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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________TO__________
COMMISSION FILE NO. 1-8247
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SCHULLER CORPORATION
(Exact name of registrant as specified in its charter)
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DELAWARE 84-0856796
(State or other jurisdiction of incorporation (IRS Employer Identification Number)
or organization)
717 17TH STREET, DENVER, COLORADO 80202
(Address of principal executive offices) (Zip Code)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (303) 978-2000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock ($.01 par value) New York Stock Exchange, Inc.
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
Yes [X] No [ ]
Based solely on the New York Stock Exchange, Inc. closing price as of March 3,
1997, the aggregate market value of the common stock held by non-affiliates of
the registrant was approximately $395,108,388.
As of March 3, 1997, there were 161,531,765 shares of the registrant's sole
class of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents or portions thereof filed with the Securities and
Exchange Commission are incorporated herein by reference:
The Selected Five-Year Financial Data, Management's Discussion and Analysis
of Financial Condition and Results of Operations and Financial Statements
and Selected Quarterly Financial Data contained in the Company's 1996
Annual Report to security holders are incorporated by reference into Parts
I, II and IV of this report.
The Annual Report to security holders, except for portions thereof that have
been specifically incorporated by reference, shall not be deemed filed as part
of this Annual Report on Form 10-K.
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TABLE OF CONTENTS
PART I
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PAGE
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ITEM 1. BUSINESS.................................................... 1
Introduction.............................................. 1
Significant Developments in 1996.......................... 1
Description of the Business............................... 2
Building Products......................................... 2
Engineered Products....................................... 4
Materials................................................. 5
Research and Development.................................. 6
Patents................................................... 6
Labor Relations........................................... 6
Seasonality............................................... 6
Environmental Regulations................................. 6
Occupational Health and Safety Aspects of the Company's
Products................................................ 6
ITEM 2. PROPERTIES.................................................. 9
Headquarters.............................................. 9
Manufacturing and Development Facilities.................. 9
ITEM 3. LEGAL PROCEEDINGS........................................... 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 10
Executive Officers of the Company........................... 10
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS....................................... 11
ITEM 6. SELECTED FINANCIAL DATA..................................... 11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 11
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................. 11
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE....................... 11
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.......... 12
ITEM 11. EXECUTIVE COMPENSATION...................................... 12
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 12
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 12
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.................................................. 12
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The "Company" or "Schuller" when used in this Form 10-K refers to Schuller
Corporation (formerly known as Johns-Manville Corporation), incorporated in the
State of Delaware in 1981, including, where applicable, its consolidated
subsidiaries.
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PART I
ITEM 1. BUSINESS
INTRODUCTION
Schuller Corporation (formerly known as Johns-Manville Corporation) was
incorporated in Delaware in 1981 to continue businesses begun by its
predecessors in 1858.
Schuller is a leading manufacturer of insulation and building products with
1996 sales of approximately $1.55 billion. Schuller manufactures and markets
insulation products for buildings and equipment, commercial and industrial
roofing systems, high-efficiency filtration media and fibers and nonwoven mats
used as reinforcements in building and industrial applications.
SIGNIFICANT DEVELOPMENTS IN 1996
Disposition of Riverwood. On March 27, 1996, the Company disposed of all of
the shares of common stock of Riverwood International Corporation ("Riverwood")
held by the Company as a result of the merger of a newly formed acquisition
company owned by an investor group with and into Riverwood (the "Riverwood
Disposition"). In the Riverwood Disposition, the Company received approximately
$1.08 billion in the aggregate for the approximately 81.3 percent of the
outstanding shares of Riverwood common stock held by the Company.
For financial reporting purposes, Riverwood's results have been included in
discontinued operations. See Note 21 to the Company's Consolidated Financial
Statements, incorporated by reference herein.
Declaration of Special Cash Dividend. On March 27, 1996, the Company's
Board of Directors declared a special cash dividend of $6.00 per share on the
Company's common stock, par value $.01 per share (the "Common Stock"), which was
paid on April 12, 1996 to stockholders of record at the close of business on
April 8, 1996.
Profit Sharing Exchange Agreement. On October 25, 1995, the Company and
Manville Personal Injury Settlement Trust (the "Trust") entered into a Profit
Sharing Exchange Agreement pursuant to which the Trust agreed to exchange its
right to receive annually 20 percent of the Company's adjusted net earnings for
newly issued shares representing 20 percent of the outstanding Common Stock on a
fully diluted basis as of the date of issuance (assuming exercise of all
outstanding options, warrants and other rights to acquire Common Stock, and
after giving effect to such issuance). Pursuant to the Profit Sharing Exchange
Agreement, on April 5, 1996, the Company issued 32,527,110 shares of Common
Stock to the Trust in exchange for its profit sharing right.
Expansion Activities. Effective January 1, 1996, Schuller formed a joint
venture with China National New Building Materials Corporation and Tianma
Corporation to manufacture fiber glass mat in China. The joint venture, in which
Schuller has a 60 percent interest, will operate and expand an existing fiber
glass mat facility in the City of Changzhou, Jiansu Province. In early 1996,
Schuller acquired Nord Bitumi SpA, Nord Bitumi Mexico, S.A. de C.V. and Nord
Bitumi U.S., Inc., manufacturers of modified bitumen roofing products, and Web
Dynamics Corporation, a manufacturer of polymer filtration products. In August
1996, Schuller acquired, in separate transactions, NRG Barriers, Inc., a U.S.
manufacturer of commercial roofing insulation, and the assets of Dibiten USA and
Dibiten Mexico, manufacturers of modified bitumen roofing products. In January
1997, Schuller acquired the assets of Ergon Nonwovens, Inc., a manufacturer of
synthetic meltblown nonwoven products. In February 1997, Schuller announced its
agreement to acquire the Mitex group of companies, subject to certain
conditions, including regulatory approvals. The Mitex group manufactures fiber
glass wall covering fabrics used primarily in commercial and industrial
buildings and has manufacturing facilities in Sweden and the United Kingdom.
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DESCRIPTION OF THE BUSINESS
Schuller is a leading manufacturer of insulation and building products,
with 1996 net sales of approximately $1.55 billion. Schuller manufactures and
markets insulation products for buildings and equipment, commercial and
industrial roofing systems, high-efficiency filtration media and fibers and
nonwoven mats used as reinforcements in building and industrial applications.
Schuller operates 50 manufacturing facilities in North America, Europe and China
and is comprised of two principal business segments, as set forth in the
following table:
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PRODUCT GROUPS BY BUSINESS SEGMENT (1) PRODUCTS AND APPLICATIONS
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BUILDING PRODUCTS
Building Insulation Fiber glass wool insulation for walls, floors and
attics; residential foam sheathing
Commercial and Industrial Roofing Roofing systems, including membranes, insulation,
Systems accessories and related guarantees
Mechanical Insulations Pipe and duct insulation for various commercial
applications
ENGINEERED PRODUCTS
Specialty Insulations and Filtration Thermal and acoustic insulation for aircraft; marine
vessels; automobiles; heating, ventilating and air
conditioning ("HVAC"); and other equipment
Air filtration media for buildings; ultra-fine fibers
for clean room air filters and battery separators;
liquid filtration media; medical/surgical and
protective apparel products; and industrial oil
sorbent products
Mats and Fibers Continuous filament fiber glass and nonwoven fiber glass
mats for roofing and flooring substrates, plastics
reinforcements, electrical grade yarn and wall
coverings
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(1) For additional business segment information and geographical data, see Note
25 to the Company's Consolidated Financial Statements contained in the
Company's Annual Report to security holders which is incorporated by
reference into this report.
BUILDING PRODUCTS
Schuller's Building Products segment with 1996 net sales of $960.5 million,
or 60.6 percent of Schuller's total net sales (before elimination of
intersegment sales), is comprised of the building insulation, commercial and
industrial roofing systems and mechanical insulations product groups.
Building Insulation
Products. Schuller's building insulation business manufactures a complete
line of fiber glass wool insulation products for walls, attics and floors in
residential and commercial buildings. Schuller's building insulation products
include fiber glass batts, rolls, blowing wool and related products. Schuller
also produces polyisocyanurate foam sheathing for use in residential structures.
Schuller operates six manufacturing and two support facilities throughout
North America to serve regional population and construction centers. This
regional structure, which keeps most shipping distances within a 500-mile
radius, improves Schuller's customer service and reduces its total
transportation costs.
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Markets and Distribution. Demand for Schuller's building insulation
products is driven primarily by North American housing starts. Schuller
estimates that during 1996, 75 percent of its wall, attic and floor insulation
was sold to residential markets and the remaining 25 percent was sold to
commercial markets. Other important influences are the repair/remodel market and
commercial construction of warehouses and light manufacturing facilities. In
addition, implementation of various federal and state energy conservation codes
serves to increase the amount of insulation per unit built.
Building insulation products typically reach end users through contractors,
retailers and distributors. Schuller's marketing efforts are normally directed
toward insulation contractors and national retailers.
Competition. Schuller's building insulation business competes primarily
with Owens-Corning Corporation ("OC") and CertainTeed Corporation, the U.S.
subsidiary of Compagnie de Saint-Gobain ("CSG"). Schuller competes in the
building insulation business primarily on the basis of price,
packaging/merchandising and service.
Commercial and Industrial Roofing Systems
Products. Schuller is a full-line supplier of roofing systems and
components for low-slope commercial and industrial roofs, including a wide range
of membranes, insulations, accessories and roofing system guarantees.
Schuller's commercial roofing systems business operates 18 manufacturing
facilities and seven distribution facilities in North America, and one
manufacturing facility in Italy. In early 1996, Schuller expanded its roofing
business by acquiring Nord Bitumi SpA, Nord Bitumi Mexico, S.A. de C.V. and Nord
Bitumi U.S., Inc., manufacturers of modified bitumen roofing products. In August
1996, Schuller acquired NRG Barriers, Inc. ("NRG"), a U.S. manufacturer of
commercial roofing insulation. Through the NRG acquisition, Schuller now
produces various polyisocyanurate foam roofing insulation and building
insulation products. Also in August 1996, Schuller acquired the assets of
Dibiten USA and Dibiten Mexico, manufacturers of modified bitumen roofing
products.
Markets and Distribution. Demand for Schuller's roofing systems products is
driven primarily by commercial and industrial reroofing needs. Schuller
estimates that approximately 75 percent of its commercial and industrial roofing
sales during 1996 were attributable to reroofing, with the balance attributable
to new construction. While sales of roofing systems are affected by levels of
new construction and general economic conditions, sales attributable to
reroofing are less sensitive to these factors, thus mitigating the adverse
effect of recessionary periods.
Schuller targets, owners, architects, specifiers and roofing consultants
who generally recommend premium roofing systems. Approximately 95 percent of
Schuller's commercial and industrial roofing sales during 1996 were sold through
wholesale distributors; the remainder was sold through contractors.
Competition. The commercial roofing business is a highly fragmented market.
Competitors include several large national participants, such as Firestone
Roofing Products, GAF Corporation, Tamko Asphalt Products Inc., Carlisle
Companies Incorporated, and various smaller regional companies. Schuller
competes in the commercial roofing business primarily on the basis of breadth of
product line, specifications, guarantees, systems reliability and price.
Mechanical Insulations
Products. Schuller's mechanical insulations business produces pipe and duct
insulation for use in commercial buildings, factories, refineries and other
industrial applications. In response to industry attention to indoor
environmental quality, Schuller offers EnviroSystem(TM), a group of products
sold together aimed at indoor environmental quality improvement. Such products
include duct insulation with enhanced thermal and acoustical properties with an
antimicrobial agent for improved air filtration. To further broaden its pipe
insulation product lines, in October 1996 the Company entered into a strategic
alliance with Nomaco, Inc., a leading manufacturer of engineered polyolefin foam
insulation products. Under the strategic alliance, Schuller has exclusive rights
in North America to sell engineered polyolefin foam pipe insulation products
manufactured by Nomaco.
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Mechanical insulation products are manufactured at seven facilities in the
United States.
Markets and Distribution. Demand for Schuller's mechanical insulations is
driven primarily by commercial construction activity. Mechanical insulation
products reach the market through Schuller's network of distributors,
contractors and fabricators.
Competition. Schuller's mechanical insulations business primarily competes
with OC, CSG and Knauf Fiberglass USA. Schuller competes in the mechanical
insulations business primarily on the basis of price, breadth of product line
and strength of fabricator and distributor networks.
ENGINEERED PRODUCTS
Schuller's Engineered Products segment with 1996 net sales of $623.2
million, or 39.4 percent of Schuller's total net sales (before elimination of
intersegment sales), is comprised of the specialty insulations and filtration
and mats and fibers product groups.
Specialty Insulations and Filtration
Products. Schuller's specialty insulations and filtration businesses
produce thermal and acoustic insulation for aircraft, marine vessels,
automobiles, HVAC and other equipment; air filtration media for commercial and
industrial buildings; and ultra-fine fibers for clean room air filters and
battery separators; and liquid filtration cartridges and media for use in
commercial and industrial applications. Specialty insulations and filtration
products generally require extremely fine and uniform fibers to provide the
required insulation and filtration properties, and therefore command higher
prices than other fiber glass products. As an alternative to fiber glass
insulation, the Company manufactures and sells polyimide foam insulation
products for applications on naval vessels.
In 1996, Schuller expanded its specialty insulations and filtration
businesses through the acquisition of Web Dynamics Corporation, a manufacturer
of synthetic meltblown nonwoven products. In January 1997, Schuller further
expanded its synthetic manufacturing capabilities and its product lines by
acquiring the assets of Ergon Nonwovens, Inc. With these acquisitions, Schuller
produces a full line of synthetic meltblown nonwoven products used in air and
liquid filtration applications, medical/surgical, personal care, protective
apparel products, and in industrial oil sorbent applications.
Specialty insulations and filtration products are manufactured at twelve of
Schuller's U.S. facilities.
Markets and Distribution. Demand for Schuller's specialty insulations and
filtration products is driven primarily by commercial construction (HVAC and
other insulations), commercial building occupancy (air filtration media), the
construction of clean rooms requiring dust-free environments which are primarily
used by the pharmaceutical and semiconductor industries (ultra-fine fibers), the
need for high-efficiency filtration of water, paints, inks, chemicals, resins
and oils in industrial manufacturing operations (liquid filtration media) and
the production of aircraft, marine vessels and automobiles (specialty
insulations). Increasing public attention to environmental issues also
stimulates demand for filtration media and industrial oil sorbent products.
Schuller typically sells specialty insulations and filtration products to
distributors and fabricators who, in turn, sell to original equipment
manufacturers. Air filtration media products are sold to producers of air
filtration systems for use in commercial buildings. Liquid filtration media
products are sold to producers of liquid filtration systems and products for use
in commercial and industrial manufacturing operations. Schuller also sells
finished cartridges for use in high-efficiency liquid filtration applications.
Schuller sells ultra-fine fibers to specialty filtration paper manufacturers.
Schuller sells its synthetic nonwoven products primarily to distributors and
fabricators.
Competition. Schuller's specialty insulations and filtration businesses
compete with a variety of large and small companies in its various niche
markets. Schuller competes in the specialty insulations and filtration business
primarily on the basis of quality and product customization.
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Mats and Fibers
Products. Schuller's mats and fibers business manufactures continuous
filament fiber glass-based products (chopped fiber and fiber glass mat) used for
reinforcing roofing, flooring, wall covering and plastics. Schuller is a
worldwide supplier of nonwoven fiber glass mat products, which are used as
substrates in roofing and flooring. Schuller focuses primarily on roofing and
flooring substrates and also sells products for plastics reinforcements and
electrical-grade yarn.
The business operates three manufacturing plants and one support facility
in the United States. Schuller GmbH, Schuller's German subsidiary, operates
three plants in Germany and one plant in Poland. Schuller GmbH was the pioneer
in wet fiber glass mat technology and also developed the unique sliver fiber
glass process, which created the market for fiber glass wall coverings in
Europe.
Effective January 1, 1996, Schuller formed a joint venture with China
National New Building Materials Corporation and Tianma Corporation to
manufacture fiber glass mat in China. The joint venture, in which Schuller has a
60 percent interest, operates a fiber glass mat facility in the City of
Changzhou, Jiansu Province.
In February 1997, Schuller announced its agreement to acquire the Mitex
group of companies, subject to certain conditions, including regulatory
approvals. The Mitex group manufactures fiber glass wall covering fabrics used
primarily in commercial and industrial buildings and has manufacturing
facilities in Sweden and the United Kingdom.
Markets and Distribution. Demand for Schuller's mats and fibers products is
driven primarily by the worldwide commercial construction and retrofit markets,
as well as by U.S. residential construction and reroofing. These products are
sold directly to roofing and flooring manufacturers as well as to European
textile weavers. Schuller's U.S. mats and fibers business provides fiber glass
mat to Schuller's commercial roofing systems business for its fiber glass-based
roofing products.
Competition. Schuller's primary competitors in the worldwide mats and
fibers business are OC, CSG and Elk Corporation of Dallas. Schuller competes in
the mats and fibers business primarily on the basis of quality and service.
MATERIALS
Fiber glass is the basic material in a significant number of Schuller's
products. The principal raw materials used to manufacture fiber glass products
include sand, soda ash, lime, borate minerals and aluminous materials.
Phenol-formaldehyde, urea extended phenol-formaldehyde and other resins are also
used to bind glass fibers. All of these raw materials are readily available in
sufficient quantities from various sources for Schuller to maintain and expand
its current production levels.
Schuller's products contain materials other than fiber glass to satisfy the
broader needs of its customers. For example, calcium silicate pipe insulation
products and plastic accessories complement Schuller's product offerings to
commercial/industrial insulation distributors. Schuller manufactures polyimide
foam for marine insulation which is used by the United States Navy in
shipbuilding. Commercial roofing systems use perlite insulation board, rubber
membranes and polyester substrates. In addition, the Company uses several
advanced polymers in roll goods for roofing substrates. The Company manufactures
polyisocyanurate foam sheathing and roof insulation using liquid chemicals
comprised primarily of polyol and polyisocyanurate. In order to further broaden
its product lines, Schuller is pursuing expansion into certain polymer fiber
applications for filtration, substrates, and equipment insulation, apparel and
industrial oil sorbents as evidenced by the acquisitions of Web Dynamics
Corporation and the assets of Ergon Nonwovens, Inc. The raw materials used in
these various products are readily available in sufficient quantities from
various sources for Schuller to maintain and expand its current production
levels.
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RESEARCH AND DEVELOPMENT
The Company carries out research and development activities at its
facilities in Littleton, Colorado; Waterville, Ohio; Richmond, Indiana and
Wertheim, Germany. Research, development and engineering expenses for the years
ended December 31, 1996, 1995 and 1994 were $32.7 million, $30.0 million and
$29.7 million, respectively.
PATENTS
The Company presently owns, controls or holds licenses to approximately 650
U.S. and foreign patents and patent applications. While the Company regards its
patents and licenses as valuable, it does not consider any of its businesses to
be materially dependent upon any single patent or license.
LABOR RELATIONS
At March 28, 1997, the Company employed approximately 8,100 persons
worldwide, of whom approximately 3,700 were covered by collective bargaining
agreements. The Company has experienced a long history of good working
relationships with its employees and labor unions.
SEASONALITY
The Company's quarterly results of operations are moderately seasonal due
to increases in construction activity that typically occur in the second and
third quarters of the calendar year, thereby increasing sales and gross profits
in those periods.
ENVIRONMENTAL REGULATIONS
All of the Company's domestic operations are subject to a variety of
federal, state and local environmental laws and regulations. These laws and
regulations regulate the discharge of materials into the air, land and water and
govern the use and disposal of hazardous substances. The most significant of the
federal laws are the Clean Air Act, the Clean Water Act, the Toxic Substances
Control Act, the Resource Conservation and Recovery Act ("RCRA") and the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"). These environmental regulatory programs are administered by the
federal Environmental Protection Agency ("EPA"). In addition, states and local
jurisdictions have adopted equivalent or more stringent environmental laws and
regulations, or have enacted their own parallel environmental programs, which
are enforced through various state and local administrative agencies. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and Note 9 to the Company's
Consolidated Financial Statements, each incorporated by reference herein.
OCCUPATIONAL HEALTH AND SAFETY ASPECTS OF THE COMPANY'S PRODUCTS
The Company has an ongoing product stewardship program to facilitate
compliance with existing laws, and to protect the health and safety of the
Company's employees, customers and the general public. This program is
implemented through extensive research, a continuing process of workplace and
product evaluation and an extensive communications program. National and
international scientific authorities are involved on an ongoing basis in the
assessment of potential human health hazards. The results of these evaluations
are reported regularly to employees and customers as part of the Company's
communications program.
The Company manufactures, processes and sells products, and has in the past
manufactured, processed and sold products, that contain certain chemicals or
substances, including man-made vitreous fibers ("MMVF") such as fiber glass,
refractory ceramic fiber ("RCF") and mineral wools classified by the
International Agency for Research on Cancer ("IARC") as possible human
carcinogens. In 1987, the IARC evaluated the carcinogenicity of MMVF. Fiber
glass wool, RCF and mineral wool were classified as "possibly carcinogenic to
humans." The IARC concluded that continuous glass filament (chopped strand) was
"not classifiable as to human carcinogenicity." Crystalline silica exists in
trace amounts in the Company's calcium
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silicate insulation products and is a major constituent of the diatomaceous
earth products produced by a former subsidiary. In 1996, the IARC classified
crystalline silica as "known carcinogenic to humans." The IARC classification of
crystalline silica was based upon animal and human studies. Asphalt used by the
Company's roofing operations presently is being evaluated by the National
Institute of Occupational Safety and Health to determine its carcinogenic
potential.
Although crystalline silica is a contaminant in one of the raw materials
used in Schuller's calcium silicate insulation products, the silica content
constitutes less than one percent of the finished product. Crystalline silica
exposures have been measured under conditions of foreseeable use and found to be
nondetectable. Hazard communication materials reflecting the potential cancer
risk have been developed and are used by the Company to address the proper
handling of these products by employees and customers.
The Company sold most of its RCF operations in 1990 and agreed to indemnify
the purchaser for pre-closing liabilities, including claims by transferred
employees arising out of pre-closing occupational exposures incurred in the
course of their employment with the Company or its predecessors. RCF products
have been labeled as a possible cause of cancer since 1985. Subsequently, RCF
product labels were revised to warn of the additional potential hazard
associated with exposure to crystalline silica, which can be formed after use of
RCF products at high temperatures.
For purposes of occupational exposure, the Occupational Safety and Health
Administration regulates all MMVF as nuisance dusts. The Company believes that
it is in substantial compliance with all applicable workplace exposure
regulations and product "right-to-know" labeling requirements with respect to
MMVF. The language on these labels not only advises of the possible health
hazards, but includes proper handling and protective measures to be followed.
In 1987, the IARC reviewed epidemiological studies involving occupational
exposure to fiber glass wool, including a large U.S. and a large European study
of fiber glass manufacturing workers that had reported modest but statistically
significant increases of lung cancer deaths compared to national mortality
rates. The IARC concluded that evidence of cancer in humans from such
epidemiological studies was "inadequate" to permit a conclusion regarding the
presence or absence of a causal relationship with fiber glass exposure. The IARC
also concluded, however, that the evidence from animal studies was "sufficient"
to establish a causal relationship. That finding was based entirely on positive
laboratory results achieved through implantation or other artificial techniques
of exposing animals to fibrous materials. The relevance of such implantation
studies to the evaluation of risk to humans has been questioned by many
scientists, who believe that animal inhalation studies are more appropriate than
animal implantation studies to assess the potential risk to humans.
In 1990, the authors of the large U.S. epidemiological study reviewed by
the IARC in 1987 noted a small, but statistically significant, excess in
respiratory cancer deaths of fiber glass manufacturing workers compared with
local mortality rates. However, as in the IARC assessment, the authors, after
looking at the cumulative evidence from the relevant factors that might support
a causal relationship, concluded that the evidence of an association between
exposure to fiber glass wool and respiratory cancer was actually "somewhat
weaker" than that at the time of the IARC assessment. The U.S. investigation is
continuing to determine if the small excess in lung cancer was associated with
lifestyle factors such as smoking or other workplace exposures. The next update
is expected in 1997. Data contained in a recent draft report of an update of the
large European epidemiological study show mortality findings for fiber glass
wool similar to those from the large U.S. study.
On June 24, 1994, the U.S. Department of Health and Human Services ("HHS")
announced its decision to act on the recommendation of the National Toxicology
Program ("NTP") and list fiber glass wool and RCF in the Seventh Annual Report
on Carcinogens ("ARC") as substances which "may be reasonably anticipated" to be
a carcinogen. The NTP listing criteria provide that a substance must be listed
if there are two or more animal studies showing carcinogenic effect, regardless
of route of exposure and notwithstanding any other evidence. As a result, the
NTP concluded that the results of the experimental animal implantation studies
provided sufficient evidence to support the listing. HHS explained that the NTP
"reasonably anticipated" category for fiber glass essentially corresponds to the
IARC 1987 "possibly carcinogenic" classification.
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Labels and other hazard communication materials reflecting the potential
cancer risk have been developed and are used by the Company to address the
proper handling of fiber glass wool products by employees and customers. In
addition, the Company has agreed to indemnify certain purchasers, under certain
circumstances, for personal injury claims arising out of exposure to the
Company's fiber glass wool products.
Since 1988, the Company has funded, in conjunction with other companies in
the industry, several epidemiological and chronic animal inhalation studies to
assess the cancer-causing potential of MMVF. In August 1995, the industry
expanded the animal research it had begun in 1988 to include exposure of
hamsters to a building insulation/wool fiber and a special purpose glass fiber
used in some filtration and a few thermal high performance applications. As with
previous research involving exposure of rats to glass fibers, this study also is
a two year chronic inhalation study which is now in its eighteenth month.
Preliminary findings indicate that some of the hamsters exposed to special
purpose fibers have developed fibrosis of the lung, and one animal also exposed
to special purpose fibers has developed mesothelioma. The building insulation
fibers have not, consistent with the previous inhalation study of this fiber,
produced any adverse respiratory results. These preliminary findings have been
reported to the EPA under the Toxic Substances Control Act, and the Company has
notified its employees and customers.
In 1997, the Institute of Occupation Medicine ("IOM") in Edinburgh,
Scotland released preliminary results from a chronic inhalation study of E glass
microfiber using rats. Some of the animals that inhaled this fiber developed
lung fibrosis and tumors. E glass microfiber is no longer manufactured in the
United States, however, Schuller produced small quantities until 1994 at one
manufacturing location. E glass microfiber is different than the large diameter
E glass continuous filaments that Schuller manufactures in its mats and fibers
business. E glass continuous filaments are too thick to be inhaled into the deep
lung and are not considered to be respirable. The findings of the IOM study have
also been reported to the EPA and the Company has notified its employees and
former customers.
The results of an industry supported epidemiological study of RCF workers
was published in 1996. This case-control morbidity study evaluated chest x-rays
of workers at two RCF manufacturing plants owned by Carborundum Corporation.
Although no significant increase in lung fibrosis was seen, an exposure-related
increase in pleural plaques was observed.
While there is some disagreement within the scientific and medical
community regarding the interpretation of the studies, based upon its analysis
to date, the Company does not believe that the IARC classification, the listing
in the ARC, or any action taken by federal and state regulatory agencies will
have a material adverse effect on the Company. The foregoing statement
constitutes a "forward-looking statement" under federal securities laws. The
Company's analysis of available data and it expectations concerning human health
hazards associated with its products are subject to risks and uncertainties.
Because domestic and international regulatory and scientific authorities are
involved on an ongoing basis in the assessment of potential human health
hazards, and there can be no assurance that future actions taken by such
authorities or other developments relating to the Company's liability for its
products will not have an adverse effect on the Company.
8
<PAGE> 11
ITEM 2. PROPERTIES
HEADQUARTERS
The Company's headquarters are located in Denver, Colorado. The Company
leases approximately 150,000 square feet of office space at Manville Plaza in
downtown Denver.
MANUFACTURING AND DEVELOPMENT FACILITIES
The following table sets forth certain information with respect to the
Company's major manufacturing and development plants and buildings. All of the
buildings are adequate and suitable for the business of the Company, have been
well maintained and are in sound operating condition and regular use. The
Southgate, California; Lakewood, Colorado; Kansas City, Kansas; Edison, New
Jersey; and Kent, Washington facilities are leased.
<TABLE>
<CAPTION>
LOCATION BUSINESS SEGMENT
-------- ----------------
<S> <C>
UNITED STATES AND CANADA
Innisfail, Alberta, Canada........................... Building Products
Tucson, Arizona...................................... Engineered and Building Products
Corona, California................................... Engineered Products
Pittsburg, California................................ Building Products
Southgate, California................................ Building Products
Willows, California.................................. Building Products
Lakewood, Colorado................................... Building Products
Jacksonville, Florida................................ Building Products
Littleton, Colorado.................................. Engineered and Building Products
Macon, Georgia....................................... Building Products
Winder, Georgia...................................... Building Products
Rockdale, Illinois................................... Building Products
Waukegan, Illinois................................... Building Products
Bluffton, Indiana.................................... Engineered Products
Bremen, Indiana...................................... Building Products
Richmond, Indiana.................................... Building Products
Kansas City, Kansas.................................. Building Products
McPherson, Kansas.................................... Building Products
Lewiston, Maine...................................... Building Products
Saco, Maine.......................................... Building Products
Natchez, Mississippi................................. Building Products
Richland, Mississippi................................ Engineered Products
Edison, New Jersey................................... Building Products
Penbryn, New Jersey.................................. Building Products
Plattsburg, New York................................. Building Products
Defiance, Ohio....................................... Engineered and Building Products
Waterville, Ohio..................................... Engineered Products
Oklahoma City, Oklahoma.............................. Building Products
East Stroudsburg, Pennsylvania....................... Engineered Products
Hazelton, Pennsylvania............................... Building Products
Etowah, Tennessee.................................... Engineered Products
Baytown, Texas....................................... Building Products
Cleburne, Texas...................................... Engineered and Building Products
Ft. Worth, Texas..................................... Building Products
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
LOCATION BUSINESS SEGMENT
-------- ----------------
<S> <C>
Edinburg, Virginia................................... Building Products
Richmond, Virginia................................... Building Products
Kent, Washington..................................... Building Products
Parkersburg, West Virginia........................... Engineered Products
INTERNATIONAL
Changzhou, Jiansu, China............................. Engineered Products
Karlstein, Bavaria, Germany.......................... Engineered Products
Steinach, Thuringen, Germany......................... Engineered Products
Wertheim, Baden-Wuerttemberg, Germany................ Engineered Products
Verona, Italy........................................ Building Products
Altamira, Mexico..................................... Building Products
Lubliniec, Poland.................................... Engineered Products
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal actions occurring in the normal
course of its business. In the opinion of the Company's management, adequate
provision has been made for losses which may result from these actions and,
accordingly, the outcome of these proceedings is not expected to have a material
adverse effect on the financial condition of Schuller. For additional
information concerning certain of these proceedings, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources -- Contingent Product Liability
and -- Environmental Contingencies."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1996, there were no matters submitted to a
vote of security holders.
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. Each of the executive
officers holds office until the Board of Directors meeting following the Annual
Meeting of Stockholders unless previously removed by the Board of Directors.
Each executive officer listed below, other than Mr. Henry, has been or was an
officer or an executive officer of the Company or its subsidiaries during the
past five years.
<TABLE>
<CAPTION>
NAME AND TITLE AGE EXECUTIVE OFFICER SINCE
-------------- --- -----------------------
<S> <C> <C>
Charles L. Henry............................................ 55 September 1996
Chairman of the Board, Chief Executive Officer and President
Kenneth L. Jensen........................................... 45 1996
Senior Vice President and Chief Financial Officer
Harvey L. Perry, Jr. ....................................... 42 1996
Senior Vice President, Global Engineered Products Group
Richard B. Von Wald......................................... 54 1989
Executive Vice President, General Counsel and Secretary
Dixon R. Walker............................................. 45 1996
Senior Vice President, Global Insulation Group
</TABLE>
10
<PAGE> 13
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company had approximately 10,588 common stockholders of record at March
3, 1997. The Common Stock is listed and traded on the New York Stock Exchange,
Inc. (symbol GLS). The Company has scheduled the 1997 Annual Meeting of
Stockholders for May 2, 1997 in Toledo, Ohio.
A two-year history of high and low sale prices for the Common Stock based
on the sales transactions reported by the New York Stock Exchange, Inc. is
provided below. On March 27, 1996, the Company's Board of Directors declared a
special cash dividend of $6.00 per share on the Common Stock to be paid on April
12, 1996 to stockholders of record at the close of business on April 8, 1996.
On July 31, 1996, the Company's Board of Directors approved the adoption of
a dividend policy which will pay a regular quarterly cash dividend, subject to
periodic review by the Board of Directors, of $.03 per share to holders of
Common Stock to begin in the third quarter of 1996. Simultaneously with the
approval of the dividend policy, the Company's Board of Directors declared a
dividend of $.03 per share on the Common Stock to be paid on October 10, 1996.
On December 6, 1996, the Company's Board of Directors declared a dividend of
$.03 per share on the Common Stock which was paid on January 10, 1997.
MARKET PRICES PER SHARE
<TABLE>
<CAPTION>
1995 1996
---- ----
COMMON STOCK COMMON STOCK
------------- -------------
FOR THE QUARTERS ENDED HIGH LOW HIGH LOW
---------------------- ---- --- ---- ---
<S> <C> <C> <C> <C>
March 31.......................................... 9 3/8 8 1/4 14 1/2 12 1/8
June 30........................................... 13 3/4 9 1/8 15 1/4 7 3/4
September 30...................................... 15 1/4 12 1/2 10 5/8 8 1/8
December 31....................................... 13 3/8 11 10 3/4 8 5/8
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
Information with respect to this item is incorporated by reference to
Selected Five-Year Financial Data in the Company's 1996 Annual Report to
security holders included in Exhibit 13 to this report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information with respect to this item is incorporated by reference to
Management's Discussion and Analysis of Financial Condition and Results of
Operations in the Company's 1996 Annual Report to security holders included in
Exhibit 13 to this report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information with respect to this item is incorporated by reference to the
Financial Statements and Selected Quarterly Financial Data in the Company's 1996
Annual Report to security holders included in Exhibit 13 to this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in the Company's accountants during the two most
recent fiscal years. There were also no disagreements with accountants on
accounting or financial disclosures during such period.
11
<PAGE> 14
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
In addition to the information set forth under the caption "Executive
Officers of the Company" in Part I of this Form 10-K, the information required
by this item is incorporated by reference to the Company's 1997 Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to this item is incorporated by reference to the
Company's 1997 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to this item is incorporated by reference to the
Company's 1997 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to this item is incorporated by reference to the
Company's 1997 Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
a. Financial statements, financial statement schedules and exhibits filed
in this report:
1. Information with respect to financial statements is incorporated by
reference to the Financial Statements and Selected Quarterly
Financial Data in the Company's 1996 Annual Report to security
holders.
2. The Company is filing herewith Schedule II -- Valuation and
Qualifying Accounts.
b. On April 11, 1996, the Company filed with the Securities and Exchange
Commission a current report on Form 8-K dated March 27, 1996, regarding
the Company's disposition of all its shares of Riverwood International
Corporation Common Stock, the Company's approval of the Profit Sharing
Agreement with Manville Personal Injury Settlement Trust and a resulting
$6.00 per share special cash dividend declaration on the Company's
Common Stock, and the amending of the Company's name to Schuller
Corporation.
c. Exhibit Index to Schuller Corporation Annual Report on Form 10-K for
Fiscal Year Ended December 31, 1996:
<TABLE>
<CAPTION>
EXHIBIT REFERENCE
------- ---------
<S> <C> <C>
2.(a) Second Amended and Restated Plan of Refiled as an exhibit to the Company's
Reorganization confirmed by the United 1992 Annual Report on Form 10-K filed
States Bankruptcy Court for the Southern March 30, 1993, and incorporated herein
District of New York on December 22, by reference.
1986.
(b) Agreement and Plan of Merger, dated as of Filed as an exhibit to the Company's Form
October 25, 1995, among Riverwood 8-K, dated October 25, 1995, and
International Corporation, CDRO Holding incorporated herein by reference.
Corporation and CDRO Acquisition
Corporation.
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
EXHIBIT REFERENCE
------- ---------
<S> <C> <C>
3.(a) Restated Certificate of Incorporation. Filed as an exhibit to the Company's 1995
Annual Report on Form 10-K filed April
11, 1996, and incorporated herein by
reference.
(b) Certificate of Amendment to Restated Filed as an exhibit to the Company's 1995
Certificate of Incorporation. Annual Report on Form 10-K filed April
11, 1996, and incorporated herein by
reference.
(c) Amended and Restated Bylaws. Filed herewith.
10.(a) Schuller International Employees Filed as an exhibit to the Company's 1994
Retirement Plan.* Annual Report on Form 10-K filed March
31, 1995, and incorporated herein by
reference.
(b) Supplemental Pension Plan.* Refiled as an exhibit to the Company's
1992 Annual Report on Form 10-K filed
March 30, 1993, and incorporated herein
by reference.
(c) Key Man Supplemental Retirement Refiled as an exhibit to the Company's
Agreement.* 1992 Annual Report on Form 10-K filed
March 30, 1993, and incorporated herein
by reference.
(d) Annual Executive Incentive Compensation Refiled as an exhibit to the Company's
Plan.* 1992 Annual Report on Form 10-K filed
March 30, 1993 and incorporated herein by
reference.
(e) Executive Long-Term Disability Plan.* Refiled as an exhibit to the Company's
1992 Annual Report on Form 10-K filed
March 30, 1993, and incorporated herein
by reference.
(f) Long-Term Incentive Stock Plan.* Refiled as an exhibit to the Company's
1992 Annual Report on Form 10-K filed
March 30, 1993, and incorporated herein
by reference.
(g) Amendment to Long-Term Incentive Stock Refiled as an exhibit to the Company's
Plan.* 1992 Annual Report on Form 10-K filed
March 30, 1993, and incorporated herein
by reference.
(h) Amendment No. 2 to Long-Term Incentive Filed as an exhibit to the Company's Form
Stock Plan.* 10-Q for the quarter ended June 30, 1995,
and incorporated herein by reference.
(i) Schuller Corporation Deferred Filed as an exhibit to the Company's Form
Compensation Plan.* S-8 filed June 19, 1996, and incorporated
herein by reference.
(j) Schuller Corporation Non-Employee Filed herewith.
Directors' Deferred Compensation Plan.*
(k) Schuller Corporation 1996 Stock Award Filed as an exhibit to the Company's Form
Plan.* S-8 filed June 19, 1996, and incorporated
herein by reference.
(l) Schuller Corporation 1996 Executive Filed as an exhibit to the Company's Form
Incentive Compensation Plan.* S-8 filed June 20, 1996, and incorporated
herein by reference.
(m) Employment Agreement between Charles L. Filed as an exhibit to the Company's Form
Henry and the Company, effective as of 10-Q for the quarter ended September 30,
September 9, 1996.* 1996, and incorporated herein by
reference.
(n) Employment Agreements with other Filed herewith.
Executive Officers of the Company*
</TABLE>
13
<PAGE> 16
<TABLE>
<CAPTION>
EXHIBIT REFERENCE
------- ---------
<S> <C> <C>
(o) Agreement between W. Thomas Stephens and Filed as an exhibit to the Company's Form
the Company, effective as of April 12, 10-Q for the quarter ended June 30, 1996,
1996.* and incorporated herein by reference.
(p) Intercompany Agreement between the Filed as an exhibit to the Company's Form
Company and Schuller International Group, 10-Q for the quarter ended September 30,
Inc., dated as of September 22, 1994. 1994, filed on November 14, 1994, and
incorporated herein by reference.
(q) Treasury Management Agreement between the Filed as an exhibit to the Company's Form
Company and Schuller International Group, 10-Q for the quarter ended September 30,
Inc., dated as of September 22, 1994. 1994, filed on November 14, 1994, and
incorporated herein by reference.
(r) Tax Sharing Agreement between the Company Filed as an exhibit to the Company's Form
and Schuller International Group, Inc., 10-Q for the quarter ended September 30,
dated as of January 1, 1994. 1994, filed on November 14, 1994, and
incorporated herein by reference.
(s) Corporate Agreement between the Company Filed as an exhibit to the Company's Form
and Schuller International Group, Inc., 10-Q for the quarter ended September 30,
dated as of September 22, 1994. 1994, filed on November 14, 1994, and
incorporated herein by reference.
(t) Selling Securityholders' Agreement, Filed as an exhibit to the Company's 1994
between the Company and the Trust, dated Annual Report on Form 10-K filed March
as of September 22, 1994. 31, 1995, and incorporated herein by
reference.
(u) Second Amended and Restated Supplemental Filed as an exhibit to the Company's 1995
Agreement between the Company and the Annual Report on Form 10-K filed April
Trust, dated as of April 5, 1996. 11, 1996, and incorporated herein by
reference.
(v) Final Property Damage Settlement Filed as an exhibit to the Company's 1995
Agreement between the Company and Annual Report on Form 10-K filed April
Manville Property Damage Settlement 11, 1996, and incorporated herein by
Trust, dated as of March 22, 1996. reference.
(w) Form of Payment and Termination Agreement Filed as an exhibit to the Company's 1995
with the Executive Officers of the Annual Report on Form 10-K filed April
Company.* 11, 1996, and incorporated herein by
reference.
(x) Supplemental Retirement Agreement between Filed as an exhibit to the Company's 1994
Richard B. Von Wald and the Company, Annual Report on Form 10-K filed on March
effective as of November 4, 1994, with 31, 1995, and incorporated herein by
related agreements.* reference.
(y) Schuller 1994 Long-Term Cash Incentive Filed as an exhibit to the Company's 1994
Compensation Plan.* Annual Report on Form 10-K filed on March
31, 1995, and incorporated herein by
reference.
