeiture of Awards in the event of termination
of employment by the Participant and terms permitting a Participant to make
elections relating to his or her Award. The Committee shall retain full
power and discretion to accelerate, waive or modify, at any time, any term
or condition of an Award that is not mandatory under the Plan. Except in
cases in which the Committee is authorized to require other forms of
consideration under the Plan, or to the extent other forms of consideration
must by paid to satisfy the requirements of the Delaware General
Corporation Law, no consideration other than services may be required for
the grant (but not the exercise) of any Award.
(b) OPTIONS. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(i) EXERCISE PRICE. The exercise price per share of Stock
purchasable under an Option shall be determined by the Committee,
provided that such exercise price shall be not less than the Fair
Market Value of a share of Stock on the date of grant of such Option
except as provided under Section 7(a) hereof.
(ii) TIME AND METHOD OF EXERCISE. The Committee shall determine
the time or times at which or the circumstances under which an Option
may be exercised in whole or in part (including based on achievement
of performance goals and/or future service requirements), the methods
by which such exercise price may be paid or deemed to be paid, the
form of such payment, including, without limitation, cash, Stock,
other Awards or awards granted under other plans of the Company or any
subsidiary, or other property (including notes or other contractual
obligations of Participants to make payment on a deferred basis), and
the methods by or forms in which Stock will be delivered or deemed to
be delivered to Participants.
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(iii) ISOS. The terms of any ISO granted under the Plan
shall comply in all respects with the provisions of Code Section 422.
Anything in the Plan to the contrary notwithstanding, no term of the
Plan relating to ISOs (including any SAR in tandem therewith) shall be
interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be exercised, so as to disqualify either the
Plan or any ISO under Code Section 422, unless the Participant has
first requested the change that will result in such disqualification.
(c) STOCK APPRECIATION RIGHTS. The Committee is authorized to grant
SAR's to Participants on the following terms and conditions:
(i) RIGHT TO PAYMENT. A SAR shall confer on the Participant to
whom it is granted a right to receive, upon exercise thereof, the
excess of (A) the Fair Market Value of one share of Stock on the date
of exercise (or, in the case of a "Limited SAR," the Fair Market Value
determined by reference to the Change in Control Price, as defined
under Section 9(c) hereof), over (B) the grant price of the SAR as
determined by the Committee.
(ii) OTHER TERMS. The Committee shall determine at the date of
grant or thereafter, the time or times at which and the circumstances
under which a SAR may be exercised in whole or in part (including
based on achievement of performance goals and/or future service
requirements), the method of exercise, method of settlement, form of
consideration payable in settlement, method by or forms in which Stock
will be delivered or deemed to be delivered to Participants, whether
or not a SAR shall be in tandem or in combination with any other
Award, and any other terms and conditions of any SAR. Limited SARs
that may only be exercised in connection with a Change in Control or
other event as specified by the Committee may be granted on such
terms, not inconsistent with this Section 6(c), as the Committee may
determine. SARs and Limited SARs may be either freestanding or in
tandem with other Awards.
(d) RESTRICTED STOCK. The Committee is authorized to grant
Restricted Stock to Participants on the following terms and conditions:
(i) GRANT AND RESTRICTIONS. Restricted Stock shall be subject
to such restrictions on transferability, risk of forfeiture and other
restrictions, if any, as the Committee may impose, which restrictions
may lapse separately or in combination at such times, under such
circumstances (including based on achievement of performance goals
and/or future service requirements), in such installments or
otherwise, as the Committee may determine at the date of grant or
thereafter. Except to the extent restricted under the terms of the
Plan and any Award agreement relating to the Restricted Stock, a
Participant granted Restricted Stock shall have all of the rights of a
stockholder, including the right to vote the Restricted Stock and the
right to receive dividends thereon (subject to any mandatory
reinvestment or other requirement imposed by the Committee). During
the restricted period applicable to the Restricted Stock, subject to
Section 10(b) below, the Restricted Stock may not be sold,
transferred, pledged, hypothecated, margined or otherwise encumbered
by the Participant.
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(ii) FORFEITURE. Except as otherwise determined by the
Committee, upon termination of employment during the applicable
restriction period, Restricted Stock that is at that time subject to
restrictions shall be forfeited and reacquired by the Company;
provided that the Committee may provide, by rule or regulation or in
any Award agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Restricted Stock
shall be waived in whole or in part in the event of terminations
resulting from specified causes, and the Committee may in other cases
waive in whole or in part the forfeiture of Restricted Stock.
(iii) CERTIFICATES FOR STOCK. Restricted Stock granted under
the Plan may be evidenced in such manner as the Committee shall
determine. If certificates representing Restricted Stock are
registered in the name of the Participant, the Committee may require
that such certificates bear an appropriate legend referring to the
terms, conditions and restrictions applicable to such Restricted
Stock, that the Company retain physical possession of the
certificates, and that the Participant deliver a stock power to the
Company, endorsed in blank, relating to the Restricted Stock.