(z) Amended and Restated Indenture between Filed as an exhibit to the Company's 1994
Schuller International Group, Inc. and Annual Report on Form 10-K filed on March
The Bank of New York, as Trustee, dated 31, 1995, and incorporated herein by
December 15, 1994. reference.
(aa) Amended and Restated Receivables Purchase Filed as an exhibit to the Company's 1995
Agreement dated as of August 15, 1994, Annual Report on Form 10-K filed April
between Schuller International Group, 11, 1996, and incorporated herein by
Inc. and the banks and others named reference.
therein.
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
EXHIBIT REFERENCE
------- ---------
<S> <C> <C>
(ab) Voting and Indemnification Agreement, Filed as an exhibit to the Company's Form
dated as of October 25, 1995, by and 8-K, dated October 31, 1995, and
among the Company, CDRO Holding incorporated herein by reference.
Corporation and CDRO Acquisition
Corporation.
(ac) Tax Matters Agreement, dated as of Filed as an exhibit to the Company's Form
October 25, 1995, by and among the 8-K, dated October 31, 1995, and
Company, CDRO Holding Corporation and incorporated herein by reference.
CDRO Acquisition Corporation.
(ad) Profit Sharing Exchange Agreement, dated Filed as an exhibit to the Company's Form
October 25, 1995, between the Company and 8-K, dated October 31, 1995, and
the Trust. incorporated herein by reference.
13. 1996 Annual Report. Pages 21 through 71 of the Company's 1996
Annual Report to security holders are
filed herewith and are incorporated
herein by reference.
21. Subsidiaries of the Registrant. Page 19.
23. Consent of Coopers & Lybrand L.L.P. Filed herewith.
24. Powers of Attorney. Page 20 (included on signature page to
this report).
27.1 Financial Data Schedule. Filed herewith.
27.2 Financial Data Schedule. Filed herewith.
</TABLE>
- ---------------
* Management contract or compensatory plan or arrangements.
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the Company hereby
agrees to furnish to the Securities and Exchange Commission, upon request, a
copy of the Class 6 Interest Indenture between the Company and The Bank of New
York, formerly known as Irving Trust Company, Trustee, dated November 28, 1988.
15
<PAGE> 18
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Directors of Schuller Corporation:
Our report on the consolidated financial statements of Schuller Corporation
has been incorporated by reference in this Form 10-K from the 1996 Annual Report
to Stockholders of Schuller Corporation. In connection with our audits of such
financial statements, we have also audited the related financial statement
schedule listed in the Index to Financial Statement Schedule of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
/s/ COOPERS & LYBRAND
Denver, Colorado
March 28, 1997
16
<PAGE> 19
SCHULLER CORPORATION
INDEX TO FINANCIAL STATEMENT SCHEDULE
TO FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
SCHEDULE PAGE
- -------- ----
<C> <S> <C>
II -- Valuation and qualifying accounts, for each of the three
years in the period ended December 31, 1996.............. 18
</TABLE>
17
<PAGE> 20
SCHULLER CORPORATION
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
ADDITIONS
------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
CLASSIFICATION OF YEAR EXPENSES ACCOUNTS(a) DEDUCTIONS(b) YEAR
-------------- ---------- ---------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
1996
- -----------------------------------------
Allowances Reducing the Assets in the
Balance Sheet:
Doubtful accounts receivable........... $ 6,497 $1,122 $ 2,022 $ 2,071 $ 7,570
Cash discounts......................... 1,967 -- 20,962 21,651 1,278
Other allowances....................... 18,646 -- 34,386 31,864 21,168
Deferred tax assets.................... 82,512 -- -- 12,324 70,188
-------- ------ ------- ------- --------
Total.......................... $109,622 $1,122 $57,370 $67,910 $100,204
======== ====== ======= ======= ========
1995
- -----------------------------------------
Allowances Reducing the Assets in the
Balance Sheet:
Doubtful accounts receivable........... $ 6,422 $ 776 $ -- $ 701 $ 6,497
Cash discounts......................... 1,537 -- 19,963 19,533 1,967
Other allowances....................... 15,765 -- 30,977 28,096 18,646
Deferred tax assets.................... 96,449 314 -- 14,251 82,512
-------- ------ ------- ------- --------
Total.......................... $120,173 $1,090 $50,940 $62,581 $109,622
======== ====== ======= ======= ========
1994
- -----------------------------------------
Allowances Reducing the Assets in the
Balance Sheet:
Doubtful accounts receivable........... $ 5,860 $1,600 $ -- $ 1,038 $ 6,422
Cash discounts......................... 1,489 -- 14,590 14,542 1,537
Other allowances....................... 14,634 -- 27,818 26,687 15,765
Deferred tax assets.................... 94,795 1,654 -- -- 96,449
-------- ------ ------- ------- --------
Total.......................... $116,778 $3,254 $42,408 $42,267 $120,173
======== ====== ======= ======= ========
</TABLE>
- ---------------
Notes:
(a) Charged against sales and additions due to acquisitions.
(b) Principally charges for which reserves were provided, net of recoveries.
18
<PAGE> 21
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Direct and indirect subsidiaries of the Company and the jurisdiction in
which each company was incorporated are listed below. Certain companies not
important to an understanding of the Company's businesses have been omitted and
which, if aggregated, would not constitute a significant subsidiary.
<TABLE>
<CAPTION>
JURISDICTION OF
SUBSIDIARY INCORPORATION
---------- ---------------
<S> <C>
CHANGZHOU SCHULLER ZHONGXIN TIANMA
FIBER GLASS PROD. CO., LTD................................ China
EUROPEAN OVERSEAS CORPORATION............................... Delaware
IACP, INC................................................... Delaware
MANVILLE MEXICANA S.A. DE C.V............................... Mexico
MANVILLE MINING COMPANY..................................... Delaware
NORD BITUMI MEXICO, S.A. DE C.V............................. Mexico
NORD BITUMI SpA............................................. Italy
ROCKY MOUNTAIN INTERNATIONAL INSURANCE LTD.................. Bermuda
SCHULLER FUNDING CORPORATION................................ Delaware
SCHULLER GmbH............................................... Germany
SCHULLER INTERNATIONAL B.V.................................. Netherlands
SCHULLER INTERNATIONAL CANADA INC........................... Canada
SCHULLER INTERNATIONAL CHANGZHOU, B. V...................... Netherlands
SCHULLER INTERNATIONAL GROUP, INC........................... Delaware
SCHULLER INTERNATIONAL, INC................................. Delaware
SCHULLER POLSKA Sp. zo.o.................................... Poland
SEVENTEENTH STREET REALTY, INC.............................. Colorado
SCHULLER MEXICANA S.A. DE C.V............................... Mexico
WEB DYNAMICS CORPORATION.................................... New Jersey
</TABLE>
19
<PAGE> 22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized as of the 28th day of
March, 1997.
SCHULLER CORPORATION
(Registrant)
By: CHARLES L. HENRY
----------------------------------
Charles L. Henry
Chairman of the Board, Chief
Executive Officer
and President
POWER OF ATTORNEY
Know all men by these presents that each person whose signature appears
below does hereby constitute and appoint Charles L. Henry, Kenneth L. Jensen and
Richard B. Von Wald, and each of them, with full power to act without the other,
his true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign all amendments to this report, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission granting unto said attorney-in-fact and
agent, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them, or his substitute or substitutes, lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities indicated as of March 28, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
CHARLES L. HENRY Chairman of the Board, Chief Executive
- -------------------------------------------- Officer and President (Principal Executive
(Charles L. Henry) Officer)
KENNETH L. JENSEN Senior Vice President and Chief Financial
- -------------------------------------------- Officer (Principal Accounting and
(Kenneth L. Jensen) Financial Officer)
LEO BENATAR Director
- --------------------------------------------
(Leo Benatar)
ROBERT A. FALISE Director
- --------------------------------------------
(Robert A. Falise)
TODD GOODWIN Director
- --------------------------------------------
(Todd Goodwin)
MICHAEL N. HAMMES Director
- --------------------------------------------
(Michael N. Hammes)
JOHN NILS HANSON Director
- --------------------------------------------
(John Nils Hanson)
</TABLE>
20
<PAGE> 23
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
KATHRYN R. HARRIGAN Director
- --------------------------------------------
(Kathryn R. Harrigan)
LOUIS KLEIN, JR. Director
- --------------------------------------------
(Louis Klein, Jr.)
FRANK J. MACCHIAROLA Director
- --------------------------------------------
(Frank J. Macchiarola)
CHRISTIAN E. MARKEY, JR. Director
- --------------------------------------------
(Christian E. Markey, Jr.)
WILLIAM E. MAYER Director
- --------------------------------------------
(William E. Mayer)
</TABLE>
21
<PAGE> 24
ADDITIONAL INFORMATION
Individuals interested in receiving additional information may contact the
following:
<TABLE>
<S> <C>
FOR COMPANY INFORMATION FOR PRODUCT INFORMATION
Call (303) 978-2000 Call (303) 978-4900 or (800) 654-3103
or write to: or write to:
Schuller Corporation Schuller Corporation
Investor Relations Product Information
P.O. Box 5108 P.O. Box 5108
Denver, CO 80217-5108 Denver, CO 80217-5108
TRANSFER AGENT AND REGISTRAR INDEPENDENT ACCOUNTANTS
First Chicago Trust Company of New York Coopers & Lybrand L.L.P.
P.O. Box 2565, Suite 4660 370 Seventeenth Street, Suite 3300
Jersey City, NJ 07303-2565 Denver, CO 80202-5633
(send stockholder address
changes to the above address)
</TABLE>
22
<PAGE> 25
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT REFERENCE
------- ---------
<S> <C> <C>
2.(a) Second Amended and Restated Plan of Refiled as an exhibit to the Company's
Reorganization confirmed by the United 1992 Annual Report on Form 10-K filed
States Bankruptcy Court for the Southern March 30, 1993, and incorporated herein
District of New York on December 22, by reference.
1986.
(b) Agreement and Plan of Merger, dated as of Filed as an exhibit to the Company's Form
October 25, 1995, among Riverwood 8-K, dated October 25, 1995, and
International Corporation, CDRO Holding incorporated herein by reference.
Corporation and CDRO Acquisition
Corporation.
3.(a) Restated Certificate of Incorporation. Filed as an exhibit to the Company's 1995
Annual Report on Form 10-K filed April
11, 1996, and incorporated herein by
reference.
(b) Certificate of Amendment to Restated Filed as an exhibit to the Company's 1995
Certificate of Incorporation. Annual Report on Form 10-K filed April
11, 1996, and incorporated herein by
reference.
(c) Amended and Restated Bylaws. Filed herewith.
10.(a) Schuller International Employees Filed as an exhibit to the Company's 1994
Retirement Plan.* Annual Report on Form 10-K filed March
31, 1995, and incorporated herein by
reference.
(b) Supplemental Pension Plan.* Refiled as an exhibit to the Company's
1992 Annual Report on Form 10-K filed
March 30, 1993, and incorporated herein
by reference.
(c) Key Man Supplemental Retirement Refiled as an exhibit to the Company's
Agreement.* 1992 Annual Report on Form 10-K filed
March 30, 1993, and incorporated herein
by reference.
(d) Annual Executive Incentive Compensation Refiled as an exhibit to the Company's
Plan.* 1992 Annual Report on Form 10-K Filed
March 30, 1993 and incorporated herein by
reference.
(e) Executive Long-Term Disability Plan.* Refiled as an exhibit to the Company's
1992 Annual Report on Form 10-K filed
March 30, 1993, and incorporated herein
by reference.
(f) Long-Term Incentive Stock Plan.* Refiled as an exhibit to the Company's
1992 Annual Report on Form 10-K filed
March 30, 1993, and incorporated herein
by reference.
(g) Amendment to Long-Term Incentive Stock Refiled as an exhibit to the Company's
Plan.* 1992 Annual Report on Form 10-K filed
March 30, 1993, and incorporated herein
by reference.
(h) Amendment No. 2 to Long-Term Incentive Filed as an exhibit to the Company's Form
Stock Plan.* 10-Q for the quarter ended June 30, 1995,
and incorporated herein by reference.
(i) Schuller Corporation Deferred Filed as an exhibit to the Company's Form
Compensation Plan.* S-8 filed June 19, 1996, and incorporated
herein by reference.
(j) Schuller Corporation Non-Employee Filed herewith.
Directors' Deferred Compensation Plan.*
</TABLE>
<PAGE> 26
<TABLE>
<CAPTION>
EXHIBIT REFERENCE
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<S> <C> <C>
(k) Schuller Corporation 1996 Stock Award Filed as an exhibit to the Company's Form
Plan.* S-8 filed June 19, 1996, and incorporated
herein by reference.
(l) Schuller Corporation 1996 Executive Filed as an exhibit to the Company's Form
Incentive Compensation Plan.* S-8 filed June 20, 1996, and incorporated
herein by reference.
(m) Employment Agreement between Charles L. Filed as an exhibit to the Company's Form
Henry and the Company, effective as of 10-Q for the quarter ended September 30,
September 9, 1996.* 1996, and incorporated herein by
reference.
(n) Employment Agreements with other Filed herewith.
Executive Officers of the Company*
(o) Agreement between W. Thomas Stephens and Filed as an exhibit to the Company's Form
the Company, effective as of April 12, 10-Q for the quarter ended June 30, 1996,
1996.* and incorporated herein by reference.
(p) Intercompany Agreement between the Filed as an exhibit to the Company's Form
Company and Schuller International Group, 10-Q for the quarter ended September 30,
Inc., dated as of September 22, 1994. 1994, filed on November 14, 1994, and
incorporated herein by reference.
(q) Treasury Management Agreement between the Filed as an exhibit to the Company's Form
Company and Schuller International Group, 10-Q for the quarter ended September 30,
Inc., dated as of September 22, 1994. 1994, filed on November 14, 1994, and
incorporated herein by reference.
(r) Tax Sharing Agreement between the Company Filed as an exhibit to the Company's Form
and Schuller International Group, Inc., 10-Q for the quarter ended September 30,
dated as of January 1, 1994. 1994, filed on November 14, 1994, and
incorporated herein by reference.
(s) Corporate Agreement between the Company Filed as an exhibit to the Company's Form
and Schuller International Group, Inc., 10-Q for the quarter ended September 30,
dated as of September 22, 1994. 1994, filed on November 14, 1994, and
incorporated herein by reference.
(t) Selling Securityholders' Agreement, Filed as an exhibit to the Company's 1994
between the Company and the Trust, dated Annual Report on Form 10-K filed March
as of September 22, 1994. 31, 1995, and incorporated herein by
reference.
(u) Second Amended and Restated Supplemental Filed as an exhibit to the Company's 1995
Agreement between the Company and the Annual Report on Form 10-K filed April
Trust, dated as of April 5, 1996. 11, 1996, and incorporated herein by
reference.
(v) Final Property Damage Settlement Filed as an exhibit to the Company's 1995
Agreement between the Company and Annual Report on Form 10-K filed April
Manville Property Damage Settlement 11, 1996, and incorporated herein by
Trust, dated as of March 22, 1996. reference.
(w) Form of Payment and Termination Agreement Filed as an exhibit to the Company's 1995
with the Executive Officers of the Annual Report on Form 10-K filed April
Company.* 11, 1996, and incorporated herein by
reference.
(x) Supplemental Retirement Agreement between Filed as an exhibit to the Company's 1994
Richard B. Von Wald and the Company, Annual Report on Form 10-K filed on March
effective as of November 4, 1994, with 31, 1995, and incorporated herein by
related agreements.* reference.
</TABLE>
<PAGE> 27
<TABLE>
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EXHIBIT REFERENCE
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<S> <C> <C>
(y) Schuller 1994 Long-Term Cash Incentive Filed as an exhibit to the Company's 1994
Compensation Plan.* Annual Report on Form 10-K filed on March
31, 1995, and incorporated herein by
reference.
(z) Amended and Restated Indenture between Filed as an exhibit to the Company's 1994
Schuller International Group, Inc. and Annual Report on Form 10-K filed on March
The Bank of New York, as Trustee, dated 31, 1995, and incorporated herein by
December 15, 1994. reference.
(aa) Amended and Restated Receivables Purchase Filed as an exhibit to the Company's 1995
Agreement dated as of August 15, 1994, Annual Report on Form 10-K filed April
between Schuller International Group, 11, 1996, and incorporated herein by
Inc. and the banks and others named reference.
therein.
(ab) Voting and Indemnification Agreement, Filed as an exhibit to the Company's Form
dated as of October 25, 1995, by and 8-K, dated October 31, 1995, and
among the Company, CDRO Holding incorporated herein by reference.
Corporation and CDRO Acquisition
Corporation.
(ac) Tax Matters Agreement, dated as of Filed as an exhibit to the Company's Form
October 25, 1995, by and among the 8-K, dated October 31, 1995, and
Company, CDRO Holding Corporation and incorporated herein by reference.
CDRO Acquisition Corporation.
(ad) Profit Sharing Exchange Agreement, dated Filed as an exhibit to the Company's Form
October 25, 1995, between the Company and 8-K, dated October 31, 1995, and
the Trust. incorporated herein by reference.
13. 1996 Annual Report. Pages 21 through 71 of the Company's 1996
Annual Report to security holders are
filed herewith and are incorporated
herein by reference.
21. Subsidiaries of the Registrant. Page 19.
23. Consent of Coopers & Lybrand L.L.P. Filed herewith.
24. Powers of Attorney. Page 20 (included on signature page to
this report).
27.1 Financial Data Schedule. Filed herewith.
27.2 Financial Data Schedule. Filed herewith.
</TABLE>
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* Management contract or compensatory plan or arrangements.
<PAGE> 1
EXHIBIT 3(c)
BY-LAWS
OF
SCHULLER CORPORATION
As Amended and Restated on February 7, 1997
<PAGE> 2
BY-LAWS
OF
SCHULLER CORPORATION
(A DELAWARE CORPORATION)
__________________________________________________________
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1.01. Annual Meetings. The annual meeting of shareholders
for the election of Directors and for the transaction of such other business as
may come before the meeting shall be held at such place within or without the
State of Delaware and at such date and at such time as determined by resolution
of the Board of Directors.
SECTION 1.02. Special Meetings. Special meetings of the shareholders
may be called for any purpose at any time by the chief executive officer of the
Corporation or by the Board of Directors and shall be called by the chief
executive officer or the Secretary of the Corporation upon the written request
of shareholders owning 15 percent or more of the outstanding shares entitled to
vote. Such written request shall specify the purpose or purposes of, and a
proposed date for, the meeting and shall be sent to the Corporation at its
principal offices, addressed to the attention of the chief executive officer or
Secretary, by first class mail, return receipt requested, postage prepaid, or
by facsimile or hand delivery. Upon receipt of such written request, the chief
executive officer or Secretary shall promptly give notice of, and shall
convene, a special meeting of the shareholders for the purpose or purposes set
forth in such written request to be held on a date within five days of the
proposed date specified in the written request (or the date closest to such
date which complies with applicable law, regulations and the rules of any
exchange on which the Corporation's voting shares are then listed). Special
meetings may be held at such place within or without the State of Delaware and
at such hour as may be designated in the notice of such meeting.
SECTION 1.03. Notice of Shareholders' Meetings. The notice of all
meetings of shareholders shall be in writing and shall state the place, date
and hour of the meeting and the name and capacity of the person issuing the
notice. The notice of an annual meeting shall state that the meeting is called
for the election of Directors and for the transaction of other business which
may properly come before the meeting and, if any other action which could be
taken as a special meeting is to be taken at such annual meeting, shall state
the additional purpose or purposes of the meeting. The notice of special
meeting shall state the purpose or purposes for which the meeting is called and
shall also indicate that it is being issued by or at the direction of the
person or persons calling the meeting.
A copy of the notice of each meeting of shareholders shall be given,
personally or by mail, not less than ten days nor more than sixty days before
the date of the meeting, to each shareholder at his record address or at such
other address which he may have furnished by
1
<PAGE> 3
request in writing to the Secretary of the Corporation. If a meeting is
adjourned to another time or place, and, if any announcement of the adjourned
time or place is made at the meeting, it shall not be necessary to give notice
of the adjourned meeting unless the adjournment is for more than thirty days or
the Directors, after adjournment, fix a new record date for the adjourned
meeting.
Notice of a meeting need not be given to any shareholder who submits a
signed waiver of notice, in person or by proxy, whether before or after the
meeting. The attendance of a shareholder at a meeting, in person or by proxy,
shall constitute a waiver, except when the shareholder attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
SECTION 1.04. Quorum at Shareholders' Meetings: Vote Required. At
any meeting of the shareholders the holders of a majority of the outstanding
shares entitled to vote at such meeting and present in person or by proxy shall
constitute a quorum. If there shall be less than a quorum at any meeting of
the shareholders, a majority of those present may adjourn the meeting.
Directors shall be elected by a plurality of the votes cast at a
meeting of shareholders by the holders of shares entitled to vote in the
election. Whenever any corporate action, other than the election of Directors,
is to be taken by vote of the shareholders, it shall, except as otherwise
required by the General Corporation Law of the State of Delaware, be authorized
by a majority of the votes cast at a meeting of shareholders by the holders of
shares entitled to vote thereon.
SECTION 1.05. Inspectors at Shareholders' Meetings. The Board of
Directors or the Chairman of the Board, in advance of any shareholders'
meeting, may appoint one or more inspectors to act at the meeting or any
adjournment thereof. If inspectors are not so appointed, the person presiding
at the shareholders' meeting may, and on the request of any shareholders
entitled to vote thereat shall, appoint one or more inspector. In case any
person appointed fails to appear or act, the vacancy may be filled by
appointment made by the Board of Directors or the Chairman of the Board in
advance of the meeting or at the meeting by the person presiding thereat. Each
inspector, before entering upon the discharge of his duties, shall take and
sign an oath faithfully to execute the duties of inspector at such meeting with
strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares outstanding and
the voting power of each, the shares represented at the meeting, the existence
of a quorum, the validity and effect of proxies, and shall receive votes,
ballots or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all shareholders. On request of the person
presiding at the meeting or any shareholder entitled to vote thereat, the
inspectors shall make a report in writing of any challenge, question or matter
determined by them and execute a certificate of any fact found by them. Any
report or certificate made by them shall be prima facie evidence of the facts
stated and of the vote as certified by them.
2
<PAGE> 4
SECTION 1.06. Presiding Officer and Secretary of Meetings. At each
meeting of the shareholders, the chief executive officer of the Corporation
shall preside. If the Chairman of the Board is the chief executive officer and
is not present, then the President, or if neither be present, a Vice President,
shall preside. If none of such officers be present, a presiding officer shall
be elected at the meeting. The Secretary of the Corporation shall act as
secretary of such meetings, if present, and if not, a secretary for the meeting
shall be appointed by the presiding officer thereat.
ARTICLE II
DIRECTORS
SECTION 2.01. Qualifications and Number. A Director need not be a
shareholder, a citizen of the United States or a resident of the State of
Delaware. The number of Directors constituting the whole Board of Directors
shall be not less than two nor more than nineteen, the precise number to be
fixed from time to time by resolution of the Board of Directors. The number of
Directors may be increased or decreased by action of Directors, provided that
any such increase or decrease shall require the vote of a majority of the whole
Board of Directors. No decrease shall shorten the term of any incumbent
Director. Any Director may be removed with or without cause by the holders of
a majority of the shares then entitled to vote at an election of directors.
SECTION 2.02. Term. Directors who are elected at an annual meeting
of shareholders, and Directors who are elected in the interim to fill vacancies
and newly created directorships, shall hold office until the next annual
meeting of shareholders and until their successors have been elected and
qualified. In the interim between annual meetings of shareholders, newly
created directorships and any vacancies in the Board of Directors, including
vacancies resulting from the resignation or removal of Directors, may be filled
by the vote of the remaining Directors then in office, although less than a
quorum exists.
SECTION 2.03. Place and Time of Meetings of the Board. Regular and
special meetings of the Board of Directors shall be held at such places (within
or without the State of Delaware) and at such times as may be fixed by the
Board of Directors or upon call of the chief executive officer of the
Corporation or of the executive committee or, in the case of special meetings,
upon call of at least two Directors.
SECTION 2.04. Quorum and Manner of Acting. One-third of the whole
Board of Directors shall constitute a quorum for the transaction of business,
but if there shall be less than a quorum at any meeting of the Board of
Directors, a majority of those present (or if only one be present, then that
one) may adjourn the meeting from time to time and the meeting may be held as
adjourned without further notice. At all meetings of Directors, a quorum being
present, all matters shall be decided by the vote of a majority of the
Directors present at the time of the vote.
3
<PAGE> 5
SECTION 2.05. Unanimous Written Consent. Any action required or
permitted to be taken by the Board of Directors or any of its committees may be
taken without a meeting if all members of the Board of Directors or the
committee consent in writing to the adoption of a resolution authorizing the
action. The resolution and the written consent thereto by the members of the
Board of Directors or the committee shall be filed with the minutes of the
proceedings of the Board of Directors or committee.
SECTION 2.06. Attendance by Electronic Means. Any one or more
members of the Board of Directors or any committee thereof may participate in a
meeting of such Board or committee by means of a conference telephone or
similar communications equipment allowing all persons participating in the
meeting to hear each other at the same time. Participation by such means shall
constitute presence in person at a meeting.
SECTION 2.07. Remuneration of Directors. In addition to
reimbursement for his reasonable expenses incurred in attending meetings or
otherwise in connection with his attention to the affairs of the Corporation,
each Director as such, and as a member of any committee of the Board of
Directors, shall be entitled to receive such remuneration as may be fixed from
time to time by the Board of Directors.
SECTION 2.08. Notice of Meetings. Regular meetings of the Board of
Directors may be held without notice if the time and place of such meetings are
fixed by the Board. All regular meetings of the Board of Directors, the time
and place of which have not been fixed by the Board of Directors, and all
special meetings of the Board of Directors shall be held upon at least two
hours' notice to the Directors given by letter, telegram or telephone. No
notice need specify the purpose of the meeting. Any requirement of notice
shall be effectively waived by any Director who signs a waiver of notice before
or after the meeting. Attendance of any Director at a meeting shall constitute
a waiver of any requirement of notice, except when such Director attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called
or convened.
SECTION 2.09. Committees. The Board of Directors may designate one
or more committees, each committee to consist of one or more of the Directors
of the Corporation. The Board of Directors may designate one or more Directors
as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of any such committee. In the absence or
disqualification of a member of a committee, and in the absence of a
designation by the Board of Directors of an alternate member to replace the
absent or disqualified member, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute
a quorum, may unanimously appoint another member of the Board of Directors to
act at the meeting in the place of any absence or disqualified member. Any
committee, to the extent allowed by law and provided in the resolution
establishing such committee, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation. Each committee shall keep regular minutes and
report to the Board of Directors when required.
4
<PAGE> 6
ARTICLE III
OFFICERS
SECTION 3.01. Officers. The Board of Directors, at its first meeting
held after the annual meeting of shareholders in each year, shall appoint a
President, one or more Vice Presidents, a Secretary and a Treasurer. The Board
of Directors may also appoint from time to time such other officers or agents
as they may deem proper. The President shall be appointed from among the
members of the Board of Directors. The Board of Directors may specify which
officer shall be chief executive office of the Corporation. Any two or more
offices may be held by the same person.
Any two or more offices may be held by the same person.
SECTION 3.02. Term of Office. Unless otherwise provided in the
resolution or election or appointment, each officer should hold office until
the meeting of the Board of Directors following the next annual meeting of
shareholders and until his successor has been elected and qualified, provided,
the Board of Directors may remove any officer for cause or without cause.
SECTION 3.03. Powers and Duties. Officers shall have such powers and
duties as generally pertain to their respective offices and such further powers
and duties as from time to time shall be conferred by the Board of Directors.
ARTICLE IV
INDEMNIFICATION
SECTION 4.01. Indemnification. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he is or was a Director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a Director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor
by reason of the fact that he is or was a Director, officer, employee or agent,
of the Corporation, or is or was serving at the request of the Corporation as a
Director, officer, employee or agent of another corporation, partnership, joint
5
<PAGE> 7
venture, trust or other enterprise, against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the Court of Chancery of the
State of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery of the
State of Delaware or such other court shall deem proper.
To the extent that a Director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in the first two paragraphs of this
Section 4.01 or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
Any indemnification under the first two paragraphs of this Section
4.01 (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of
the Director, officer, employee or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in the first two
paragraphs of this Section 4.01. Such determination shall be made (1) by the
Board of Directors by a majority vote of a quorum consisting of Directors who
were not parties to such action, suit or proceeding, or (2) if such a quorum is
not obtainable, or even if obtainable a quorum of disinterested Directors so
directs, by independent legal counsel in a written opinion, or (3) by the
shareholders.
Expenses incurred in defending a civil or criminal action, suit or
proceeding shall be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of the Director, officer, employee or agent to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in this Section 4.01.
The indemnification provided by Section 4.01 shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any by-law, agreement, vote of shareholders or disinterested
Directors or otherwise, both as to action in their official capacity and as to
action in another capacity while holding such office, and shall continue as to
a person who has ceased to be a Director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
The Corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a Director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
Director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Section 4.01.
6
<PAGE> 8
For purposes of this Section 4.01, references to "the Corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its Directors, officers, and
employees, or agents, so that any person who is or was a Director, officer,
employee or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a Director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise shall stand in the same position under the provisions of this
Section 4.01 with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
For purposes of this Section 4.01, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a Director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such Director, officer, employee,
or agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this
Section 4.01.
ARTICLE V
CAPITAL STOCK
SECTION 5.01. Share Certificates. Each certificate representing
shares of the Corporation shall be signed by the Chairman of the Board or the
President or a Vice President and by the Secretary or Treasurer or an Assistant
Secretary or an Assistant Treasurer. The signatures of said officers upon a
certificate may be facsimile, engraved or printed, to the extent permitted by
law. In case any officer who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer before such
certificate is issued, it may be issued by the Corporation with the same
effects as if he were such officer at the date of issue.
SECTION 5.02. Lost, Destroyed or Stolen Certificates. No certificate
representing shares shall be issued in place of any certificate alleged to have
been lost, destroyed or stolen, except on production of such evidence of such
loss, destruction or theft and on delivery to the Corporation, if the Board of
Directors shall so require, of a bond of indemnity in such amount, upon such
terms and secured by such surety as the Board of Directors may in its
discretion require.
SECTION 5.03. Transfer of Shares. The shares of stock of the
Corporation shall be transferable or assignable on the books of the Corporation
only by the person to whom they have been issued or his legal representative
and only upon surrender of the certificate or certificates representing such
shares.
7
<PAGE> 9
SECTION 5.04. Record Dates. For the purpose of determining the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof or for the purpose of determining shareholders entitled
to receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action, the Board may fix, in advance, a date as the
record date for any such determination of shareholders. Such date shall not be
more than sixty nor less than ten days before the date of such meeting, nor
more than sixty days prior to any other action.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Signing of Instruments. All checks, drafts, notes,
acceptances, bills of exchange and orders for the payment of money shall be
signed in such manner and by such person or persons as may be authorized from
time to time by resolution of the Board of Directors.
SECTION 6.02. Corporate Seal. The seal of the Corporation shall have
inscribed thereon the name of the Corporation, the year of its organization and
the words "Corporate Seal, Delaware."
ARTICLE VII
AMENDMENTS TO BY-LAWS
SECTION 7.01. Amendments. These by-laws or any of them may be
amended or repealed, and new by-laws adopted, at any annual meeting of the
shareholders, or at any special meeting called for that purpose, by a vote of a
majority of the shares represented and entitled to vote. The Board of
Directors shall have power, by a majority vote of the whole Board, to amend or
repeal these by-laws, or any of them, or to adopt new by-laws if notice of the
proposed change has been delivered or mailed to each Director with the notice
of the meeting or if all the Directors are present or have all assented in
writing to such change, but any such action of the Board of Directors may be
amended or repealed by the shareholders at any annual meeting or any special
meeting called for that purpose. If any by-law regulating an impending
election of Directors is adopted, amended or repealed by the Board, there shall
be set forth in the notice of the next meeting of shareholders for the election
of Directors the by-law so adopted, amended or repealed, together with a
concise statement of changes made.
8
<PAGE> 1
EXHIBIT 10(j)
SCHULLER CORPORATION
- -------------------------------------------------------------------------------
NON-EMPLOYEE DIRECTORS' DEFERRED COMPENSATION PLAN
AS AMENDED
- -------------------------------------------------------------------------------
<PAGE> 2
SCHULLER CORPORATION
- --------------------------------------------------------------------------------
NON-EMPLOYEE DIRECTORS' DEFERRED COMPENSATION PLAN
AS AMENDED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
1. Purpose ............................................................... 1
2. Definitions ........................................................... 1
3. Administration ........................................................ 3
4. Shares Available Under the Plan ....................................... 4
5. Eligibility ........................................................... 5
6. Crediting to Amounts to Retirement Account in Settlement of Rights
Under Retirement Plan ................................................ 5
7. Crediting of Annual Amounts to Retirement Account ..................... 6
8. Elective Deferral of Director Compensation ............................ 7
9. Certain Other Terms of Deferral Accounts .............................. 8
10. Settlement of Deferral Accounts ....................................... 12
11. Amendment/Termination ................................................. 13
12. General Provisions .................................................... 13
</TABLE>
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SCHULLER CORPORATION
NON-EMPLOYEE DIRECTORS' DEFERRED COMPENSATION PLAN
AS AMENDED
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1. PURPOSE. The purpose of this Non-Employee Directors' Deferred
Compensation Plan (the "Plan") is to attract and retain highly qualified
persons to serve as non-employee directors of Schuller Corporation (the
"Company") by providing appropriate kinds and amounts of compensation to each
such director. The Plan is designed to achieve this purpose by providing to
each such director (i) an opportunity to elect deferred and alternative forms
of compensation in lieu of cash fees for service as a director, including
Deferred Shares (as defined below) and other deferred investment alternatives,
(ii) crediting of an amount of deferred compensation in exchange for the
director's rights to benefits under the Company's retirement program for
non-employee directors, in the form of Deferred Shares for directors other than
Trustee-Directors (as defined below) and other deferral investment alternatives
for Trustee-Directors, and (iii) an additional annual crediting of $12,500,
subject to mandatory deferral under the Plan, in partial compensation for
continuing service as a director.
2. DEFINITIONS. In addition to the terms defined in Section 1 above, the
following terms used in the Plan shall have the meanings set forth below:
(a) "Administrator" shall mean the Administrative Committee specified in
Section 3(b) to whom the Board has delegated the authority to take action under
the Plan.
(b) "Beneficiary" shall mean any person (which may include trusts and is
not limited to one person) who has been designated by the Participant in his or
her most recent written beneficiary designation filed with the Company to
receive the benefits specified under the Plan in the event of the Participant's
death. If no Beneficiary has been designated who survives the Participant's
death, then Beneficiary means any person(s) entitled by will or, in the absence
thereof, the laws of descent and distribution to receive such benefits.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Change in Control" shall have the meaning given to such term in the
Schuller Corporation 1996 Executive Incentive Compensation Plan; provided,
however, that no event solely within the control of a Participant shall be
deemed a Change in Control with respect to that Participant.
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(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
References to any provision of the Code or regulation (including a proposed
regulation) thereunder shall include any successor provisions or regulations.
(f) "Deferral Account" shall mean the account established and maintained
by the Company for Deferred Shares and other deferral investments credited
under the Plan. A Deferral Account shall include one or more subaccounts,
including a Retirement Account and an Elective Account established under
Section 9(a). The Deferral Account and subaccounts, and Deferred Shares,
deferred cash, and other amounts credited thereto, will be maintained solely as
bookkeeping entries by the Company and its agents, to evidence unfunded
obligations of the Company.
(g) "Deferred Share" shall mean a credit to a Participant's Retirement
or Elective Account, which represents the right to receive one share of Stock
upon settlement of such Account, together with dividend equivalents and other
rights under the Plan.
(h) "Director Compensation" shall mean retainer fees payable to a
director in cash for agreeing to serve and serving on the Board, retainer fees
for agreeing to serve and serving as Chairman or a member of any Board
committee, and, for fees payable on and after February 7, 1997, fees for
attending Board and committee meetings and other fees for service on the Board
and Board committees. Reimbursements for expenses do not constitute Director
Compensation.
(i) "Disability" shall mean a Participant's termination of service as a
director of the Company or any subsidiary due to a physical or mental
incapacity of long duration which renders the Participant unable to perform the
duties of a director of the Company.
(j) "Effective Date" shall mean July 31, 1996], the date the Retirement
Plan became effective.
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended. References to any provision of the Exchange Act or rule thereunder
shall include any successor provisions or rules.
(l) "Fair Market Value" of Stock as of any given date shall mean the
closing sale price per share of Stock reported on a consolidated basis for
securities listed on the principal stock exchange or market on which Stock is
traded on such date or, if there is no sale on that date, then on the last
previous day on which a sale was reported.
(m) "Participant" shall mean any person who has amounts credited to his
or her Deferral Account under the Plan.
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(n) "Plan Year" shall mean a calendar year except, with respect to a
Participant who is newly elected or appointed to the Board of Directors prior
to December 17 of a calendar year, the Plan Year shall mean the period
commencing at the earlier of the filing of the director's election to
participate in the Plan or 14 days after his or her election or appointment as
a director and continuing until the end of the calendar year.
(o) "Retirement" shall mean a Participant's termination or retirement
from service as a Director at or after age 70.
(p) "Retirement Plan" shall mean the Company's retirement program for
non-employee directors, as in effect immediately prior to February 7, 1997.
(q) "Stock" shall mean Schuller Corporation Common Stock, $0.01 par
value, or any other equity securities of the Company designated by the Board.
(r) "Trust" shall mean any trust or trusts established by the Company as
part of the Plan, subject to Sections 9(f) and 12(d).
(s) "Trustee-Director" shall mean a director of the Company who is a
trustee of the Manville Personal Injury Settlement Trust.
(t) "Valuation Date" shall mean the close of business on the last
business day of each calendar quarter; provided, however, that in the case of
termination of service as a director for reasons other than Retirement, death,
or Disability, the Valuation Date shall mean the close of business on the last
business day of the month in which such service terminates, and, in the case of
a Change in Control of the Company, the Valuation Date shall be the date of
such Change in Control.
3. ADMINISTRATION.
(a) Authority. Both the Board and the Administrator (subject to the
ability of the Board to restrict the Administrator) shall administer the Plan
in accordance with its terms, and shall have all powers necessary to accomplish
such purpose, including the power and authority to construe and interpret the
Plan, to define the terms used herein, to prescribe, amend, and rescind rules
and regulations, agreements, forms, and notices relating to the administration
of the Plan, and to make all other determinations necessary or advisable for
the administration of the Plan. Any actions of the Board or the Administrator
with respect to the Plan shall be conclusive and binding upon all persons
interested in the Plan, except that any action of the Administrator will not be
binding on the Board. The Board and Administrator may each appoint agents and
delegate thereto powers and duties under the Plan, except as otherwise limited
by the Plan. Any action by the Board relating to the Plan shall be taken only
if, in addition to any other required vote, such action is approved by the
affirmative vote of a majority of the directors who are not then participating
or eligible to participate in the Plan.
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(b) Administrator. The Administrator shall be the Committee on Board
Organization and Operation, or such other committee as may be designated by the
Board; provided, however, that any committee serving as Administrator shall
consist of such number of members as shall be determined by the Board, each of
whom shall be appointed by, shall remain in office at the will of, and may be
removed, with or without cause, by the Board. Any member of such committee may
resign at any time. No member of such committee shall be entitled to act on or
decide any matter relating solely to his or her rights or benefits under the
Plan. The members of committee acting as Administrator shall not receive any
special compensation for serving as members but shall be reimbursed for any
reasonable expenses incurred in connection therewith. No bond or other
security need be required of the Administrator or any member of the committee
serving as Administrator in any jurisdiction.
(c) Limitation of Liability. Each member of the Board and the
Administrator shall be entitled to, in good faith, rely or act upon any report
or other information furnished to him or her by any officer or other employee
of the Company or any subsidiary, the Company's independent certified public
accountants, or any executive compensation consultant, legal counsel, or other
professional retained by the Company to assist in the administration of the
Plan. To the maximum extent permitted by law, no member of the Board or the
Administrator, nor any person to whom ministerial duties have been delegated,
shall be liable to any person for any action taken or omitted in connection
with the interpretation and administration of the Plan.
4. SHARES AVAILABLE UNDER THE PLAN. The total number of shares of Stock
reserved and available for delivery under the Plan is 125,000, subject to
adjustment as provided in Section 12(b). Shares that may be delivered under
the Plan shall be treasury shares or shares acquired in the market for the
account of the Participant; previously unissued shares may not be issued or
delivered under the Plan. The Company will use its best efforts to ensure
that, at any time shares are deliverable by the Company under the Plan, the
Company has a sufficient number of treasury shares available for such delivery.
5. ELIGIBILITY. Each director of the Company who is not an employee of
the Company or any subsidiary is eligible to become a Participant in the Plan,
subject to the terms hereof. No person other than those specified in this
Section 5 will be eligible to participate in the Plan. The Administrator will
notify each person of his or her eligibility to participate in the Plan not
later than 15 days (or such lesser period as may be practicable in the
circumstances) prior to any deadline for filing an election form.
6. CREDITING OF AMOUNTS TO RETIREMENT ACCOUNT IN SETTLEMENT OF RIGHTS
UNDER RETIREMENT PLAN. Each director of the Company who is named on Exhibit A
shall be credited, in accordance with Section 6(a) or 6(b), with the amount set
forth opposite his or her name under the column "Present Value of Accrued
Benefits" in exchange for his or her surrender of all rights to retirement
benefits under the Retirement Plan. A director who agrees to surrender all
rights to benefits under the
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Retirement Plan in the exchange provided for under this Section 6 must execute
and deliver to the Company an agreement, on or before February 28, 1997, in
such form as may be specified by the Administrator, agreeing to the irrevocable
surrender of rights under the Retirement Plan. A director may not elect to
receive an immediate distribution of cash or any other property from the
Retirement Plan, and no amounts will be further accrued under the Retirement
Plan on and after February 7, 1997.