(iv) DIVIDENDS AND SPLITS. As a condition to the grant of an
Award of Restricted Stock, the Committee may require that any cash
dividends paid on a share of Restricted Stock be automatically
reinvested in additional shares of Restricted Stock or applied to the
purchase of additional Awards under the Plan. Unless otherwise
determined by the Committee, Stock distributed in connection with a
Stock split or Stock dividend, and other property distributed as a
dividend, shall be subject to restrictions and a risk of forfeiture to
the same extent as the Restricted Stock with respect to which such
Stock or other property has been distributed.
(e) DEFERRED STOCK. The Committee is authorized to grant Deferred
Stock to Participants, which are rights to receive Stock, cash, or a
combination thereof at the end of a specified deferral period, subject to
the following terms and conditions:
(i) AWARD AND RESTRICTIONS. Satisfaction of an Award of
Deferred Stock shall occur upon expiration of the deferral period
specified for such Deferred Stock by the Committee (or, if permitted
by the Committee, as elected by the Participant). In addition,
Deferred Stock shall be subject to such restrictions (which may
include a risk of forfeiture) as the Committee may impose, if any,
which restrictions may lapse at the expiration of the deferral period
or at earlier specified times (including based on achievement of
performance goals and/or future service requirements), separately or
in combination, in installments or otherwise, as the Committee may
determine. Deferred Stock may be satisfied by delivery of Stock, cash
equal to the Fair Market Value of the specified number of shares of
Stock covered by the Deferred Stock, or a combination thereof, as
determined by the Committee at the date of grant or thereafter.
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(ii) FORFEITURE. Except as otherwise determined by the
Committee, upon termination of employment during the applicable
deferral period or portion thereof to which forfeiture conditions
apply (as provided in the Award agreement evidencing the Deferred
Stock), all Deferred Stock that is at that time subject to deferral
(other than a deferral at the election of the Participant) shall be
forfeited; provided that the Committee may provide, by rule or
regulation or in any Award agreement, or may determine in any
individual case, that restrictions or forfeiture conditions relating
to Deferred Stock shall be waived in whole or in part in the event of
terminations resulting from specified causes, and the Committee may in
other cases waive in whole or in part the forfeiture of Deferred
Stock.
(iii) DIVIDEND EQUIVALENTS. Unless otherwise determined by
the Committee at date of grant, Dividend Equivalents on the specified
number of shares of Stock covered by an Award of Deferred Stock shall
be either (A) paid with respect to such Deferred Stock at the dividend
payment date in cash or in shares of unrestricted Stock having a Fair
Market Value equal to the amount of such dividends, or (B) deferred
with respect to such Deferred Stock and the amount or value thereof
automatically deemed reinvested in additional Deferred Stock, other
Awards or other investment vehicles, as the Committee shall determine
or permit the Participant to elect.
(f) BONUS STOCK AND AWARDS IN LIEU OF OBLIGATIONS. The Committee is
authorized to grant Stock as a bonus, or to grant Stock or other Awards in
lieu of Company obligations to pay cash or deliver other property under the
Plan or under other plans or compensatory arrangements, provided that, in
the case of Participants subject to Section 16 of the Exchange Act, the
amount of such grants remains within the discretion of the Committee to the
extent necessary to ensure that acquisitions of Stock or other Awards are
exempt from liability under Section 16(b) of the Exchange Act. Stock or
Awards granted hereunder shall be subject to such other terms as shall be
determined by the Committee.
(g) DIVIDEND EQUIVALENTS. The Committee is authorized to grant
Dividend Equivalents to a Participant, entitling the Participant to receive
cash, Stock, other Awards, or other property equal in value to dividends
paid with respect to a specified number of shares of Stock, or other
periodic payments. Dividend Equivalents may be awarded on a free-standing
basis or in connection with another Award. The Committee may provide that
Dividend Equivalents shall be paid or distributed when accrued or shall be
deemed to have been reinvested in additional Stock, Awards, or other
investment vehicles, and subject to such restrictions on transferability
and risks of forfeiture, as the Committee may specify.
(h) OTHER STOCK-BASED AWARDS. The Committee is authorized, subject
to limitations under applicable law, to grant to Participants such other
Awards that may be denominated or payable in, valued in whole or in part by
reference to, or otherwise based on, or related to, Stock, as deemed by the
Committee to be consistent with the purposes of the Plan, including,
without limitation, convertible or exchangeable debt securities, other
rights convertible or exchangeable into Stock, purchase rights for Stock,
Awards with value and payment contingent upon performance of the Company or
any other factors designated by the Committee, and Awards valued by
reference to the book value of Stock or the value of securities of or the
performance of specified subsidiaries. The Committee shall determine the
terms and conditions of such Awards. Stock delivered pursuant to
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an Award in the nature of a purchase right granted under this Section 6(h)
shall be purchased for such consideration, paid for at such times, by such
methods, and in such forms, including, without limitation, cash, Stock,
other Awards, or other property, as the Committee shall determine. Cash
awards, as an element of or supplement to any other Award under the Plan,
may also be granted pursuant to this Section 6(h).