(a) Crediting of Deferred Shares To Accounts of Non-Trustee-Directors.
At the close of business on February 7, 1997, each director who is not a
Trustee-Director who has agreed to the exchange provided for under this Section
6 shall have credited to his or her Retirement Account a number of Deferred
Shares equal to (i) the applicable amount set forth on Exhibit A divided by
(ii) the Fair Market Value of a share of Stock at that date. Such amounts
credited as Deferred Shares may not be reallocated to other deferral investment
alternatives, as provided in Section 9(c).
(b) Crediting of Deferral Amounts to Accounts of Trustee-Directors. At
the close of business on February 7, 1997, each Trustee-Director who has agreed
to the exchange provided for under this Section 6 shall have credited to his or
her Retirement Account the applicable cash amount set forth on Exhibit A. Except
as provided in Section 9(c), such amount initially shall be deemed invested in
such deferral investment alternative, other than as Deferred Shares, as may be
provided under the Plan and elected by the Participant, in accordance with
Section 9(a) or, if no other alternative is then available under the Plan or has
been elected by the Participant, the amount initially shall be deemed invested
in a hypothetical investment that provides a return equivalent to that of a
money market or other fund specified by the Administrator. Such amounts
credited to a Trustee-Director's Retirement Account are subject to mandatory
reallocation as Deferred Shares in certain circumstances, in accordance with
Section 9(c).
(c) Other Terms of Settlement of Rights Under Retirement Plan. Upon the
crediting of such Deferred Shares or cash amounts to a director's Retirement
Account, the director shall have no further rights under the Retirement Plan.
7. CREDITING OF ANNUAL AMOUNTS TO RETIREMENT ACCOUNT. Each director of
the Company who is eligible under the Plan shall have credited to his or her
Retirement Account $12,500 each year, subject to mandatory deferral under the
Plan and the limitations set forth in this Section 7 and Section 9(e).
Commencing on April 1, 1997 with respect to the second quarter of 1997, $3,125
shall be credited quarterly, on the date on which quarterly payments of the
annual retainer are made, to the Retirement Account of each director who is
then eligible to participate in the Plan (or, if annual retainer is paid on a
basis other than quarterly, at the times and in the same proportions as the
annual retainer is paid). At the close of business on the date any amount is
credited under this Section 7:
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(i) In the case of a director who is not a Trustee-Director and any
Trustee-Director who is then permitted to have amounts deemed invested in
Deferred Shares, the amount so credited that day shall be deemed invested in
Deferred Shares by dividing such amount by the Fair Market Value of a share of
Stock at that date; and (ii) In the case of a director who is a
Trustee-Director who is not then permitted to have amounts deemed invested in
Deferred Shares, the amount so credited that day initially shall be deemed
invested in such deferral investment alternative, other than Deferred Shares,
as may be provided under the Plan and elected by the Participant in accordance
with Section 9(a) or, if no other alternative is then available under the Plan
or has been elected by the Participant, the amount initially shall be deemed
invested in a hypothetical investment that provides a return equivalent to that
of the money market or other fund specified by the Administrator.
Amounts previously credited to a Trustee-Director's Retirement Account are
subject to mandatory reallocation as Deferred Shares in certain circumstances,
in accordance with Section 9(c).
8. ELECTIVE DEFERRAL OF DIRECTOR COMPENSATION. Each director of the
Company, including both Trustee-Directors and other directors, who is eligible
under Section 5 may defer receipt of Director Compensation pursuant to his or
her election, in accordance with this Section 8.
(a) Elections. A director shall elect to participate and the terms of
such participation by filing an election with the Company prior to the
beginning of a Plan Year or at such other time as may be specified by the
Administrator as may ensure effective deferral of taxation and otherwise comply
with applicable laws; provided, however, that a director may file an election
with respect to services performed in the period from April 1, 1997 through
December 31, 1997 at any time prior to February 28, 1997.
(i) Effect and Irrevocability of Elections. Elections shall be
deemed continuing, and therefore applicable to Plan Years after the initial
Plan Year covered by the election, until the election is modified or revoked by
the Participant. Elections other than those subject to Section 9(d) shall
become irrevocable at the commencement of the Plan Year to which an election
relates, unless the Administrator specifies a different time. Elections
relating to the time of settlement of a Deferral Account shall become
irrevocable at the time and to the extent specified in Section 9(d). Elections
may be modified or revoked by filing a new election prior to the time the
election to be modified or revoked has become irrevocable. The latest election
filed with the Administrator shall be deemed to revoke all prior inconsistent
elections that remain revocable at the time of filing of the latest election.
The Company will notify eligible directors of any date prior to the
commencement of a Plan Year by which directors must make elections or upon
which elections will become irrevocable.
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(ii) Matters To Be Elected. A Director's election must specify the
amount or percentage of Director Compensation to be deferred and credited to
the Elective Account, the allocation of such amounts to the deferred investment
alternatives available under the Plan, and the matters relating to settlement
of the Elective Account specified in Section 9(d). If a director has elected
to defer less than 100% of his or her Director Compensation under the Plan, the
balance not deferred hereunder will be paid in accordance with the Company's
regular non-employee director compensation policies.
(iii) Time of Filing Elections. An election must be received by the
Administrator prior to the date specified by the Administrator. Under no
circumstances may a Participant defer compensation to which the Participant has
attained, at the time of deferral, a legally enforceable right to current
receipt of such compensation.
(b) Deferral Investment Alternatives. Amounts payable as Director
Compensation shall be credited to a Participant's Elective Deferral account at
the date such Director Compensation would otherwise be paid. Such amounts
initially shall be deemed invested in the deferral investment alternative, which
may include Deferred Shares (except for Trustee-Directors who are not permitted
to have deferred amounts be deemed to be invested in Deferred Shares), as may be
provided under the Plan and elected by the Participant or, if no alternative has
been elected by the Participant, such amounts initially shall be deemed invested
in a hypothetical investment that provides a return equivalent to that of the
money market or other fund specified by the Administrator. The manner of
crediting Deferred Shares or cash to an Elective Account shall be consistent
with the manner of crediting amounts under Section 7. Subsequent reallocations
of amounts credited to a Participant's Elective Account, if permitted, shall be
subject Section 9(c).
(c) Cessation of Service as a Director. Elective Deferrals shall be
subject to the limitation set forth in Section 9(e). In addition, if any
Director Compensation otherwise subject to an election would be paid to a
Participant after he or she has ceased to serve as a director, such payment
shall not be subject to deferral under this Section 8, but shall instead be
paid in accordance with the Company's regular non-employee director
compensation policies.
9. CERTAIN OTHER TERMS OF DEFERRAL ACCOUNTS.
(a) Establishment of Deferral Accounts; Investment Alternatives. A
Deferral Account, including a Retirement Account and Elective Account (if
applicable), will be established for each Participant, subject to such terms as
shall be determined by the Administrator. The Administrator shall from time to
time specify the deferral investment alternatives that shall be available under
the Plan, provided that Deferred Shares at all times shall be available as one
such alternative. The Administrator may change or discontinue any deferral
investment alternative available under the Plan in its discretion; provided,
however, that, subject to the authority of the Administrator to
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disregard the directions of any Participant, each affected Participant shall be
given the opportunity, without limiting or otherwise impairing any other right
of such Participant regarding changes in investment directions, to redirect the
allocation of his or her Deferral Account deemed invested in a discontinued
deferral investment alternative among the other investment alternatives,
including any replacement investment alternative. Subject to Section 9(b) (in
the case of Deferred Shares), any deemed income and appreciation and
depreciation in value of an investment alternative shall be credited and
debited to a Participant's Deferral Account or otherwise reflected from time to
time.
(b) Dividend Equivalents on Deferred Shares. Dividend equivalents will
be credited on Deferred Shares credited to a Participant's Retirement or
Elective Account, as follows:
(i) Cash and Non-Share Dividends. If the Company declares and pays a
dividend on Stock in the form of cash or property other than shares of Stock,
then a number of additional Deferred Shares shall be credited to a
Participant's Retirement and Elective Accounts as of the payment date for such
dividend equal to (i) the number of Deferred Shares credited to the respective
Account as of the record date for such dividend, multiplied by (ii) the amount
of cash plus the Fair Market Value of any property other than shares actually
paid as a dividend on each share at such payment date, divided by (iii) the
Fair Market Value of a share of Stock at such payment date.
(ii) Share Dividends and Splits. If the Company declares and pays a
dividend on Stock in the form of additional shares of Stock, or there occurs a
forward split of Stock, then a number of additional Deferred Shares shall be
credited to the Participant's Retirement and Elective Accounts as of the
payment date for such dividend or forward Stock split equal to (i) the number
of Deferred Shares credited the respective Account as of the record date for
such dividend or split multiplied by (ii) the number of additional Shares
actually paid as a dividend or issued in such split in respect of each Share.
(c) Limitation on Reallocation of Deferred Shares; Reallocation of
Investment Alternatives Other than Deferred Shares; Mandatory Reallocation.
Amounts credited as Deferred Shares may not be reallocated by a Participant to
another deferral investment alternative. Amounts credited to any deferral
investment alternative other than Deferred Shares may be reallocated to another
investment alternative other than Deferred Shares subject to such terms and
conditions as may be specified by the Administrator. The foregoing
notwithstanding, if at any time it becomes permissible for a Trustee-Director
who is still serving as a director to have amounts deemed invested in Deferred
Shares, all amounts then credited to such Trustee-Director's Retirement Account
(but not his or her Elective Account) shall be reallocated, as promptly as
practicable, into Deferred Shares.
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(d) Elections as to Settlement. Each Participant, while still a
director of the Company, shall file an election with the Administrator
specifying the time or times at which the Participant's Deferral Account will
be settled, and whether such settlement will be in a single lump sum
distribution or in a number of annual installments not exceeding ten; provided,
however, that, if no valid election has been filed as to the time of settlement
of a Participant's Deferral Account or any portion thereof, such Deferral
Account or portion thereof shall be distributed in a single lump sum on the
first business day of the year following the year in which the Participant
ceases to serve as a director. A director may elect settlement of his or her
Retirement Account in or commencing in a specified year following termination
of service as a director of the Company, and may elect settlement of his or her
Elective Account in or commencing in a specified year that is after the year in
which the election is filed; provided, however, that, unless otherwise
determined by the Committee, settlement distributions made in accordance with
an election shall be made on the first business day of a year, shall be made as
a lump sum not later than the fifth year following the year in which the
Participant ceases to serve as a director, and shall commence in the case of
installments, not later than the first business day of the first year following
the year in which the Participant ceases to serve as a director.
(i) An election as to the time or times at which a Deferral Account
will be settled may relate to a specified sub-account (i.e., the Retirement
Account or the Elective Account) or a specified Plan Year. If an election
relates to a specified Plan Year, such election shall apply to the amounts
originally credited to the specified subaccount in respect of such Plan Year
and to any additional amounts credited as dividend equivalents or other income
in respect of such originally credited amounts and previously credited
additional amounts.
(ii) A Participant may modify a prior election as to the time at
which a Participant's Deferral Account (including a specified subaccount) will
be settled at any time prior to the time the Participant ceases to serve as a
director of the Company, except that such modification may only extend the date
of settlement to a date later than the previously elected settlement date. Such
modification shall be made by filing a new election with the Administrator.
The foregoing notwithstanding, the Administrator may disapprove or limit
elections under this Section 9(d) in order to ensure that the Participant will
not be deemed to have constructively received compensation in respect of the
Participant's Deferral Account prior to settlement.
(e) Forfeitures and Non-Forfeitable Rights. If any amount is credited
to a Participant's account pursuant to Section 7 or 8 for services to be
performed in a period following the date of such crediting, upon cessation of
service as a director during such period for any reason other than death or
disability an amount shall be forfeited by the Participant determined by
multiplying the amount so credit, adjusted to reflect any earnings or
appreciation or depreciation of value from the time of crediting to the date of
such cessation of service, by a fraction the numerator of which is the number
of days remaining in the period after the date of such cessation of service and
the denominator of which is the total number of days in such period. Except
for the
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forfeiture provided for in this Section 9(e), the right and interest of
each Participant relating to his or her Deferral Account, including both the
Retirement Account and the Elective Account, shall at all times be
non-forfeitable.
(f) Trusts. The Administrator may, in its discretion, establish one or
more Trusts (including sub-accounts under such Trusts), and deposit therein
amounts of cash, Stock, or other property not exceeding the amount of the
Company's anticipated obligations with respect to a Participant's Deferral
Account established under this Section 9. In such case, the amounts of
hypothetical income and appreciation and depreciation in value of such Deferral
Account shall be equal to the actual income on, and appreciation and
depreciation of, the assets in such Trusts. Other provisions of this Section 9
notwithstanding, the timing of allocations and reallocations of assets in such
a Deferral Account, and the investment vehicles available with respect to such
Deferral Account, may be varied to reflect the timing of actual investments of
the assets of such Trust and the actual investments available to such Trust.
(g) Elections and Election Forms. Elections under the Plan shall be
made in writing on such form or forms as may be specified from time to time by
the Administrator. Unless otherwise specified by the Committee, a director's
elections under Section 8(a) and 9(d) shall govern participation, including
Elective Deferrals and settlements, in years subsequent to the first year
covered by the election; such an election shall become irrevocable for each
such subsequent year at the time new elections are due for such subsequent
year, except to the extent theretofore revoked or modified by a new election
filed by the director.
(h) Agreements and Statements. The Administrator may specify the form
of any agreement to evidence rights and obligations under the Plan. The
Administrator will furnish statements to each Participant reflecting the amount
credited to a Participant's Deferral Account, transactions therein, and other
related information not less frequently than once each calendar year.
(i) Fractional Shares. The amount of Deferred Shares credited to a
Retirement or Elective Account shall include fractional shares calculated to at
least three decimal places, unless otherwise determined by the Administrator.
10. SETTLEMENT OF DEFERRAL ACCOUNTS. The Company will settle a
Participant's Deferral Account by making one or more distributions to the
Participant (or his or her Beneficiary, following Participant's death) at the
time or times, in a lump sum or installments, as specified in accordance with
Section 9(d); provided, however, that a Deferral Account shall be settled on an
accelerated basis in accordance with Sections 10(b), (c), and (d).
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(a) Form of Distribution. Distributions in respect of a Participant's
Retirement or Elective Account shall be made in shares of Stock, together with
cash in lieu of any fractional share remaining at a time that less than one
whole Deferred Share is credited to such Deferred Share Account. Shares may be
delivered in certificate form to a Participant (or his or her Beneficiary) or
to a nominee for the account of the Participant (or his or her Beneficiary), or
in such other manner as the Administrator may determine. Distributions in
respect of deferral investment alternatives other than Deferred Shares may be
made in cash or property of the type to which the investment alternative
related, as determined by the Administrator.
(b) Death or Disability. If a Participant ceases to serve as a director
due to death or dies prior to distribution of all amounts from his or her
Deferral Account, the Company shall make a single lump-sum distribution to the
Participant's Beneficiary. Any such distribution shall be made as soon as
practicable following notification to the Company of the Participant's death.
If a Participant ceases to serve as a director due to Disability, the Company
shall make a single lump-sum distribution to the Participant on the first
business day of the year following the year in which the Participant ceases to
serve as a director, unless otherwise determined by the Administrator.
(c) Financial Emergency and Other Payments. Other provisions of the
Plan notwithstanding, if, upon the written application of a Participant, the
Board or Administrator determines that the Participant has a financial
emergency of such a substantial nature and beyond the Participant's control
that payment of amounts previously deferred under the Plan is warranted, the
Board or Administrator may direct the payment to the Participant of all or a
portion of the balance of a Deferral Account and the time and manner of such
payment.
(d) Change in Control. In the event of a Change in Control, payments in
full settlement of each Deferral Account (including a Deferral Account with
respect to which one or more installment payments have previously been made)
shall be made within fifteen (15) business days following such Change in
Control. For this purpose, Deferred Shares shall be valued at the date of the
Change in Control and settled in cash (except Deferred Shares shall be settled
in shares if cash settlement would adversely affect the availability of
"pooling" accounting for a transaction then pending and approved by the Board
of Directors of the Company). Other deferral investment alternatives shall be
valued at the Valuation Date. The foregoing notwithstanding, a Participant may
waive the accelerated settlement of all or a specified part of his Deferral
Account provided under this Section 10(d) by filing a notice of such waiver
with the Company prior to the earlier of the occurrence of a Change in Control
or the elimination of all material conditions to a Change in Control (excluding
conditions solely within the Participant's control) such that a Change in
Control is substantially certain to occur. Such a waiver may specify that, in
the event of a Change in Control, in lieu of accelerated settlement, all or a
specified part of the Participant's Deferral Account shall
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be distributed in a lump sum, or in two to five installments beginning, on the
first business day of January of the year following the year of the Change in
Control, or distributed in accordance with such other election as the
Participant has previously filed and otherwise in accordance with the Plan.
11. AMENDMENT/TERMINATION. The Board may, with prospective or retroactive
effect, amend, alter, suspend, discontinue, or terminate the Plan at any time
without the consent of Participants, stockholders, or any other person;
provided, however, that, without the consent of a Participant, no such action
shall materially and adversely affect the rights of such Participant with
respect to any rights to payment of amounts credited to such Participant's
Deferral Account. Notwithstanding the foregoing, the Board may, in its sole
discretion, terminate the Plan (in whole or in part) and distribute to
Participants (in whole or in part) the amounts credited to their Deferral
Accounts.
12. GENERAL PROVISIONS.
(a) Limits on Transferability. Deferred Shares and all other rights
under the Plan shall not be transferable by a Participant except by will or the
laws of descent and distribution, or to a Beneficiary in the event of a
Participant's death, and will not otherwise be subject to alienation,
anticipation, encumbrance, garnishment, attachment, levy, execution or other
legal or equitable process, nor subject to the debts, contracts, liabilities or
engagements, or torts of any Participant or his or her Beneficiary. Any attempt
to alienate, sell, transfer, assign, pledge, garnish, attach or take any other
action subject to legal or equitable process or encumber or dispose of any
interest in the Plan shall be void. The Company may rely upon the Beneficiary
designation last filed in accordance with this Section 12(a).
(b) 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 Administrator or the Board to be appropriate in
order to prevent dilution or enlargement of a Participant's rights under the
Plan, then the Administrator or the Board shall, in such manner as it may deem
equitable, adjust any or all of (i) the number and kind of shares of Stock
reserved and available for delivery under the Plan, and (ii) the number and
kind of shares of Stock to be issued upon settlement of outstanding Deferred
Shares under Section 9.
(c) Receipt and Release. Payments (in any form) to any Participant or
Beneficiary in accordance with the provisions of the Plan shall, to the extent
thereof, be in full satisfaction of all claims for the compensation deferred
and relating to the Deferral Account to which the payments relate against the
Company, the Board, or the Administrator, and the Administrator may require
such Participant or Beneficiary, as a condition to such payments, to execute a
receipt and release to such effect. In the
12
<PAGE> 15
case of any payment under the Plan of less than all amounts then credited to a
Deferral Account in the form of Deferred Shares, the amounts paid shall be
deemed to relate to the Deferred Shares credited to the Account at the earliest
time.
(d) Unfunded Status of Plan; Creation of Trusts. The Plan is intended
to constitute an "unfunded" plan for deferred compensation and Participants
shall rely solely on the unsecured promise of the Company for payment
hereunder. With respect to any payment not yet made to a Participant under the
Plan, nothing contained in the Plan shall give a Participant any rights that
are greater than those of a general unsecured creditor of the Company;
provided, however, that, if any Trust is authorized or other arrangements made
to meet the Company's obligations under the Plan, such Trust or other
arrangements shall be consistent with the "unfunded" status of the Plan unless
the Board or Administrator otherwise determines with the consent of each
affected Participant.
(e) Compliance. The Company shall not be obligated to settle any
Deferral Account of a Participant (in any form) until all legal and contractual
obligations of the Company relating to establishment of the Plan and such
settlement shall have been complied with in full. In addition, the Company
shall impose such restrictions on Stock delivered to a Participant hereunder
and any other interest constituting a security as it may deem advisable in
order to comply with the Securities Act of 1933, as amended, the requirements
of the New York Stock Exchange or any other stock exchange or automated
quotation system upon which the Stock is then listed or quoted, any state
securities laws applicable to such a transfer, any provision of the Company's
Certificate of Incorporation or Bylaws, or any other law, regulation, or
binding contract to which the Company is a party.
(f) Other Participant Rights. No Participant shall have any of the
rights or privileges of a stockholder of the Company under the Plan, including
as a result of the crediting of Deferred Shares or other amounts to a Deferral
Account, or the creation of any Trust and deposit of Stock therein, except at
such time as Stock may be actually delivered in settlement of a Deferral
Account or as may be explicitly authorized under the terms of such Trust. No
provision of the Plan, and document relating to the Plan, or any transaction
hereunder shall confer upon any Participant any right to continue to serve as a
director of the Company or in any other capacity with the Company or a
subsidiary or be nominated for reelection as a director, or to interfere in any
way with the right of the Company to increase or decrease the amount of any
compensation payable to directors generally or such Participant. Subject to
the limitations set forth in Section 12(a) hereof, the Plan shall inure to the
benefit of, and be binding upon, the parties hereto and their successors and
assigns.
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<PAGE> 16
(g) Continued Service as an Employee. If a Participant ceases to serve
as a director and, immediately thereafter, is employed by the Company or any
subsidiary, then such Participant will not be deemed to have ceased to serve as
a director, and his or her continued employment by the Company or any
subsidiary will be deemed to be continued service as a director for purposes of
the Plan; provided, however, that such former director will not be deemed to be
an eligible non-employee director for purposes of Section 5.
(h) Governing Law. The validity, construction, and effect of the Plan
and any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Delaware, without giving effect to
principles of conflicts of laws, and applicable provisions of federal law.
(i) Limitation. A Participant and his or her Beneficiary shall assume
all risk in connection with any decrease in value of the Deferral Account, and
neither the Company, the Board, nor the Administrator shall be liable or
responsible therefor.
(j) Construction. The captions and numbers preceding the sections of
the Plan are included solely as a matter of convenience of reference and are
not to be taken as limiting or extending the meaning of any of the terms and
provisions of the Plan. Whenever appropriate, words used in the singular shall
include the plural or the plural may be read as the singular.
(k) Severability. In the event that any provision of the Plan shall be
declared illegal or invalid for any reason, said illegality or invalidity shall
not affect the remaining provisions of the Plan but shall be fully severable,
and the Plan shall be construed and enforced as if said illegal or invalid
provision had never been inserted herein.
(l) Status. The establishment and maintenance of, or allocations and
credits to, the Deferral Account of any Participant shall not vest in any
Participant any right, title, or interest in and to any Plan assets or benefits
except at the time or times and upon the terms and conditions and to the extent
expressly set forth in the Plan and in accordance with the terms of any Trust.
(m) Nonexclusivity of the Plan. The adoption of the Plan by the Board
shall not be construed as creating any limitation on the power of the Board to
adopt such other compensatory arrangements for directors as it may deem
desirable.
(n) Effective Date. The Retirement Plan was adopted by the Board and
became effective on the Effective Date. The Plan is effective as of February
7, 1997.
14
<PAGE> 17
EXHIBIT A
<TABLE>
<S> <C>
PRESENT VALUE OF ACCRUED BENEFITS
- ------------------------------------
NAME PRESENT VALUE
- ------------------------------------
Leo Benatar $ 18,153
- ----------- -----------------
Robert Falise 90,252
- ------------- -----------------
Todd Goodwin 110,401
- ------------ -----------------
Michael Hammes 83,018
- -------------- -----------------
John Hanson 83,018
- ----------- -----------------
Kathryn Harrigan 41,479
- ---------------- -----------------
Louis Klein 91,253
- ----------- -----------------
Frank Macchiarola 18,259
- ----------------- -----------------
Christian Markey 121,331
- ---------------- -----------------
William Mayer 18,368
- ------------------------------------
TOTAL $675,532
====================================
</TABLE>
<PAGE> 1
EXHIBIT 10(n)
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of April 10, 1992, (the "Agreement") by and
between SCHULLER INTERNATIONAL, INC., a Delaware corporation (the "Company")
and a subsidiary of MANVILLE CORPORATION, a Delaware corporation ("Manville")
and Kenneth L. Jensen (the "Executive").
WHEREAS the Company desires to continue to employ Executive and to enter
into an agreement embodying the terms of such employment (the "Agreement"); and
WHEREAS Executive desires to continue such employment and enter into such
an Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. Term of Employment. The Executive shall be employed by the Company for
a period commencing on April 10, 1992 and, except as otherwise provided herein,
ending three years from such date. At the end of each year of employment
hereunder, the Board of Directors of the Company and the Chief Executive
Officer of the Company shall review this Agreement and the Executive's
performance hereunder and shall determine, in their sole discretion, whether or
not to extend the period of Executive's employment pursuant to this Agreement
by one year. The period of Executive's employment hereunder, including any
extension or extensions pursuant to the
1
<PAGE> 2
foregoing sentence, is referred to hereinafter as the "Employment Term". A
failure to renew this Agreement shall not constitutes termination of
Executive's employment.
2. Position. Executive shall serve as Vice President Finance &
Administration, Schuller International, Inc. Executive shall devote
substantially all of his business time and energies to the business of the
Company. Notwithstanding the foregoing, Executive may (a) continue to serve on
the board of directors of any business corporation on which he is serving as of
the date of this Agreement (as shown on Schedule A), (b) serve on the boards of
directors or committees of non-profit organizations and (c) with the prior
approval of the Chief Executive Officer of the Company or of the Board of
Directors of the Company, serve on the boards of directors of other business
corporations, provided that in the Company's sole reasonable discretion none of
the foregoing activities materially interferes with the performance of
Executive's duties hereunder.
3. Base Salary. Company shall pay Executive a base salary at the rate of
not less than $135,000 per year, as the same may from time to time be increased
at the sole discretion of the Board of Directors of the Company or, prior to a
Change in Control, decreased in the event of across the board salary reductions
within the corporate staff group or the business division in which Executive is
employed, whichever is applicable ("Base Salary").
4. Incentive Compensation. Executive shall participate in the Manville
executive incentive compensation plans, as in effect from time to time during
the Employment Term, for which he is eligible. (References herein to "Manville
executive
2
<PAGE> 3
incentive compensation plans" whether annual or long-term, shall include such
plans maintained by Manville and/or the Company, as the case may be, from time
to time.) The Manville executive incentive compensation plans in effect on the
date hereof in which Executive participates are listed on Schedule B.
5. Employee Benefits. Executive shall be eligible to participate in such
other of the Company's employee benefit plans and to receive such benefits for
which his level of employment makes him eligible, in accordance with the
Company's policies as in effect from time to time during the Employment Term.
6. Business Expenses. Necessary and reasonable business expenses incurred
by Executive during the Employment Term shall be reimbursed in accordance with
Company policies.
7. Termination Prior to a Change in Control.
(a) Retirement. This Agreement shall terminate automatically upon
Executive's Retirement, as defined hereafter. For purposes of this Agreement,
"Retirement" means termination of Executive's employment initiated by
Executive, other than for Good Reason as defined in Section 7(e) or Section
8(e) hereof, whichever is applicable, whereby Executive is entitled to receive
an immediately payable benefit, including an early retirement benefit, under
the Company's retirement plan generally applicable to its salaried employees or
under any retirement arrangement established with respect to Executive with his
consent, in either case, whether or not Executive commences to receive such
benefit at the time of such termination. Upon termination of Executive's
employment by reason of Retirement prior to a Change in Control,
3
<PAGE> 4
Executive shall be entitled to benefits determined in accordance with the
Company's retirement, benefit and insurance programs in effect at such time.
(b) Death or Disability.
(i) Disability. Executive's employment hereunder may be terminated
by the Company if Executive becomes physically or mentally incapacitated and is
therefore unable for a period of six (6) consecutive months to perform his
duties (such incapacity is hereinafter referred to as "Disability"). Any
question as to the existence of the Disability of the Executive as to which the
Executive and the Company cannot agree shall be determined in writing by a
qualified independent physician mutually acceptable to the Executive and the
Company. Upon any such termination for Disability prior to a Change in Control,
Executive shall be entitled to receive his Base Salary through the date on
which the Executive is first eligible to receive payment of disability benefits
in lieu of salary under the Company's employee benefit plans as then in effect.
(ii) Death. Upon termination for death prior to a Change in
Control, Executive shall be entitled to his Base Salary at the rate in effect
at the time of Executive's death through the end of the month in which his
death occurs.
(iii) Death or Disability Benefits. All other benefits to which
Executive may be entitled following Executive's termination for death or
Disability prior to a Change in Control shall be determined in accordance with
the plans, policies and practices of the Company.
4
<PAGE> 5
(c) For Cause by the Company; Voluntary Termination by Executive.
Executive's employment hereunder may be terminated by the Company for "Cause".
For purposes of this Agreement, prior to a Change in Control, "Cause" shall
mean (i) Executive's willful and continued failure substantially to perform his
duties hereunder (other than as a result of total or partial incapacity due to
physical or mental illness or as a result of termination by Executive for Good
Reason as defined in Section 7(e) below), (ii) Executive's dishonesty in the
performance of his duties hereunder or (iii) Executive's conviction of a felony
under the laws of the United States or any state thereof. If Executive is
terminated for Cause, or if Executive voluntarily terminates employment
hereunder other than for Good Reason, in either case, prior to a Change in
Control, he shall be entitled to receive his Base Salary through the date of
termination. All other benefits, if any, payable to Executive following such
termination of Executive's employment shall be determined in accordance with
the plans, policies and practices of the Company.
(d) Without Cause by the Company or with Good Reason by Executive. If
prior to a Change in Control Executive's employment hereunder is terminated by
the Company without Cause (other than by reason of death or Disability) or by
Executive with "Good Reason" (as defined in Section 7(e) below), Executive
shall be entitled to receive the following benefits:
(i) The Company shall pay Executive at the time of such termination
in a lump sum a cash amount equal to two times his Base Salary in effect at the
time of such termination or, in the event of termination by the Executive on
account
5
<PAGE> 6
of an event described in Section 7(e)(iv) below, the Base Salary as in effect
prior to the reduction or reductions referred to therein plus the bonus the
Executive would have earned in respect of the year of termination under the
Manville annual incentive compensation plan, if any, in effect at the date of
termination or, in the event of a termination by Executive by reason of an
event described in Section 7(e)(vi), the plan in effect prior to the
elimination referred to therein, determined as if the Executive had been
employed by the Company for the full year and without regard to any right
reserved by the Company to decrease or eliminate such bonus, and assuming
actual performance had equaled 100% of the performance objective established
for such year pursuant to the terms of such plan.
(ii) For a 24-month period after such termination, the Company
shall cause Executive to be provided with life, accident, medical, dental and
prescription insurance benefits substantially similar to, and on the same terms
as, those benefits elected and received by Executive under the Company's "Flex
Benefit" program immediately prior to such termination; provided that,
Executive shall be charged an amount equal to any monthly payroll deduction
charged for similar benefits to executives in positions similar to that which
Executive held before his termination; and provided further that, if Executive
receives medical benefits under the Manville Retiree Comprehensive Health Care
Plan and post-retirement life insurance benefits (collectively, "Retiree
Medical and Life Insurance Benefits"), at any time during the 24-month period
referred to above, once such benefits begin Executive shall be entitled only to
Retiree Medical and Life Insurance Benefits.
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<PAGE> 7
(iii) For a period of 24 months after such termination, the Company
shall provide or cause Executive to be provided with the perquisites listed on
Schedule C, attached hereto, as may be amended by the Company from time to time
without Executive's consent prior to such termination (provided that nothing
herein shall be deemed to permit such an amendment without Executive's consent
following a Change in Control), on the same terms and conditions on which such
perquisites were provided prior to Executive's termination.
(iv) In addition to all other amounts payable to Executive under
this Section 7(d), Executive shall be entitled to receive all benefits payable
to Executive under any other plan, policy or agreement relating to retirement
or other benefits in accordance with the terms of such plans, policies or
agreements; provided, however that, amounts paid pursuant to this Section 7(d)
shall be in lieu of any payments under any Manville separation policy.
(v) The Company shall provide Executive with outplacement services
from the firm of Executive's choice at a cost to the Company not to exceed the
lesser of (A) 20% of Executive's Base Salary in effect at the time of
Executive's termination of employment with the Company or (B) $25,000.
(e) Good Reason. For purposes of this Agreement, prior to a Change in
Control, "Good Reason" shall mean:
(i) a material reduction in Executive's responsibilities,
authorities or duties, all as contemplated by Section 2 hereof; provided,
however, that
7
<PAGE> 8
such reduction by reason of a termination for Cause or Disability shall not
constitute Good Reason;
(ii) Executive's job is eliminated other than by reason of
promotion or termination for Cause or Disability.
(iii) the Company fails to pay Executive any amount otherwise
vested and due hereunder or under any plan or policy of the Company;
(iv) a reduction in Executive's Base Salary except in the event of
an across the board salary reduction within the corporate staff group or the
business division in which Executive is employed, whichever is applicable;
(v) a reduction in Executive's aggregate level of benefits under the
Company's pension, life insurance, medical, health and accident, disability,
deferred compensation or savings or similar plans, except in the event of an
across the board reduction in such benefits within the corporate staff group or
the business division in which Executive is employed, whichever is applicable;
(vi) the elimination of an annual incentive compensation plan; or
(vii) the Executive's office is relocated outside of a 50-mile
radius of Denver, Colorado without his written consent.
If Executive provides to the Company a Notice of Termination, as defined
in Section 13(f), in connection with an event described in clauses (i) through
(vii) of this Section 7(e), the Company shall have ten (10) business days from
the date of receipt of such notice to effect a cure of the event described
therein, and upon cure thereof by
8
<PAGE> 9
the Company to Executive's reasonable satisfaction, such event shall no longer
constitute Good Reason for purposes of this Agreement.
(f) Mitigation. In the event of termination of Executive's employment
hereunder by the Company without Cause or by Executive with Good Reason prior
to a Change in Control, benefits otherwise receivable by Executive pursuant to
subsection 7(d)(ii) shall be reduced to the extent comparable benefits are
received by Executive during the 24-month period following such termination.
Executive shall report to the Company any such benefits actually received by
Executive.
8. Termination Following a Change in Control.
(a) Retirement. This Agreement shall terminate automatically upon
Executive's Retirement. Upon a termination of Executive's employment by reason
of Retirement following a Change in Control, Executive shall be entitled to
benefits determined in accordance with the Company's retirement, benefit and
insurance programs in effect immediately prior to the Change in Control or, if
more generous, such programs in effect at the time of such Retirement.
(b) Death or Disability.
(i) Disability. Executive's employment hereunder may be terminated
by reason of Executive's Disability, subject to the procedure for determining
such Disability outlined in Section 7(b)(i). Upon any termination for
Disability following a Change in Control, Executive shall be entitled to
receive his Base Salary for a two-year period ending on the second anniversary
of Executive's date of termination. Such Base Salary shall be paid in equal
monthly installments and shall be reduced by any
9
<PAGE> 10
amounts received as disability benefits in lieu of salary under the Company's
employee benefit plans.
(ii) Death. Upon termination for death following a Change in
Control, Executive shall be entitled to (x) his Base Salary at the rate in
effect at the time of Executive's death through the end of the month in which
his death occurs and (y) if and to the extent the death benefits provided
Executive by the Company are less than would have been paid immediately prior
to a Change in Control, a lump sum payment of cash in an amount equal to the
value of such shortfall. Any such lump sum payment shall be made within ten
(10) business days following Executive's death.
(iii) Death or Disability Benefits. All other benefits to which
Executive may be entitled upon Executive's termination for death or Disability
following a Change in Control shall be determined in accordance with the plans,
policies and practices of the Company in effect immediately prior to the Change
in Control or, if more generous, such plans, policies and practices as in
effect at any time following the Change in Control; provided that, nothing in
this Section 8(b)(iii) shall be interpreted so as to result in the duplication
of the benefits provided under Section 8(b)(i) or (ii).
(c) For Cause by the Company; Voluntary Termination by Executive. For
purposes of this Agreement, following a Change in Control, "Cause" shall mean
(i) Executive's willful and continued failure substantially to perform his
duties hereunder (other than as a result of total or partial incapacity due to
physical or mental illness or as a result of termination by Executive for Good
Reason as defined in Section 8(e) below) after a written demand for substantial
performance is delivered to Executive personally
10
<PAGE> 11
and Executive shall have failed during the sixty-day period following such
written demand to have corrected such failure, (ii) Executive's dishonesty in
the performance of his duties hereunder or (iii) Executive's conviction of a
felony under the laws of the United States or any state thereof. For purposes
of this Section 8(c) no act or failure to act on Executive's part shall be
deemed willful unless done or omitted to be done by Executive not in good faith
and without reasonable belief that Executive's action or omission was in the
best interest of the Company.
If Executive is terminated for Cause, or if Executive voluntarily
terminates his employment with the Company other than for Good Reason, in
either case, following a Change in Control, he shall be entitled to receive his
Base Salary through the date of termination. All other benefits, if any,
payable to Executive following such termination of Executive's employment shall
be determined in accordance with the plans, policies and practices of the
Company.
(d) Without Cause by the Company or with Good Reason by Executive. If
Executive's employment is terminated by the Company following a Change in
Control without Cause (other than by reason of death or Disability) or by
Executive with "Good Reason" (which following a Change in Control shall have
the meaning set forth in Section 8(e) below), Executive shall be entitled to
receive the following benefits:
(i) The Company shall pay Executive at the time of such termination
in a lump sum a cash amount equal to two times the sum of (A) his Base Salary
in effect at the time of such termination or, in the event of termination by
the
11
<PAGE> 12
Executive by reason of an event described in Section 8(e)(iv) below, the Base
Salary as in effect prior to the reduction or reductions referred to therein
plus (B) the bonus the Executive would have earned in respect of the year of
termination under the Manville annual incentive compensation plan, if any, in
effect at the date of termination or in the event of a termination by Executive
by reason of an event described in Section 8(e)(v), the plan in effect
immediately prior to the reduction or reductions referred to therein,
determined as if the Executive had been employed by the Company for the full
year and without regard to any right reserved by the Company to decrease or
eliminate such bonus, and assuming actual performance had equaled 100% of the
performance objective established for such year pursuant to the terms of such
plan.
(ii) The Company shall pay Executive in a lump sum a cash amount
equal to a fraction of the annual bonus which (absent such termination and
without regard to any right reserved by the Company to decrease or eliminate
such bonus) Executive would have earned with respect to the year of termination
under the Manville annual executive incentive compensation plan, if any, in
effect at the date of termination or, in the event of a termination by
Executive by reason of an event described in Section 8(e)(v), the plan in
effect prior to the reduction or reductions referred to therein, assuming
actual performance had equaled 100% of the performance objective established
for such year pursuant to the terms of such plan, the numerator of which
fraction is the number of days in such year during which the Executive was
employed by the Company and the denominator of which is 365. Such payment shall
be made at the time of Executive's termination.
12
<PAGE> 13
(iii) The Company shall pay Executive in a lump sum a cash amount
equal to the sum of the amounts Executive would have received in respect of all
Performance Units (and other similar interests) granted to Executive under the
1991 Long Term Cash Incentive Compensation Plan (or any other Manville
long-term cash incentive plan adopted after the date hereof) assuming Executive
remained employed through the applicable expiration or final payment date of
such Performance Units or other interests, less any amount paid to Executive in
respect of such Performance Units and other interests prior to termination of
his employment. For purposes of calculating the sum to which Executive is
entitled it shall be assumed that all "Scheduled Dividend Payments" (as such
term is defined in the 1991 Long Term Cash Incentive Compensation Plan) not
paid at or prior to Executive's termination of employment will be paid in full
at their then estimated value, as determined by the Company (without reduction
or deferral). Such payment shall be made at the time of Executive's
termination.
(iv) Executive shall receive credit under the Supplemental Plan for
Participants in the Manville Salaried Retirement Plan for two additional years
of service for purposes of both vesting and accrual of benefits.
(v) For a 36-month period following Executive's termination, the
Company shall pay Executive in monthly installments the sum of the monthly
costs to Executive of purchasing life, accident, medical, dental and
prescription insurance benefits substantially similar to such benefits elected
and received by Executive under the Company's "Flex Benefit" program
immediately prior to Executive's termination or, if
13
<PAGE> 14
more generous, immediately prior to the Change in Control ("Continued
Benefits") less the monthly payroll deduction, if any, charged to Executive
immediately prior to Executive's termination, or, if applicable, immediately
prior to the Change in Control, for any of such Continued Benefits;
notwithstanding the foregoing, if Executive begins to receive Retiree Medical
and Life Insurance Benefits at any time during the 36-month period referred to
above, once such benefits begin, the monthly payment due Executive under the
preceding clause shall equal the monthly costs to Executive of purchasing
Continued Benefits not provided by the Company to Executive as Retiree Medical
and Life Insurance Benefits.
(vi) For a 24-month period after such termination, the Company shall
provide or cause Executive to be provided with the perquisites listed on
Schedule C, attached hereto (which the Company may amend from time to time
prior to a Change in Control, without Executive's consent), on the same terms
and conditions on which such perquisites were provided at the time of
Executive's termination or, if more generous, immediately prior to such
termination.