7. CERTAIN PROVISIONS APPLICABLE TO AWARDS.
(a) STAND-ALONE, ADDITIONAL, TANDEM, AND SUBSTITUTE AWARDS. Awards
granted under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in substitution or
exchange for, any other Award or any award granted under another plan of
the Company, any subsidiary, or any business entity to be acquired by the
Company or a subsidiary, or any other right of a Participant to receive
payment from the Company or any subsidiary. Such additional, tandem, and
substitute or exchange Awards may be granted at any time. If an Award is
granted in substitution or exchange for another Award or award, the
Committee shall require the surrender of such other Award or award in
consideration for the grant of the new Award. In addition, Awards may be
granted in lieu of cash compensation, including in lieu of cash amounts
payable under other plans of the Company or any subsidiary, in which the
value of Stock subject to the Award is equivalent in value to the cash
compensation (for example, Deferred Stock or Restricted Stock), or in which
the exercise price, grant price or purchase price of the Award in the
nature of a right that may be exercised is equal to the Fair Market Value
of the underlying Stock minus the value of the cash compensation
surrendered (for example, Options granted with an exercise price
"discounted" by the amount of the cash compensation surrendered).
(b) TERM OF AWARDS. The term of each Award shall be for such period
as may be determined by the Committee; provided that in no event shall the
term of any Option or SAR exceed a period of ten years (or such shorter
term as may be required in respect of an ISO under Code Section 422).
(c) FORM AND TIMING OF PAYMENT UNDER AWARDS; DEFERRALS. Subject to
the terms of the Plan and any applicable Award agreement, payments to be
made by the Company or a subsidiary upon the exercise of an Option or other
Award or settlement of an Award may be made in such forms as the Committee
shall determine, including, without limitation, cash, Stock, other Awards
or other property, and may be made in a single payment or transfer, in
installments, or on a deferred basis. The settlement of any Award may be
accelerated, and cash paid in lieu of Stock in connection with such
settlement, in the discretion of the Committee or upon occurrence of one or
more specified events (in addition to a Change in Control). Installment or
deferred payments may be required by the Committee (subject to
Section 10(e) of the Plan, including the consent provisions thereof in the
case of any deferral of an outstanding Award not provided for in the
original Award agreement) or permitted at the election of the Participant
on terms and conditions established by the Committee. Payments may
include, without limitation, provisions for the payment or crediting of
reasonable interest on installment or deferred payments or the grant or
crediting of Dividend Equivalents or other amounts in respect of
installment or deferred payments denominated in Stock.
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(d) EXEMPTIONS FROM SECTION 16(b) LIABILITY. It is the intent of the
Company that this Plan as currently in effect on the date of adoption
comply in all respects with applicable provisions of Rule 16b-3 or
Rule 16a-1(c)(3) to the extent necessary to ensure that neither the grant
of any Awards to nor other transaction by a Participant who is subject to
Section 16 of the Exchange Act is subject to liability under Section 16(b)
thereof (except for transactions acknowledged in writing to be non-exempt
by such Participant). Accordingly, if any provision of this Plan or any
Award agreement does not comply with the requirements of Rule 16b-3 or
Rule 16a-1(c)(3) as then applicable to any such transaction, such provision
will be construed or deemed amended to the extent necessary to conform to
the applicable requirements of Rule 16b-3 or Rule 16a-1(c)(3) so that such
Participant shall avoid liability under Section 16(b).
8. PERFORMANCE AND ANNUAL INCENTIVE AWARDS.
(a) PERFORMANCE CONDITIONS. The right of a Participant to exercise
or receive a grant or settlement of any Award, and the timing thereof, may
be subject to such performance conditions as may be specified by the
Committee. The Committee may use such business criteria and other measures
of performance as it may deem appropriate in establishing any performance
conditions, and may exercise its discretion to reduce or increase the
amounts payable under any Award subject to performance conditions, except
as limited under Sections 8(b) and 8(c) hereof in the case of a Performance
Award or Annual Incentive Award intended to qualify under Code Section
162(m).
(b) PERFORMANCE AWARDS GRANTED TO DESIGNATED COVERED EMPLOYEES. If
the Committee determines that a Performance Award to be granted to an
Eligible Person who is designated by the Committee as likely to be a
Covered Employee should qualify as "performance-based compensation" for
purposes of Code Section 162(m), the grant, exercise and/or settlement of
such Performance Award shall be contingent upon achievement of
preestablished performance goals and other terms set forth in this Section
8(b).
(i) PERFORMANCE GOALS GENERALLY. The performance goals for such
Performance Awards shall consist of one or more business criteria and
a targeted level or levels of performance with respect to each of such
criteria, as specified by the Committee consistent with this Section
8(b). Performance goals shall be objective and shall otherwise meet
the requirements of Code Section 162(m) and regulations thereunder
(including Regulation 1.162-27 and successor regulations thereto),
including the requirement that the level or levels of performance
targeted by the Committee result in the achievement of performance
goals being "substantially uncertain." The Committee may determine
that such Performance Awards shall be granted, exercised and/or
settled upon achievement of any one performance goal or that two or
more of the performance goals must be achieved as a condition to
grant, exercise and/or settlement of such Performance Awards.
Performance goals may differ for Performance Awards granted to any one
Participant or to different Participants.
(ii) BUSINESS CRITERIA. One or more of the following business
criteria for the Company, on a consolidated basis, and/or for
specified subsidiaries or business units of the Company (except with
respect to the total stockholder return and earnings per share
criteria), shall be used exclusively by the Committee in establishing
performance goals for such Performance Awards: (1) earnings per share;
(2) revenues; (3) cash flow; (4) cash flow return on investment; (5)
return on assets, return on investment, return on capital, return on
equity; (6) economic value added; (7) operating margin; (8) net
income; pretax earnings; pretax earnings before interest, depreciation
and amortization; pretax operating earnings
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after interest expense and before incentives, service fees, and
extraordinary or special items; operating earnings; (9) total
stockholder return; and (10) any of the above goals as compared to the
performance of a published or special index deemed applicable by the
Committee including, but not limited to, the Standard & Poor's 500
Stock Index or the Standard & Poor's Building Materials Index. One or
more of the foregoing business criteria shall also be exclusively used
in establishing performance goals for Annual Incentive Awards granted
to a Covered Employee under Section 8(c) hereof.
(iii) PERFORMANCE PERIOD; TIMING FOR ESTABLISHING PERFORMANCE
GOALS. Achievement of performance goals in respect of such
Performance Awards shall be measured over a performance period of up
to ten years, as specified by the Committee. Performance goals shall
be established not later than 90 days after the beginning of any
performance period applicable to such Performance Awards, or at such
other date as may be required or permitted for "performance-based
compensation" under Code Section 162(m).
(iv) PERFORMANCE AWARD POOL. The Committee may establish a
Performance Award pool, which shall be an unfunded pool, for purposes
of measuring Company performance in connection with Performance
Awards. The amount of such Performance Award pool shall be based upon
the achievement of a performance goal or goals based on one or more of
the business criteria set forth in Section 8(b)(ii) hereof during the
given performance period, as specified by the Committee in accordance
with Section 8(b)(iii) hereof. The Committee may specify the amount
of the Performance Award pool as a percentage of any of such business
criteria, a percentage thereof in excess of a threshold amount, or as
another amount which need not bear a strictly mathematical
relationship to such business criteria.
(v) SETTLEMENT OF PERFORMANCE AWARDS; OTHER TERMS. Settlement
of such Performance Awards shall be in cash, Stock, other Awards or
other property, in the discretion of the Committee. The Committee
may, in its discretion, reduce the amount of a settlement otherwise to
be made in connection with such Performance Awards, but may not
exercise discretion to increase any such amount payable to a Covered
Employee in respect of a Performance Award subject to this Section
8(b). The Committee shall specify the circumstances in which such
Performance Awards shall be paid or forfeited in the event of
termination of employment by the Participant prior to the end of a
performance period or settlement of Performance Awards.
(c) ANNUAL INCENTIVE AWARDS GRANTED TO DESIGNATED COVERED EMPLOYEES.
If the Committee determines that an Annual Incentive Award to be granted to
an Eligible Person who is designated by the Committee as likely to be a
Covered Employee should qualify as "performance-based compensation" for
purposes of Code Section 162(m), the grant, exercise and/or settlement of
such Annual Incentive Award shall be contingent upon achievement of
preestablished performance goals and other terms set forth in this Section
8(c).
(i) ANNUAL INCENTIVE AWARD POOL. The Committee may establish an
Annual Incentive Award pool, which shall be an unfunded pool, for
purposes of measuring Company performance in connection with Annual
Incentive Awards. The amount of such Annual Incentive Award pool
shall be based upon the achievement of a performance goal or goals
based on one or more of the business criteria set forth in Section
8(b)(ii) hereof during the
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given performance period, as specified by the Committee in accordance with
Section 8(b)(iii) hereof. The Committee may specify the amount of the
Annual Incentive Award pool as a percentage of any of such business
criteria, a percentage thereof in excess of a threshold amount, or as
another amount which need not bear a strictly mathematical relationship to
such business criteria.
(ii) POTENTIAL ANNUAL INCENTIVE AWARDS. Not later than the end
of the 90th day of each fiscal year, or at such other date as may be
required or permitted in the case of Awards intended to be
"performance-based compensation" under Code Section 162(m), the
Committee shall determine the Eligible Persons who will potentially
receive Annual Incentive Awards, and the amounts potentially payable
thereunder, for that fiscal year, either out of an Annual Incentive
Award pool established by such date under Section 8(c)(i) hereof or as
individual Annual Incentive Awards. In the case of individual Annual
Incentive Awards intended to qualify under Code Section 162(m), the
amount potentially payable shall be based upon the achievement of a
performance goal or goals based on one or more of the business
criteria set forth in Section 8(b)(ii) hereof in the given performance
year, as specified by the Committee; in other cases, such amount shall
be based on such criteria as shall be established by the Committee.
In all cases, the maximum Annual Incentive Award of any Participant
shall be subject to the limitation set forth in Section 5 hereof.