(vii) In addition to all other amounts payable to Executive under this
Section 8(d), Executive shall be entitled to receive all benefits payable to
Executive under any other plan, policy or agreement relating to retirement or
other benefits, in accordance with the terms of such plans, policies or
agreements; provided, however that, amounts paid pursuant to this Section 8(d)
shall be in lieu of any payments under any Manville separation policy.
14
<PAGE> 15
(viii) The Company shall provide Executive with outplacement services
from the firm of Executive's choice at a cost to the Company not to exceed 20%
of Executive's Base Salary in effect at the time of such termination or, in the
event of termination by Executive by reason of an event described in Section
8(e)(iv) below, the Base Salary as in effect prior to the reduction or
reductions referred to therein.
(e) Good Reason Following a Change in Control. For purposes of this
Agreement, following a Change in Control, "Good Reason" shall mean:
(i) a material adverse change in the nature or scope of Executive's
responsibilities, authorities, duties and/or position (including by reason of a
substantial reduction in the size of the Company or other substantial change in
the character or scope of the Company's operations);
(ii) Executive no longer serves in the position described in Section
2, other than by reason of a promotion or a termination for Cause or
Disability;
(iii) the Company fails to pay Executive any amounts otherwise vested
and due hereunder or under any plan or policy of the Company;
(iv) a reduction in the Executive's Base Salary in effect immediately
prior to the Change in Control or as the same may be increased from time to
time;
(v) a reduction in the Executive's incentive compensation opportunity,
as defined below, under the Manville executive incentive compensation plans as
in effect immediately prior to the Change in Control or as the same may be
15
<PAGE> 16
increased from time to time (absent, in the case of any such reduction relative
to Executive's annual bonus, a corresponding increase in his Base Salary);
(vi) the failure of the Company, to continue to provide Executive with
benefits and perquisites which are substantially similar in the aggregate to
those enjoyed by Executive under the Company's pension, life insurance,
medical, health and accident, disability, deferred compensation or savings or
similar plans and fringe benefit programs (including vacation) in which
Executive was participating immediately prior to the Change in Control; or the
failure by the Company to continue to provide Executive with directors' or
officers' insurance, as applicable, at the level maintained immediately prior
to the Change in Control;
(vii) the Executive's office is relocated outside of a 50-mile radius
of Denver, Colorado without his written consent;
(viii) the failure of the Company to obtain an agreement from any
successor to assume and agree to perform this Agreement, as contemplated in
Section 13(e) hereof; or
(ix) any purported termination of Executive's employment by the
Company which is not effected pursuant to a Notice of Termination satisfying
the requirements of Section 13(f) and, if applicable, following the written
demand described in Section 8(c) and the relevant cure period.
If Executive provides a Notice of Termination, as defined in Section 13(f),
in connection with an event described in clauses (i) through (vii) of this
Section 8(e), to the Company, the Company shall have ten (10) business days
from the date of receipt
16
<PAGE> 17
of such notice to effect a cure of the event described therein, and upon cure
thereof by the Company to Executive's reasonable satisfaction, such event shall
no longer constitute Good Reason for purposes of this Agreement.
(f) Reduction in Incentive Compensation Opportunity. For purposes of this
Agreement, a "reduction in the Executive's incentive compensation opportunity"
under the Manville executive incentive compensation plans shall include
(i) the failure to maintain both an annual and a long-term incentive
plan;
(ii) any reduction or elimination by the Company of Executive's annual
or long-term incentive compensation pursuant to any reserved right under any
such plan to decrease or eliminate such bonus or award;
(iii) any reduction in Executive's participation level under any such
plan; and
(iv) any adverse change in the payout schedule or its equivalent or
in the manner of assessing actual performance under any such plan and/or any
extraordinary change in the applicable performance criteria thereunder.
(g) Change in Control. For purposes of this Agreement, the phrase "Change
in Control" shall mean the following and shall be deemed to have occurred if
any of the following events shall have occurred:
(i) except for Manville, a subsidiary or an affiliate thereof, an
employee benefit plan (including any trustee of such plan, acting as trustee)
sponsored or maintained by Manville or any subsidiary thereof or the Manville
Personal Injury
17
<PAGE> 18
Settlement Trust (the "Trust"), any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended from time to
time, and any successor act (the "Exchange Act") is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly of securities of Manville representing 30% or more of the combined
voting power of Manville's then outstanding securities;
(ii) at least 40% of the directors of Manville constitute persons who
were not, at the time of their first election to the Board, candidates proposed
by a majority of the Board in office prior to the time of such first election,
(iii) (A) the dissolution of Manville; (B) a sale or other disposition
or the last sale or other disposition to occur in a series of sales and/or
other dispositions within any 18-month period ("Serial Sales") by Manville
and/or one or more subsidiaries of Manville of assets (including any sale
through a public offering of shares of voting stock of a Manville subsidiary by
Manville or by any subsidiary thereof) which, in the case of Serial Sales, as
of the beginning of such 18-month period, account for (or, in the case of stock
sold through a public offering, which represents indirect ownership on a
proportionate basis of assets accounting for) more than 40% of the consolidated
revenues of Manville and its subsidiaries, as determined in accordance with
generally accepted accounting principles; provided, however, that no sale or
disposition of assets or stock shall be taken into account to the extent that
the proceeds of such sale or disposition (whether in cash or in-kind) are
reinvested or are, in the case of proceeds received in-kind, used in the
ongoing conduct by Manville or one or more of its
18
<PAGE> 19
subsidiaries of the business of Manville and/or such subsidiary or
subsidiaries, provided further that such a reinvestment shall not be deemed to
have occurred unless made within 18 months of such sale or disposition and
provided further that, the term reinvestment shall exclude, inter alia, the use
of proceeds (x) to repay debt owed to the Trust or debt incurred in connection
with the operation of the business in which the assets sold or disposed of were
used or (y) to pay dividends; (C) a transaction to which Manville is a party
pursuant to which the holders of all of the shares of Manville outstanding
prior to such transaction do not hold, directly or indirectly, shares
outstanding of the surviving corporation in substantially the same proportions
as those in which they held the outstanding shares of Manville prior to the
transaction; or (D) any other event which the Board determines, in its
discretion, would materially alter the structure of Manville or its ownership;
(iv) a sale of the business unit, division or group within which
Executive is employed, other than to another entity which is directly or
indirectly controlled by Manville as a result of which Executive is no longer
employed by an entity which is directly or indirectly controlled by Manville;
or
(v) a reduction in workforce, or the last to occur in a series of
reductions in workforce within any 24-month period, of the Company, if
Executive is employed by the Company at the time of such reduction or last
reduction, or Riverwood International Corporation ("Riverwood"), if Executive
is employed by Riverwood at the time of such reduction or last reduction, as a
result of which 80% of such workforce measured as of the date 24 months prior
to the last such reduction is no longer
19
<PAGE> 20
employed by the Company or Riverwood, whichever is applicable, excluding for
these purposes any reduction in the workforce of either the Company or
Riverwood attributable to transfers of employees to Manville.
In the event of a Change in Control by reason of an event described in
Section 8(g)(iv) the Company shall pay Executive in a lump sum a cash amount
equal to the sum of the amounts Executive would have received in respect of all
Performance Units granted to Executive under the 1991 Long Term Cash Incentive
Compensation Plan assuming Executive remained employed through the applicable
expiration or final payment date of such Performance Units, less any amount
paid to Executive in respect of such Performance Units prior to termination of
his employment. For purposes of calculating the sum to which Executive is
entitled it shall be assumed that all "Scheduled Dividend Payments" (as such
term is defined in the 1991 Long Term Cash Incentive Compensation Plan) not
paid at or prior to Executive's termination of employment will be paid in full
at their then estimated value as determined by the Company (without reduction
or deferral). Such payment shall be made in the event of a Change in Control
described in Section 8(g)(iv) at the time of such Change in Control and the
Performance Units and all rights related thereto shall be extinguished upon
such payment.
9. Reduction of Payments. If any payment to or for the benefit of
Executive under this Agreement either alone or together with other payments to
or for the benefit of Executive would constitute a "parachute payment" (as
defined in Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code")), the payments under this
20
<PAGE> 21
Agreement shall be reduced to the largest amount that will minimize or
eliminate both the imposition of the excise tax imposed by Section 4999 of the
Code and the disallowance of deductions to the Company under Section 280G of
the Code of any such payments. The determination of any reduction in the
payments under this Agreement pursuant to this Section shall be made by the
Company's independent accountants.
10. Indemnification. The Company will indemnify the Executive (and his
legal representatives or other successors) to the fullest extent permitted
(including payment of expenses in advance of final disposition of a proceeding)
by the laws of the jurisdiction of incorporation of the Company, as in effect
at the time of the subject act or omission, or by the Restated Certificate of
Incorporation and By-Laws of the Company, as in effect at such time or on the
effective date of this Agreement, or by the terms of any indemnification
agreement between the Company and the Executive, whichever affords or afforded
greatest protection to the Executive, and the Executive shall be entitled to
the protection of any insurance policies the Company may elect to maintain
generally for the benefit of its directors and officers (and to the extent the
Company maintains such an insurance policy or policies, the Executive shall be
covered by such policy or policies, in accordance with its or their terms, to
the maximum extent of the coverage available for any Company officer or
director), against all costs, charges and expenses whatsoever incurred or
sustained by him or his legal representatives at the time such costs, charges
and expenses are incurred or sustained, in connection with any action, suit or
proceeding to which he (or his legal representatives or other
21
<PAGE> 22
successors) may be made a party by reason of his being or having been a
director, officer or employee of the Company, Manville or any subsidiary of
either of them, or his serving or having served any other enterprise as a
director, officer or employee at the request of the Company or Manville.
11. Legal Fees. In the event of a dispute between the Executive and the
Company with respect to any of the Executive's rights under this Agreement, the
Company shall reimburse the Executive for any and all legal fees and related
expenses incurred by him in connection with enforcing such rights, at the time
such fees and related expenses are incurred; provided that, if Executive's
claim is found by a court of competent jurisdiction to have been frivolous,
Executive shall reimburse the Company for all amounts paid by it under this
Section.
12. Confidentiality; Specific Performance. Executive will not at any time
(whether during or after his employment with the Company) disclose or use for
his own benefit or purposes, or the benefit or purposes of any other person,
firm, partnership, joint venture, association, corporation or other business
organization, entity or enterprise other than the Company and any of its
subsidiaries or affiliates, any trade secrets, information, data, or other
confidential information relating to customers, development programs, costs,
marketing, trading, investment, sales activities, promotion, credit and
financial data, manufacturing processes, financing methods, plans, or the
business and affairs of the Company generally, or of any subsidiary or
affiliate of the Company, provided that the foregoing shall not apply to
information which is not unique to the Company or which is generally known to
the industry or the public
22
<PAGE> 23
other than as a result of Executive's breach of this covenant. Executive agrees
that upon termination of his employment with the Company for any reason, he
will return to the Company immediately all memoranda, books, papers, plans,
information, letters and other data, and all copies thereof or therefrom, in
any way relating to the business of the Company and its affiliates, except that
he may retain personal notes, notebooks and diaries. Executive further agrees
that he will not retain or use for his account at any time any trade names,
trademark or other proprietary business designation used or owned in connection
with the business of the Company or its affiliates.
Executive acknowledges and agrees that the Company's remedies at law for a
breach or threatened breach of any of the provisions of this Section would be
inadequate and, in recognition of this fact, Executive agrees that, in the
event of such a breach or threatened breach, in addition to any remedies at
law, the Company, without posting any bond, shall be entitled to obtain
equitable relief in the form of specific performance, temporary restraining
order, temporary or permanent injunction or any other equitable remedy which
may then be available.
13. Miscellaneous.
(a) Governing Law; Liability of the Executive.
This Agreement shall be governed by and construed in accordance with the laws
of the State of Colorado. The Executive shall not be subject to liability for
breach of this Agreement by reason of his termination of his employment
hereunder.
(b) Entire Agreement/Amendments/Effectiveness. This Agreement shall
supersede any and all existing employment, change-in-control or severance
23
<PAGE> 24
agreements between Executive and the Company or any of its affiliates and
contains the entire understanding of the parties with respect to the employment
of Executive by the Company. There are no restrictions, agreements, promises,
warranties, covenants or undertakings between the parties with respect to the
subject matter herein other than those expressly set forth herein. THIS
AGREEMENT AND ANY AMENDMENT HERETO SHALL NOT BE EFFECTIVE UNLESS AND UNTIL
SIGNED BY THE CHIEF EXECUTIVE OFFICER OF THE COMPANY AND ATTESTED TO BY THE
GENERAL COUNSEL OF THE COMPANY.
(c) No Waiver. The failure of a party to insist upon strict adherence
to any term of this Agreement on any occasion shall not be considered a waiver
of such party's rights or deprive such party of the right thereafter to insist
upon strict adherence to that term or any other term of this Agreement.
(d) Severability. In the event that any one or more of the
provisions of this Agreement shall be or become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions of this Agreement shall not be affected thereby.
(e) Successors; Binding Agreement. (i) In the event of a Change in
Control, the Company will require the successor to the Company as Executive's
employer (whether such succession is direct or indirect, by purchase, merger,
consolidation or otherwise, to any portion of the business and/or assets of
Manville or the Company) to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no
24
<PAGE> 25
such succession had taken place. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement
by operation of law, or otherwise. Prior to a Change in Control, the term
"Company" shall also mean any affiliate of the Company to which Executive may
be transferred and the Company shall cause such successor employer to be
considered the "Company" bound by the terms of this Agreement and this
Agreement shall be amended so to provide. Following a Change in Control the
term "Company" shall not mean any affiliate of the Company to which Executive
may be transferred unless Executive shall have previously approved of such
transfer in writing, in which case the Company shall cause such successor
employer to be considered the "Company" bound by the terms of this Agreement
and this Agreement shall be amended so to provide.
(ii) This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive should die while any amount would still be payable to Executive
hereunder if Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Executive's devisee, legatee or other designee or, if there is no
such designee, to Executive's estate. This Agreement shall not be assignable by
Executive.
(f) Notice; Notice of Termination. (i) For the purpose of this
Agreement, notices and all other communications provided for in the Agreement
shall
25
<PAGE> 26
be in writing and, except as otherwise provided in paragraph (ii) below, shall
be deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the signature page of this Agreement;
provided that all notices to the Company shall be directed to the attention of
the General Counsel of Manville, or to such other address as either party may
have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt,
(ii) Any purported termination of Executive's employment by the
Company or by Executive shall not be effective unless communicated by written
Notice of Termination to the other party hereto in accordance with paragraph
(i) above. For purposes of this Agreement, a "Notice of Termination" in the
case of a termination for Cause following a Change in Control shall mean a
notice given within ten (10) business days of the Company's having actual
knowledge of the events giving rise to such termination and in all cases shall
mean a notice which indicates the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated.
(iii) The date of termination of Executive's employment shall be the
date of receipt of the Notice of Termination, except in the case of (A)
Executive's death, in which case the date of termination of employment shall be
the date of death or (B) Executive's termination for Cause following a Change
in Control, in which case the date of termination shall be ten (10) business
days after actual receipt by Executive of
26
<PAGE> 27
the Notice of Termination; provided that, if within thirty (30) days after any
Notice of Termination following a Change in Control is received, the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the date of termination of Executive's
employment shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction
(which is not appealable or the time for appeal therefrom has expired and no
appeal has been perfected); and provided further that the date of termination
of Executive's employment shall be extended by a notice of dispute only if such
notice is given in good faith and the party giving such notice pursues the
resolution of such dispute with reasonable diligence. Notwithstanding the
pendency of any such dispute, the Company will continue to pay Executive his
full compensation in effect when the notice giving rise to the dispute was
given (including, but not limited to, Base Salary and incentive compensation)
or, if higher, the compensation in effect immediately prior to the Change in
Control, and continue Executive as a participant in all compensation, benefits
(including fringe benefits and perquisites) and insurance plans in which
Executive was participating when the notice giving rise to the dispute was
given, until the dispute is finally resolved in accordance with this paragraph
(iii). Amounts paid under this paragraph are in addition to all other amounts
due under this Agreement and shall not be offset against or reduce any other
amounts due under this Agreement.
27
<PAGE> 28
(g) Arbitration. The parties hereby agree to submit all controversies,
claims and matters of difference in any way related to this Agreement or the
performance or breach of the whole or any part hereof, to arbitration in
Denver, Colorado, according to the rules and practices of the American
Arbitration Association from time to time in force. If such rules and
practices shall conflict with the Colorado Rules of Civil Procedure or any
other provisions of Colorado law then in force, such Colorado rules and
provisions shall govern. Arbitration of any such controversy, claim or matter
of difference shall be a condition precedent to any legal action thereon. This
submission and agreement to arbitration shall be specifically enforceable.
Awards shall be final and binding on all parties to the extent and in the
manner provided by Colorado law; provided that an arbitration award shall not
be binding on the Company to the extent such award exceeds the maximum amount
the Company would be required to pay Executive pursuant to the express terms of
this Agreement. All awards may be filed by any party with the Clerk of the
District Court in the County of Denver, Colorado and an appropriate judgment
entered thereon and execution issued therefor. At the election of any party,
said award may also be filed, and judgment entered thereon and execution issued
therefor, with the clerk of one or more other courts, state or federal, having
jurisdiction over the party against whom such award is rendered or its
property.
(h) Counterparts. This Agreement may be signed in several counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
28
<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
/s/ Kenneth L. Jensen
---------------------
Kenneth L. Jensen
SCHULLER INTERNATIONAL, INC.
By: /s/ W. T. Stephens
------------------------
Chief Executive Officer
ATTEST:
/s/ R. B. Von Wald
- ------------------
General Counsel
29
<PAGE> 30
Kenneth L. Jensen
Schedule A
Outside Directorships Held
None.
30
<PAGE> 31
Kenneth L. Jensen
Schedule B
Incentive Compensation Plans in Effect
Annual Incentive Compensation Plan.
Manville Corporation Stock Incentive Plan.
1991 Long-Term Cash Incentive Compensation Plan for Manville Corporation.
1994 Long-Term Cash Incentive Compensation Plan for Schuller International
Group, Inc.
31
<PAGE> 32
Kenneth L. Jensen
Schedule C
Fringe Benefit Arrangements and Perquisites in Effect
Club Initiation Fees & Dues
The Company will pay the initiation fee and dues for one country
club of the officer's choice. The initiation fee and first year's
dues will be "grossed up" for tax purposes.
Financial & Estate Planning
The Company will pay the reasonable cost of periodic financial and
estate planning.
Annual Executive Physical Exam Program
Income Tax Return Preparation
The Company will pay annual income tax return preparation fees up
to $1,000 plus additional fees if incurred on account of
job-related circumstances including the cost of representation by
return preparer during an audit.
32
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July 8, 1993
K.L. Jensen
5 Bobcat Lane
Littleton, CO 80127
RE: EMPLOYMENT AGREEMENT EXTENSION
Dear Ken:
Recently, the Board of Directors of Manville Corporation approved the extension
of your Employment Agreement for an additional year. This letter serves as
notice of the extension and, subject to execution by you and attestation by the
Company's General Counsel, an amendment to your Employment Agreement extending
the "Employment Term" (as defined in the Employment Agreement) for one year.
If you agree with this amendment, please sign both copies of this letter below
and return them to Dan Japha in the Denver Legal Department, P.O. Box 5108,
Denver, Colorado 8021 7-5108 at your earliest convenience. If you have
questions about this, please contact Dick Von Wald at 950-4911 or Dan Japha at
950-2266.
Very truly yours,
/s/ W. T. Stephens
- -----------------------
W. T. Stephens
Chief Executive Officer
This amendment is accepted this 3rd day of August, 1993.
/s/ Kenneth L. Jensen
---------------------
(Executive)
Attest: /s/ R. B. Von Wald
---------------------
General Counsel
33
<PAGE> 34
AMENDMENT TO EMPLOYMENT AGREEMENT
BETWEEN SCHULLER INTERNATIONAL, INC.
AND KENNETH L. JENSEN
This AMENDMENT dated as of February 4, 1994 is by and between SCHULLER
INTERNATIONAL, INC., a Delaware corporation (the "Company"), and Kenneth L.
Jensen (the "Executive"), and amends the EMPLOYMENT AGREEMENT dated April 10,
1992 by and between the Company and the Executive as previously extended on
August 3, 1993 (as so extended, the "Agreement').
WHEREAS, effective as of the date hereof, the Company and the Executive
agreed to change the Executive's position and annual base salary in accordance
with the terms hereof.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:
A. The first sentence of paragraph 2 of the Agreement is hereby amended to
read as follows:
Executive shall serve as the Senior Vice President - Finance.
B. The first sentence of paragraph 3 of the Agreement is hereby amended to
read as follows:
Company shall pay Executive a base salary at the rate of not less than
$165,000 per year, as the same may from time to time be increased at
the sole discretion of the Board of Directors of the Company, or, prior
to a Change in Control, decreased in the event of across the board
salary reductions within the corporate staff group or the business
division in which Executive is employed, whichever is applicable ("Base
Salary").
C. The "Employment Term" (as defined in the Agreement) is hereby extended
for one year to April 10, 1997.
D. Except as provided by this Amendment to the Agreement, the Agreement
shall remain in full force and effect.
34
<PAGE> 35
IN WITNESS WHEREOF, the parties have executed this Amendment to the
Agreement to be effective as of February 4, 1 994.
/s/ Kenneth L. Jensen
----------------------
Kenneth L. Jensen
SCHULLER INTERNATIONAL, INC.
By: /s/ W. T. Stephens
--------------------------
W. T. Stephens
Chairman of the Board
ATTEST
/s/ Richard B. Von Wald
----------------------------------
Richard B. Von Wald
Senior Vice President,
General Counsel and Secretary
35
<PAGE> 36
April 26, 1995
K. L. Jensen
RE: EMPLOYMENT AGREEMENT EXTENSION AND AMENDMENT
Dear Ken:
Recently, the Board of Directors of Manville Corporation approved an extension
and amendment of your Employment Agreement with Schuller International, Inc.
(the "Company"), dated April 10, 1992 (as previously amended, the "Employment
Agreement"). The extension and amendment, as set forth below, extends the term
of the Employment Agreement to April 10, 1998 and modifies the Change in
Control definition, all as set forth below:
Paragraph 1 of the Employment Agreement shall be amended to extend the
"Employment Term" (as defined therein) until April 10, 1998.
Paragraph 8(g)(i) shall be amended to read as follows:
except for Manville, a subsidiary or an affiliate
thereof, an employee benefit plan (including any
trustee of such plan, acting as trustee) sponsored or
maintained by Manville or any subsidiary thereof or
Manville Personal Injury Settlement Trust (the
"Trust"), any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended from time to time, and any
successor act (the "Exchange Act")) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities
of Manville or Schuller International Group, Inc.
("Schuller") representing 30% or more of the combined
voting power of Manville's or Schuller's, as
applicable, then outstanding securities;
Paragraph 8(g)(iii)(B) shall be amended to read as follows:
a sale or other disposition or the last sale or other
disposition to occur in a series of sales and/or other
dispositions within any 18-month period ("Serial
Sales") by Schuller and/or one or more subsidiaries of
Schuller of assets which, in the case of Serial Sales,
as of the beginning of such 18-month period, account
for more than 40% of the consolidated revenues of
Schuller and its subsidiaries, as determined in
accordance with generally accepted accounting
principles; provided,
36
<PAGE> 37
K. L. Jensen
April 26, 1995
Page Two
be taken into account to the extent that the proceeds
of such sale or disposition (whether in cash or
in-kind) are reinvested or are, in the case of
proceeds received in kind, used in the ongoing conduct
by Schuller or one or more of its subsidiaries of the
business of Schuller and/or such subsidiary or
subsidiaries, provided further that such a
reinvestment shall not be deemed to have occurred
unless made within 18 months of such sale or
disposition and provided further that, the term
reinvestment shall exclude, inter alia, the use of
proceeds (x) to repay debt owed to the Trust or debt
incurred in connection with the operation of the
business in which the assets sold or disposed of were
used or (y) to pay dividends;
From and after the date of execution of this extension and amendment by you and
attestation of this extension and amendment by the Company's General Counsel,
the extension and amendment shall be effective and the Employment Agreement
shall be deemed amended in the manner set forth above.
Please sign and date two copies of this Amendment and Extension and return them
to Judie Bratek, Manager of Compensation in Denver, Mail Code 2-01, at your
earliest convenience.
If you have questions about the extension, please call Dion Persson at
950-3422.
Very truly yours,
/s/ W. T. Stephens
W. T. Stephens
Chairman, President and
Chief Executive Officer
Manville Corporation
This amendment and extension is accepted this 8th day of May, 1995.
/s/ K. L. Jensen
-----------------
K. L. Jensen
Attest:
/s/ Richard B. Von Wald
- -------------------------
Richard B. Von Wald
General Counsel
37
<PAGE> 38
March 14, 1996
Kenneth L. Jensen - 12-05
RE: EMPLOYMENT AGREEMENT EXTENSION
Dear Ken:
Recently, the Board of Directors of Manville Corporation approved an
extension of your employment agreement with Schuller International, Inc. (the
"Company"), dated April 10, 1992 (as previously amended and extended, the
"Employment Agreement"). This letter serves as notice of the extension and,
subject to execution by you and attestation by Manville Corporation's General
Counsel, an amendment to the Employment Agreement extending the "Employment
Term" (as defined in the Employment Agreement) to April 10, 1999.
To evidence your agreement to so extend the Employment Term, please sign
and date both copies of this letter where indicated and return them to Dion
Persson (Denver 11-01) at your earliest convenience. A fully executed copy
will be returned to you for your files. If you have any questions about the
extension, please call Dion Persson at 303-978-3422.
Very truly yours,
/s/ W. T. Stephens
W.T. Stephens
Chairman of the Board, President
and Chief Executive Officer
This amendment is accepted this 18th day of March, 1996.
/s/ K. L. Jensen
--------------------
Kenneth L. Jensen
Attest:
/s/ Richard B. Von Wald
- ------------------------------------------
Richard B. Von Wald
Senior Vice President, General Counsel
& Secretary
38
<PAGE> 39
AMENDMENT TO EMPLOYMENT AGREEMENT
BETWEEN SCHULLER INTERNATIONAL, INC.
AND KENNETH L. JENSEN
This AMENDMENT, dated as of June 7, 1996, is by and between SCHULLER
INTERNATIONAL, INC., a Delaware corporation (the "Company"), and Kenneth L.
Jensen (the "Executive") and amends the EMPLOYMENT AGREEMENT, dated April 10,
1992, between the Company and the Executive (as previously amended and
extended, the "Employment Agreement").
WHEREAS, the Company and the Executive have agreed to amend the Employment
Agreement in accordance with the terms hereof.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. The first sentence of Section 2 of the Employment Agreement is hereby
amended to read as follows:
Executive shall serve as Senior Vice President and Chief Financial Officer
of the Company.
2. Section 8(g) of the Employment Agreement is hereby amended in its
entirety to read as follows:
(g) Change in Control. For purposes of this Agreement, the phrase
"Change in Control" shall mean the following and shall be deemed to have
occurred if any of the following events shall have occurred:
(i) any Person (as defined below) (other than Schuller Corporation
("Schuller")), any trustee or other fiduciary holding securities under any
employee benefit plan of Schuller, or any company owned, directly or
indirectly, by the stockholders of Schuller in substantially the same
proportions as their ownership of the common stock of Schuller) becomes the
Beneficial Owner (as defined below) (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 (as defined below)),
directly or indirectly, of securities of Schuller or any Significant Subsidiary
(as defined below), representing 30 percent or more of the combined voting
power of Schuller's or such subsidiary's then outstanding securities; provided,
however, that
39
<PAGE> 40
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 (the
"Trust");
(ii) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board of Directors of Schuller (the
"Board"), and any new director (other than a director designated by a person
who has entered into an agreement with Schuller to effect a transaction
described in clause (i), (iii), or (iv) of this paragraph) whose election by
the Board or nomination for election by Schuller'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
Schuller owned beneficially, directly or indirectly, by the Trust is less than
50 percent of all such outstanding securities;
(iii) the consummation of a merger or consolidation of Schuller or
any subsidiary owning directly or indirectly all or substantially all of the
consolidated assets of Schuller (a "Significant Subsidiary") with any other
corporation, other than a merger or consolidation which would result in the
voting securities of Schuller 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;
(iv) the stockholders of Schuller or any affiliate approve a plan or
agreement for the sale or disposition of all or substantially all of the
consolidated assets of Schuller (other than such a sale or disposition
immediately after which such assets will be owned directly or indirectly by the
stockholders of Schuller in substantially the same proportions as their
ownership of the common stock of Schuller immediately prior to such sale or
disposition) in which case the Board shall determine the effective date of the
Change in Control resulting therefrom;
(v) a sale of the business unit, division or group within which
Executive is employed, other than to another entity which is directly or
indirectly controlled by Schuller, as a result of which Executive is no longer
employed by an entity which is directly or indirectly controlled by Schuller;
or
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(vi) any other event occurs which the Board determines, in its
discretion, would materially alter the structure of Schuller or its ownership.
(vii) Defined terms.
(A) "Beneficial Owner" shall have the meaning ascribed to such
term in Rule 13d-3 under the Exchange Act and any successor to such Rule.
(B) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, including rules thereunder and successor provisions
and rules thereto.
(C) "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.
3. Section 9 of the Employment Agreement is hereby amended in its entirety
to read as follows:
9. [Reserved]
4. Attached hereto is a revised Schedule B to the Employment Agreement,
which shall supersede and replace any previously existing Schedule B to the
Employment Agreement.
5. Except as provided by this Amendment, the Employment Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment to be
effective as of June 7, 1996.
/s/ K. L. Jensen
----------------------------------------
Kenneth L. Jensen
SCHULLER INTERNATIONAL, INC.
/s/ W. T. Stephens
----------------------------------------
W. Thomas Stephens
Chief Executive Officer and President
ATTEST:
/s/ Richard B. Von Wald
- ----------------------------------
Richard B. Von Wald
Executive Vice President,
General Counsel and Secretary
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Schedule B
Incentive Compensation Plan in Effect
Annual Incentive Compensation Plan for Schuller Corporation
1994 Long-Term Cash Incentive Compensation Plan for Schuller
International Group, Inc.
Schuller Corporation 1996 Stock Award Plan
Schuller Corporation 1996 Deferred Compensation Plan
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EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of June 3, 1992, (the "Agreement") by and
between SCHULLER INTERNATIONAL, INC., a Delaware corporation (the "Company")
and a subsidiary of MANVILLE CORPORATION, a Delaware corporation ("Manville")
and HARVEY L. PERRY, JR. (the "Executive").
WHEREAS the Company desires to continue to employ Executive and to enter
into an agreement embodying the terms of such employment (the "Agreement"); and
WHEREAS Executive desires to continue such employment and enter into such
an Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. Term of Employment. The Executive shall be employed by the Company for
a period commencing on June 3, 1992 and, except as otherwise provided herein,
ending three years from such date. At the April meeting of Manville's Board of
Directors or at the next meeting thereafter at which the extension of
employment agreements of executives of the Company is considered, the Board of
Directors of Manville and the Chief Executive Officer of the Company shall
review this Agreement and the Executive's performance hereunder and shall
determine, in their sole discretion, whether or not to extend the period of
Executive's employment pursuant to this Agreement by one year. The period of
Executive's employment hereunder, including
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any extension or extensions pursuant to the foregoing sentence, is referred to
hereinafter as the "Employment Term". A failure to renew this Agreement shall
not constitutes termination of Executive's employment.
2. Position. Executive shall serve as Vice President - Manufacturing.
Executive shall devote substantially all of his business time and energies to
the business of the Company. Notwithstanding the foregoing, Executive may (a)
continue to serve on the board of directors of any business corporation on
which he is serving as of the date of this Agreement (as shown on Schedule A),
(b) serve on the boards of directors or committees of non-profit organizations
and (c) with the prior approval of the Chief Executive Officer of the Company
or of the Board of Directors of the Company, serve on the boards of directors
of other business corporations, provided that in the Company's sole reasonable
discretion none of the foregoing activities materially interferes with the
performance of Executive's duties hereunder.
3. Base Salary. Company shall pay Executive a base salary at the rate of
not less than $110,000 per year, as the same may from time to time be increased
at the sole discretion of the Board of Directors of the Company or, prior to a
Change in Control, decreased in the event of across the board salary reductions
within the corporate staff group or the business division in which Executive is
employed, whichever is applicable ("Base Salary").
4. Incentive Compensation. Executive shall participate in the Manville
executive incentive compensation plans, as in effect from time to time during
the Employment Term, for which he is eligible. (References herein to "Manville
executive
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incentive compensation plans" whether annual or long-term, shall include such
plans maintained by Manville and/or the Company, as the case may be, from time
to time.) The Manville executive incentive compensation plans in effect on the
date hereof in which Executive participates are listed on Schedule B.
5. Employee Benefits. Executive shall be eligible to participate in such
other of the Company's employee benefit plans and to receive such benefits for
which his level of employment makes him eligible, in accordance with the
Company's policies as in effect from time to time during the Employment Term.
6. Business Expenses. Necessary and reasonable business expenses incurred
by Executive during the Employment Term shall be reimbursed in accordance with
Company policies.
7. Termination Prior to a Change in Control.
(a) Retirement. This Agreement shall terminate automatically upon
Executive's Retirement, as defined hereafter. For purposes of this Agreement,
"Retirement" means termination of Executive's employment initiated by
Executive, other than for Good Reason as defined in Section 7(e) or Section
8(e) hereof, whichever is applicable, whereby Executive is entitled to receive
an immediately payable benefit, including an early retirement benefit, under
the Company's retirement plan generally applicable to its salaried employees or
under any retirement arrangement established with respect to Executive with his
consent, in either case, whether or not Executive commences to receive such
benefit at the time of such termination. Upon termination of Executive's
employment by reason of Retirement prior to a Change in Control,
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Executive shall be entitled to benefits determined in accordance with the
Company's retirement, benefit and insurance programs in effect at such time.
(b) Death or Disability.
(i) Disability. Executive's employment hereunder may be terminated
by the Company if Executive becomes physically or mentally incapacitated and is
therefore unable for a period of six (6) consecutive months to perform his
duties (such incapacity is hereinafter referred to as "Disability"). Any
question as to the existence of the Disability of the Executive as to which the
Executive and the Company cannot agree shall be determined in writing by a
qualified independent physician mutually acceptable to the Executive and the
Company. Upon any such termination for Disability prior to a Change in Control,
Executive shall be entitled to receive his Base Salary through the date on
which the Executive is first eligible to receive payment of disability benefits
in lieu of salary under the Company's employee benefit plans as then in effect.
(ii) Death. Upon termination for death prior to a Change in
Control, Executive shall be entitled to his Base Salary at the rate in effect
at the time of Executive's death through the end of the month in which his
death occurs.
(iii) Death or Disability Benefits. All other benefits to which
Executive may be entitled following Executive's termination for death or
Disability prior to a Change in Control shall be determined in accordance with
the plans, policies and practices of the Company.
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(c) For Cause by the Company; Voluntary Termination by Executive.
Executive's employment hereunder may be terminated by the Company for "Cause".
For purposes of this Agreement, prior to a Change in Control, "Cause" shall
mean (i) Executive's willful and continued failure substantially to perform his
duties hereunder (other than as a result of total or partial incapacity due to
physical or mental illness or as a result of termination by Executive for Good
Reason as defined in Section 7(e) below), (ii) Executive's dishonesty in the
performance of his duties hereunder or (iii) Executive's conviction of a felony
under the laws of the United States or any state thereof. If Executive is
terminated for Cause, or if Executive voluntarily terminates employment
hereunder other than for Good Reason, in either case, prior to a Change in
Control, he shall be entitled to receive his Base Salary through the date of
termination. All other benefits, if any, payable to Executive following such
termination of Executive's employment shall be determined in accordance with
the plans, policies and practices of the Company.
(d) Without Cause by the Company or with Good Reason by Executive. If
prior to a Change in Control Executive's employment hereunder is terminated by
the Company without Cause (other than by reason of death or Disability) or by
Executive with "Good Reason" (as defined in Section 7(e) below), Executive
shall be entitled to receive the following benefits:
(i) The Company shall pay Executive at the time of such termination
in a lump sum a cash amount equal to two times his Base Salary in effect at the
time of such termination or, in the event of termination by the Executive on
account
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of an event described in Section 7(e)(iv) below, the Base Salary as in effect
prior to the reduction or reductions referred to therein plus the bonus the
Executive would have earned in respect of the year of termination under the
Manville annual incentive compensation plan, if any, in effect at the date of
termination or, in the event of a termination by Executive by reason of an
event described in Section 7(e)(vi), the plan in effect prior to the
elimination referred to therein, determined as if the Executive had been
employed by the Company for the full year and without regard to any right
reserved by the Company to decrease or eliminate such bonus, and assuming
actual performance had equaled 100% of the performance objective established
for such year pursuant to the terms of such plan.
(ii) For a 24-month period after such termination, the Company shall
cause Executive to be provided with life, accident, medical, dental and
prescription insurance benefits substantially similar to, and on the same terms
as, those benefits elected and received by Executive under the Company's "Flex
Benefit" program immediately prior to such termination; provided that,
Executive shall be charged an amount equal to any monthly payroll deduction
charged for similar benefits to executives in positions similar to that which
Executive held before his termination; and provided further that, if Executive
receives medical benefits under the Manville Retiree Comprehensive Health Care
Plan and post-retirement life insurance benefits (collectively, "Retiree
Medical and Life Insurance Benefits"), at any time during the 24-month period
referred to above, once such benefits begin Executive shall be entitled only to
Retiree Medical and Life Insurance Benefits.
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(iii) For a period of 24 months after such termination, the Company
shall provide or cause Executive to be provided with the perquisites listed on
Schedule C, attached hereto, as may be amended by the Company from time to time
without Executive's consent prior to such termination (provided that nothing
herein shall be deemed to permit such an amendment without Executive's consent
following a Change in Control), on the same terms and conditions on which such
perquisites were provided prior to Executive's termination.
(iv) In addition to all other amounts payable to Executive under
this Section 7(d), Executive shall be entitled to receive all benefits payable
to Executive under any other plan, policy or agreement relating to retirement
or other benefits in accordance with the terms of such plans, policies or
agreements; provided, however that, amounts paid pursuant to this Section 7(d)
shall be in lieu of any payments under any Manville separation policy.
(v) The Company shall provide Executive with outplacement services
from the firm of Executive's choice at a cost to the Company not to exceed the
lesser of (A) 20% of Executive's Base Salary in effect at the time of
Executive's termination of employment with the Company or (B) $25,000.
(e) Good Reason. For purposes of this Agreement, prior to a Change in
Control, "Good Reason" shall mean:
(i) a material reduction in Executive's responsibilities,
authorities or duties, all as contemplated by Section 2 hereof; provided,
however, that
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such reduction by reason of a termination for Cause or Disability shall not
constitute Good Reason;
(ii) Executive's job is eliminated other than by reason of promotion
or termination for Cause or Disability.
(iii) the Company fails to pay Executive any amount otherwise vested
and due hereunder or under any plan or policy of the Company;
(iv) a reduction in Executive's Base Salary except in the event of an
across the board salary reduction within the corporate staff group or the
business division in which Executive is employed, whichever is applicable;
(v) a reduction in Executive's aggregate level of benefits under the
Company's pension, life insurance, medical, health and accident, disability,
deferred compensation or savings or similar plans, except in the event of an
across the board reduction in such benefits within the corporate staff group or
the business division in which Executive is employed, whichever is applicable;
(vi) the elimination of an annual incentive compensation plan; or
(vii) the Executive's office is relocated outside of a 50-mile radius
of Waterville, Ohio without his written consent.
If Executive provides to the Company a Notice of Termination, as defined
in Section 13(f), in connection with an event described in clauses (i) through
(vii) of this Section 7(e), the Company shall have ten (10) business days from
the date of receipt of such notice to effect a cure of the event described
therein, and upon cure thereof by the
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Company to Executive's reasonable satisfaction, such event shall no longer
constitute Good Reason for purposes of this Agreement.
(f) Mitigation. In the event of termination of Executive's employment
hereunder by the Company without Cause or by Executive with Good Reason prior
to a Change in Control, benefits otherwise receivable by Executive pursuant to
subsection 7(d)(ii) shall be reduced to the extent comparable benefits are
received by Executive during the 24-month period following such termination.
Executive shall report to the Company any such benefits actually received by
Executive.
8. Termination Following a Change in Control.
(a) Retirement. This Agreement shall terminate automatically upon
Executive's Retirement. Upon a termination of Executive's employment by reason
of Retirement following a Change in Control, Executive shall be entitled to
benefits determined in accordance with the Company's retirement, benefit and
insurance programs in effect immediately prior to the Change in Control or, if
more generous, such programs in effect at the time of such Retirement.
(b) Death or Disability.
(i) Disability. Executive's employment hereunder may be terminated
by reason of Executive's Disability, subject to the procedure for determining
such Disability outlined in Section 7(b)(i). Upon any termination for
Disability following a Change in Control, Executive shall be entitled to
receive his Base Salary for a two-year period ending on the second anniversary
of Executive's date of termination. Such Base Salary shall be paid in equal
monthly installments and shall be reduced by any amounts
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received as disability benefits in lieu of salary under the Company's
employee benefit plans.
(ii) Death. Upon termination for death following a Change in Control,
Executive shall be entitled to (x) his Base Salary at the rate in effect at the
time of Executive's death through the end of the month in which his death
occurs and (y) if and to the extent the death benefits provided Executive by
the Company are less than would have been paid immediately prior to a Change in
Control, a lump sum payment of cash in an amount equal to the value of such
shortfall. Any such lump sum payment shall be made within ten (10) business
days following Executive's death.