(iii) PAYOUT OF ANNUAL INCENTIVE AWARDS. After the end of
each fiscal year, the Committee shall determine the amount, if any, of
(A) the Annual Incentive Award pool, and the maximum amount of
potential Annual Incentive Award payable to each Participant in the
Annual Incentive Award pool, or (B) the amount of potential Annual
Incentive Award otherwise payable to each Participant. The Committee
may, in its discretion, determine that the amount payable to any
Participant as a final Annual Incentive Award shall be increased or
reduced from the amount of his or her potential Annual Incentive
Award, including a determination to make no final Award whatsoever,
but may not exercise discretion to increase any such amount in the
case of an Annual Incentive Award intended to qualify under Code
Section 162(m). The Committee shall specify the circumstances in
which an Annual Incentive Award shall be paid or forfeited in the
event of termination of employment by the Participant prior to the end
of a fiscal year or settlement of such Annual Incentive Award.
(d) WRITTEN DETERMINATIONS. All determinations by the Committee as
to the establishment of performance goals, the amount of any Performance
Award pool or potential individual Performance Awards and as to the
achievement of performance goals relating to Performance Awards under
Section 8(b), and the amount of any Annual Incentive Award pool or
potential individual Annual Incentive Awards and the amount of final Annual
Incentive Awards under Section 8(c), shall be made in writing in the case
of any Award intended to qualify under Code Section 162(m). The Committee
may not delegate any responsibility relating to such Performance Awards or
Annual Incentive Awards.
(e) STATUS OF SECTION 8(b) AND SECTION 8(c) AWARDS UNDER CODE
SECTION 162(m). It is the intent of the Company that Performance Awards
and Annual Incentive Awards under Sections 8(b) and 8(c) hereof granted to
persons who are designated by the Committee as likely to be Covered
Employees within the meaning of Code Section 162(m) and regulations
thereunder (including Regulation 1.162-27 and successor regulations
thereto) shall, if so designated by the Committee, constitute "qualified
performance-based compensation" within the meaning of Code
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Section 162(m) and regulations thereunder. Accordingly, the terms of
Sections 8(b), (c), (d) and (e), including the definitions of Covered
Employee and other terms used therein, shall be interpreted in a manner
consistent with Code Section 162(m) and regulations thereunder. The
foregoing notwithstanding, because the Committee cannot determine with
certainty whether a given Participant will be a Covered Employee with
respect to a fiscal year that has not yet been completed, the term Covered
Employee as used herein shall mean only a person designated by the
Committee, at the time of grant of Performance Awards or an Annual
Incentive Award, as likely to be a Covered Employee with respect to that
fiscal year. If any provision of the Plan as in effect on the date of
adoption or any agreements relating to Performance Awards or Annual
Incentive Awards that are designated as intended to comply with Code
Section 162(m) does not comply or is inconsistent with the requirements of
Code Section 162(m) or regulations thereunder, such provision shall be
construed or deemed amended to the extent necessary to conform to such
requirements.
9. CHANGE IN CONTROL.
(a) EFFECT OF "CHANGE IN CONTROL." In the event of a "Change in
Control," as defined in Section 9(b), the following provisions shall apply
unless otherwise provided in the Award agreement:
(i) Any Award carrying a right to exercise that was not
previously exercisable and vested shall become fully exercisable and
vested as of the time of the Change in Control and shall remain
exercisable and vested for the balance of the stated term of such
Award without regard to any termination of employment by the
Participant, subject only to applicable restrictions set forth in
Section 10(a) hereof;
(ii) Any optionee who holds an Option shall be entitled to elect,
during the 60-day period immediately following a Change in Control, in
lieu of acquiring the shares of Stock covered by such Option, to
receive, and the Company shall be obligated to pay, in cash the excess
of the Change in Control Price over the exercise price of such Option,
multiplied by the number of shares of Stock covered by such Option;
provided, however, that no optionee who is subject to Section 16 with
respect to the Company at the time of the Change in Control shall be
entitled to make such an election if the acquisition of the right to
make such election would represent a non-exempt purchase under Section
16(b) by such optionee;
(iii) The restrictions, deferral of settlement, and
forfeiture conditions applicable to any other Award granted under the
Plan shall lapse and such Awards shall be deemed fully vested as of
the time of the Change in Control, except to the extent of any waiver
by the Participant and subject to applicable restrictions set forth in
Section 10(a) hereof; and
(iv) With respect to any outstanding Award subject to achievement
of performance goals and conditions under the Plan, such performance
goals and other conditions will be deemed to be met if and to the
extent so provided by the Committee in the Award agreement relating to
such Award.
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(b) DEFINITION OF "CHANGE IN CONTROL." A "Change in Control" shall
be deemed to have occurred if:
(i) any Person (other than the Company, any trustee or other
fiduciary holding securities under any employee benefit plan of the
Company, or any company owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as
their ownership of the common stock of the Company) becomes the
Beneficial Owner (except that a Person shall be deemed to be the
Beneficial Owner of all shares that any such Person has the right to
acquire pursuant to any agreement or arrangement or upon exercise of
conversion rights, warrants or options or otherwise, without regard to
the sixty day period referred to in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company or any
Significant Subsidiary (as defined below), representing 30 percent or
more of the combined voting power of the Company's or such
subsidiary's then outstanding securities; provided, however, that such
event shall not constitute a Change in Control unless or until the
percentage of such securities owned beneficially, directly or
indirectly, by such Person is equal to or more than all such
securities owned beneficially, directly or indirectly, by Manville
Personal Injury Settlement Trust;
(ii) during any period of two consecutive years (not including
any period prior to the adoption of the Plan), individuals who at the
beginning of such period constitute the Board, and any new director
(other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in clause
(i), (iii), or (iv) of this paragraph) whose election by the Board or
nomination for election by the Company's stockholders was approved by
a vote of at least two-thirds of the directors then still in office
who either were directors at the beginning of the two-year period or
whose election or nomination for election was previously so approved
but excluding for this purpose any such new director whose initial
assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of an
individual, corporation, partnership, group, associate or other entity
or Person other than the Board, cease for any reason to constitute at
least a majority of the Board; provided, however, that such event
shall not constitute a Change in Control unless or until the
percentage of voting securities of the Company owned beneficially,
directly or indirectly, by Manville Personal Injury Settlement Trust
is less than 50 percent of all such outstanding securities;
(iii) the consummation of a merger or consolidation of the
Company or any subsidiary owning directly or indirectly all or
substantially all of the consolidated assets of the Company (a
"Significant Subsidiary") with any other corporation, other than a
merger or consolidation which would result in the voting securities of
the Company or a Significant Subsidiary outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving or resulting
entity) more than 50 percent of the combined voting power of the
surviving or resulting entity outstanding immediately after such
merger or consolidation;
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(iv) the stockholders of the Company or any affiliate approve a
plan or agreement for the sale or disposition of all or substantially
all of the consolidated assets of the Company (other than such a sale
or disposition immediately after which such assets will be owned
directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of the common
stock of the Company immediately prior to such sale or disposition) in
which case the Board shall determine the effective date of the Change
in Control resulting therefrom; or
(v) any other event occurs which the Board determines, in its
discretion, would materially alter the structure of the Company or its
ownership.
(c) DEFINITION OF "CHANGE IN CONTROL PRICE." The "Change in Control
Price" means an amount in cash equal to the higher of (i) the amount of
cash and fair market value of property that is the highest price per share
paid (including extraordinary dividends) in any transaction triggering the
Change in Control under Section 9(b) hereof or any liquidation of shares
following a sale of substantially all assets of the Company, or (ii) the
highest Fair Market Value per share at any time during the 60-day period
preceding and 60-day period following the Change in Control.
10. GENERAL PROVISIONS.
(a) COMPLIANCE WITH LEGAL AND OTHER REQUIREMENTS. The Company may,
to the extent deemed necessary or advisable by the Committee, postpone the
issuance or delivery of Stock or payment of other benefits under any Award
until completion of such registration or qualification of such Stock or
other required action under any federal or state law, rule or regulation,
listing or other required action with respect to any stock exchange or
automated quotation system upon which the Stock or other Company securities
are listed or quoted, or compliance with any other obligation of the
Company, as the Committee may consider appropriate, and may require any
Participant to make such representations, furnish such information and
comply with or be subject to such other conditions as it may consider
appropriate in connection with the issuance or delivery of Stock or payment
of other benefits in compliance with applicable laws, rules, and
regulations, listing requirements, or other obligations. The foregoing
notwithstanding, in connection with a Change in Control, the Company shall
take or cause to be taken no action, and shall undertake or permit to arise
no legal or contractual obligation, that results or would result in any
postponement of the issuance or delivery of Stock or payment of benefits
under any Award or the imposition of any other conditions on such issuance,
delivery or payment, to the extent that such postponement or other
condition would represent a greater burden on a Participant than existed on
the 90th day preceding the Change in Control.
(b) LIMITS ON TRANSFERABILITY; BENEFICIARIES. No Award or other
right or interest of a Participant under the Plan, including any Award or
right which constitutes a derivative security as generally defined in
Rule 16a-1(c) under the Exchange Act, shall be pledged, hypothecated or
otherwise encumbered or subject to any lien, obligation or liability of
such Participant to any party (other than the Company or a subsidiary), or
assigned or transferred by such Participant otherwise than by will or the
laws of descent and distribution or to a Beneficiary upon the death of a
Participant, and such Awards or rights that may be exercisable shall be
exercised during the lifetime of the Participant only by the Participant or
his or her guardian or legal representative, except that Awards and other
rights (other than ISOs and SARs in tandem therewith) may be transferred to
one or more Beneficiaries or other transferees during the lifetime of the
Participant, and may be exercised by such transferees in accordance with
the terms of such Award, but only if
A-15
<PAGE>
and to the extent such transfers are permitted by the Committee pursuant to
the express terms of an Award agreement (subject to any terms and
conditions which the Committee may impose thereon); provided, however,
that, for so long as the Company is relying on Rule 16b-3 as in effect
prior to May 1, 1991 for exemptions for Plan transactions, Awards may be
granted that are transferable (and thus are not exempted under such version
of Rule 16b-3) only on terms that do not preclude other grants of Awards
under the Plan that are exempt under such version of Rule 16b-3. A
Beneficiary, transferee, or other person claiming any rights under the Plan
from or through any Participant shall be subject to all terms and
conditions of the Plan and any Award agreement applicable to such
Participant, except as otherwise determined by the Committee, and to any
additional terms and conditions deemed necessary or appropriate by the
Committee.