(iii) Death or Disability Benefits. All other benefits to which
Executive may be entitled upon Executive's termination for death or Disability
following a Change in Control shall be determined in accordance with the plans,
policies and practices of the Company in effect immediately prior to the Change
in Control or, if more generous, such plans, policies and practices as in
effect at any time following the Change in Control; provided that, nothing in
this Section 8(b)(iii) shall be interpreted so as to result in the duplication
of the benefits provided under Section 8(b)(i) or (ii).
(c) For Cause by the Company; Voluntary Termination by Executive. For
purposes of this Agreement, following a Change in Control, "Cause" shall mean
(i) Executive's willful and continued failure substantially to perform his
duties hereunder (other than as a result of total or partial incapacity due to
physical or mental illness or as a result of termination by Executive for Good
Reason as defined in Section 8(e) below) after a written demand for substantial
performance is delivered to Executive personally
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and Executive shall have failed during the 60-day period following such written
demand to have corrected such failure, (ii) Executive's dishonesty in the
performance of his duties hereunder or (iii) Executive's conviction of a felony
under the laws of the United States or any state thereof. For purposes of this
Section 8(c) no act or failure to act on Executive's part shall be deemed
willful unless done or omitted to be done by Executive not in good faith and
without reasonable belief that Executive's action or omission was in the best
interest of the Company.
If Executive is terminated for Cause, or if Executive voluntarily
terminates his employment with the Company other than for Good Reason, in
either case, following a Change in Control, he shall be entitled to receive his
Base Salary through the date of termination. All other benefits, if any,
payable to Executive following such termination of Executive's employment shall
be determined in accordance with the plans, policies and practices of the
Company.
(d) Without Cause by the Company or with Good Reason by Executive. If
Executive's employment is terminated by the Company following a Change in
Control without Cause (other than by reason of death or Disability) or by
Executive with "Good Reason" (which following a Change in Control shall have
the meaning set forth in Section 8(e) below), Executive shall be entitled to
receive the following benefits:
(i) The Company shall pay Executive at the time of such termination
in a lump sum a cash amount equal to two times the sum of (A) his Base Salary
in effect at the time of such termination or, in the event of termination by
the
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Executive by reason of an event described in Section 8(e)(iv) below, the Base
Salary as in effect prior to the reduction or reductions referred to therein
plus (B) the bonus the Executive would have earned in respect of the year of
termination under the Manville annual incentive compensation plan, if any, in
effect at the date of termination or in the event of a termination by Executive
by reason of an event described in Section 8(e)(v), the plan in effect
immediately prior to the reduction or reductions referred to therein,
determined as if the Executive had been employed by the Company for the full
year and without regard to any right reserved by the Company to decrease or
eliminate such bonus, and assuming actual performance had equaled 100% of the
performance objective established for such year pursuant to the terms of such
plan.
(ii) The Company shall pay Executive in a lump sum a cash amount equal
to a fraction of the annual bonus which (absent such termination and without
regard to any right reserved by the Company to decrease or eliminate such
bonus) Executive would have earned with respect to the year of termination
under the Manville annual executive incentive compensation plan, if any, in
effect at the date of termination or, in the event of a termination by
Executive by reason of an event described in Section 8(e)(v), the plan in
effect prior to the reduction or reductions referred to therein, assuming
actual performance had equaled 100% of the performance objective established
for such year pursuant to the terms of such plan, the numerator of which
fraction is the number of days in such year during which the Executive was
employed by the Company and the denominator of which is 365. Such payment shall
be made at the time of Executive's termination.
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(iii) The Company shall pay Executive in a lump sum a cash amount
equal to the sum of the amounts Executive would have received in respect of all
Performance Units (and other similar interests) granted to Executive under the
1991 Long Term Cash Incentive Compensation Plan (or any other Manville
long-term cash incentive plan adopted after the date hereof) assuming Executive
remained employed through the applicable expiration or final payment date of
such Performance Units or other interests, less any amount paid to Executive in
respect of such Performance Units and other interests prior to termination of
his employment. For purposes of calculating the sum to which Executive is
entitled it shall be assumed that all "Scheduled Dividend Payments" (as such
term is defined in the 1991 Long Term Cash Incentive Compensation Plan) not
paid at or prior to Executive's termination of employment will be paid in full
at their then estimated value, as determined by the Company (without reduction
or deferral). Such payment shall be made at the time of Executive's
termination.
(iv) Executive shall receive credit under the Supplemental Plan for
Participants in the Manville Salaried Retirement Plan for two additional years
of service for purposes of both vesting and accrual of benefits.
(v) For a 36-month period following Executive's termination, the
Company shall pay Executive in monthly installments the sum of the monthly
costs to Executive of purchasing life, accident, medical, dental and
prescription insurance benefits substantially similar to such benefits elected
and received by Executive under the Company's "Flex Benefit" program
immediately prior to Executive's termination or, if
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more generous, immediately prior to the Change in Control ("Continued
Benefits") less the monthly payroll deduction, if any, charged to Executive
immediately prior to Executive's termination, or, if applicable, immediately
prior to the Change in Control, for any of such Continued Benefits;
notwithstanding the foregoing, if Executive begins to receive Retiree Medical
and Life Insurance Benefits at any time during the 36-month period referred to
above, once such benefits begin, the monthly payment due Executive under the
preceding clause shall equal the monthly costs to Executive of purchasing
Continued Benefits not provided by the Company to Executive as Retiree Medical
and Life Insurance Benefits.
(vi) For a 24-month period after such termination, the Company shall
provide or cause Executive to be provided with the perquisites listed on
Schedule C, attached hereto (which the Company may amend from time to time
prior to a Change in Control, without Executive's consent), on the same terms
and conditions on which such perquisites were provided at the time of
Executive's termination or, if more generous, immediately prior to such
termination.
(vii) In addition to all other amounts payable to Executive under this
Section 8(d), Executive shall be entitled to receive all benefits payable to
Executive under any other plan, policy or agreement relating to retirement or
other benefits, in accordance with the terms of such plans, policies or
agreements; provided, however that, amounts paid pursuant to this Section 8(d)
shall be in lieu of any payments under any Manville separation policy.
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(viii) The Company shall provide Executive with outplacement
services from the firm of Executive's choice at a cost to the Company not to
exceed 20% of Executive's Base Salary in effect at the time of such termination
or, in the event of termination by Executive by reason of an event described in
Section 8(e)(iv) below, the Base Salary as in effect prior to the reduction or
reductions referred to therein.
(e) Good Reason Following a Change in Control. For purposes of this
Agreement, following a Change in Control, "Good Reason" shall mean:
(i) a material adverse change in the nature or scope of Executive's
responsibilities, authorities, duties and/or position (including by reason of a
substantial reduction in the size of the Company or other substantial change in
the character or scope of the Company's operations);
(ii) Executive no longer serves in the position described in Section
2, other than by reason of a promotion or a termination for Cause or
Disability;
(iii) the Company fails to pay Executive any amounts otherwise
vested and due hereunder or under any plan or policy of the Company;
(iv) a reduction in the Executive's Base Salary in effect
immediately prior to the Change in Control or as the same may be increased from
time to time;
(v) a reduction in the Executive's incentive compensation
opportunity, as defined below, under the Manville executive incentive
compensation plans as in effect immediately prior to the Change in Control or
as the same may be
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increased from time to time (absent, in the case of any such reduction relative
to Executive's annual bonus, a corresponding increase in his Base Salary);
(vi) the failure of the Company, to continue to provide Executive with
benefits and perquisites which are substantially similar in the aggregate to
those enjoyed by Executive under the Company's pension, life insurance,
medical, health and accident, disability, deferred compensation or savings or
similar plans and fringe benefit programs (including vacation) in which
Executive was participating immediately prior to the Change in Control; or the
failure by the Company to continue to provide Executive with directors' or
officers' insurance, as applicable, at the level maintained immediately prior
to the Change in Control;
(vii) the Executive's office is relocated outside of a 50-mile radius
of Waterville, Ohio without his written consent;
(viii) the failure of the Company to obtain an agreement from any
successor to assume and agree to perform this Agreement, as contemplated in
Section 13(e) hereof; or
(ix) any purported termination of Executive's employment by the
Company which is not effected pursuant to a Notice of Termination satisfying
the requirements of Section 13(f) and, if applicable, following the written
demand described in Section 8(c) and the relevant cure period.
If Executive provides a Notice of Termination, as defined in Section
13(f), in connection with an event described in clauses (i) through (vii) of
this Section 8(e), to the Company, the Company shall have ten (10) business
days from the date of receipt
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of such notice to effect a cure of the event described therein, and upon cure
thereof by the Company to Executive's reasonable satisfaction, such event shall
no longer constitute Good Reason for purposes of this Agreement.
(f) Reduction in Incentive Compensation Opportunity. For purposes of this
Agreement, a "reduction in the Executive's incentive compensation opportunity"
under the Manville executive incentive compensation plans shall include
(i) the failure to maintain both an annual and a long-term incentive
plan;
(ii) any reduction or elimination by the Company of Executive's annual
or long-term incentive compensation pursuant to any reserved right under any
such plan to decrease or eliminate such bonus or award;
(iii) any reduction in Executive's participation level under any such
plan; and
(iv) any adverse change in the payout schedule or its equivalent or
in the manner of assessing actual performance under any such plan and/or any
extraordinary change in the applicable performance criteria thereunder.
(g) Change in Control. For purposes of this Agreement, the phrase "Change
in Control" shall mean the following and shall be deemed to have occurred if
any of the following events shall have occurred:
(i) except for Manville, a subsidiary or an affiliate thereof, an
employee benefit plan (including any trustee of such plan, acting as trustee)
sponsored or maintained by Manville or any subsidiary thereof or the Manville
Personal Injury
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Settlement Trust (the "Trust"), any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended from time to
time, and any successor act (the "Exchange Act") is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly of securities of Manville representing 30% or more of the combined
voting power of Manville's then outstanding securities;
(ii) at least 40% of the directors of Manville constitute persons who
were not, at the time of their first election to the Board, candidates proposed
by a majority of the Board in office prior to the time of such first election,
(iii) (A) the dissolution of Manville; (B) a sale or other disposition
or the last sale or other disposition to occur in a series of sales and/or
other dispositions within any 18-month period ("Serial Sales") by Manville
and/or one or more subsidiaries of Manville of assets (including any sale
through a public offering of shares of voting stock of a Manville subsidiary by
Manville or by any subsidiary thereof) which, in the case of Serial Sales, as
of the beginning of such 18-month period, account for (or, in the case of stock
sold through a public offering, which represents indirect ownership on a
proportionate basis of assets accounting for) more than 40% of the consolidated
revenues of Manville and its subsidiaries, as determined in accordance with
generally accepted accounting principles; provided, however, that no sale or
disposition of assets or stock shall be taken into account to the extent that
the proceeds of such sale or disposition (whether in cash or in-kind) are
reinvested or are, in the case of proceeds received in-kind, used in the
ongoing conduct by Manville or one or more of its
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subsidiaries of the business of Manville and/or such subsidiary or
subsidiaries, provided further that such a reinvestment shall not be deemed to
have occurred unless made within 18 months of such sale or disposition and
provided further that, the term reinvestment shall exclude, inter alia, the use
of proceeds (x) to repay debt owed to the Trust or debt incurred in connection
with the operation of the business in which the assets sold or disposed of were
used or (y) to pay dividends; (C) a transaction to which Manville is a party
pursuant to which the holders of all of the shares of Manville outstanding
prior to such transaction do not hold, directly or indirectly, shares
outstanding of the surviving corporation in substantially the same proportions
as those in which they held the outstanding shares of Manville prior to the
transaction; or (D) any other event which the Board determines, in its
discretion, would materially alter the structure of Manville or its ownership;
(iv) a sale of the business unit, division or group within which
Executive is employed, other than to another entity which is directly or
indirectly controlled by Manville as a result of which Executive is no longer
employed by an entity which is directly or indirectly controlled by Manville;
or
(v) a reduction in workforce, or the last to occur in a series of
reductions in workforce within any 24-month period, of the Company, if
Executive is employed by the Company at the time of such reduction or last
reduction, or Riverwood International Corporation ("Riverwood"), if Executive
is employed by Riverwood at the time of such reduction or last reduction, as a
result of which 80% of such workforce measured as of the date 24 months prior
to the last such reduction is no longer
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employed by the Company or Riverwood, whichever is applicable, excluding for
these purposes any reduction in the workforce of either the Company or
Riverwood attributable to transfers of employees to Manville.
In the event of a Change in Control by reason of an event described in
Section 8(g)(iv) the Company shall pay Executive in a lump sum a cash amount
equal to the sum of the amounts Executive would have received in respect of all
Performance Units granted to Executive under the 1991 Long Term Cash Incentive
Compensation Plan assuming Executive remained employed through the applicable
expiration or final payment date of such Performance Units, less any amount
paid to Executive in respect of such Performance Units prior to termination of
his employment. For purposes of calculating the sum to which Executive is
entitled it shall be assumed that all "Scheduled Dividend Payments" (as such
term is defined in the 1991 Long Term Cash Incentive Compensation Plan) not
paid at or prior to Executive's termination of employment will be paid in full
at their then estimated value as determined by the Company (without reduction
or deferral). Such payment shall be made in the event of a Change in Control
described in Section 8(g)(iv) at the time of such Change in Control and the
Performance Units and all rights related thereto shall be extinguished upon
such payment.
9. Reduction of Payments. If any payment to or for the benefit of
Executive under this Agreement either alone or together with other payments to
or for the benefit of Executive would constitute a "parachute payment" (as
defined in Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code")), the payments under this
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Agreement shall be reduced to the largest amount that will minimize or
eliminate both the imposition of the excise tax imposed by Section 4999 of the
Code and the disallowance of deductions to the Company under Section 280G of
the Code of any such payments. The determination of any reduction in the
payments under this Agreement pursuant to this Section shall be made by the
Company's independent accountants.
10. Indemnification. The Company will indemnify Executive (and his legal
representatives or other successors) to the fullest extent permitted (including
payment of expenses in advance of final disposition of a proceeding) by the
laws of the jurisdiction of incorporation of the Company, as in effect at the
time of the subject act or omission, or by the Restated Certificate of
Incorporation and By-Laws of the Company, as in effect at such time or on the
effective date of this Agreement, or by the terms of any indemnification
agreement between the Company and Executive, whichever affords or afforded
greatest protection to Executive, and Executive shall be entitled to the
protection of any insurance policies the Company may elect to maintain
generally for the benefit of its directors and officers (and to the extent the
Company maintains such an insurance policy or policies, Executive shall be
covered by such policy or policies, in accordance with its or their terms, to
the maximum extent of the coverage available for any Company officer or
director), against all costs, charges and expenses whatsoever incurred or
sustained by him or his legal representatives at the time such costs, charges
and expenses are incurred or sustained, in connection with any action, suit or
proceeding to which he (or his legal representatives or other successors) may
be
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made a party by reason of his being or having been a director, officer or
employee of the Company, Manville or any subsidiary of either of them, or his
serving or having served any other enterprise as a director, officer or
employee at the request of the Company or Manville.
11. Legal Fees. In the event of a dispute between Executive and the
Company with respect to any of Executive's rights under this Agreement, the
Company shall reimburse Executive for any and all legal fees and related
expenses incurred by him in connection with enforcing such rights, at the time
such fees and related expenses are incurred; provided that, if Executive's
claim is found by a court of competent jurisdiction to have been frivolous,
Executive shall reimburse the Company for all amounts paid by it under this
Section.
12. Confidentiality; Specific Performance. Executive will not at any time
(whether during or after his employment with the Company) disclose or use for
his own benefit or purposes, or the benefit or purposes of any other person,
firm, partnership, joint venture, association, corporation or other business
organization, entity or enterprise other than the Company and any of its
subsidiaries or affiliates, any trade secrets, information, data, or other
confidential information relating to customers, development programs, costs,
marketing, trading, investment, sales activities, promotion, credit and
financial data, manufacturing processes, financing methods, plans, or the
business and affairs of the Company generally, or of any subsidiary or
affiliate of the Company, provided that the foregoing shall not apply to
information which is not unique to the Company or which is generally known to
the industry or the public
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other than as a result of Executive's breach of this covenant. Executive agrees
that upon termination of his employment with the Company for any reason, he
will return to the Company immediately all memoranda, books, papers, plans,
information, letters and other data, and all copies thereof or therefrom, in
any way relating to the business of the Company and its affiliates, except that
he may retain personal notes, notebooks and diaries. Executive further agrees
that he will not retain or use for his account at any time any trade names,
trademark or other proprietary business designation used or owned in connection
with the business of the Company or its affiliates.
Executive acknowledges and agrees that the Company's remedies at law for a
breach or threatened breach of any of the provisions of this Section would be
inadequate and, in recognition of this fact, Executive agrees that, in the
event of such a breach or threatened breach, in addition to any remedies at
law, the Company, without posting any bond, shall be entitled to obtain
equitable relief in the form of specific performance, temporary restraining
order, temporary or permanent injunction or any other equitable remedy which
may then be available.
13. Miscellaneous.
(a) Governing Law; Liability of the Executive.
This Agreement shall be governed by and construed in accordance with the laws
of the State of Colorado. Executive shall not be subject to liability for
breach of this Agreement by reason of his termination of his employment
hereunder.
(b) Entire Agreement/Amendments/Effectiveness. This Agreement shall
supersede any and all existing employment, change-in-control or severance
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agreements between Executive and the Company or any of its affiliates and
contains the entire understanding of the parties with respect to the employment
of Executive by the Company. There are no restrictions, agreements, promises,
warranties, covenants or undertakings between the parties with respect to the
subject matter herein other than those expressly set forth herein. This
agreement and any amendment hereto shall not be effective unless and until
signed by the Chief Executive Officer of the Company and attested to by the
General Counsel of the Company.
(c) No Waiver. The failure of a party to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a waiver of
such party's rights or deprive such party of the right thereafter to insist
upon strict adherence to that term or any other term of this Agreement.
(d) Severability. In the event that any one or more of the provisions of
this Agreement shall be or become invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
of this Agreement shall not be affected thereby.
(e) Successors; Binding Agreement. (i) In the event of a Change in
Control, the Company will require the successor to the Company as Executive's
employer (whether such succession is direct or indirect, by purchase, merger,
consolidation or otherwise, to any portion of the business and/or assets of
Manville or the Company) to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean
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the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise. Prior to a Change in Control, the
term "Company" shall also mean any affiliate of the Company to which Executive
may be transferred and the Company shall cause such successor employer to be
considered the "Company" bound by the terms of this Agreement and this
Agreement shall be amended so to provide. Following a Change in Control the
term "Company" shall not mean any affiliate of the Company to which Executive
may be transferred unless Executive shall have previously approved of such
transfer in writing, in which case the Company shall cause such successor
employer to be considered the "Company" bound by the terms of this Agreement
and this Agreement shall be amended so to provide.
(ii) This Agreement shall inure to the benefit of and be enforceable
by Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Executive should die
while any amount would still be payable to Executive hereunder if Executive had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to Executive's devisee,
legatee or other designee or, if there is no such designee, to Executive's
estate. This Agreement shall not be assignable by Executive.
(f) Notice; Notice of Termination. (i) For the purpose of this Agreement,
notices and all other communications provided for in the Agreement shall be in
writing and, except as otherwise provided in paragraph (iii) below, shall be
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deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the signature page of this Agreement;
provided that all notices to the Company shall be directed to the attention of
the General Counsel of Manville, or to such other address as either party may
have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt,
(ii) Any purported termination of Executive's employment by the
Company or by Executive shall not be effective unless communicated by written
Notice of Termination to the other party hereto in accordance with paragraph
(i) above. For purposes of this Agreement, a "Notice of Termination" in the
case of a termination for Cause following a Change in Control shall mean a
notice given within ten (10) business days of the Company's having actual
knowledge of the events giving rise to such termination and in all cases shall
mean a notice which indicates the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated.
(iii) The date of termination of Executive's employment shall be the
date of receipt of the Notice of Termination, except in the case of (A)
Executive's death, in which case the date of termination of employment shall be
the date of death or (B) Executive's termination for Cause following a Change
in Control, in which case the date of termination shall be ten (10) business
days after actual receipt by Executive of
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the Notice of Termination; provided that, if within thirty (30) days after any
Notice of Termination following a Change in Control is received, the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the date of termination of Executive's
employment shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction
(which is not appealable or the time for appeal therefrom has expired and no
appeal has been perfected); and provided further that the date of termination
of Executive's employment shall be extended by a notice of dispute only if such
notice is given in good faith and the party giving such notice pursues the
resolution of such dispute with reasonable diligence. Notwithstanding the
pendency of any such dispute, the Company will continue to pay Executive his
full compensation in effect when the notice giving rise to the dispute was
given (including, but not limited to, Base Salary and incentive compensation)
or, if higher, the compensation in effect immediately prior to the Change in
Control, and continue Executive as a participant in all compensation, benefits
(including fringe benefits and perquisites) and insurance plans in which
Executive was participating when the notice giving rise to the dispute was
given, until the dispute is finally resolved in accordance with this paragraph
(iii). Amounts paid under this paragraph are in addition to all other amounts
due under this Agreement and shall not be offset against or reduce any other
amounts due under this Agreement.
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(g) Arbitration. The parties hereby agree to submit all controversies,
claims and matters of difference in any way related to this Agreement or the
performance or breach of the whole or any part hereof, to arbitration in
Denver, Colorado, according to the rules and practices of the American
Arbitration Association from time to time in force. If such rules and
practices shall conflict with the Colorado Rules of Civil Procedure or any
other provisions of Colorado law then in force, such Colorado rules and
provisions shall govern. Arbitration of any such controversy, claim or matter
of difference shall be a condition precedent to any legal action thereon. This
submission and agreement to arbitration shall be specifically enforceable.
Awards shall be final and binding on all parties to the extent and in the
manner provided by Colorado law; provided that an arbitration award shall not
be binding on the Company to the extent such award exceeds the maximum amount
the Company would be required to pay Executive pursuant to the express terms of
this Agreement. All awards may be filed by any party with the Clerk of the
District Court in the County of Denver, Colorado and an appropriate judgment
entered thereon and execution issued therefor. At the election of any party,
said award may also be filed, and judgment entered thereon and execution issued
therefor, with the clerk of one or more other courts, state or federal, having
jurisdiction over the party against whom such award is rendered or its
property.
(h) Counterparts. This Agreement may be signed in several counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
/s/ Harvey L. Perry, Jr.
-------------------------------
Harvey L. Perry, Jr.
SCHULLER INTERNATIONAL, INC.
By: /s/ W. T. Stephens
----------------------------
Chief Executive Officer
ATTEST:
/s/ R. B. Von Wald
- ------------------
General Counsel
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Harvey L. Perry, Jr.
Schedule A
Outside Directorships Held
None.
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Harvey L. Perry, Jr.
Schedule B
Incentive Compensation Plans in Effect
Annual Incentive Compensation Plan.
Manville Corporation Stock Incentive Plan.
1991 Long-Term Cash Incentive Compensation Plan for Manville Corporation.
1994 Long-Term Cash Incentive Compensation Plan for Schuller
International Group, Inc.
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Harvey L. Perry, Jr.
Schedule C
Fringe Benefit Arrangements and Perquisites in Effect
Club Initiation Fees & Dues
The Company will pay the initiation fee and dues for one country
club of the officer's choice. The initiation fee and first year's
dues will be "grossed up" for tax purposes.
Financial & Estate Planning
The Company will pay the reasonable cost of periodic financial and
estate planning.
Annual Executive Physical Exam Program
Income Tax Return Preparation
The Company will pay annual income tax return preparation fees up
to $1,000 plus additional fees if incurred on account of
job-related circumstances including the cost of representation by
return preparer during an audit.
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July 8, 1993
H. L. Perry, Jr.
3 Kokanee
Littleton, CO 80127
RE: EMPLOYMENT AGREEMENT EXTENSION
Dear Harvey:
Recently, the Board of Directors of Manville Corporation approved the extension
of your Employment Agreement for an additional year. This letter serves as
notice of the extension and, subject to execution by you and attestation by the
Company's General Counsel, an amendment to your Employment Agreement extending
the "Employment Term" (as defined in the Employment Agreement) for one year.
If you agree with this amendment, please sign both copies of this letter below
and return them to Dan Japha in the Denver Legal Department, P.O. Box 5108,
Denver, Colorado 8021 7-5108 at your earliest convenience. If you have
questions about this, please contact Dick Von Wald at 950-4911 or Dan Japha at
950-2266.
Very truly yours,
/s/ W. T. Stephens
W. T. Stephens
Chief Executive Officer
This amendment is accepted this 6th day of August, 1993.
/s/ H. L. Perry, Jr.
-------------------------
(Executive)
Attest: /s/ R. B. Von Wald
---------------------
General Counsel
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AMENDMENT TO EMPLOYMENT AGREEMENT
BETWEEN SCHULLER INTERNATIONAL, INC.
AND HARVEY L. PERRY, JR.
This AMENDMENT dated as of April 1, 1994 is by and between SCHULLER
INTERNATIONAL, INC., a Delaware corporation (the "Company"), and Harvey L.
perry, Jr. (the "Executive"), and amends the EMPLOYMENT AGREEMENT dated June 3,
1992 by and between the Company and the Executive as previously extended on
August 3, 1993 (as so extended, the "Agreement').
WHEREAS, effective as of the date hereof, the Company and the Executive
agreed to change the Executive's position and annual base salary in accordance
with the terms hereof.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:
A. The first sentence of paragraph 2 of the Agreement is hereby amended to
read as follows:
Executive shall serve as the Vice President & General Manager -
Filtration & Manufacturing.
B. The first sentence of paragraph 3 of the Agreement is hereby amended to
read as follows:
Company shall pay Executive a base salary at the rate of not less
than $150,000 per year, as the same may from time to time be
increased at the sole discretion of the Board of Directors of the
Company, or, prior to a Change in Control, decreased in the event
of across the board salary reductions within the corporate staff
group or the business division in which Executive is employed,
whichever is applicable ("Base Salary").
C. The "Employment Term" (as defined in the Agreement) is hereby extended
for one year to June 3, 1997.
D. Except as provided by this Amendment to the Agreement, the Agreement
shall remain in full force and effect.
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IN WITNESS WHEREOF, the parties have executed this Amendment to the
Agreement to be effective as of April 1, 1994.
/s/ Harvey L. Perry, Jr.
--------------------------
Harvey L. Perry, Jr.
SCHULLER INTERNATIONAL, INC.
By: /s/ W. T. Stephens
-----------------------
W. T. Stephens
Chairman of the Board
ATTEST
/s/ Richard B. Von Wald
- ----------------------------------
Richard B. Von Wald
Senior Vice President,
General Counsel and Secretary
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AMENDMENT TO EMPLOYMENT AGREEMENT
BETWEEN SCHULLER INTERNATIONAL, INC.
AND HARVEY L. PERRY, JR.
THIS AMENDMENT dated as of April 26, 1995 is by and between SCHULLER
INTERNATIONAL, INC., a Delaware corporation (the "Company"), and Harvey L.
Perry, Jr. (the "Executive"), and amends the Employment Agreement dated as of
June 3, 1992 by and between the Company and the Executive (as previously
amended and extended, the "Agreement").
WHEREAS, the Company and the Executive have agreed to amend the
Agreement as set forth herein; and
WHEREAS, the Board of Directors of Manville Corporation has approved
an extension of the Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
A. Paragraph 1 of the Agreement is hereby amended to extend the
"Employment Term" (as defined in the Agreement) until April 10, 1998.
B. The first sentence of Paragraph 2 of the Agreement is hereby amended,
effective as of April 1, 1995, to read as follows:
Executive shall serve as Vice President & General Manager of the
Performance Materials Division.
C. The first sentence of Paragraph 3 of the Agreement is hereby amended
to read as follows:
Company shall pay Executive a base salary at the rate of not less
than $175,000 per year, as the same may from time to time be
increased at the sole discretion of the Board of Directors of the
Company or, prior to a Change in Control, decreased in the event of
across the board salary reductions within the corporate staff group
or the business division in which Executive is employed, whichever
is applicable ("Base Salary").
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D. Paragraph 7(f)(i) is hereby amended to read as follows:
except for Manville, a subsidiary or an affiliate thereof, an
employee benefit plan (including any trustee of such plan, acting
as trustee) sponsored or maintained by Manville or any subsidiary
thereof or Manville Personal Injury Trust (the "Trust"), any
"person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended from time to time, and
any successor act (the "Exchange Act")) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of Manville or Schuller
International Group, Inc. ("Schuller") representing 30% or more of
the combined voting power of Manville's or Schuller's, as
applicable, then outstanding securities;
E. Paragraph 7(f)(iii)(B) shall be amended to read as follows:
a sale or other disposition or the last sale or other disposition
to occur in a series of sales and/or other dispositions within any
18-month period ("Serial Sales") by Schuller and/or one or more
subsidiaries of Schuller of assets which, in the case of Serial
Sales, as of the beginning of such 18-month period, account for
more than 40% of the consolidated revenues of Schuller and its
subsidiaries, as determined in accordance with generally accepted
accounting principles; provided, however, that no sale or
disposition of assets or stock shall be taken into account to the
extent that the proceeds of such sale or disposition (whether in
cash or in-kind) are reinvested or are, in the case of proceeds
received in kind, used in the ongoing conduct by Schuller or one or
more of its subsidiaries of the business of Schuller and/or such
subsidiary or subsidiaries, provided further that such a
reinvestment shall not be deemed to have occurred unless made
within 18 months of such sale or disposition and provided further
that, the term reinvestment shall exclude, inter alia, the use of
proceeds (x) to repay debt owed to the Trust or debt incurred in
connection with the operation of the business in which the assets
sold or disposed of were used or (y) to pay dividends.
F. Except as provided by this Amendment to the Agreement, the Agreement
shall remain in full force and effect.
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IN WITNESS WHEREOF, the parties have executed this Amendment to the
Agreement as of the date set forth above.
/s/ Harvey L. Perry, Jr.
----------------------------
Harvey L. Perry, Jr.
SCHULLER INTERNATIONAL, INC.
By: /s/ W. T. Stephens
--------------------------
W. Thomas Stephens
Chairman of the Board
ATTEST:
/s/ Richard B. Von Wald
- -----------------------------
Richard B. Von Wald
Senior Vice President,
General Counsel and Secretary
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March 14, 1996
Harvey L. Perry, Jr. - R-17
RE: EMPLOYMENT AGREEMENT EXTENSION
Dear Harv:
Recently, the Board of Directors of Manville Corporation approved an
extension of your employment agreement with Schuller International, Inc. (the
"Company"), dated June 3, 1992 (as previously amended and extended, the
"Employment Agreement"). This letter serves as notice of the extension and,
subject to execution by you and attestation by Manville Corporation's General
Counsel, an amendment to the Employment Agreement extending the "Employment
Term" (as defined in the Employment Agreement) to April 10, 1999.
To evidence your agreement to so extend the Employment Term, please sign
and date both copies of this letter where indicated and return them to Dion
Persson (Denver 11-01) at your earliest convenience. A fully executed copy
will be returned to you for your files. If you have any questions about the
extension, please call Dion Persson at 303-978-3422.
Very truly yours,
/s/ W. T. Stephens
W.T. Stephens
Chairman of the Board, President
and Chief Executive Officer
This amendment is accepted this 18th day of March, 1996.
/s/ Harvey L. Perry, Jr.
--------------------------
Harvey L. Perry, Jr.
Attest:
/s/ Richard B. Von Wald
- --------------------------------------
Richard B. Von Wald
Senior Vice President, General Counsel
& Secretary
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AMENDMENT TO EMPLOYMENT AGREEMENT
BETWEEN SCHULLER INTERNATIONAL, INC.
AND HARVEY L. PERRY, JR.
This AMENDMENT, dated as of June 7, 1996, is by and between SCHULLER
INTERNATIONAL, INC., a Delaware corporation (the "Company"), and Harvey L.
Perry, Jr. (the "Executive") and amends the EMPLOYMENT AGREEMENT, dated June 3,
1992, between the Company and the Executive (as previously amended and
extended, the "Employment Agreement").
WHEREAS, the Company and the Executive have agreed to amend the Employment
Agreement in accordance with the terms hereof.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. The first sentence of Section 2 of the Employment Agreement is hereby
amended to read as follows:
Executive shall serve as Senior Vice President and General Manager,
Performance Materials of the Company.
2. Section 8(g) of the Employment Agreement is hereby amended in its
entirety to read as follows:
(g) Change in Control. For purposes of this Agreement, the phrase
"Change in Control" shall mean the following and shall be deemed to have
occurred if any of the following events shall have occurred:
(i) any Person (as defined below) (other than Schuller
Corporation ("Schuller")), any trustee or other fiduciary holding securities
under any employee benefit plan of Schuller, or any company owned, directly or
indirectly, by the stockholders of Schuller in substantially the same
proportions as their ownership of the common stock of Schuller) becomes the
Beneficial Owner (as defined below) (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 (as defined below)),
directly or indirectly, of securities of Schuller or any Significant Subsidiary
(as defined below), representing 30 percent or more of the combined voting
power of Schuller's or such subsidiary's then outstanding securities; provided,
however, that
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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 (the
"Trust");
(ii) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board of Directors of Schuller
(the "Board"), and any new director (other than a director designated by a
person who has entered into an agreement with Schuller to effect a transaction
described in clause (i), (iii), or (iv) of this paragraph) whose election by
the Board or nomination for election by Schuller'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
Schuller owned beneficially, directly or indirectly, by the Trust is less than
50 percent of all such outstanding securities;
(iii) the consummation of a merger or consolidation of Schuller
or any subsidiary owning directly or indirectly all or substantially all of the
consolidated assets of Schuller (a "Significant Subsidiary") with any other
corporation, other than a merger or consolidation which would result in the
voting securities of Schuller 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;
(iv) the stockholders of Schuller or any affiliate approve a plan
or agreement for the sale or disposition of all or substantially all of the
consolidated assets of Schuller (other than such a sale or disposition
immediately after which such assets will be owned directly or indirectly by the
stockholders of Schuller in substantially the same proportions as their
ownership of the common stock of Schuller immediately prior to such sale or
disposition) in which case the Board shall determine the effective date of the
Change in Control resulting therefrom;
(v) a sale of the business unit, division or group within which
Executive is employed, other than to another entity which is directly or
indirectly controlled by Schuller, as a result of which Executive is no longer
employed by an entity which is directly or indirectly controlled by Schuller;
or
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(vi) any other event occurs which the Board determines, in its
discretion, would materially alter the structure of Schuller or its ownership.
(vii) Defined terms.
(A) "Beneficial Owner" shall have the meaning ascribed to
such term in Rule 13d-3 under the Exchange Act and any successor to such Rule.
(B) "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, including rules thereunder and successor
provisions and rules thereto.
(C) "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.
3. Section 9 of the Employment Agreement is hereby amended in its entirety
to read as follows:
9. [Reserved]
4. Attached hereto is a revised Schedule B to the Employment Agreement,
which shall supersede and replace any previously existing Schedule B to the
Employment Agreement.
5. Except as provided by this Amendment, the Employment Agreement shall
remain in full force and effect.
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IN WITNESS WHEREOF, the parties have executed this Amendment to be
effective as of June 7, 1996.
/s/ Harvey L. Perry, Jr.
-----------------------------
Harvey L. Perry, Jr.
SCHULLER INTERNATIONAL, INC.
/s/ W. T. Stephens
------------------------------
W. Thomas Stephens
Chief Executive Officer and President
ATTEST:
/s/ Richard B. Von Wald
- -----------------------------
Richard B. Von Wald
Executive Vice President,
General Counsel and Secretary
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Schedule B
Incentive Compensation Plan in Effect
Annual Incentive Compensation Plan for Schuller Corporation
1994 Long-Term Cash Incentive Compensation Plan for Schuller
International Group, Inc.
Schuller Corporation 1996 Stock Award Plan
Schuller Corporation 1996 Deferred Compensation Plan
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EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of April 10, 1992, by and between MANVILLE
CORPORATION, a Delaware corporation ("Manville" or the "Company") and Richard
B. Von Wald, (the "Executive").
WHEREAS the Company desires to continue to employ Executive and to enter
into an agreement embodying the terms of such employment (the "Agreement"); and
WHEREAS Executive desires to continue such employment and enter into such
an Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. Term of Employment. The Executive shall be employed by the Company for
a period commencing on April 10, 1992 and, except as otherwise provided herein,
ending three years from such date. At the end of each year of employment
hereunder, the Board of Directors of the Company and the Chief Executive
Officer of the Company shall review this Agreement and the Executive's
performance hereunder and shall determine, in their sole discretion, whether or
not to extend the period of Executive's employment pursuant to this Agreement
by one year. The period of Executive's employment hereunder, including any
extension or extensions pursuant to the foregoing sentence, is referred to
hereinafter as the "Employment Term". A failure to renew this Agreement shall
not constitutes termination of Executive's employment.
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2. Position. Executive shall serve as Senior Vice President and General
Counsel & Secretary, Manville. Executive shall devote substantially all of his
business time and energies to the business of the Company. Notwithstanding the
foregoing, Executive may (a) continue to serve on the board of directors of any
business corporation on which he is serving as of the date of this Agreement
(as shown on Schedule A), (b) serve on the boards of directors or committees of
non-profit organizations and (c) with the prior approval of the Chief Executive
Officer of the Company or of the Board of Directors of the Company, serve on
the boards of directors of other business corporations, provided that in the
Company's sole reasonable discretion none of the foregoing activities
materially interferes with the performance of Executive's duties hereunder.
3. Base Salary. Company shall pay Executive a base salary at the rate of
not less than $225,000 per year, as the same may from time to time be increased
at the sole discretion of the Board of Directors of the Company or, prior to a
Change in Control, decreased in the event of across the board salary reductions
within the corporate staff group or the business division in which Executive is
employed, whichever is applicable ("Base Salary").
4. Incentive Compensation. Executive shall participate in the Manville
executive incentive compensation plans, as in effect from time to time during
the Employment Term, for which he is eligible. (References herein to "Manville
executive incentive compensation plans" whether annual or long-term, shall
include such plans maintained by Manville, from time to time.) The Manville
executive incentive
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compensation plans in effect on the date hereof in which Executive participates
are listed on Schedule B.
5. Employee Benefits. Executive shall be eligible to participate in such
other of the Company's employee benefit plans and to receive such benefits for
which his level of employment makes him eligible, in accordance with the
Company's policies as in effect from time to time during the Employment Term.
6. Business Expenses. Necessary and reasonable business expenses incurred
by Executive during the Employment Term shall be reimbursed in accordance with
Company policies.
7. Termination Prior to a Change in Control.
(a) Retirement. This Agreement shall terminate automatically upon
Executive's Retirement, as defined hereafter. For purposes of this Agreement,
"Retirement" means termination of Executive's employment initiated by
Executive, other than for Good Reason as defined in Section 7(e) or Section
8(e) hereof, whichever is applicable, whereby Executive is entitled to receive
an immediately payable benefit, including an early retirement benefit, under
the Company's retirement plan generally applicable to its salaried employees or
under any retirement arrangement established with respect to Executive with his
consent, in either case, whether or not Executive commences to receive such
benefit at the time of such termination. Upon termination of Executive's
employment by reason of Retirement prior to a Change in Control, Executive
shall be entitled to benefits determined in accordance with the Company's
retirement, benefit and insurance programs in effect at such time.
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(b) Death or Disability.
(i) Disability. Executive's employment hereunder may be
terminated by the Company if Executive becomes physically or mentally
incapacitated and is therefore unable for a period of six (6) consecutive
months to perform his duties (such incapacity is hereinafter referred to as
"Disability"). Any question as to the existence of the Disability of the
Executive as to which the Executive and the Company cannot agree shall be
determined in writing by a qualified independent physician mutually acceptable
to the Executive and the Company. Upon any such termination for Disability
prior to a Change in Control, Executive shall be entitled to receive his Base
Salary through the date on which the Executive is first eligible to receive
payment of disability benefits in lieu of salary under the Company's employee
benefit plans as then in effect.
(ii) Death. Upon termination for death prior to a Change in
Control, Executive shall be entitled to his Base Salary at the rate in effect
at the time of Executive's death through the end of the month in which his
death occurs.
(iii) Death or Disability Benefits. All other benefits to which
Executive may be entitled following Executive's termination for death or
Disability prior to a Change in Control shall be determined in accordance with
the plans, policies and practices of the Company.
(c) For Cause by the Company; Voluntary Termination by Executive.
Executive's employment hereunder may be terminated by the Company for "Cause".
For purposes of this Agreement, prior to a Change in Control, "Cause" shall
mean (i)
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Executive's willful and continued failure substantially to perform his duties
hereunder (other than as a result of total or partial incapacity due to
physical or mental illness or as a result of termination by Executive for Good
Reason as defined in Section 7(e) below), (ii) Executive's dishonesty in the
performance of his duties hereunder or (iii) Executive's conviction of a felony
under the laws of the United States or any state thereof. If Executive is
terminated for Cause, or if Executive voluntarily terminates employment
hereunder other than for Good Reason, in either case, prior to a Change in
Control, he shall be entitled to receive his Base Salary through the date of
termination. All other benefits, if any, payable to Executive following such
termination of Executive's employment shall be determined in accordance with
the plans, policies and practices of the Company.
(d) Without Cause by the Company or with Good Reason by Executive. If
prior to a Change in Control Executive's employment hereunder is terminated by
the Company without Cause (other than by reason of death or Disability) or by
Executive with "Good Reason" (as defined in Section 7(e) below), Executive
shall be entitled to receive the following benefits:
(i) The Company shall pay Executive at the time of such termination
in a lump sum a cash amount equal to two times his Base Salary in effect at the
time of such termination or, in the event of termination by the Executive on
account of an event described in Section 7(e)(iv) below, the Base Salary as in
effect prior to the reduction or reductions referred to therein plus the bonus
the Executive would have earned in respect of the year of termination under the
Manville annual incentive
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compensation plan, if any, in effect at the date of termination or, in the
event of a termination by Executive by reason of an event described in Section
7(e)(vi), the plan in effect prior to the elimination referred to therein,
determined as if the Executive had been employed by the Company for the full
year and without regard to any right reserved by the Company to decrease or
eliminate such bonus, and assuming actual performance had equaled 100% of the
performance objective established for such year pursuant to the terms of such
plan.