(c) ADJUSTMENTS. In the event that any dividend or other
distribution (whether in the form of cash, Stock, or other property),
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, share exchange,
liquidation, dissolution or other similar corporate transaction or event
affects the Stock such that an adjustment is determined by the Committee to
be appropriate under the Plan, then the Committee shall, in such manner as
it may deem equitable, adjust any or all of (i) the number and kind of
shares of Stock which may be delivered in connection with Awards granted
thereafter, (ii) the number and kind of shares of Stock by which annual
per-person Award limitations are measured under Section 5 hereof, (iii) the
number and kind of shares of Stock subject to or deliverable in respect of
outstanding Awards and (iv) the exercise price, grant price or purchase
price relating to any Award and/or make provision for payment of cash or
other property in respect of any outstanding Award. In addition, the
Committee is authorized to make adjustments in the terms and conditions of,
and the criteria included in, Awards (including Performance Awards and
performance goals, and Annual Incentive Awards and any Annual Incentive
Award pool or performance goals relating thereto) in recognition of unusual
or nonrecurring events (including, without limitation, events described in
the preceding sentence, as well as acquisitions and dispositions of
businesses and assets) affecting the Company, any subsidiary or any
business unit, or the financial statements of the Company or any
subsidiary, or in response to changes in applicable laws, regulations,
accounting principles, tax rates and regulations or business conditions or
in view of the Committee's assessment of the business strategy of the
Company, any subsidiary or business unit thereof, performance of comparable
organizations, economic and business conditions, personal performance of a
Participant, and any other circumstances deemed relevant; provided that no
such adjustment shall be authorized or made if and to the extent that such
authority or the making of such adjustment would cause Options, SARs,
Performance Awards granted under Section 8(b) hereof or Annual Incentive
Awards granted under Section 8(c) hereof to Participants designated by the
Committee as Covered Employees and intended to qualify as "performance-
based compensation" under Code Section 162(m) and regulations thereunder to
otherwise fail to qualify as "performance-based compensation" under Code
Section 162(m) and regulations thereunder.
(d) TAXES. The Company and any subsidiary is authorized to withhold
from any Award granted, any payment relating to an Award under the Plan,
including from a distribution of Stock, or any payroll or other payment to
a Participant, amounts of withholding and other taxes due or potentially
payable in connection with any transaction involving an Award, and to take
such other action as the Committee may deem advisable to enable the Company
and Participants to satisfy obligations for the payment of withholding
taxes and other tax obligations relating to any Award. This authority
shall include authority to withhold or receive Stock or other property and
to make cash payments in respect thereof in satisfaction of a Participant's
tax obligations, either on a mandatory or elective basis in the discretion
of the Committee.
A-16
<PAGE>
(e) CHANGES TO THE PLAN AND AWARDS. The Board may amend, alter,
suspend, discontinue or terminate the Plan or the Committee's authority to
grant Awards under the Plan without the consent of stockholders or
Participants, except that any amendment or alteration to the Plan shall be
subject to the approval of the Company's stockholders not later than the
annual meeting next following such Board action if such stockholder
approval is required by any federal or state law or regulation or the rules
of any stock exchange or automated quotation system on which the Stock may
then be listed or quoted, and the Board may otherwise, in its discretion,
determine to submit other such changes to the Plan to stockholders for
approval; provided that, without the consent of an affected Participant, no
such Board action may materially and adversely affect the rights of such
Participant under any previously granted and outstanding Award. The
Committee may waive any conditions or rights under, or amend, alter,
suspend, discontinue or terminate any Award theretofore granted and any
Award agreement relating thereto, except as otherwise provided in the Plan;
provided that, without the consent of an affected Participant, no such
Committee action may materially and adversely affect the rights of such
Participant under such Award. Notwithstanding anything in the Plan to the
contrary, if any right under this Plan would cause a transaction to be
ineligible for pooling of interest accounting that would, but for the right
hereunder, be eligible for such accounting treatment, the Committee may
modify or adjust the right so that pooling of interest accounting shall be
available, including the substitution of Stock having a Fair Market Value
equal to the cash otherwise payable hereunder for the right which caused
the transaction to be ineligible for pooling of interest accounting.
(f) LIMITATION ON RIGHTS CONFERRED UNDER PLAN. Neither the Plan nor
any action taken hereunder shall be construed as (i) giving any Eligible
Person or Participant the right to continue as an Eligible Person or
Participant or in the employ of the Company or a subsidiary,
(ii) interfering in any way with the right of the Company or a subsidiary
to terminate any Eligible Person's or Participant's employment at any time,
(iii) giving an Eligible Person or Participant any claim to be granted any
Award under the Plan or to be treated uniformly with other Participants and
employees, or (iv) conferring on a Participant any of the rights of a
stockholder of the Company unless and until the Participant is duly issued
or transferred shares of Stock in accordance with the terms of an Award.
(g) UNFUNDED STATUS OF AWARDS; CREATION OF TRUSTS. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant
or obligation to deliver Stock pursuant to an Award, nothing contained in
the Plan or any Award shall give any such Participant any rights that are
greater than those of a general creditor of the Company; provided that the
Committee may authorize the creation of trusts and deposit therein cash,
Stock, other Awards or other property, or make other arrangements to meet
the Company's obligations under the Plan. Such trusts or other
arrangements shall be consistent with the "unfunded" status of the Plan
unless the Committee otherwise determines with the consent of each affected
Participant. The trustee of such trusts may be authorized to dispose of
trust assets and reinvest the proceeds in alternative investments, subject
to such terms and conditions as the Committee may specify and in accordance
with applicable law.
(h) NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by
the Board nor its submission to the stockholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board or a committee thereof to adopt such other incentive arrangements as
it may deem desirable including incentive arrangements and awards which do
not qualify under Code Section 162(m).
A-17
<PAGE>
(i) PAYMENTS IN THE EVENT OF FORFEITURES; FRACTIONAL SHARES. Unless
otherwise determined by the Committee, in the event of a forfeiture of an
Award with respect to which a Participant paid cash or other consideration,
the Participant shall be repaid the amount of such cash or other
consideration. No fractional shares of Stock shall be issued or delivered
pursuant to the Plan or any Award. The Committee shall determine whether
cash, other Awards or other property shall be issued or paid in lieu of
such fractional shares or whether such fractional shares or any rights
thereto shall be forfeited or otherwise eliminated.
(j) GOVERNING LAW. The validity, construction and effect of the
Plan, any rules and regulations under the Plan, and any Award agreement
shall be determined in accordance with the Delaware General Corporation
Law, without giving effect to principles of conflicts of laws, and
applicable federal law.
(k) AWARDS UNDER PREEXISTING PLAN. Upon approval of the Plan by
stockholders of the Company, as required under Section 10(l) hereof, no
further Awards shall be granted under any Preexisting Plan.
(l) PLAN EFFECTIVE DATE AND STOCKHOLDER APPROVAL. The Plan shall
become effective on June 7, 1996, subject to approval at the Company's 1996
Annual Meeting of Stockholders, by stockholders of the Company eligible to
vote in the election of directors, by a vote sufficient to meet the
requirements of Code Sections 162(m) and 422, Rule 16b-3 under the Exchange
Act, Section 312.03 of the Listed Company Manual of the New York Stock
Exchange, Inc., and other laws, regulations, and obligations of the Company
applicable to the Plan. Awards may be granted subject to stockholder
approval, but may not be exercised or otherwise settled in the event
stockholder approval is not obtained.
A-18
<PAGE>
SCHULLER CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
P The undersigned hereby appoints Robert E. Fowler, Jr., W. Thomas Stephens
R and Will M. Storey or any of them as Proxies, each with the power to
O appoint a substitute, and hereby authorizes them to represent and to
X vote as designated hereon, all the shares of common stock of Schuller
Y Corporation held of record by the undersigned on April 9, 1996, at the
Annual Meeting of Stockholders to be held on June 7, 1996 or any
adjournment thereof.
Change of Address
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(If you have written in the above
space, please mark the corresponding
box on the reverse side of this card.)
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICE BY MARKING THE APPROPRIATE
BOXES. SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO
VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. PLEASE
SIGN THIS CARD ON THE REVERSE. A RETURN ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE IN RETURNING THIS CARD.
-----------
SEE REVERSE
SIDE
-----------
FOLD AND DETACH HERE
<PAGE>
PLEASE MARK YOUR |
X VOTES AS IN THIS | 9835
EXAMPLE |
--------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BELOW.
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3.
<TABLE>
<CAPTION>
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
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FOR WITHHELD FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C> <C> <C>
1. Election of NOMINEES 2. Approval of Schuller
Directors Leo Benatar, Robert A. Fallsa, Todd Goodwin, Michael N. Corporation 1996
Hammes, John N. Hanson, Kathryn Rudie Harrigan, Louis Executive Incentive
Klein, Jr., Frank J. Macchaiarola, Christian E. Markey, Jr., Compensation Plan.
For, except vote William E. Mayer, W. Thomas Stephens. 3. Approval of
withheld from the Appointment of
following nominee(s): Independent
Accountants.
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If you plan to amend the
1996 Annual Meeting in
Denver, Colorado, please
check this box.
Please sign exactly as name appears hereon. Joint owners
should each sign. When signing as attorney, executor, ad-
ministrator, trustee or guardian, please give full title as such.
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SIGNATURE(S) DATE
</TABLE>
FOLD AND DETACH HERE
SCHULLER CORPORATION
YOUR VOTE IS IMPORTANT TO US. PLEASE COMPLETE,
DATE AND SIGN THE ABOVE PROXY CARD AND RETURN
IT PROMPTLY IN THE ACCOMPANYING ENVELOPE.