(ii) For a 24-month period after such termination, the Company shall
cause Executive to be provided with life, accident, medical, dental and
prescription insurance benefits substantially similar to, and on the same terms
as, those benefits elected and received by Executive under the Company's "Flex
Benefit" program immediately prior to such termination; provided that,
Executive shall be charged an amount equal to any monthly payroll deduction
charged for similar benefits to executives in positions similar to that which
Executive held before his termination; and provided further that, if Executive
receives medical benefits under the Manville Retiree Comprehensive Health Care
Plan and post-retirement life insurance benefits (collectively, "Retiree
Medical and Life Insurance Benefits"), at any time during the 24-month period
referred to above, once such benefits begin Executive shall be entitled only to
Retiree Medical and Life Insurance Benefits.
(iii) For a period of 24 months after such termination, the
Company shall provide or cause Executive to be provided with the perquisites
listed on Schedule C, attached hereto, as may be amended by the Company from
time to time
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without Executive's consent prior to such termination (provided that nothing
herein shall be deemed to permit such an amendment without Executive's consent
following a Change in Control), on the same terms and conditions on which such
perquisites were provided prior to Executive's termination.
(iv) In addition to all other amounts payable to Executive under this
Section 7(d), Executive shall be entitled to receive all benefits payable to
Executive under any other plan, policy or agreement relating to retirement or
other benefits in accordance with the terms of such plans, policies or
agreements; provided, however that, amounts paid pursuant to this Section 7(d)
shall be in lieu of any payments under any Manville separation policy.
(v) The Company shall provide Executive with outplacement services
from the firm of Executive's choice at a cost to the Company not to exceed the
lesser of (A) 20% of Executive's Base Salary in effect at the time of
Executive's termination of employment with the Company or (B) $50,000.
(e) Good Reason. For purposes of this Agreement, prior to a Change in
Control, "Good Reason" shall mean:
(i) a material reduction in Executive's responsibilities, authorities
or duties, all as contemplated by Section 2 hereof; provided, however, that
such reduction by reason of a termination for Cause or Disability shall not
constitute Good Reason;
(ii) Executive's job is eliminated other than by reason of promotion
or termination for Cause or Disability.
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(iii) the Company fails to pay Executive any amount otherwise vested
and due hereunder or under any plan or policy of the Company;
(iv) a reduction in Executive's Base Salary except in the event of an
across the board salary reduction within the corporate staff group or the
business division in which Executive is employed, whichever is applicable;
(v) a reduction in Executive's aggregate level of benefits under the
Company's pension, life insurance, medical, health and accident, disability,
deferred compensation or savings or similar plans, except in the event of an
across the board reduction in such benefits within the corporate staff group or
the business division in which Executive is employed, whichever is applicable;
(vi) the elimination of an annual incentive compensation plan; or
(vii) the Executive's office is relocated outside of a 50-mile radius
of Denver, Colorado without his written consent.
If Executive provides to the Company a Notice of Termination, as defined
in Section 13(f), in connection with an event described in clauses (i) through
(vii) of this Section 7(e), the Company shall have ten (10) business days from
the date of receipt of such notice to effect a cure of the event described
therein, and upon cure thereof by the Company to Executive's reasonable
satisfaction, such event shall no longer constitute Good Reason for purposes of
this Agreement.
(f) Mitigation. In the event of termination of Executive's employment
hereunder by the Company without Cause or by Executive with Good Reason prior
to a Change in Control, benefits otherwise receivable by Executive pursuant to
subsection
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7(d)(ii) shall be reduced to the extent comparable benefits are received by
Executive during the 24-month period following such termination. Executive
shall report to the Company any such benefits actually received by Executive.
8. Termination Following a Change in Control.
(a) Retirement. This Agreement shall terminate automatically upon
Executive's Retirement. Upon a termination of Executive's employment by reason
of Retirement following a Change in Control, Executive shall be entitled to
benefits determined in accordance with the Company's retirement, benefit and
insurance programs in effect immediately prior to the Change in Control or, if
more generous, such programs in effect at the time of such Retirement.
(b) Death or Disability.
(i) Disability. Executive's employment hereunder may be
terminated by reason of Executive's Disability, subject to the procedure for
determining such Disability outlined in Section 7(b)(i). Upon any termination
for Disability following a Change in Control, Executive shall be entitled to
receive his Base Salary for a two-year period ending on the second anniversary
of Executive's date of termination. Such Base Salary shall be paid in equal
monthly installments and shall be reduced by any amounts received as disability
benefits in lieu of salary under the Company's employee benefit plans.
(ii) Death. Upon termination for death following a Change in
Control, Executive shall be entitled to (x) his Base Salary at the rate in
effect at the time of Executive's death through the end of the month in which
his death occurs and (y) if and
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to the extent the death benefits provided Executive by the Company are less
than would have been paid immediately prior to a Change in Control, a lump sum
payment of cash in an amount equal to the value of such shortfall. Any such
lump sum payment shall be made within ten (10) business days following
Executive's death.
(iii) Death or Disability Benefits. All other benefits to which
Executive may be entitled upon Executive's termination for death or Disability
following a Change in Control shall be determined in accordance with the plans,
policies and practices of the Company in effect immediately prior to the Change
in Control or, if more generous, such plans, policies and practices as in
effect at any time following the Change in Control; provided that, nothing in
this Section 8(b)(iii) shall be interpreted so as to result in the duplication
of the benefits provided under Section 8(b)(i) or (ii).
(c) For Cause by the Company; Voluntary Termination by Executive. For
purposes of this Agreement, following a Change in Control, "Cause" shall mean
(i) Executive's willful and continued failure substantially to perform his
duties hereunder (other than as a result of total or partial incapacity due to
physical or mental illness or as a result of termination by Executive for Good
Reason as defined in Section 8(e) below) after a written demand for substantial
performance is delivered to Executive personally and Executive shall have
failed during the sixty-day period following such written demand to have
corrected such failure, (ii) Executive's dishonesty in the performance of his
duties hereunder or (iii) Executive's conviction of a felony under the laws of
the United States or any state thereof. For purposes of this Section 8(c) no
act or failure to act on Executive's part shall be deemed willful unless done
or omitted to be done by
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Executive not in good faith and without reasonable belief that Executive's
action or omission was in the best interest of the Company.
If Executive is terminated for Cause, or if Executive voluntarily
terminates his employment with the Company other than for Good Reason, in
either case, following a Change in Control, he shall be entitled to receive his
Base Salary through the date of termination. All other benefits, if any,
payable to Executive following such termination of Executive's employment shall
be determined in accordance with the plans, policies and practices of the
Company.
(d) Without Cause by the Company or with Good Reason by Executive. If
Executive's employment is terminated by the Company following a Change in
Control without Cause (other than by reason of death or Disability) or by
Executive with "Good Reason" (which following a Change in Control shall have
the meaning set forth in Section 8(e) below), Executive shall be entitled to
receive the following benefits:
(i) The Company shall pay Executive at the time of such termination
in a lump sum a cash amount equal to two times the sum of (A) his Base Salary
in effect at the time of such termination or, in the event of termination by
the Executive by reason of an event described in Section 8(e)(iv) below, the
Base Salary as in effect prior to the reduction or reductions referred to
therein plus (B) the bonus the Executive would have earned in respect of the
year of termination under the Manville annual incentive compensation plan, if
any, in effect at the date of termination or in the event of a termination by
Executive by reason of an event described in Section 8(e)(v),
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the plan in effect immediately prior to the reduction or reductions
referred to therein, determined as if the Executive had been employed by the
Company for the full year and without regard to any right reserved by the
Company to decrease or eliminate such bonus, and assuming actual performance
had equaled 100% of the performance objective established for such year
pursuant to the terms of such plan.
(ii) The Company shall pay Executive in a lump sum a cash amount equal
to a fraction of the annual bonus which (absent such termination and without
regard to any right reserved by the Company to decrease or eliminate such
bonus) Executive would have earned with respect to the year of termination
under the Manville annual executive incentive compensation plan, if any, in
effect at the date of termination or, in the event of a termination by
Executive by reason of an event described in Section 8(e)(v), the plan in
effect prior to the reduction or reductions referred to therein, assuming
actual performance had equaled 100% of the performance objective established
for such year pursuant to the terms of such plan, the numerator of which
fraction is the number of days in such year during which the Executive was
employed by the Company and the denominator of which is 365. Such payment shall
be made at the time of Executive's termination.
(iii) The Company shall pay Executive in a lump sum a cash amount
equal to the sum of the amounts Executive would have received in respect of all
Performance Units (and other similar interests) granted to Executive under the
1991 Long Term Cash Incentive Compensation Plan (or any other Manville
long-term cash incentive plan adopted after the date hereof) assuming Executive
remained employed
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through the applicable expiration or final payment date of such Performance
Units or other interests, less any amount paid to Executive in respect of such
Performance Units and other interests prior to termination of his employment.
For purposes of calculating the sum to which Executive is entitled it shall be
assumed that all "Scheduled Dividend Payments" (as such term is defined in the
1991 Long Term Cash Incentive Compensation Plan) not paid at or prior to
Executive's termination of employment will be paid in full at their then
estimated value, as determined by the Company (without reduction or deferral).
Such payment shall be made at the time of Executive's termination.
(iv) If Executive is age 55 or older at the time of such termination,
Executive shall receive credit under the Supplemental Plan for Participants in
the Manville Salaried Retirement Plan for two additional years of service for
purposes of both vesting and accrual of benefits.
(v) For a 36-month period following Executive's termination, the
Company shall pay Executive in monthly installments the sum of the monthly
costs to Executive of purchasing life, accident, medical, dental and
prescription insurance benefits substantially similar to such benefits elected
and received by Executive under the Company's "Flex Benefit" program
immediately prior to Executive's termination or, if more generous, immediately
prior to the Change in Control ("Continued Benefits") less the monthly payroll
deduction, if any, charged to Executive immediately prior to Executive's
termination, or, if applicable, immediately prior to the Change in Control, for
any of such Continued Benefits; notwithstanding the foregoing, if Executive
begins to
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receive Retiree Medical and Life Insurance Benefits at any time during the
36-month period referred to above, once such benefits begin, the monthly
payment due Executive under the preceding clause shall equal the monthly costs
to Executive of purchasing Continued Benefits not provided by the Company to
Executive as Retiree Medical and Life Insurance Benefits.
(vi) For a 24-month period after such termination, the Company shall
provide or cause Executive to be provided with the perquisites listed on
Schedule C, attached hereto (which the Company may amend from time to time
prior to a Change in Control, without Executive's consent), on the same terms
and conditions on which such perquisites were provided at the time of
Executive's termination or, if more generous, immediately prior to such
termination.
(vii) In addition to all other amounts payable to Executive under this
Section 8(d), Executive shall be entitled to receive all benefits payable to
Executive under any other plan, policy or agreement relating to retirement or
other benefits, in accordance with the terms of such plans, policies or
agreements; provided, however that, amounts paid pursuant to this Section 8(d)
shall be in lieu of any payments under any Manville separation policy.
(viii) The Company shall provide Executive with outplacement services
from the firm of Executive's choice at a cost to the Company not to exceed 20%
of Executive's Base Salary in effect at the time of such termination or, in the
event of termination by Executive by reason of an event described in Section
8(e)(iv) below, the Base Salary as in effect prior to the reduction or
reductions referred to therein.
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(e) Good Reason Following a Change in Control. For purposes of this
Agreement, following a Change in Control, "Good Reason" shall mean:
(i) a material adverse change in the nature or scope of Executive's
responsibilities, authorities, duties and/or position (including by reason of a
substantial reduction in the size of the Company or other substantial change in
the character or scope of the Company's operations);
(ii) Executive no longer serves in the position described in
Section 2, other than by reason of a promotion or a termination for Cause or
Disability;
(iii) the Company fails to pay Executive any amounts otherwise
vested and due hereunder or under any plan or policy of the Company;
(iv) a reduction in the Executive's Base Salary in effect
immediately prior to the Change in Control or as the same may be increased from
time to time;
(v) a reduction in the Executive's incentive compensation
opportunity, as defined below, under the Manville executive incentive
compensation plans as in effect immediately prior to the Change in Control or
as the same may be increased from time to time (absent, in the case of any such
reduction relative to Executive's annual bonus, a corresponding increase in his
Base Salary);
(vi) the failure of the Company, to continue to provide Executive
with benefits and perquisites which are substantially similar in the aggregate
to those enjoyed by Executive under the Company's pension, life insurance,
medical, health and accident, disability, deferred compensation or savings or
similar plans and fringe benefit
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programs (including vacation) in which Executive was participating immediately
prior to the Change in Control; or the failure by the Company to continue to
provide Executive with directors' or officers' insurance, as applicable, at the
level maintained immediately prior to the Change in Control;
(vii) the Executive's office is relocated outside of a 50-mile radius
of Denver, Colorado without his written consent;
(viii) the failure of the Company to obtain an agreement from any
successor to assume and agree to perform this Agreement, as contemplated in
Section 13(e) hereof; or
(ix) any purported termination of Executive's employment by the
Company which is not effected pursuant to a Notice of Termination satisfying
the requirements of Section 13(f) and, if applicable, following the written
demand described in Section 8(c) and the relevant cure period.
If Executive provides a Notice of Termination, as defined in Section
13(f), in connection with an event described in clauses (i) through (vii) of
this Section 8(e), to the Company, the Company shall have ten (10) business
days from the date of receipt of such notice to effect a cure of the event
described therein, and upon cure thereof by the Company to Executive's
reasonable satisfaction, such event shall no longer constitute Good Reason for
purposes of this Agreement.
(f) Reduction in Incentive Compensation Opportunity. For purposes of this
Agreement, a "reduction in the Executive's incentive compensation opportunity"
under the Manville executive incentive compensation plans shall include
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(i) the failure to maintain both an annual and a long-term incentive
plan;
(ii) any reduction or elimination by the Company of Executive's annual
or long-term incentive compensation pursuant to any reserved right under any
such plan to decrease or eliminate such bonus or award;
(iii) any reduction in Executive's participation level under any such
plan; and
(iv) any adverse change in the payout schedule or its equivalent or in
the manner of assessing actual performance under any such plan and/or any
extraordinary change in the applicable performance criteria thereunder.
(g) Change in Control. For purposes of this Agreement, the phrase "Change
in Control" shall mean the following and shall be deemed to have occurred if
any of the following events shall have occurred:
(i) except for Manville, a subsidiary or an affiliate thereof, an
employee benefit plan (including any trustee of such plan, acting as trustee)
sponsored or maintained by Manville or any subsidiary thereof or the Manville
Personal Injury Settlement Trust (the "Trust"), any "person" (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended from time to time, and any successor act (the "Exchange Act") is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly of securities of Manville representing 30% or more
of the combined voting power of Manville's then outstanding securities;
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(ii) at least 40% of the directors of Manville constitute persons who
were not members of the Board on the date hereof;
(iii) (A) the dissolution of Manville; (B) a sale or other disposition
or the last sale or other disposition to occur in a series of sales and/or
other dispositions within any 18-month period ("Serial Sales") by Manville
and/or one or more subsidiaries of Manville of assets (including any sale
through a public offering of shares of voting stock of a Manville subsidiary by
Manville or by any subsidiary thereof) which, in the case of Serial Sales, as
of the beginning of such 18-month period, account for (or, in the case of stock
sold through a public offering, which represents indirect ownership on a
proportionate basis of assets accounting for) more than 40% of the consolidated
revenues of Manville and its subsidiaries, as determined in accordance with
generally accepted accounting principles; provided, however, that no sale or
disposition of assets or stock shall be taken into account to the extent that
the proceeds of such sale or disposition (whether in cash or in-kind) are
reinvested or are, in the case of proceeds received in-kind, used in the
ongoing conduct by Manville or one or more of its subsidiaries of the business
of Manville and/or such subsidiary or subsidiaries, provided further that such
a reinvestment shall not be deemed to have occurred unless made within 18
months of such sale or disposition and provided further that, the term
reinvestment shall exclude, inter alia, the use of proceeds (x) to repay debt
owed to the Trust or debt incurred in connection with the operation of the
business in which the assets sold or disposed of were used or (y) to pay
dividends; (C) a transaction to which Manville is a party pursuant to which the
holders of all of the shares of Manville
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outstanding prior to such transaction do not hold, directly or indirectly,
shares outstanding of the surviving corporation in substantially the same
proportions as those in which they held the outstanding shares of Manville
prior to the transaction; or (D) any other event which the Board determines, in
its discretion, would materially alter the structure of Manville or its
ownership;
(iv) a reduction in workforce, or the last to occur in a series of
reductions in workforce within any 24-month period, of Manville, Schuller
International, Inc. ("Schuller") or Riverwood International Corporation
("Riverwood"), as a result of which 80% of the workforce of Manville, Schuller
or Riverwood, measured as the date 24 months prior to the last such reduction,
is no longer employed by Manville, Schuller or Riverwood, whichever is
applicable, excluding for these purposes any reduction in the workforce or
Manville attributable to transfers of employees to either Schuller or Riverwood
or any reduction in the workforce of either Schuller or Riverwood attributable
to transfers of employees to Manville.
9. Reduction of Payments. If any payment to or for the benefit of
Executive under this Agreement either alone or together with other payments to
or for the benefit of Executive would constitute a "parachute payment" (as
defined in Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code")), the payments under this Agreement shall be reduced to the largest
amount that will minimize or eliminate both the imposition of the excise tax
imposed by Section 4999 of the Code and the disallowance of deductions to the
Company under Section 280G of the Code of any such payments. The determination
of any reduction in the payments under this
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Agreement pursuant to this Section shall be made by the Company's independent
accountants.
10. Indemnification. The Company will indemnify the Executive (and his
legal representatives or other successors) to the fullest extent permitted
(including payment of expenses in advance of final disposition of a proceeding)
by the laws of the jurisdiction of incorporation of the Company, as in effect
at the time of the subject act or omission, or by the Restated Certificate of
Incorporation and By-Laws of the Company, as in effect at such time or on the
effective date of this Agreement, or by the terms of any indemnification
agreement between the Company and the Executive, whichever affords or afforded
greatest protection to the Executive, and the Executive shall be entitled to
the protection of any insurance policies the Company may elect to maintain
generally for the benefit of its directors and officers (and to the extent the
Company maintains such an insurance policy or policies, the Executive shall be
covered by such policy or policies, in accordance with its or their terms, to
the maximum extent of the coverage available for any Company officer or
director), against all costs, charges and expenses whatsoever incurred or
sustained by him or his legal representatives at the time such costs, charges
and expenses are incurred or sustained, in connection with any action, suit or
proceeding to which he (or his legal representatives or other successors) may
be made a party by reason of his being or having been a director, officer or
employee of the Company or any subsidiary or his serving or having served any
other enterprise as a director, officer or employee at the request of the
Company.
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11. Legal Fees. In the event of a dispute between the Executive and the
Company with respect to any of the Executive's rights under this Agreement, the
Company shall reimburse the Executive for any and all legal fees and related
expenses incurred by him in connection with enforcing such rights, at the time
such fees and related expenses are incurred; provided that, if Executive's
claim is found by a court of competent jurisdiction to have been frivolous,
Executive shall reimburse the Company for all amounts paid by it under this
Section.
12. Confidentiality; Specific Performance. Executive will not at any time
(whether during or after his employment with the Company) disclose or use for
his own benefit or purposes, or the benefit or purposes of any other person,
firm, partnership, joint venture, association, corporation or other business
organization, entity or enterprise other than the Company and any of its
subsidiaries or affiliates, any trade secrets, information, data, or other
confidential information relating to customers, development programs, costs,
marketing, trading, investment, sales activities, promotion, credit and
financial data, manufacturing processes, financing methods, plans, or the
business and affairs of the Company generally, or of any subsidiary or
affiliate of the Company, provided that the foregoing shall not apply to
information which is not unique to the Company or which is generally known to
the industry or the public other than as a result of Executive's breach of this
covenant. Executive agrees that upon termination of his employment with the
Company for any reason, he will return to the Company immediately all
memoranda, books, papers, plans, information, letters and other data, and all
copies thereof or therefrom, in any way relating to the business
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of the Company and its affiliates, except that he may retain personal notes,
notebooks and diaries. Executive further agrees that he will not retain or use
for his account at any time any trade names, trademark or other proprietary
business designation used or owned in connection with the business of the
Company or its affiliates.
Executive acknowledges and agrees that the Company's remedies at law for a
breach or threatened breach of any of the provisions of this Section would be
inadequate and, in recognition of this fact, Executive agrees that, in the
event of such a breach or threatened breach, in addition to any remedies at
law, the Company, without posting any bond, shall be entitled to obtain
equitable relief in the form of specific performance, temporary restraining
order, temporary or permanent injunction or any other equitable remedy which
may then be available.
13. Miscellaneous.
(a) Governing Law; Liability of the Executive.
This Agreement shall be governed by and construed in accordance with the laws
of the State of Colorado. The Executive shall not be subject to liability for
breach of this Agreement by reason of his termination of his employment
hereunder.
(b) Entire Agreement/Amendments/Effectiveness. This Agreement shall
supersede any and all existing employment, change-in-control or severance
agreements between Executive and the Company or any of its affiliates and
contains the entire understanding of the parties with respect to the employment
of Executive by the Company. There are no restrictions, agreements, promises,
warranties, covenants or undertakings between the parties with respect to the
subject matter herein other than
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those expressly set forth herein. THIS AGREEMENT AND ANY AMENDMENT HERETO SHALL
NOT BE EFFECTIVE UNLESS AND UNTIL SIGNED BY THE CHIEF EXECUTIVE OFFICER OF THE
COMPANY AND ATTESTED TO BY THE GENERAL COUNSEL OF THE COMPANY.
(c) No Waiver. The failure of a party to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a waiver of
such party's rights or deprive such party of the right thereafter to insist
upon strict adherence to that term or any other term of this Agreement.
(d) Severability. In the event that any one or more of the provisions of
this Agreement shall be or become invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
of this Agreement shall not be affected thereby.
(e) Successors; Binding Agreement. (i) In the event of a Change in
Control, the Company will require the successor to the Company as Executive's
employer (whether such succession is direct or indirect, by purchase, merger,
consolidation or otherwise, to any portion of the business and/or assets of the
Company) to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise. Prior to a Change in Control, the
term "Company" shall also mean any
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<PAGE> 110
affiliate of the Company to which Executive may be transferred and the
Company shall cause such successor employer to be considered the "Company"
bound by the terms of this Agreement and this Agreement shall be amended so to
provide. Following a Change in Control the term "Company" shall not mean any
affiliate of the Company to which Executive may be transferred unless Executive
shall have previously approved of such transfer in writing, in which case the
Company shall cause such successor employer to be considered the "Company"
bound by the terms of this Agreement and this Agreement shall be amended so to
provide.
(ii) This Agreement shall inure to the benefit of and be enforceable
by Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Executive should die
while any amount would still be payable to Executive hereunder if Executive had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to Executive's devisee,
legatee or other designee or, if there is no such designee, to Executive's
estate. This Agreement shall not be assignable by Executive.
(f) Notice; Notice of Termination. (i) For the purpose of this Agreement,
notices and all other communications provided for in the Agreement shall be in
writing and, except as otherwise provided in paragraph (ii) below, shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the signature page of this Agreement;
provided that all notices to the Company
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<PAGE> 111
shall be directed to the attention of the General Counsel of Manville, or to
such other address as either party may have furnished to the other in writing
in accordance herewith, except that notice of change of address shall be
effective only upon receipt,
(ii) Any purported termination of Executive's employment by the
Company or by Executive shall not be effective unless communicated by written
Notice of Termination to the other party hereto in accordance with paragraph
(i) above. For purposes of this Agreement, a "Notice of Termination" in the
case of a termination for Cause following a Change in Control shall mean a
notice given within ten (10) business days of the Company's having actual
knowledge of the events giving rise to such termination and in all cases shall
mean a notice which indicates the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated.
(iii) The date of termination of Executive's employment shall be the
date of receipt of the Notice of Termination, except in the case of (A)
Executive's death, in which case the date of termination of employment shall be
the date of death or (B) Executive's termination for Cause following a Change
in Control, in which case the date of termination shall be ten (10) business
days after actual receipt by Executive of the Notice of Termination; provided
that, if within thirty (30) days after any Notice of Termination following a
Change in Control is received, the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the termination, the
date of termination of Executive's employment shall be the date on which the
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<PAGE> 112
dispute is finally determined, either by mutual written agreement of the
parties, by a binding arbitration award, or by a final judgment, order or
decree of a court of competent jurisdiction (which is not appealable or the
time for appeal therefrom has expired and no appeal has been perfected); and
provided further that the date of termination of Executive's employment shall
be extended by a notice of dispute only if such notice is given in good faith
and the party giving such notice pursues the resolution of such dispute with
reasonable diligence. Notwithstanding the pendency of any such dispute, the
Company will continue to pay Executive his full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to,
Base Salary and incentive compensation) or, if higher, the compensation in
effect immediately prior to the Change in Control, and continue Executive as a
participant in all compensation, benefits (including fringe benefits and
perquisites) and insurance plans in which Executive was participating when the
notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this paragraph (iii). Amounts paid under this
paragraph are in addition to all other amounts due under this Agreement and
shall not be offset against or reduce any other amounts due under this
Agreement.
(g) Arbitration. The parties hereby agree to submit all controversies,
claims and matters of difference in any way related to this Agreement or the
performance or breach of the whole or any part hereof, to arbitration in
Denver, Colorado, according to the rules and practices of the American
Arbitration Association from time to time in force. If such rules and practices
shall conflict with the Colorado
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Rules of Civil Procedure or any other provisions of Colorado law then in force,
such Colorado rules and provisions shall govern. Arbitration of any such
controversy, claim or matter of difference shall be a condition precedent to
any legal action thereon. This submission and agreement to arbitration shall be
specifically enforceable.
Awards shall be final and binding on all parties to the extent and in the
manner provided by Colorado law; provided that an arbitration award shall not
be binding on the Company to the extent such award exceeds the maximum amount
the Company would be required to pay Executive pursuant to the express terms of
this Agreement. All awards may be filed by any party with the Clerk of the
District Court in the County of Denver, Colorado and an appropriate judgment
entered thereon and execution issued therefor. At the election of any party,
said award may also be filed, and judgment entered thereon and execution issued
therefor, with the clerk of one or more other courts, state or federal, having
jurisdiction over the party against whom such award is rendered or its
property.
(h) Counterparts. This Agreement may be signed in several counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
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<PAGE> 114
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
/s/ Richard B. Von Wald
----------------------------
Richard B. Von Wald
SCHULLER INTERNATIONAL, INC.
By: /s/ W. T. Stephens
--------------------------
Chief Executive Officer
ATTEST:
/s/ R. B. Von Wald
- ------------------
General Counsel
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Richard B. Von Wald
Level II
Schedule A
Outside Directorships Held
None.
115
<PAGE> 116
Richard B. Von Wald
Level II
Schedule B
Incentive Compensation Plans in Effect
Annual Incentive Compensation Plan for Manville Corporation.
1991 Long-Term Cash Incentive Compensation Plan for Manville Corporation.
Manville Corporation Stock Incentive Plan.
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Richard B. Von Wald
Level II
Schedule C
Fringe Benefit Arrangements and Perquisites in Effect
Club Initiation Fees & Dues
The Company will pay the initiation fee and dues for one country
club and one luncheon or city club of the officer's choice. The
initiation fee and first year's dues will be "grossed up" for tax
purposes.
Financial & Estate Planning
The Company will pay the reasonable cost of periodic financial and
estate planning.
Annual Executive Physical Exam Program
Income Tax Return Preparation
The Company will pay annually up to $1,100 plus additional fees if
incurred on account of job-related circumstances and the cost of
representation by return preparer during an audit.
Executive Alarm System
The Company pays the cost of the installation and maintenance of a
24 hour fire, smoke and security monitoring system for the
Executive's residence.
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<PAGE> 118
July 21, 1993
R. B. Von Wald
4 Cherry Hills Farm Drive
Englewood, CO 80110
RE: EMPLOYMENT AGREEMENT EXTENSION
Dear Dick:
Recently, the Board of Directors of Manville Corporation approved the extension
of your Employment Agreement for an additional year. This letter serves as
notice of the extension and, subject to execution by you and attestation by the
Company's General Counsel, an amendment to your Employment Agreement extending
the "Employment Term" (as defined in the Employment Agreement) for one year.
If you agree with this amendment, please sign both copies of this letter below
and return them to Dan Japha in the Denver Legal Department, P.O. Box 5108,
Denver, Colorado 8021 7-5108 at your earliest convenience. If you have
questions about this, please contact Dick Von Wald at 950-4911 or Dan Japha at
950-2266.
Very truly yours,
/s/ W. T. Stephens
W. T. Stephens
Chief Executive Officer
This amendment is accepted this 1st day of October, 1993.
/s/ R. B. Von Wald
--------------------
(Executive)
Attest: /s/ R. B. Von Wald
-------------------
General Counsel
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<PAGE> 119
Amendment No. 1
to the Employment Agreement dated April 10, 1992
by and between Manville Corporation (the "Company")
and Richard B. Von Wald (the "Executive")
WHEREAS, the Company and Executive have entered into the Supplemental
Retirement Agreement between Richard B. Von Wald and Manville Corporation,
dated as of November 4, 1994 (the "Supplemental Retirement Agreement");
WHEREAS, a condition to the effectiveness of the Supplemental Retirement
Agreement is the amendment of the above-referenced employment agreement (the
"Employment Agreement") as set forth herein;
NOW THEREFORE, the parties agree as follows:
1. Section 7(e)(iii) of the Employment Agreement is hereby amended and
restated in its entirety to read as follows:
"(iii) the Company fails to pay Executive any amount otherwise vested and
due hereunder or under any plan or policy of the Company (including without
limitation any amount due under the Supplemental Retirement Agreement between
Richard B. Von Wald and the Company, dated as of November 4, 1994 (the
"Supplemental Retirement Agreement"));".
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2. Section 8(d) of the Employment Agreement is hereby amended and restated
in its entirety to read as follows:
"(d) Without Cause by the Company or with Good Reason by Executive. If
Executive's employment is terminated by the Company following a Change in
Control without Cause (other than by reason of death or Disability) or by
Executive with "Good Reason" (which following a Change in Control shall have
the meaning set forth in Section 8(e) below), Executive shall be entitled to
receive the following benefits:
(i) The Company shall pay Executive at the time of such termination in
a lump sum a cash amount equal to two times the sum of (A) his Base
Salary in effect at the time of such termination or, in the event
of termination by the Executive by reason of an event described in
Section 8(e)(iv) below, the Base Salary as in effect prior to the
reduction or reductions referred to therein plus (B) the bonus the
Executive would have earned in respect of the year of termination
under the Manville annual incentive compensation plan, if any, in
effect at the date of termination or in the event of a termination
by Executive by reason of an event described in Section 8(e)(v),
the plan in effect immediately prior to the reduction or reductions
referred to therein, determined as if the Executive had been
employed by the Company for the full year and without regard to any
right reserved by the Company to decrease or eliminate such bonus,
and assuming actual performance had equaled 100% of the performance
objective established for such year pursuant to the terms of such
plan.
(ii) The Company shall pay Executive in a lump sum a cash amount equal to
a fraction of the annual bonus which (absent such termination and
without regard to any right reserved by the Company to decrease or
eliminate such bonus) Executive would have earned with respect to
the year of termination under the Manville annual executive
incentive compensation plan, if any, in effect at the date of
termination or, in the event of a termination by Executive by
reason of an event described in Section 8(e)(v), the plan in effect
prior to the reduction or reductions referred to therein, assuming
actual performance had equaled 100% of the performance objective
established for such year pursuant to the terms of such plan, the
numerator of which fraction is the number of days in such year
during which the Executive was employed by the Company and the
denominator of which is 365. Such payment shall be made at the time
of Executive's termination.
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(iii) The Company shall pay Executive in a lump sum a cash amount equal
to the sum of the amounts Executive would have received in respect
of 11 Performance Units (and other similar interests) granted to
Executive under the 1991 Long Term Cash Incentive Compensation Plan
(or any other Manville long-term cash incentive plan adopted after
the date hereof) assuming Executive remained employed through the
applicable expiration or final payment date of such Performance
Units or other interests, less any amount paid to Executive in
respect of such Performance Units and other interests prior to
termination of his employment. For purposes of calculating the sum
to which Executive is entitled it shall be assumed that all
"Scheduled Dividend Payments" (as such term is defined in the 1991
Long Term Cash Incentive Compensation Plan) not paid at or prior to
Executive's termination of employment will be paid in full at their
then estimated value, as determined by the Company (without
reduction or deferral). Such payment shall be made at the time of
Executive's termination.
(iv) For a 36-month period following Executive's termination, the
Company shall pay Executive in monthly installments the sum of the
monthly costs to Executive of purchasing life, accident, medical,
dental and prescription insurance benefits substantially similar to
such benefits elected and received by Executive under the Company's
"Flex Benefit" program immediately prior to Executive's termination
or, if more generous, immediately prior to the Change in Control
("Continued Benefits") less the monthly payroll deduction, if any,
charged to Executive immediately prior to Executive's termination,
or, if applicable, immediately prior to the Change in Control, for
any of such Continued Benefits; notwithstanding the foregoing, if
Executive begins to receive Retiree Medical and Life Insurance
Benefits at any time during the 36-month period referred to above,
once such benefits begin, the monthly payment due Executive under
the preceding clause shall equal the monthly costs to Executive of
purchasing Continued Benefits not provided by the Company to
Executive as Retiree Medical and Life Insurance Benefits.
(v) For a 24-month period after such termination, the Company shall
provide or cause Executive to be provided with the perquisites
listed on Schedule C, attached hereto (which the Company may amend
from time to time prior to a Change in Control, without Executive's
consent), on the same terms and conditions on which such
perquisites were provided at the time of Executive's termination
or, if more generous, immediately prior to such termination.
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(vi) In addition to all other amounts payable to Executive under this
Section 8(d), Executive shall be entitled to receive all benefits
payable to Executive under any other plan, policy or agreement
relating to retirement or other benefits, in accordance with the
terms of such plans, policies or agreements; provided, however
that, amounts paid pursuant to this Section 8(d) shall be in lieu
of any payments under any Manville separation policy.
(vii) The Company shall provide Executive with outplacement services
from the firm of Executive's choice at a cost to the Company not to
exceed 20% of Executive's Base Salary in effect at the time of such
termination or, in the event of termination by Executive by reason
of an event described in Section S(e)(iv) below, the Base Salary as
in effect prior to the reduction or reductions referred to
therein."
3. Section 8(e)(iii) of the Employment Agreement is hereby amended and
restated in its entirety to read as follows:
"(iii) the Company fails to pay Executive any amounts otherwise vested and
due hereunder or under any plan or policy of the Company (including without
limitation any amount due under the Supplemental Retirement Agreement);".
4. Section 8(g) of the Employment Agreement is hereby amended and restated
in its entirety to read as follows:
"(g) Change in Control. For purposes of this Agreement, the phrase
"Change in Control" shall mean the following and shall be deemed to have
occurred if any of the following events shall have occurred:
(i) except for Manville, a subsidiary or an affiliate thereof, an
employee benefit plan (including any trustee of such plan, acting
as trustee) sponsored or maintained by Manville or any subsidiary
thereof or the Manville Personal Injury Settlement Trust (the
"Trust"), any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended from time
to time, and any successor act (the "Exchange Act") is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly of securities of Manville representing
30% or more of the combined voting power of Manville's then
outstanding securities;
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(ii) at least 40% of the directors of Manville constitute persons who
were not at the time of their first election to the board,
candidates proposed by a majority of the Board in office prior to
the time of such first election,
(iii) (A) the dissolution of Manville; (B) a sale or other disposition
or the last sale or other disposition to occur in a series of sales
and/or other dispositions within any 18-month period ("Serial
Sales") by Manville and/or one or more subsidiaries of Manville of
assets (including any sale through a public offering of shares of
voting stock of a Manville subsidiary by Manville or by any
subsidiary thereof) which, in the case of Serial Sales, as of the
beginning of such 18 month period, account for (or, in the case of
stock sold through a public offering, which represents indirect
ownership on a proportionate basis of assets accounting for) more
than 40% of the consolidated revenues of Manville and its
subsidiaries, as determined in accordance with generally accepted
accounting principles; provided, however, that no sale or
disposition of assets or stock shall be taken into account to the
extent that the proceeds of such sale or disposition (whether in
cash or in-kind) are reinvested or are, in the case of proceeds
received in-kind, used in the ongoing conduct by Manville or one or
more of its subsidiaries of the business of Manville and/or such
subsidiary or subsidiaries, provided further that such a
reinvestment shall not be deemed to have occurred unless made
within 18 months of such sale or disposition and provided further
that, the term reinvestment shall exclude, inter alia, the use of
proceeds (x) to repay debt owed to the Trust or debt incurred in
connection with the operation of the business in which the assets
sold or disposed of were used or (y) to pay dividends; (C) a
transaction to which Manville is a party pursuant to which the
holders of all of the shares of Manville outstanding prior to such
transaction do not hold, directly or indirectly, shares outstanding
of the surviving corporation in substantially the same proportions
as those in which they held the outstanding shares of Manville
prior to the transaction; or (D) any other event which the Board
determines, in its discretion, would materially alter the structure
of Manville or its ownership; or
(iv) a reduction in workforce, or the last to occur in a series of
reductions in workforce within any 24-month period, of Manville,
Schuller International Group, Inc. ("Schuller") or Riverwood
International Corporation ("Riverwood"), as a result of which 80%
of the consolidated workforce of Manville, Schuller or Riverwood,
measured as of the date 24 months prior to the last such reduction,
is no longer employed by Manville, Schuller or Riverwood,
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whichever is applicable, excluding for these purposes any reduction
in the workforce of Manville attributable to transfers of employees
to either Schuller or Riverwood or any reduction in the workforce
of either Schuller or Riverwood attributable to transfers of
employees to Manville."
5. Section 9 of the Employment Agreement is hereby amended and restated in
its entirety to read as follows:
"9. Reduction in Payments.
(a) Notwithstanding anything to the contrary in this Agreement, if, as
of the date of Executive's termination of employment, the Offset under the
Supplemental Retirement Agreement exceeds the benefit to which Executive is
entitled under Section 2 of the Supplemental Retirement Agreement prior to any
offset, as defined therein, then the aggregate payments (including perquisites
and benefits) due to Executive, if any, under this Agreement shall be reduced
by such excess, except to the extent that such excess shall otherwise be
satisfied by the Company's canceling other compensation or other amounts or
property due to Executive.
(b) Notwithstanding any other provision of this Agreement or any other
agreement between Executive and the Company or any affiliate, if a reduction in
the aggregate amount of payments Executive otherwise would be entitled to
receive from the Company or any affiliate, which payments are deemed contingent
on a change described in Section 280G(b)(2)(A)(i) of the Internal Revenue Code
of 1986, as amended (the "Code"), (the "Contingent Payments") would result in a
greater "Net After-Tax Amount", as such term is defined below, then such
payments, as Executive shall designate, shall be reduced to provide the
greatest Net After-Tax Amount. For these purposes, the term "Net After-Tax
Amount" shall mean the net amount of the Contingent Payments after giving
effect to all taxes which would be applicable to such payments, including, but
not limited to, any tax under Section 4999 of the Code. The determination of
whether any such payment reduction shall be effected shall be made by a
nationally recognized accounting firm acceptable to Executive and the Company
and such determination shall be binding upon Executive and the Company."
6. Section 13(b) of the Employment Agreement is hereby amended and
restated in its entirety to read as follows:
"(b) Entire Agreement/Amendments/Effectiveness. This Agreement shall
supersede any and all existing employment, change-in-control or severance
agreements between Executive and the Company or any of it affiliates and
contains the entire understanding of the parties with respect to the employment
of Executive by the Company. There are no restrictions, agreements, promises,
warranties, covenants or
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undertakings between the parties with respect to the subject matter herein
other than those expressly set forth herein. THIS AGREEMENT AND ANY AMENDMENT
HERETO SHALL NOT BE EFFECTIVE UNLESS AND UNTIL SIGNED BY THE CHAIRMAN OF THE
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF THE COMPANY AND ATTESTED TO
BY THE CHIEF EXECUTIVE OFFICER OF THE COMPANY."
7. Counterparts. This Amendment may be signed in counterpart, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the 4th day of November, 1994.
/s/ Richard B. Von Wald
------------------------
Richard B. Von Wald
MANVILLE CORPORATION
/s/ Bette B. Anderson
------------------------
By: Bette B. Anderson
Chairman of the
Compensation Committee
of the Board of Directors
/s/ W. T. Stephens
------------------------
Chief Executive Officer
ATTEST: /s/ W. T. Stephens
--------------------------
Chief Executive Officer
ATTEST: /s/ R. B. Von Wald
--------------------------
General Counsel
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May 15, 1995
R. B. Von Wald
RE: EMPLOYMENT AGREEMENT EXTENSION
Dear Dick:
Recently, the Board of Directors of Manville Corporation (the "Company")
approved the extension of your employment agreement with the Company, dated
April 10, 1992 (as previously amended and extendded, the "Employment
Agreement"). This letter serves as notice of the extension and, subject to
execution by you and attestation by the Company's General Counsel, an amendment
to your Employment Agreement extending the "Employment Term" (as defined in the
Employment Agreement) to April 10, 1998.
To evidence your agreement to so exten the Employment Term, please sign and
date both copies of this letter where indicated and return them to Dick Von
Wald (Denver, Mail Code 11-01) at your earliest convenience. A fully executed
copy will be returned to you for your files. If you have any questions about
the extension, please call Dick Von Wald at 950-4911 or Dion Persson at
950-3422.
Very truly yours,
/s/ W. T. Stephens
W. T. Stephens
Chairman of the Board, President
and Chief Executive Officer
This amendment is accepted this 17th day of May, 1995.
/s/ R. B. Von Wald
------------------
R. B. Von Wald
Attest: /s/ Richard B. Von Wald
-------------------------
Richard B. Von Wald
126
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Amendment No. 2
to the Employment Agreement dated April 10, 1992
by and between Manville Corporation (the "Company")
and Richard B. Von Wald (the "Executive")
WHEREAS, the Company and Executive amended Section 13(b) of the
above-referenced employment agreement (the "Employment Agreement") on November
4, 1994;
WHEREAS, the Company and Executive wish to clarify that amendment;
NOW THEREFORE, the parties agree as follows:
1. Section 13(b) of the Employment Agreement is hereby amended and
restated in its entirety to read as follows:
"(b) Entire Agreement/Amendments/Effectiveness. This Agreement shall
supersede any and all existing employment, change-in-control or severance
agreements between Executive and the Company or any of it affiliates and
contains the entire understanding of the parties with respect to the employment
of Executive by the Company. There are no restrictions, agreements, promises,
warranties, covenants or undertakings between the parties with respect to the
subject matter herein other than those expressly set forth herein. THIS
AGREEMENT SHALL NOT BE EFFECTIVE UNLESS SIGNED BY THE CHIEF EXECUTIVE OFFICER
OF THE COMPANY AND ATTESTED TO BY THE ASSISTANT SECRETARY OF THE COMPANY. ANY
AMENDMENT HERETO SHALL NOT BE EFFECTIVE UNLESS AND UNTIL SIGNED BY THE CHAIRMAN
OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF THE COMPANY AND
ATTESTED TO BY THE CHIEF EXECUTIVE OFFICER OF THE COMPANY."
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2. This Amendment may be signed in counterpart, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were
upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment
as of the 6th day of September, 1995.
/s/ Richard B. Von Wald
-------------------------
Richard B. Von Wald
MANVILLE CORPORATION
/s/ Todd Goodwin
-------------------------
Todd Goodwin
Chairman of the
Compensation Committee
of the Board of Directors
ATTEST: /s/ W. T. Stephens
---------------------------------
Chief Executive Officer
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Amendment No. 3 to the Employment Agreement
dated April 10, 1992, as amended November 4, 1994,
by and between Schuller Corporation (formerly
Manville Corporation) (the "Company") and
Richard B. Von Wald (the "Executive").
W I T N E S S E T H
WHEREAS, Executive currently serves as General Counsel of the Company;
WHEREAS, in consideration of Executive's continued employment with the
Company the parties wish to amend the Employment Agreement;
WHEREAS, in all other respects the Employment Agreement shall remain in
full force and effect;
NOW THEREFORE, in consideration of the foregoing and the covenants and
agreements herein contained, the parties hereto hereby agree as follows:
1. Section 9 of the Employment Agreement is hereby amended and restated in
its entirety to read as follows:
"9. Golden Parachute Tax. (a) Anything in this agreement to the contrary
notwithstanding, in the event Executive's employment hereunder is terminated
other than for Cause or is terminated for Good Reason within the meaning of
Section 8(e) occurring after March 27, 1996 other than merely by reason of the
closing of the transaction contemplated by the Agreement and Plan of Merger,
dated as of October 25, 1995, by and among Riverwood International Corporation,
RIC Holding, Inc., formerly named CDRO Holding Corporation ("Parent") , and
CDRO Acquisition Corporation, a wholly owned subsidiary of Parent, or in the
event of a Change in Control occurring after March 27, 1996, then:
(i) If it is determined that any payment by the Company to or for the
benefit of Executive, whether paid or payable pursuant to the terms of this
agreement or otherwise, (such payment, excluding any payment pursuant to this
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Section 9, a "Payment") would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986, as amended, (the "Code") or any
interest or penalties with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then Executive shall be entitled to receive
from the Company, within 15 days following the determination described in
Section 9(a)(ii) below, an additional payment ("Excise Tax Adjustment Payment")
in an amount such that after payment by Executive of all applicable Federal,
state and local taxes (computed at the maximum marginal rates and including any
interest or penalties imposed with respect to such taxes), including any Excise
Tax imposed upon the Excise Tax Adjustment Payment, Executive retains an amount
of the Excise Tax Adjustment Payment equal to the Excise Tax imposed upon the
Payments.
(ii) Subject to the provisions of Section 9(a)(iii), all
determinations required to be made under this Section 9(a), including whether
an Excise Tax Adjustment Payment is required and the amount of such Excise Tax
Adjustment Payment, shall be made by a nationally recognized accounting firm
acceptable to Executive and the Company (the "Accounting Firm"), which shall
provide detailed supporting calculations to the Company and Executive within 15
business days of the date of termination of Executive's employment. Except as
hereinafter provided, any determination by the Accounting Firm shall be binding
upon the Company and Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination hereunder, it is possible that (x) certain Excise Tax Adjustment
Payments will not have been made by the Company which should have been made (an
"Underpayment"). In the event that the Company exhausts its remedies pursuant
to Section 9(a)(iii) and Executive thereafter is required to make a payment of
any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid
by the Company to or for the benefit of Executive.
(iii) Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Excise Tax Adjustment Payment. Such notification shall be
given as soon as practicable but no later than ten business days after
Executive is informed in writing of such claim and shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid. Executive shall not pay such claim prior to the expiration of the 30-day
period following the date on which it gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(A) give the Company any information reasonably requested by
the Company relating to such claim,
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(B) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(C) cooperate with the Company in good faith in order effectively to
contest such claim, and
(D) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limiting the foregoing provisions of
this Section 9 (a) (iii) , the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and Executive agrees to prosecute such contest
to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs Executive to pay such
claim and sue for a refund, the Company shall advance the amount of such
payment to Executive, on an interest-free basis and shall indemnify and hold
Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such
advance; and further provided that any extension of the statute of limitations
relating to payment of taxes for the taxable year of Executive with respect to
which such contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the contest shall be
limited to issues with respect to which an Excise Tax Adjustment Payment would
be payable hereunder and the Executive shall be entitled to settle or contest,
as the case may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
(iv) If, after the receipt by Executive of an amount advanced by the
Company pursuant to Section 9(a)(iii), Executive becomes entitled to receive
any refund with respect to such claim, Executive shall (subject to the
Company's complying with the requirements of Section 9(a)(iii)) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by
Executive of an amount advanced by the Company pursuant to Section 9(a)(iii), a
determination is made that Executive shall not be entitled to any refund with
respect to such claim and the Company does not notify Executive in
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writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Excise Tax Adjustment Payment required to
be paid.
(b) In the event of any other termination of Executive's employment
hereunder, notwithstanding any other provision of this Agreement or any other
agreement between Executive and the company or any affiliate, if a reduction in
the aggregate amount of payments Executive otherwise would be entitled to
receive from the Company or any affiliate, which payments are deemed contingent
on a change described in Section 280G(b)(2)(A)(i) of the Code, (the "Contingent
Payments") would result in a greater "Net After-Tax Amount", as such term is
defined below, then such payments, as Executive shall designate, shall be
reduced to provide the greatest Net After-Tax Amount. For these purposes, the
term "Net After-Tax Amount" shall mean the net amount of the Contingent
Payments after giving effect to all taxes which would be applicable to such
payments, including, but not limited to, any tax under Section 4999 of the
Code. The determination of whether any such payment reduction shall be
effected shall be made by a nationally recognized accounting firm acceptable to
Executive and the Company and such determination shall be binding upon
Executive and the Company.
(c) Notwithstanding anything to the contrary in this Agreement, if, as
of the date of Executive's termination of employment, the offset under the
Supplemental Retirement Agreement exceeds the benefit to which Executive is
entitled under Section 2 of the Supplemental Retirement Agreement prior to any
offset, as defined therein, then the aggregate payments (including perquisites
and benefits) due to Executive, if any, under this Agreement shall be reduced
by such excess, except to the extent that such excess shall otherwise be
satisfied by the Company's canceling other compensation or other amounts or
property due to Executive."
2. No Waiver of Existing Rights. Executive's continued employment by the
Company and the execution of this agreement by Executive shall in no way
constitute a waiver by Executive of any right Executive has or may have under
his Employment Agreement as of the date hereof.
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3. Counterparts. This agreement may be signed in counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
4. Headings. The headings of the sections contained in this agreement are
for convenience only and shall not be deemed to control or affect the meaning
or construction of any provision of this agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the 12th day of April, 1996.
/s/ Richard B. Von Wald
--------------------------
Richard B. Von Wald
Address:
SCHULLER CORPORATION
By: /s/ Todd Goodwin
----------------------
Chairman of the
Compensation Committee
Attest:/s/ W. T. Stephens
-----------------------
Chief Executive Officer
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AMENDMENT NO. 4 TO THE EMPLOYMENT AGREEMENT
BETWEEN SCHULLER CORPORATION
AND RICHARD B. VON WALD
This AMENDMENT, dated as of June 7, 1996, is by and between SCHULLER
CORPORATION, a Delaware corporation (the "Company"), and Richard B. Von Wald
(the "Executive") and amends the EMPLOYMENT AGREEMENT dated April 10, 1992,
between the Company (f/k/a Manville Corporation) and the Executive (as
previously amended on November 4, 1994, September 6, 1995 and April 12, 1996
and as previously extended, the "Employment Agreement").
WHEREAS, on March 14, 1996, the Company delivered to the Executive a
letter attached as Attachment I hereto acknowledging the existence of a "Change
in Control" and "Good Reason" for purposes of all of the Executive's
compensation arrangements with the Company, including, without limitation, the
Employment Agreement (the "March 14 Letter").
WHEREAS, the Company and the Executive have agreed to amend the Employment
Agreement in accordance with the terms hereof.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. The first sentence of Section 2 of the Employment Agreement is hereby
amended to read as follows:
Executive shall serve as Executive Vice President, General Counsel and
Secretary of the Company.
2. Section 8(g) of the Employment Agreement is hereby amended in its
entirety to read as follows from and after the date hereof; provided, however,
that for the entire term of the Employment Agreement, a "Change in Control" and
"Good Reason" shall be deemed to have occurred for all purposes of the
Employment Agreement pursuant to the March 14 Letter:
(g) Change in Control. For purposes of this Agreement, the phrase
"Change in Control" shall mean the following and shall be deemed to have
occurred if any of the following events shall have occurred:
(i) any Person (as defined below) (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
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of the Company) becomes the Beneficial Owner (as defined below) (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
(as defined below)), 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 (the "Trust");
(ii) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board of Directors of the Company
(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 the
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;
(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
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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.
(vi) Defined terms.
(A) "Beneficial Owner" shall have the meaning ascribed to such
term in Rule 13d-3 under the Exchange Act and any successor to such Rule.
(B) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, including rules thereunder and successor provisions
and rules thereto.
(C) "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.
3. Attached hereto is a revised Schedule B to the Employment Agreement,
which shall supersede and replace any previously existing Schedule B to the
Employment Agreement.
4. Except as provided by this Amendment, the Employment Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment to be
effective as of June 7, 1996.
/s/ Richard B. Von Wald
-------------------------------
Richard B. Von Wald
SCHULLER CORPORATION
/s/ Todd Goodwin
-------------------------------
Todd Goodwin
Chairman of the Compensation
Committee
ATTEST:
/s/ Dion Persson
- -------------------------
Dion Persson
Assistant Secretary
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Attachment I
March 14, 1996
Richard B. Von Wald, Esq.
Senior Vice President, General Counsel and Secretary
Manville Corporation
717 17th Street
Denver, CO 80217-5108
Dear Dick:
Recently the Board of Directors of Manville Corporation (the "Company")
approved the extension of your employment agreement with the Company dated as
of April 10, 1992 (as previously amended and extended, the "Employment
Agreement"). The Employment Agreement is hereby extended and Paragraph 1 of
the Employment Agreement is amended to extend the Employment Term" as defined
therein until April 10, 1999.
In addition, the Company hereby acknowledges and agrees that the closing
of the transaction contemplated by the Agreement and Plan of Merger, dated as
of October 25, 1995, by and among Riverwood International Corporation, RIC
Holding, Inc., formerly named CDRO Holding Corporation ("Parent"), and CDRO
Acquisition Corporation, a wholly owned subsidiary of Parent, will constitute
both a "Change in Control" and an event of "Good Reason" with respect to you
for purposes of all of your compensation arrangements with the Company,
including without limitation the Employment Agreement, the Supplemental
Retirement Agreement between you and the Company dated as of November 4, 1994,
as amended as of September 30, 1995
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and the Restricted Stock Agreement between you and the Company dated November 4,
1994. The Company further acknowledges and agrees that it does not currently
have "Cause" to terminate your employment within the meaning of, or for
purposes of, any such compensation arrangement.
To evidence your agreement to the extension of the Employment Term, please
sign below as indicated.
Very truly yours,
MANVILLE CORPORATION
/s/ Todd Goodwin
-----------------------------
Todd Goodwin, Chairman of the
Compensation Committee
This extension is accepted this 21st day of March, 1996.
/s/ Richard B. Von Wald
-------------------------
Richard B. Von Wald
Attest: /s/ W. T. Stephens
-------------------
W. T. Stephens
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Schedule B
Incentive Compensation Plans in Effect
Annual Incentive Compensation Plan for Schuller Corporation
Schuller Corporation 1996 Executive Incentive Compensation Plan
Schuller Corporation 1996 Deferred Compensation Plan
Manville Corporation Stock Incentive Plan
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EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of April 10, 1992, (the "Agreement") by and
between SCHULLER INTERNATIONAL, INC., a Delaware corporation (the "Company")
and a subsidiary of MANVILLE CORPORATION, a Delaware corporation ("Manville")
and Dixon R. Walker (the "Executive").
WHEREAS the Company desires to continue to employ Executive and to enter
into an agreement embodying the terms of such employment (the "Agreement"); and
WHEREAS Executive desires to continue such employment and enter into such
an Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. Term of Employment. The Executive shall be employed by the Company for
a period commencing on April 10, 1992 and, except as otherwise provided herein,
ending three years from such date. At the end of each year of employment
hereunder, the Board of Directors of the Company and the Chief Executive
Officer of the Company shall review this Agreement and the Executive's
performance hereunder and shall determine, in their sole discretion, whether or
not to extend the period of Executive's employment pursuant to this Agreement
by one year. The period of Executive's employment hereunder, including any
extension or extensions pursuant to the
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foregoing sentence, is referred to hereinafter as the "Employment Term". A
failure to renew this Agreement shall not constitute termination of
Executive's employment.
2. Position. Executive shall serve as Vice President and General Manager
of Roofing Systems Division, Schuller International, Inc. Executive shall
devote substantially all of his business time and energies to the business of
the Company. Notwithstanding the foregoing, Executive may (a) continue to
serve on the board of directors of any business corporation on which he is
serving as of the date of this Agreement (as shown on Schedule A), (b) serve on
the boards of directors or committees of non-profit organizations and (c) with
the prior approval of the Chief Executive Officer of the Company or of the
Board of Directors of the Company, serve on the boards of directors of other
business corporations, provided that in the Company's sole reasonable
discretion none of the foregoing activities materially interferes with the
performance of Executive's duties hereunder.
3. Base Salary. Company shall pay Executive a base salary at the rate of
not less than $150,000 per year, as the same may from time to time be increased
at the sole discretion of the Board of Directors of the Company or, prior to a
Change in Control, decreased in the event of across the board salary reductions
within the corporate staff group or the business division in which Executive is
employed, whichever is applicable ("Base Salary").
4. Incentive Compensation. Executive shall participate in the Manville
executive incentive compensation plans, as in effect from time to time during
the Employment Term, for which he is eligible. (References herein to "Manville
executive
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incentive compensation plans" whether annual or long-term, shall include such
plans maintained by Manville and/or the Company, as the case may be, from time
to time.) The Manville executive incentive compensation plans in effect on the
date hereof in which Executive participates are listed on Schedule B.
5. Employee Benefits. Executive shall be eligible to participate in such
other of the Company's employee benefit plans and to receive such benefits for
which his level of employment makes him eligible, in accordance with the
Company's policies as in effect from time to time during the Employment Term.
6. Business Expenses. Necessary and reasonable business expenses incurred
by Executive during the Employment Term shall be reimbursed in accordance with
Company policies.
7. Termination Prior to a Change in Control.
(a) Retirement. This Agreement shall terminate automatically upon
Executive's Retirement, as defined hereafter. For purposes of this Agreement,
"Retirement" means termination of Executive's employment initiated by
Executive, other than for Good Reason as defined in Section 7(e) or Section
8(e) hereof, whichever is applicable, whereby Executive is entitled to receive
an immediately payable benefit, including an early retirement benefit, under
the Company's retirement plan generally applicable to its salaried employees or
under any retirement arrangement established with respect to Executive with his
consent, in either case, whether or not Executive commences to receive such
benefit at the time of such termination. Upon termination of Executive's
employment by reason of Retirement prior to a Change in Control,
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Executive shall be entitled to benefits determined in accordance with the
Company's retirement, benefit and insurance programs in effect at such time.
(b) Death or Disability.
(i) Disability. Executive's employment hereunder may be
terminated by the Company if Executive becomes physically or mentally
incapacitated and is therefore unable for a period of six (6) consecutive
months to perform his duties (such incapacity is hereinafter referred to as
"Disability"). Any question as to the existence of the Disability of the
Executive as to which the Executive and the Company cannot agree shall be
determined in writing by a qualified independent physician mutually acceptable
to the Executive and the Company. Upon any such termination for Disability
prior to a Change in Control, Executive shall be entitled to receive his Base
Salary through the date on which the Executive is first eligible to receive
payment of disability benefits in lieu of salary under the Company's employee
benefit plans as then in effect.
(ii) Death. Upon termination for death prior to a Change in
Control, Executive shall be entitled to his Base Salary at the rate in effect
at the time of Executive's death through the end of the month in which his
death occurs.
(iii) Death or Disability Benefits. All other benefits to which
Executive may be entitled following Executive's termination for death or
Disability prior to a Change in Control shall be determined in accordance with
the plans, policies and practices of the Company.
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(c) For Cause by the Company; Voluntary Termination by Executive.
Executive's employment hereunder may be terminated by the Company for "Cause".
For purposes of this Agreement, prior to a Change in Control, "Cause" shall
mean (i) Executive's willful and continued failure substantially to perform his
duties hereunder (other than as a result of total or partial incapacity due to
physical or mental illness or as a result of termination by Executive for Good
Reason as defined in Section 7(e) below), (ii) Executive's dishonesty in the
performance of his duties hereunder or (iii) Executive's conviction of a felony
under the laws of the United States or any state thereof. If Executive is
terminated for Cause, or if Executive voluntarily terminates employment
hereunder other than for Good Reason, in either case, prior to a Change in
Control, he shall be entitled to receive his Base Salary through the date of
termination. All other benefits, if any, payable to Executive following such
termination of Executive's employment shall be determined in accordance with
the plans, policies and practices of the Company.
(d) Without Cause by the Company or with Good Reason by Executive. If
prior to a Change in Control Executive's employment hereunder is terminated by
the Company without Cause (other than by reason of death or Disability) or by
Executive with "Good Reason" (as defined in Section 7(e) below), Executive
shall be entitled to receive the following benefits:
(i) The Company shall pay Executive at the time of such
termination in a lump sum a cash amount equal to two times his Base Salary in
effect at the time of such termination or, in the event of termination by the
Executive on account
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of an event described in Section 7(e)(iv) below, the Base Salary as in effect
prior to the reduction or reductions referred to therein plus the bonus the
Executive would have earned in respect of the year of termination under the
Manville annual incentive compensation plan, if any, in effect at the date of
termination or, in the event of a termination by Executive by reason of an
event described in Section 7(e)(vi), the plan in effect prior to the
elimination referred to therein, determined as if the Executive had been
employed by the Company for the full year and without regard to any right
reserved by the Company to decrease or eliminate such bonus, and assuming
actual performance had equaled 100% of the performance objective established
for such year pursuant to the terms of such plan.
(ii) For a 24-month period after such termination, the Company
shall cause Executive to be provided with life, accident, medical, dental and
prescription insurance benefits substantially similar to, and on the same terms
as, those benefits elected and received by Executive under the Company's "Flex
Benefit" program immediately prior to such termination; provided that,
Executive shall be charged an amount equal to any monthly payroll deduction
charged for similar benefits to executives in positions similar to that which
Executive held before his termination; and provided further that, if Executive
receives medical benefits under the Manville Retiree Comprehensive Health Care
Plan and post-retirement life insurance benefits (collectively, "Retiree
Medical and Life Insurance Benefits"), at any time during the 24-month period
referred to above, once such benefits begin Executive shall be entitled only to
Retiree Medical and Life Insurance Benefits.
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(iii) For a period of 24 months after such termination, the
Company shall provide or cause Executive to be provided with the perquisites
listed on Schedule C, attached hereto, as may be amended by the Company from
time to time without Executive's consent prior to such termination (provided
that nothing herein shall be deemed to permit such an amendment without
Executive's consent following a Change in Control), on the same terms and
conditions on which such perquisites were provided prior to Executive's
termination.
(iv) In addition to all other amounts payable to Executive under
this Section 7(d), Executive shall be entitled to receive all benefits payable
to Executive under any other plan, policy or agreement relating to retirement
or other benefits in accordance with the terms of such plans, policies or
agreements; provided, however that, amounts paid pursuant to this Section 7(d)
shall be in lieu of any payments under any Manville separation policy.
(v) The Company shall provide Executive with outplacement
services from the firm of Executive's choice at a cost to the Company not to
exceed the lesser of (A) 20% of Executive's Base Salary in effect at the time
of Executive's termination of employment with the Company or (B) $25,000.
(e) Good Reason. For purposes of this Agreement, prior to a Change in
Control, "Good Reason" shall mean:
(i) a material reduction in Executive's responsibilities,
authorities or duties, all as contemplated by Section 2 hereof; provided,
however, that
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such reduction by reason of a termination for Cause or Disability shall not
constitute Good Reason;
(ii) Executive's job is eliminated other than by reason of
promotion or termination for Cause or Disability.
(iii) the Company fails to pay Executive any amount otherwise
vested and due hereunder or under any plan or policy of the Company;
(iv) a reduction in Executive's Base Salary except in the event
of an across the board salary reduction within the corporate staff group or the
business division in which Executive is employed, whichever is applicable;
(v) a reduction in Executive's aggregate level of benefits under
the Company's pension, life insurance, medical, health and accident,
disability, deferred compensation or savings or similar plans, except in the
event of an across the board reduction in such benefits within the corporate
staff group or the business division in which Executive is employed, whichever
is applicable;
(vi) the elimination of an annual incentive compensation plan; or
(vii) the Executive's office is relocated outside of a 50-mile
radius of Denver, Colorado without his written consent.
If Executive provides to the Company a Notice of Termination, as defined in
Section 13(f), in connection with an event described in clauses (i) through
(vii) of this Section 7(e), the Company shall have ten (10) business days from
the date of receipt of such notice to effect a cure of the event described
therein, and upon cure thereof by
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the Company to Executive's reasonable satisfaction, such event shall no longer
constitute Good Reason for purposes of this Agreement.
(f) Mitigation. In the event of termination of Executive's employment
hereunder by the Company without Cause or by Executive with Good Reason prior
to a Change in Control, benefits otherwise receivable by Executive pursuant to
subsection 7(d)(ii) shall be reduced to the extent comparable benefits are
received by Executive during the 24-month period following such termination.
Executive shall report to the Company any such benefits actually received by
Executive.
8. Termination Following a Change in Control.
(a) Retirement. This Agreement shall terminate automatically upon
Executive's Retirement. Upon a termination of Executive's employment by reason
of Retirement following a Change in Control, Executive shall be entitled to
benefits determined in accordance with the Company's retirement, benefit and
insurance programs in effect immediately prior to the Change in Control or, if
more generous, such programs in effect at the time of such Retirement.
(b) Death or Disability.
(i) Disability. Executive's employment hereunder may be
terminated by reason of Executive's Disability, subject to the procedure for
determining such Disability outlined in Section 7(b)(i). Upon any termination
for Disability following a Change in Control, Executive shall be entitled to
receive his Base Salary for a two-year period ending on the second anniversary
of Executive's date of termination. Such Base Salary shall be paid in equal
monthly installments and shall be reduced by any amounts
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received as disability benefits in lieu of salary under the Company's employee
benefit plans.
(ii) Death. Upon termination for death following a Change in
Control, Executive shall be entitled to (x) his Base Salary at the rate in
effect at the time of Executive's death through the end of the month in which
his death occurs and (y) if and to the extent the death benefits provided
Executive by the Company are less than would have been paid immediately prior
to a Change in Control, a lump sum payment of cash in an amount equal to the
value of such shortfall. Any such lump sum payment shall be made within ten
(10) business days following Executive's death.
(iii) Death or Disability Benefits. All other benefits to which
Executive may be entitled upon Executive's termination for death or Disability
following a Change in Control shall be determined in accordance with the plans,
policies and practices of the Company in effect immediately prior to the Change
in Control or, if more generous, such plans, policies and practices as in
effect at any time following the Change in Control; provided that, nothing in
this Section 8(b)(iii) shall be interpreted so as to result in the duplication
of the benefits provided under Section 8(b)(i) or (ii).
(c) For Cause by the Company; Voluntary Termination by Executive.
For purposes of this Agreement, following a Change in Control, "Cause" shall
mean (i) Executive's willful and continued failure substantially to perform his
duties hereunder (other than as a result of total or partial incapacity due to
physical or mental illness or as a result of termination by Executive for Good
Reason as defined in Section 8(e) below) after a written demand for substantial
performance is delivered to Executive personally
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and Executive shall have failed during the sixty-day period following such
written demand to have corrected such failure, (ii) Executive's dishonesty in
the performance of his duties hereunder or (iii) Executive's conviction of a
felony under the laws of the United States or any state thereof. For purposes
of this Section 8(c) no act or failure to act on Executive's part shall be
deemed willful unless done or omitted to be done by Executive not in good faith
and without reasonable belief that Executive's action or omission was in the
best interest of the Company.
If Executive is terminated for Cause, or if Executive voluntarily
terminates his employment with the Company other than for Good Reason, in
either case, following a Change in Control, he shall be entitled to receive his
Base Salary through the date of termination. All other benefits, if any,
payable to Executive following such termination of Executive's employment shall
be determined in accordance with the plans, policies and practices of the
Company.
(d) Without Cause by the Company or with Good Reason by Executive. If
Executive's employment is terminated by the Company following a Change in
Control without Cause (other than by reason of death or Disability) or by
Executive with "Good Reason" (which following a Change in Control shall have
the meaning set forth in Section 8(e) below), Executive shall be entitled to
receive the following benefits:
(i) The Company shall pay Executive at the time of such termination
in a lump sum a cash amount equal to two times the sum of (A) his Base Salary
in effect at the time of such termination or, in the event of termination by
the
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Executive by reason of an event described in Section 8(e)(iv) below, the Base
Salary as in effect prior to the reduction or reductions referred to therein
plus (B) the bonus the Executive would have earned in respect of the year of
termination under the Manville annual incentive compensation plan, if any, in
effect at the date of termination or in the event of a termination by Executive
by reason of an event described in Section 8(e)(v), the plan in effect
immediately prior to the reduction or reductions referred to therein,
determined as if the Executive had been employed by the Company for the full
year and without regard to any right reserved by the Company to decrease or
eliminate such bonus, and assuming actual performance had equaled 100% of the
performance objective established for such year pursuant to the terms of such
plan.
(ii) The Company shall pay Executive in a lump sum a cash amount
equal to a fraction of the annual bonus which (absent such termination and
without regard to any right reserved by the Company to decrease or eliminate
such bonus) Executive would have earned with respect to the year of termination
under the Manville annual executive incentive compensation plan, if any, in
effect at the date of termination or, in the event of a termination by
Executive by reason of an event described in Section 8(e)(v), the plan in
effect prior to the reduction or reductions referred to therein, assuming
actual performance had equaled 100% of the performance objective established
for such year pursuant to the terms of such plan, the numerator of which
fraction is the number of days in such year during which the Executive was
employed by the Company and the denominator of which is 365. Such payment shall
be made at the time of Executive's termination.
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(iii) The Company shall pay Executive in a lump sum a cash amount
equal to the sum of the amounts Executive would have received in respect of all
Performance Units (and other similar interests) granted to Executive under the
1991 Long Term Cash Incentive Compensation Plan (or any other Manville
long-term cash incentive plan adopted after the date hereof) assuming Executive
remained employed through the applicable expiration or final payment date of
such Performance Units or other interests, less any amount paid to Executive in
respect of such Performance Units and other interests prior to termination of
his employment. For purposes of calculating the sum to which Executive is
entitled it shall be assumed that all "Scheduled Dividend Payments" (as such
term is defined in the 1991 Long Term Cash Incentive Compensation Plan) not
paid at or prior to Executive's termination of employment will be paid in full
at their then estimated value, as determined by the Company (without reduction
or deferral). Such payment shall be made at the time of Executive's
termination.
(iv) Executive shall receive credit under the Supplemental Plan
for Participants in the Manville Salaried Retirement Plan for two additional
years of service for purposes of both vesting and accrual of benefits.
(v) For a 36-month period following Executive's termination, the
Company shall pay Executive in monthly installments the sum of the monthly
costs to Executive of purchasing life, accident, medical, dental and
prescription insurance benefits substantially similar to such benefits elected
and received by Executive under the Company's "Flex Benefit" program
immediately prior to Executive's termination or, if
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more generous, immediately prior to the Change in Control ("Continued
Benefits") less the monthly payroll deduction, if any, charged to Executive
immediately prior to Executive's termination, or, if applicable, immediately
prior to the Change in Control, for any of such Continued Benefits;
notwithstanding the foregoing, if Executive begins to receive Retiree Medical
and Life Insurance Benefits at any time during the 36-month period referred to
above, once such benefits begin, the monthly payment due Executive under the
preceding clause shall equal the monthly costs to Executive of purchasing
Continued Benefits not provided by the Company to Executive as Retiree Medical
and Life Insurance Benefits.
(vi) For a 24-month period after such termination, the Company
shall provide or cause Executive to be provided with the perquisites listed on
Schedule C, attached hereto (which the Company may amend from time to time
prior to a Change in Control, without Executive's consent), on the same terms
and conditions on which such perquisites were provided at the time of
Executive's termination or, if more generous, immediately prior to such
termination.
(vii) In addition to all other amounts payable to Executive under
this Section 8(d), Executive shall be entitled to receive all benefits payable
to Executive under any other plan, policy or agreement relating to retirement
or other benefits, in accordance with the terms of such plans, policies or
agreements; provided, however that, amounts paid pursuant to this Section 8(d)
shall be in lieu of any payments under any Manville separation policy.
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(viii) The Company shall provide Executive with outplacement
services from the firm of Executive's choice at a cost to the Company not to
exceed 20% of Executive's Base Salary in effect at the time of such termination
or, in the event of termination by Executive by reason of an event described in
Section 8(e)(iv) below, the Base Salary as in effect prior to the reduction or
reductions referred to therein.
(e) Good Reason Following a Change in Control. For purposes of this
Agreement, following a Change in Control, "Good Reason" shall mean:
(i) a material adverse change in the nature or scope of
Executive's responsibilities, authorities, duties and/or position (including by
reason of a substantial reduction in the size of the Company or other
substantial change in the character or scope of the Company's operations);
(ii) Executive no longer serves in the position described in
Section 2, other than by reason of a promotion or a termination for Cause or
Disability;
(iii) the Company fails to pay Executive any amounts otherwise
vested and due hereunder or under any plan or policy of the Company;
(iv) a reduction in the Executive's Base Salary in effect
immediately prior to the Change in Control or as the same may be increased from
time to time;
(v) a reduction in the Executive's incentive compensation
opportunity, as defined below, under the Manville executive incentive
compensation plans as in effect immediately prior to the Change in Control or
as the same may be
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increased from time to time (absent, in the case of any such reduction relative
to Executive's annual bonus, a corresponding increase in his Base Salary);
(vi) the failure of the Company, to continue to provide Executive
with benefits and perquisites which are substantially similar in the aggregate
to those enjoyed by Executive under the Company's pension, life insurance,
medical, health and accident, disability, deferred compensation or savings or
similar plans and fringe benefit programs (including vacation) in which
Executive was participating immediately prior to the Change in Control; or the
failure by the Company to continue to provide Executive with directors' or
officers' insurance, as applicable, at the level maintained immediately prior
to the Change in Control;
(vii) the Executive's office is relocated outside of a 50-mile
radius of Denver, Colorado without his written consent;
(viii) the failure of the Company to obtain an agreement from any
successor to assume and agree to perform this Agreement, as contemplated in
Section 13(e) hereof; or
(ix) any purported termination of Executive's employment by the
Company which is not effected pursuant to a Notice of Termination satisfying
the requirements of Section 13(f) and, if applicable, following the written
demand described in Section 8(c) and the relevant cure period.
If Executive provides a Notice of Termination, as defined in Section
13(f), in connection with an event described in clauses (i) through (vii) of
this Section 8(e), to the Company, the Company shall have ten (10) business
days from the date of receipt
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of such notice to effect a cure of the event described therein, and upon cure
thereof by the Company to Executive's reasonable satisfaction, such event shall
no longer constitute Good Reason for purposes of this Agreement.
(f) Reduction in Incentive Compensation Opportunity. For purposes of
this Agreement, a "reduction in the Executive's incentive compensation
opportunity" under the Manville executive incentive compensation plans shall
include
(i) the failure to maintain both an annual and a long-term
incentive plan;
(ii) any reduction or elimination by the Company of Executive's
annual or long-term incentive compensation pursuant to any reserved right under
any such plan to decrease or eliminate such bonus or award;
(iii) any reduction in Executive's participation level under any
such plan; and
(iv) any adverse change in the payout schedule or its equivalent
or in the manner of assessing actual performance under any such plan and/or any
extraordinary change in the applicable performance criteria thereunder.
(g) Change in Control. For purposes of this Agreement, the phrase
"Change in Control" shall mean the following and shall be deemed to have
occurred if any of the following events shall have occurred:
(i) except for Manville, a subsidiary or an affiliate thereof, an
employee benefit plan (including any trustee of such plan, acting as trustee)
sponsored or maintained by Manville or any subsidiary thereof or the Manville
Personal Injury
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Settlement Trust (the "Trust"), any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended from time to
time, and any successor act (the "Exchange Act") is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly of securities of Manville representing 30% or more of the combined
voting power of Manville's then outstanding securities;
(ii) at least 40% of the directors of Manville constitute persons
who were not, at the time of their first election to the Board, candidates
proposed by a majority of the Board in office prior to the time of such first
election,
(iii) (A) the dissolution of Manville; (B) a sale or other
disposition or the last sale or other disposition to occur in a series of sales
and/or other dispositions within any 18-month period ("Serial Sales") by
Manville and/or one or more subsidiaries of Manville of assets (including any
sale through a public offering of shares of voting stock of a Manville
subsidiary by Manville or by any subsidiary thereof) which, in the case of
Serial Sales, as of the beginning of such 18-month period, account for (or, in
the case of stock sold through a public offering, which represents indirect
ownership on a proportionate basis of assets accounting for) more than 40% of
the consolidated revenues of Manville and its subsidiaries, as determined in
accordance with generally accepted accounting principles; provided, however,
that no sale or disposition of assets or stock shall be taken into account to
the extent that the proceeds of such sale or disposition (whether in cash or
in-kind) are reinvested or are, in the case of proceeds received in-kind, used
in the ongoing conduct by Manville or one or more of its
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subsidiaries of the business of Manville and/or such subsidiary or
subsidiaries, provided further that such a reinvestment shall not be deemed to
have occurred unless made within 18 months of such sale or disposition and
provided further that, the term reinvestment shall exclude, inter alia, the use
of proceeds (x) to repay debt owed to the Trust or debt incurred in connection
with the operation of the business in which the assets sold or disposed of were
used or (y) to pay dividends; (C) a transaction to which Manville is a party
pursuant to which the holders of all of the shares of Manville outstanding
prior to such transaction do not hold, directly or indirectly, shares
outstanding of the surviving corporation in substantially the same proportions
as those in which they held the outstanding shares of Manville prior to the
transaction; or (D) any other event which the Board determines, in its
discretion, would materially alter the structure of Manville or its ownership;
(iv) a sale of the business unit, division or group within which
Executive is employed, other than to another entity which is directly or
indirectly controlled by Manville as a result of which Executive is no longer
employed by an entity which is directly or indirectly controlled by Manville;
or
(v) a reduction in workforce, or the last to occur in a series of
reductions in workforce within any 24-month period, of the Company, if
Executive is employed by the Company at the time of such reduction or last
reduction, or Riverwood International Corporation ("Riverwood"), if Executive
is employed by Riverwood at the time of such reduction or last reduction, as a
result of which 80% of such workforce measured as of the date 24 months prior
to the last such reduction is no longer
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employed by the Company or Riverwood, whichever is applicable, excluding for
these purposes any reduction in the workforce of either the Company or
Riverwood attributable to transfers of employees to Manville.
In the event of a Change in Control by reason of an event described in
Section 8(g)(iv) the Company shall pay Executive in a lump sum a cash amount
equal to the sum of the amounts Executive would have received in respect of all
Performance Units granted to Executive under the 1991 Long Term Cash Incentive
Compensation Plan assuming Executive remained employed through the applicable
expiration or final payment date of such Performance Units, less any amount
paid to Executive in respect of such Performance Units prior to termination of
his employment. For purposes of calculating the sum to which Executive is
entitled it shall be assumed that all "Scheduled Dividend Payments" (as such
term is defined in the 1991 Long Term Cash Incentive Compensation Plan) not
paid at or prior to Executive's termination of employment will be paid in full
at their then estimated value as determined by the Company (without reduction
or deferral). Such payment shall be made in the event of a Change in Control
described in Section 8(g)(iv) at the time of such Change in Control and the
Performance Units and all rights related thereto shall be extinguished upon
such payment.
9. Reduction of Payments. If any payment to or for the benefit of
Executive under this Agreement either alone or together with other payments to
or for the benefit of Executive would constitute a "parachute payment" (as
defined in Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code")), the payments under this
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Agreement shall be reduced to the largest amount that will minimize or
eliminate both the imposition of the excise tax imposed by Section 4999 of the
Code and the disallowance of deductions to the Company under Section 280G of
the Code of any such payments. The determination of any reduction in the
payments under this Agreement pursuant to this Section shall be made by the
Company's independent accountants.
10. Indemnification. The Company will indemnify the Executive (and his
legal representatives or other successors) to the fullest extent permitted
(including payment of expenses in advance of final disposition of a proceeding)
by the laws of the jurisdiction of incorporation of the Company, as in effect
at the time of the subject act or omission, or by the Restated Certificate of
Incorporation and By-Laws of the Company, as in effect at such time or on the
effective date of this Agreement, or by the terms of any indemnification
agreement between the Company and the Executive, whichever affords or afforded
greatest protection to the Executive, and the Executive shall be entitled to
the protection of any insurance policies the Company may elect to maintain
generally for the benefit of its directors and officers (and to the extent the
Company maintains such an insurance policy or policies, the Executive shall be
covered by such policy or policies, in accordance with its or their terms, to
the maximum extent of the coverage available for any Company officer or
director), against all costs, charges and expenses whatsoever incurred or
sustained by him or his legal representatives at the time such costs, charges
and expenses are incurred or sustained, in connection with any action, suit or
proceeding to which he (or his legal representatives or other
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successors) may be made a party by reason of his being or having been a
director, officer or employee of the Company, Manville or any subsidiary of
either of them, or his serving or having served any other enterprise as a
director, officer or employee at the request of the Company or Manville.
11. Legal Fees. In the event of a dispute between the Executive and the
Company with respect to any of the Executive's rights under this Agreement, the
Company shall reimburse the Executive for any and all legal fees and related
expenses incurred by him in connection with enforcing such rights, at the time
such fees and related expenses are incurred; provided that, if Executive's
claim is found by a court of competent jurisdiction to have been frivolous,
Executive shall reimburse the Company for all amounts paid by it under this
Section.
12. Confidentiality; Specific Performance. Executive will not at any time
(whether during or after his employment with the Company) disclose or use for
his own benefit or purposes, or the benefit or purposes of any other person,
firm, partnership, joint venture, association, corporation or other business
organization, entity or enterprise other than the Company and any of its
subsidiaries or affiliates, any trade secrets, information, data, or other
confidential information relating to customers, development programs, costs,
marketing, trading, investment, sales activities, promotion, credit and
financial data, manufacturing processes, financing methods, plans, or the
business and affairs of the Company generally, or of any subsidiary or
affiliate of the Company, provided that the foregoing shall not apply to
information which is not unique to the Company or which is generally known to
the industry or the public
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other than as a result of Executive's breach of this covenant. Executive agrees
that upon termination of his employment with the Company for any reason, he
will return to the Company immediately all memoranda, books, papers, plans,
information, letters and other data, and all copies thereof or therefrom, in
any way relating to the business of the Company and its affiliates, except that
he may retain personal notes, notebooks and diaries. Executive further agrees
that he will not retain or use for his account at any time any trade names,
trademark or other proprietary business designation used or owned in connection
with the business of the Company or its affiliates.
Executive acknowledges and agrees that the Company's remedies at law for a
breach or threatened breach of any of the provisions of this Section would be
inadequate and, in recognition of this fact, Executive agrees that, in the
event of such a breach or threatened breach, in addition to any remedies at
law, the Company, without posting any bond, shall be entitled to obtain
equitable relief in the form of specific performance, temporary restraining
order, temporary or permanent injunction or any other equitable remedy which
may then be available.
13. Miscellaneous.
(a) Governing Law; Liability of the Executive.
This Agreement shall be governed by and construed in accordance with the laws
of the State of Colorado. The Executive shall not be subject to liability for
breach of this Agreement by reason of his termination of his employment
hereunder.
(b) Entire Agreement/Amendments/Effectiveness. This Agreement shall
supersede any and all existing employment, change-in-control or severance
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agreements between Executive and the Company or any of its affiliates and
contains the entire understanding of the parties with respect to the employment
of Executive by the Company. There are no restrictions, agreements, promises,
warranties, covenants or undertakings between the parties with respect to the
subject matter herein other than those expressly set forth herein. THIS
AGREEMENT AND ANY AMENDMENT HERETO SHALL NOT BE EFFECTIVE UNLESS AND UNTIL
SIGNED BY THE CHIEF EXECUTIVE OFFICER OF THE COMPANY AND ATTESTED TO BY THE
GENERAL COUNSEL OF THE COMPANY.
(c) No Waiver. The failure of a party to insist upon strict adherence
to any term of this Agreement on any occasion shall not be considered a waiver
of such party's rights or deprive such party of the right thereafter to insist
upon strict adherence to that term or any other term of this Agreement.
(d) Severability. In the event that any one or more of the provisions
of this Agreement shall be or become invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
of this Agreement shall not be affected thereby.
(e) Successors; Binding Agreement. (i) In the event of a Change in
Control, the Company will require the successor to the Company as Executive's
employer (whether such succession is direct or indirect, by purchase, merger,
consolidation or otherwise, to any portion of the business and/or assets of
Manville or the Company) to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no
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such succession had taken place. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement
by operation of law, or otherwise. Prior to a Change in Control, the term
"Company" shall also mean any affiliate of the Company to which Executive may
be transferred and the Company shall cause such successor employer to be
considered the "Company" bound by the terms of this Agreement and this
Agreement shall be amended so to provide. Following a Change in Control the
term "Company" shall not mean any affiliate of the Company to which Executive
may be transferred unless Executive shall have previously approved of such
transfer in writing, in which case the Company shall cause such successor
employer to be considered the "Company" bound by the terms of this Agreement
and this Agreement shall be amended so to provide.
(ii) This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive should die while any amount would still be payable to Executive
hereunder if Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Executive's devisee, legatee or other designee or, if there is no
such designee, to Executive's estate. This Agreement shall not be assignable by
Executive.
(f) Notice; Notice of Termination. (i) For the purpose of this
Agreement, notices and all other communications provided for in the Agreement
shall
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be in writing and, except as otherwise provided in paragraph (ii) below, shall
be deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the signature page of this Agreement;
provided that all notices to the Company shall be directed to the attention of
the General Counsel of Manville, or to such other address as either party may
have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt,
(ii) Any purported termination of Executive's employment by the
Company or by Executive shall not be effective unless communicated by written
Notice of Termination to the other party hereto in accordance with paragraph
(i) above. For purposes of this Agreement, a "Notice of Termination" in the
case of a termination for Cause following a Change in Control shall mean a
notice given within ten (10) business days of the Company's having actual
knowledge of the events giving rise to such termination and in all cases shall
mean a notice which indicates the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated.
(iii) The date of termination of Executive's employment shall be
the date of receipt of the Notice of Termination, except in the case of (A)
Executive's death, in which case the date of termination of employment shall be
the date of death or (B) Executive's termination for Cause following a Change
in Control, in which case the date of termination shall be ten (10) business
days after actual receipt by Executive of
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the Notice of Termination; provided that, if within thirty (30) days after any
Notice of Termination following a Change in Control is received, the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the date of termination of Executive's
employment shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction
(which is not appealable or the time for appeal therefrom has expired and no
appeal has been perfected); and provided further that the date of termination
of Executive's employment shall be extended by a notice of dispute only if such
notice is given in good faith and the party giving such notice pursues the
resolution of such dispute with reasonable diligence. Notwithstanding the
pendency of any such dispute, the Company will continue to pay Executive his
full compensation in effect when the notice giving rise to the dispute was
given (including, but not limited to, Base Salary and incentive compensation)
or, if higher, the compensation in effect immediately prior to the Change in
Control, and continue Executive as a participant in all compensation, benefits
(including fringe benefits and perquisites) and insurance plans in which
Executive was participating when the notice giving rise to the dispute was
given, until the dispute is finally resolved in accordance with this paragraph
(iii). Amounts paid under this paragraph are in addition to all other amounts
due under this Agreement and shall not be offset against or reduce any other
amounts due under this Agreement.
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(g) Arbitration. The parties hereby agree to submit all controversies,
claims and matters of difference in any way related to this Agreement or the
performance or breach of the whole or any part hereof, to arbitration in
Denver, Colorado, according to the rules and practices of the American
Arbitration Association from time to time in force. If such rules and practices
shall conflict with the Colorado Rules of Civil Procedure or any other
provisions of Colorado law then in force, such Colorado rules and provisions
shall govern. Arbitration of any such controversy, claim or matter of
difference shall be a condition precedent to any legal action thereon. This
submission and agreement to arbitration shall be specifically enforceable.
Awards shall be final and binding on all parties to the extent and in the
manner provided by Colorado law; provided that an arbitration award shall not
be binding on the Company to the extent such award exceeds the maximum amount
the Company would be required to pay Executive pursuant to the express terms of
this Agreement. All awards may be filed by any party with the Clerk of the
District Court in the County of Denver, Colorado and an appropriate judgment
entered thereon and execution issued therefor. At the election of any party,
said award may also be filed, and judgment entered thereon and execution issued
therefor, with the clerk of one or more other courts, state or federal, having
jurisdiction over the party against whom such award is rendered or its
property.
(h) Counterparts. This Agreement may be signed in several counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
/s/ Dixon R. Walker
---------------------------
Dixon R. Walker
SCHULLER INTERNATIONAL, INC.
By: /s/ W. T. Stephens
-------------------------
Chief Executive Officer
ATTEST:
/s/ R. B. Von Wald
- ------------------
General Counsel
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Dixon R. Walker
Schedule A
Outside Directorships Held
None.
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Dixon R. Walker
Schedule B
Incentive Compensation Plans in Effect
Annual Incentive Compensation Plan.
Manville Corporation Stock Incentive Plan.
1991 Long-Term Cash Incentive Compensation Plan for Manville Corporation.
1994 Long-Term Cash Incentive Compensation Plan for Schuller International
Group, Inc.
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Dixon R. Walker
Schedule C
Fringe Benefit Arrangements and Perquisites in Effect
Club Initiation Fees & Dues
The Company will pay the initiation fee and dues for one country
club of the officer's choice. The initiation fee and first year's
dues will be "grossed up" for tax purposes.
Financial & Estate Planning
The Company will pay the reasonable cost of periodic financial and
estate planning.
Annual Executive Physical Exam Program
Income Tax Return Preparation
The Company will pay annual income tax return preparation fees up
to $2,000 plus additional fees if incurred on account of
job-related circumstances including the cost of representation by
return preparer during an audit.
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FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
BETWEEN SCHULLER INTERNATIONAL, INC.
AND DIXON R. WALKER
This AMENDMENT dated March 5, 1993, is by and between SCHULLER
INTERNATIONAL, INC., a Delaware corporation (the "Company") and a subsidiary of
MANVILLE CORPORATION, a Delaware corporation ("Manville") and DIXON R. WALKER,
(the "Executive"), who are parties to an EMPLOYMENT AGREEMENT dated April 10,
1992 (the "Agreement").
I. The Company and the Executive desire to amend the Agreement on the
terms set forth below.
In consideration of the premises and mutual covenants contained herein and
for other good and valuable consideration, the parties agree as follows:
A. The first sentence of paragraph 2. of the Agreement is amended to
read as follows:
2. Position. Executive shall serve as Senior Vice President -
Roofing Systems, Mats and Reinforcements.
B. The first sentence of paragraph 3. of the Agreement is amended to
read as follows:
3. Base Salary. Company shall pay Executive a base salary at the
rate of not less than $180,000 per year, as the same may from time to time be
increased at the sole discretion of the Board of Directors of the Company, or,
prior to a
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Change in Control, decreased in the event of across the board salary reductions
within the corporate staff or the business division in which Executive is
employed, whichever is applicable ("Base Salary").
Except as provided by this First Amendment to the Agreement, the Agreement
shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this First Amendment to be
effective as of March 5, 1993.
/s/ Dixon R. Walker
----------------------------
Dixon R. Walker
SCHULLER INTERNATIONAL, INC.
By: /s/ W. T. Stephens
-------------------------
Chief Executive Officer
ATTEST:
/s/ R. B. Von Wald
- --------------------
General Counsel
173
<PAGE> 174
July 8, 1993
D. R. Walker
10 Mourning Dove
Littleton, CO 80127
RE: EMPLOYMENT AGREEMENT EXTENSION
Dear Dixon:
Recently, the Board of Directors of Manville Corporation approved the extension
of your Employment Agreement for an additional year. This letter serves as
notice of the extension and, subject to execution by you and attestation by the
Company's General Counsel, an amendment to your Employment Agreement extending
the "Employment Term" (as defined in the Employment Agreement) for one year.
If you agree with this amendment, please sign both copies of this letter below
and return them to Dan Japha in the Denver Legal Department, P.O. Box 5108,
Denver, Colorado 8021 7-5108 at your earliest convenience. If you have
questions about this, please contact Dick Von Wald at 950-4911 or Dan Japha at
950-2266.
Very truly yours,
/s/ W. T. Stephens
W. T. Stephens
Chief Executive Officer
This amendment is accepted this 3rd day of August, 1993.
/s/ Dixon R. Walker
---------------------
(Executive)
Attest: /s/ R. B. Von Wald
-------------------
General Counsel
174
<PAGE> 175
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
BETWEEN SCHULLER INTERNATIONAL, INC.
AND DIXON R. WALKER
This SECOND AMENDMENT dated as of June 2, 1994 is by and between SCHULLER
INTERNATIONAL, INC., a Delaware corporation (the "Company"), and DIXON R.
WALKER (the "Executive"), and amends the EMPLOYMENT AGREEMENT dated April 10,
1992 by and between the Company and the Executive as amended on March 5, 1993
and extended on August 3, 1993 (as so amended and extended, the "Agreement').
WHEREAS, effective February 4, 1994, the Company and the Executive agreed
that the Executive's position would be Senior Vice President - Roofing Systems,
Mats & Reinforcements and Information Technology and the Executive's base
annual salary would be $200,000; and
WHEREAS, effective as of the date hereof, the Company and the Executive
agreed to further change the Executive's position and annual base salary in
accordance with the terms hereof.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:
A. The first sentence of paragraph 2 of the Agreement is hereby amended to
read as follows:
Executive shall serve as the Senior Vice President - Roofing
Systems, Building Insulations and Information Technology.
B. The first sentence of paragraph 3 of the Agreement is hereby amended to
read as follows:
Company shall pay Executive a base salary at the rate of not less
than $225,000 per year, as the same may from time to time be
increased at the sole discretion of the Board of Directors of the
Company, or, prior to a Change in Control, decreased in the event
of across the board salary reductions within the corporate staff
group or the business division in which Executive is employed,
whichever is applicable ("Base Salary").
C. The "Employment Term" (as defined in the Agreement) is hereby extended
for one year to April 10, 1997.
175
<PAGE> 176
D. Except as provided by this Second Amendment to the Agreement, the
Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Second Amendment to the
Agreement to be effective as of June 2, 1994.
/s/ Dixon R. Walker
-----------------------------
Dixon R. Walker
SCHULLER INTERNATIONAL, INC.
By: /s/ W. T. Stephens
--------------------------
W. T. Stephens
Chairman of the Board
ATTEST
/s/ Richard B. Von Wald
- -----------------------------
Richard B. Von Wald
Senior Vice President,
General Counsel and Secretary
176
<PAGE> 177
April 26, 1995
D. R. Walker
RE: EMPLOYMENT AGREEMENT EXTENSION AND AMENDMENT
Dear Dixon:
Recently, the Board of Directors of Manville Corporation approved an extension
and amendment of your Employment Agreement with Schuller International, Inc.
(the "Company"), dated April 10, 1992 (as previously amended, the "Employment
Agreement"). The extension and amendment, as set forth below, extends the term
of the Employment Agreement to April 10, 1998 and modifies the Change in
Control definition, all as set forth below:
Paragraph 1 of the Employment Agreement shall be amended to extend the
"Employment Term" (as defined therein) until April 10, 1998.
Paragraph 8(g)(i) shall be amended to read as follows:
except for Manville, a subsidiary or an affiliate
thereof, an employee benefit plan (including any
trustee of such plan, acting as trustee) sponsored or
maintained by Manville or any subsidiary thereof or
Manville Personal Injury Settlement Trust (the
"Trust"), any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended from time to time, and any
successor act (the "Exchange Act")) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities
of Manville or Schuller International Group, Inc.
("Schuller") representing 30% or more of the combined
voting power of Manville's or Schuller's, as
applicable, then outstanding securities;
Paragraph 8(g)(iii)(B) shall be amended to read as follows:
a sale or other disposition or the last sale or other
disposition to occur in a series of sales and/or other
dispositions within any 18-month period ("Serial
Sales") by Schuller and/or one or more subsidiaries of
Schuller of assets which, in the case of Serial Sales,
as of the beginning of such 18-month period, account
for more than 40% of the consolidated revenues of
Schuller and its subsidiaries, as determined in
accordance with generally accepted accounting
principles; provided,
177
<PAGE> 178
D. R. Walker
April 26, 1995
Page Two
however, that no sale or disposition of assets or
stock shall be taken into account to the extent that
the proceeds of such sale or disposition (whether in
cash or in-kind) are reinvested or are, in the case of
proceeds received in kind, used in the ongoing conduct
by Schuller or one or more of its subsidiaries of the
business of Schuller and/or such subsidiary or
subsidiaries, provided further that such a
reinvestment shall not be deemed to have occurred
unless made within 18 months of such sale or
disposition and provided further that, the term
reinvestment shall exclude, inter alia, the use of
proceeds (x) to repay debt owed to the Trust or debt
incurred in connection with the operation of the
business in which the assets sold or disposed of were
used or (y) to pay dividends;
From and after the date of execution of this extension and amendment by you and
attestation of this extension and amendment by the Company's General Counsel,
the extension and amendment shall be effective and the Employment Agreement
shall be deemed amended in the manner set forth above.
Please sign and date two copies of this Amendment and Extension and return them
to Judie Bratek, Manager of Compensation in Denver, Mail Code 2-01, at your
earliest convenience.
If you have questions about the extension, please call Dion Persson at
950-3422.
Very truly yours,
/s/ W. T. Stephens
W. T. Stephens
Chairman, President and
Chief Executive Officer
Manville Corporation
This amendment and extension is accepted this 27th day of April, 1995.
/s/ D. R. Walker
-----------------------
D. R. Walker
Attest: /s/ Richard B. Von Wald
------------------------
Richard B. Von Wald
General Counsel
178
<PAGE> 179
March 14, 1996
Dixon R. Walker - 12-03
RE: EMPLOYMENT AGREEMENT EXTENSION
Dear Dixon:
Recently, the Board of Directors of Manville Corporation approved an
extension of your employment agreement with Schuller International, Inc. (the
"Company"), dated April 10, 1992 (as previously amended and extended, the
"Employment Agreement"). This letter serves as notice of the extension and,
subject to execution by you and attestation by Manville Corporation's General
Counsel, an amendment to the Employment Agreement extending the "Employment
Term" (as defined in the Employment Agreement) to April 10, 1999.
To evidence your agreement to so extend the Employment Term, please sign
and date both copies of this letter where indicated and return them to Dion
Persson (Denver 11-01) at your earliest convenience. A fully executed copy
will be returned to you for your files. If you have any questions about the
extension, please call Dion Persson at 303-978-3422.
Very truly yours,
/s/ W. T. Stephens
W.T. Stephens
Chairman of the Board, President
and Chief Executive Officer
This amendment is accepted this 20th day of March, 1996.
/s/ Dixon R. Walker
--------------------
Dixon R. Walker
Attest:
/s/ Richard B. Von Wald
- --------------------------------------
Richard B. Von Wald
Senior Vice President, General Counsel
& Secretary
179
<PAGE> 180
AMENDMENT TO EMPLOYMENT AGREEMENT
BETWEEN SCHULLER INTERNATIONAL, INC.
AND DIXON R. WALKER
This AMENDMENT, dated as of June 7, 1996, is by and between SCHULLER
INTERNATIONAL, INC., a Delaware corporation (the "Company"), and Dixon R.
Walker (the "Executive") and amends the EMPLOYMENT AGREEMENT, dated April 10,
1992, between the Company and the Executive (as previously amended and
extended, the "Employment Agreement").
WHEREAS, the Company and the Executive have agreed to amend the Employment
Agreement in accordance with the terms hereof.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Section 8(g) of the Employment Agreement is hereby amended in its
entirety to read as follows:
(g) Change in Control. For purposes of this Agreement, the phrase
"Change in Control" shall mean the following and shall be deemed to have
occurred if any of the following events shall have occurred:
(i) any Person (as defined below) (other than Schuller Corporation
("Schuller")), any trustee or other fiduciary holding securities under any
employee benefit plan of Schuller, or any company owned, directly or
indirectly, by the stockholders of Schuller in substantially the same
proportions as their ownership of the common stock of Schuller) becomes the
Beneficial Owner (as defined below) (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 (as defined below)),
directly or indirectly, of securities of Schuller or any Significant Subsidiary
(as defined below), representing 30 percent or more of the combined voting
power of Schuller'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 (the "Trust");
(ii) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board of Directors of Schuller
(the "Board"), and any new director (other than a director designated by a
person who has entered into an agreement with Schuller to effect a transaction
described in clause (i),
180
<PAGE> 181
(iii), or (iv) of this paragraph) whose election by the Board or nomination for
election by Schuller'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
Schuller owned beneficially, directly or indirectly, by the Trust is less than
50 percent of all such outstanding securities;
(iii) the consummation of a merger or consolidation of Schuller
or any subsidiary owning directly or indirectly all or substantially all of the
consolidated assets of Schuller (a "Significant Subsidiary") with any other
corporation, other than a merger or consolidation which would result in the
voting securities of Schuller 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;
(iv) the stockholders of Schuller or any affiliate approve a plan
or agreement for the sale or disposition of all or substantially all of the
consolidated assets of Schuller (other than such a sale or disposition
immediately after which such assets will be owned directly or indirectly by the
stockholders of Schuller in substantially the same proportions as their
ownership of the common stock of Schuller immediately prior to such sale or
disposition) in which case the Board shall determine the effective date of the
Change in Control resulting therefrom;
(v) a sale of the business unit, division or group within which
Executive is employed, other than to another entity which is directly or
indirectly controlled by Schuller, as a result of which Executive is no longer
employed by an entity which is directly or indirectly controlled by Schuller;
or
(vi) any other event occurs which the Board determines, in its
discretion, would materially alter the structure of Schuller or its ownership.
181
<PAGE> 182
(vii) Defined terms.
(A) "Beneficial Owner" shall have the meaning ascribed to
such term in Rule 13d-3 under the Exchange Act and any successor to such Rule.
(B) "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, including rules thereunder and successor
provisions and rules thereto.
(C) "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.
2. Section 9 of the Employment Agreement is hereby amended in its entirety
to read as follows:
9. [Reserved]
3. Attached hereto is a revised Schedule B to the Employment Agreement,
which shall supersede and replace any previously existing Schedule B to the
Employment Agreement.
4. Except as provided by this Amendment, the Employment Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment to be
effective as of June 7, 1996.
/s/ Dixon R. Walker
-------------------------------------
Dixon R. Walker
SCHULLER INTERNATIONAL, INC.
/s/ W. T. Stephens
-------------------------------------
W. Thomas Stephens
Chief Executive Officer and President
ATTEST:
/s/ Richard B. Von Wald
- ----------------------------------
Richard B. Von Wald
Executive Vice President,
General Counsel and Secretary
182
<PAGE> 183
Schedule B
Incentive Compensation Plans in Effect
Annual Incentive Compensation Plan for Schuller Corporation
1994 Long-Term Cash Incentive Compensation Plan for Schuller
International Group, Inc.
Schuller Corporation 1996 Stock Award Plan
Schuller Corporation 1996 Deferred Compensation Plan
183
<PAGE> 1
EXHIBIT 13
Schuller Corporation 1996 Annual Report
SELECTED FIVE-YEAR FINANCIAL DATA
<TABLE>
<CAPTION>
==========================================================================================================================
In thousands of dollars, except per share data
Years Ended December 31, 1996 1995 1994 1993 1992
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income
-------------------------------------------------------------------------------------------------------------------------
Net Sales (Note B) $ 1,552,429 $ 1,391,522 $ 1,277,818 $ 1,165,810 $ 1,095,353
Income from Operations (Notes A and B) 187,427 201,283 142,299 52,451 56,124
Income from Continuing Operations,
net of tax (Notes A and B) 190,525 122,006 55,606 57,837 6,792
Income before Extraordinary Items and
Cumulative Effect of Accounting Change (Note B) 406,771 115,995 65,416 60,772 47,465
Net Income (Notes B, D, E and F) 90,486 115,995 36,996 47,782 35,949
-------------------------------------------------------------------------------------------------------------------------
Financial Position (As of December 31)
-------------------------------------------------------------------------------------------------------------------------
Total Assets (Note C) $ 1,946,726 $ 2,474,059 $ 2,317,498 $ 2,163,079 $ 2,414,031
Long-Term Debt, less current portion 428,160 447,007 441,798 354,205 422,485
Stockholders' Equity 580,462 1,181,307 1,080,781 883,114 847,231
-------------------------------------------------------------------------------------------------------------------------
Additional Data (Note B)
-------------------------------------------------------------------------------------------------------------------------
Additions to Property, Plant and Equipment $ 153,000 $ 111,329 $ 82,833 $ 62,643 $ 32,495
Research, Development and Engineering 32,663 29,988 29,738 27,972 28,100
-------------------------------------------------------------------------------------------------------------------------
Per Share Data (Note G)
-------------------------------------------------------------------------------------------------------------------------
Primary and Fully Diluted Earnings
Per Common Share:
Income (Loss) from Continuing Operations,
net of tax (Notes A and B) $ .85 $ .78 $ .25 $ .29 $ (.11)
Income before Extraordinary Items and
Cumulative Effect of Accounting Change (Note B) 2.27 .73 .33 .31 .22
Net Income (Notes B, D, E and F) .20 .73 .10 .21 .13
Common Dividends Paid 6.03 1.04 1.04
-------------------------------------------------------------------------------------------------------------------------
Pro Forma Data (Note H)
-------------------------------------------------------------------------------------------------------------------------
Income from Operations $ 236,583 $ 201,283 $ 142,299 $ 84,465 $ 55,378
Net Income 119,366 93,443 60,992 31,816 2,447
Primary and Fully Diluted Earnings
Per Common Share:
Net Income $ .73 $ .57 $ .37 $ .20 $ .02
=========================================================================================================================
</TABLE>
NOTES:
(A) During the fourth quarter of 1996, the Company recorded nonrecurring
charges totaling $49.2 million. These charges include $41.7 million for the
shutdown of current operations, demolition of facilities and site restoration
and $7.5 million of asset write-downs to estimated fair values, partially
offset by a gain on the sale of other manufacturing assets.
(B) In March 1996, the Company disposed of its 81.3 percent interest in
Riverwood International Corporation ("Riverwood"). Accordingly, Riverwood's
operations have been reflected as discontinued operations and its operating
results have been excluded from the determination of income from continuing
operations for all periods presented. Income from continuing operations, net of
tax, includes gains on sales of equity investments, interest income, interest
expense and profit sharing expense. Income before extraordinary items and
cumulative effect of
21
<PAGE> 2
Schuller Corporation 1996 Annual Report
SELECTED FIVE-YEAR FINANCIAL DATA
===============================================================================
accounting change and net income include a gain on disposal of discontinued
operations of $216.2 million, net of tax, in 1996 and a loss on disposal of
discontinued operations of $42.5 million, net of tax, in 1995.
(C) The net assets and liabilities of the discontinued operations of
Riverwood have been classified as net assets held for sale for all periods
presented. At December 31, 1995, 1994, 1993 and 1992, net assets held for sale
totaled $375.6 million, $409.6 million, $435.4 million and $402.9 million,
respectively.
(D) In the first quarter of 1996, the Company recorded an extraordinary loss
of $314.3 million, net of taxes of $169.2 million, on the exchange of
approximately 32.5 million shares of the Company's common stock for Manville
Personal Injury Settlement Trust's profit sharing right to 20 percent of the
Company's net earnings (as adjusted).
(E) The Company recorded extraordinary gains (losses) on early
extinguishments of debt, net of taxes, of $(2) million, $(28.4) million, $0.9
million and $(11.5) million in 1996, 1994, 1993 and 1992, respectively.
(F) Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits." As a result, the Company recorded a charge in 1993 of $13.9 million,
net of taxes of $8.6 million, or $0.11 per common share, against net income to
reflect the accumulated postemployment benefit obligation.
(G) During the second quarter of 1996, the Company redeemed its Cumulative
Preference Stock, Series B. Earnings (loss) per share amounts were calculated
after the deduction for preference stock dividends/accretion and the $52.1
million premium on preference stock redemption.
(H) Pro forma data has been adjusted to eliminate the effects of
nonrecurring charges, restructuring of operations, gains on sales of equity
investments, interest expense on the 9 percent Sinking Fund Debentures, profit
sharing expense, unusual income tax items, discontinued operations,
extraordinary gains and losses, cumulative effect of accounting change,
preference stock dividends/accretion and premium on preference stock
redemption, on a consistent basis and adjusted for estimated applicable tax
effects. In addition, earnings per share are based on 162.7 million weighted
average shares for all periods presented.
22
<PAGE> 3
Schuller Corporation 1996 Annual Report
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
===============================================================================
Schuller Corporation ("Schuller" or the "Company") manufactures and markets
insulation for buildings and equipment, commercial roofing systems,
high-efficiency filtration media, and fibers and nonwoven mats used as
reinforcements in building and industrial applications. The Company operates 50
manufacturing facilities in North America, Europe and China, and is comprised
of two principal business segments: Building Products and Engineered Products.
The Building Products segment consists of the Company's building insulation
business, which manufactures fiber glass wool insulation for walls, attics and
floors in residential and commercial buildings and polyisocyanurate foam
sheathing for residential structures; commercial and industrial roofing systems
business, which supplies roofing membranes, insulations, accessories and
related guarantees; and mechanical insulations business, which manufactures
pipe and duct insulation for use in commercial buildings, factories, refineries
and other industrial applications.
The Engineered Products segment consists of the Company's mats and fibers
business, which manufactures continuous filament fiber glass-based products
used for reinforcing roofing, flooring, wall covering and plastic products. The
Engineered Products segment also includes the Company's specialty insulations
and filtration business, which manufactures thermal and acoustic insulation for
aircraft, marine vessels, automobiles and heating, ventilating and air
conditioning ("HVAC") and other equipment; filtration media for commercial and
industrial buildings; ultra-fine fibers for clean room air filters and battery
separators; liquid filtration cartridges and media for use in commercial and
industrial applications; and synthetic meltblown products used in various other
applications.
23
<PAGE> 4
Schuller Corporation 1996 Annual Report
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
===============================================================================
1996 VS 1995
RESULTS OF OPERATIONS
The following table sets forth, for each of the years ended December 31, 1996
and 1995, certain income and expense items, exclusive of discontinued
operations.
<TABLE>
<CAPTION>
In thousands of dollars % Increase
1996 1995 (Decrease)
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales
Building Products $ 960,497 $ 805,615 19.2
Engineered Products 623,231 612,526 1.7
Corporate and Eliminations (31,299) (26,619)
- ---------------------------------------------------------------------------
Total Net Sales 1,552,429 1,391,522 11.6
Cost of Sales 1,111,811 993,111 12.0
- ---------------------------------------------------------------------------
Gross Profit 440,618 398,411 10.6
Other Operating Expenses 203,690 180,123 13.1
Nonrecurring Charges 49,156
Other Income (Expense), net (345) (17,005)
- ---------------------------------------------------------------------------
Income from Operations
Building Products 135,437 133,025 1.8
Engineered Products 113,127 108,219 4.5
Corporate and Eliminations (61,137) (39,961)
- ---------------------------------------------------------------------------
Total Income from Operations $ 187,427 $ 201,283 (6.9)
===========================================================================
</TABLE>
Net sales increased $160.9 million, or 11.6 percent, to $1,552.4 million in
1996 from $1,391.5 million in 1995.
The Building Products segment's net sales increased $154.9 million, or 19.2
percent, for 1996 compared with 1995. These increases are due primarily to the
inclusion of the operating results of the businesses acquired during 1996 by
the commercial and industrial roofing systems business. The building insulation
business' net sales improved moderately as higher volumes from increased
housing starts in the U.S. and Canada for most of 1996 more than offset the
effects of continuing pricing pressures. Net sales of mechanical insulations
increased on higher sales volumes, reflecting market share gains and strength
in commercial and industrial construction markets.
The Engineered Products segment's net sales increased $10.7 million, or 1.7
percent, for 1996 compared with 1995. The U.S. mats and fibers business had
significantly higher net sales due to increased sales volumes as the Company
expanded its production capacity during 1996. Meanwhile, continuing
industry-wide capacity constraints led to slightly higher 1996 selling prices.
The U.S. operating results were partially offset by continuing weakness in
European construction markets and decreases in the U.S. dollar-reported results
of the Company's German operations due to the strengthening of the U.S. dollar
against the German mark. The specialty insulations and filtration businesses
experienced slightly higher overall net sales due to increased sales of HVAC
equipment insulation and
24
<PAGE> 5
Schuller Corporation 1996 Annual Report
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
===============================================================================
expanded markets for ultra-fine fibers. These increases were partially offset
by weakness in sales of automotive insulation products due to competition from
alternate materials.
Gross profit for 1996 increased $42.2 million, or 10.6 percent, compared
with 1995, due primarily to the increased sales volumes of the acquisitions
discussed above. Gross profit margins were 28.4 percent for 1996 and 28.6
percent for 1995 as the effects of lower building insulation prices were
substantially offset by improved operating efficiencies, particularly in the
roofing business.
Other operating expenses include selling, general, administrative and
research, development and engineering expenses. These expenses increased $23.6
million and were slightly higher as a percentage of net sales at 13.1 percent
for 1996 compared with 12.9 percent for 1995. The increase is principally due
to additional expenses as a result of recent acquisitions and acquisition
related activities.
In 1996, the Company recorded the following pretax nonrecurring charges
totaling $49.2 million.
During the fourth quarter of 1996, the Company completed an evaluation of a
manufacturing facility with both current and former operations and determined
that its best course of action is closure of the facility. Consequently, the
Company recorded nonrecurring charges of $41.7 million for the shutdown of
current operations, demolition of facilities and site restoration, of which $30
million and $11.7 million related to corporate and eliminations and the
Building Products segment, respectively. Of these charges, $7.5 million are
noncash asset write-downs, and $3 million are classified as other current
liabilities. Upon completion of these actions, the Company intends to
relinquish the remaining properties and does not expect to incur significant
future monitoring and maintenance costs. The Company expects to fund the
charges requiring cash outlays from existing cash balances and cash generated
from operations. Pending federal and state regulatory agency approval, the
demolition phase of the project is expected to begin in 1997 and be
substantially completed during 1998, with the majority of the liabilities
settled over the next two years. The nonrecurring charges are based on
estimates and, therefore, are subject to risks and uncertainties related to the
Company's ability to secure agreements with third parties, relinquish the
properties and obtain regulatory approvals to execute the actions described
above. As a result, the Company believes it is reasonably possible that these
estimates may be revised in the near-term. However, the impacts of such
revisions, if any, are not expected to be material.
The Company also recorded nonrecurring charges in the Engineered Products
segment of $7.5 million consisting of asset write-downs to estimated fair
values in the automotive molded parts business, which is expected to be
disposed of in 1997, partially offset by a gain on the sale of other
manufacturing assets.
Other expense, net, was $0.3 million for 1996 compared with other expense,
net, of $17 million for 1995. Included in 1996 was a $7.2 million gain relating
to the receipt of surplus pension assets in connection with the settlement of
defined benefit pension plans in which the Company's Canadian employees
previously participated. Other expense for 1996 also included higher
amortization of goodwill resulting from acquisitions completed during the year.
Other expense for 1995 included net asset write-offs/dispositions of $6.7
million related primarily to nonproductive assets. In addition, 1995 included a
$2.9 million charge for legal costs in connection with litigation brought by
the Company against the former owner of the phenolic roofing business.
25
<PAGE> 6
Schuller Corporation 1996 Annual Report
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
===============================================================================
The Company's income from operations, including $49.2 million of
nonrecurring charges, decreased $13.9 million, or 6.9 percent, to $187.4 million
in 1996 from $201.3 million in 1995.
In 1995, the Company sold its remaining equity investment in Stillwater
Mining Company ("Stillwater") for net cash proceeds of $110.5 million,
resulting in a pretax gain on the sale of equity investment of $74.9 million.
Compared with 1995, interest income in 1996 decreased by $5.3 million, due
primarily to $5.2 million of interest received during 1995 from the Internal
Revenue Service on a 1993 income tax refund.
The Company paid $6.6 million of profit sharing expense through April 5,
1996 to Manville Personal Injury Settlement Trust (the "Trust"). This
represents the final profit sharing payment to the Trust. Profit sharing
expense for 1995 totaled $27.7 million and was also paid in 1996.
INCOME TAXES
For the year ended December 31, 1996, the Company reported a net income tax
benefit of $39.1 million, which included a $104.5 million tax benefit on the
portion of the special cash dividend that was paid to the Trust in April 1996.
Exclusive of the tax benefit on the special cash dividend, the Company's
effective tax rate on income from continuing operations was 43 percent and 46
percent for the years ended December 31, 1996 and 1995, respectively. These
rates are higher than the U.S. federal statutory tax rate principally due to
higher foreign effective tax rates and state taxes.
DISCONTINUED OPERATIONS
The Company disposed of its 81.3 percent interest in Riverwood International
Corporation ("Riverwood") on March 27, 1996. As a result, the Company received
gross cash proceeds of $1.08 billion and recorded a gain of $177.2 million, net
of estimated tax expense of $177.8 million, during the first quarter of 1996.
In the fourth quarter of 1996, an additional gain of $39.1 million was
recognized, adjusting the estimated taxes previously recorded from $177.8
million to $138.7 million. The Company adjusted the estimated taxes on the gain
in the fourth quarter of 1996 due to the Company's determination that it would
be able to utilize foreign tax credits applicable to the gain and other
adjustments to the estimated taxes of the transaction. Accordingly, the Company
recognized a gain of $216.2 million, net of tax, for the full year of 1996.
In the fourth quarter of 1995, the Company recorded an estimated loss on the
disposal of discontinued operations of $42.5 million. This loss primarily
relates to deferred taxes on the Company's investment in Riverwood that had not
been recognized previously. The Company recorded these taxes when it became
apparent the taxes would be incurred due to the planned disposition of
Riverwood.
26
<PAGE> 7
Schuller Corporation 1996 Annual Report
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
===============================================================================
In conjunction with the Company's disposition of Riverwood, the Company has
agreed to indemnify the purchaser of Riverwood and certain affiliated parties
against losses resulting from a breach of certain representations or
warranties. The Company will not be required to indemnify the purchaser for
losses until the aggregate amount of all losses exceeds $20 million. The
Company's obligation to indemnify is limited to 80 percent of the amount of
losses in excess of $20 million and its aggregate liability will not exceed
$100 million. The Company's obligation to indemnify is limited to claims made
on or prior to May 31, 1997. To date, the Company has not received any such
claims for indemnification.
In addition, the Company may be responsible for certain Riverwood U.S.
federal, state and local income tax liabilities to the extent, if any, they are
attributable to audit adjustments for tax periods ending prior to the
disposition of Riverwood.
EXTRAORDINARY LOSS ON TRUST SETTLEMENTS
During 1996, the Company exchanged approximately 32.5 million shares of the
common stock of the Company for the Trust's profit sharing right to 20 percent
of the Company's net earnings (as adjusted). As a result, the Company recorded
an extraordinary loss of $314.3 million, net of taxes of $169.2 million.
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT
During the second quarter of 1996, the Company redeemed its 9 percent Sinking
Fund Debentures, due through 2003, with cash of $27.7 million, plus accrued
interest of $1.6 million, resulting in an extraordinary loss on early
extinguishment of debt of $2 million, net of taxes of $1.1 million.
PREFERENCE STOCK REDEMPTION
On April 30, 1996, the Company redeemed its Cumulative Preference Stock, Series
B (the "preference stock"), with cash of $230.8 million, plus accrued dividends
of $4.1 million. The excess of the redemption price over the carrying value of
the preference stock of $52.1 million was charged directly to capital in excess
of par value and was deducted from net income to compute earnings and earnings
per share applicable to common stockholders.
EARNINGS PER COMMON SHARE
The primary and fully diluted net earnings per common share for 1996 were $0.20
as compared with the primary and fully diluted net earnings per common share of
$0.73 for 1995. The gain on disposal of discontinued operations increased the
net earnings per share by $1.42 during 1996, while the loss on disposal of
discontinued operations decreased primary and fully diluted earnings per share
by $0.34 in 1995. Income from discontinued operations increased primary and
fully diluted earnings per share by $0.29 during 1995. The extraordinary loss
on trust settlements and the extraordinary loss on early extinguishment of debt
decreased the 1996 earnings per common share by $2.07.
Earnings per common share amounts are calculated after the deduction for
preference stock dividends and the premium on preference stock redemption.
27
<PAGE> 8
Schuller Corporation 1996 Annual Report
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
===============================================================================
1995 VS 1994
RESULTS OF OPERATIONS
The following table sets forth, for each of the years ended December 31, 1995
and 1994, certain income and expense items, exclusive of discontinued
operations.
<TABLE>
<CAPTION>
In thousands of dollars % Increase
1995 1994 (Decrease)
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales
Building Products $ 805,615 $ 743,967 8.3
Engineered Products 612,526 558,244 9.7
Corporate and Eliminations (26,619) (24,393)
- ---------------------------------------------------------------------------
Total Net Sales 1,391,522 1,277,818 8.9
Cost of Sales 993,111 935,951 6.1
- ---------------------------------------------------------------------------
Gross Profit 398,411 341,867 16.5
Other Operating Expenses 180,123 178,535 0.9
Other Income (Expense), net (17,005) (21,033) (19.2)
- ---------------------------------------------------------------------------
Income from Operations
Building Products 133,025 109,933 21.0
Engineered Products 108,219 76,503 41.5
Corporate and Eliminations (39,961) (44,137)
- ---------------------------------------------------------------------------
Total Income from Operations $ 201,283 $ 142,299 41.5
===========================================================================
</TABLE>
Net sales increased $113.7 million, or 8.9 percent, to $1,391.5 million in
1995 from $1,277.8 million in 1994.
The Building Products segment's net sales for 1995 increased $61.6 million,
or 8.3 percent, compared with 1994. This segment's businesses benefited from
increases in commercial construction and favorable energy conservation trends
experienced during 1995. This strong demand resulted in higher selling volumes
for all of the Building Products' businesses, along with a net increase in
selling prices for building insulation despite a decline in pricing since the
second quarter of 1995 due to new capacity added by a competitor. In addition,
the mechanical insulations business benefited from market share gains due to
new product introductions and the exit of a competitor from this market. The
Company's commercial roofing business benefited from volume gains, offset in
part by price declines resulting from a competitive marketplace.
The Engineered Products segment's net sales increased $54.3 million, or 9.7
percent, for 1995 compared with 1994. This increase was primarily attributable
to the Company's mats and fibers business, which experienced increased sales
volumes and prices as a result of strong worldwide demand for continuous
filament fiber glass. The Company's filtration business also experienced
increased sales during 1995 due to strong demand for the Company's ultra-fine
fibers. These improvements in net sales were partially offset by the effect of
continued weakness in the automotive market.
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<PAGE> 9
Schuller Corporation 1996 Annual Report
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
===============================================================================
Gross profit for 1995 increased $56.5 million, or 16.5 percent, compared
with 1994. Gross profit margins were 28.6 percent for 1995 and 26.8 percent for
1994. The increase in gross profit was primarily attributable to the increased
selling prices and sales volumes described above, in addition to reduced fixed
costs and improved manufacturing efficiencies. Combined, these factors more
than offset raw material cost increases and equipment start-up costs
experienced during 1995.
Other operating expenses, which include selling, general, administrative and
research, development and engineering expenses, increased by $1.6 million in
1995. As a percentage of net sales, these expenses decreased to 12.9 percent in
1995 compared with 14 percent in 1994.
Other expense, net, decreased $4 million to $17 million in 1995 from $21
million in 1994. The decrease is primarily attributable to an $8.9 million
charge during 1994, compared with $2.9 million in 1995, for legal costs related
to the Company's former phenolic roofing insulation business.
The Company's income from operations increased $59 million, or 41.5 percent,
to $201.3 million in 1995 from $142.3 million in 1994.
In 1995, the Company sold its remaining equity investment in Stillwater for
net cash proceeds of $110.5 million, resulting in a pretax gain on the sale of
equity investment of $74.9 million.
During 1994, the Company sold a portion of its equity investment in
Stillwater for net cash proceeds of approximately $25.5 million, resulting in a
pretax gain on the sale of equity investment of $13.5 million.
Compared with 1994, interest income in 1995 increased by $17 million, due
primarily to higher average cash and marketable securities balances and $5.2
million of interest received from the Internal Revenue Service on a 1993 income
tax refund.
In 1995, the Company recorded $27.7 million of profit sharing expense which
was paid in 1996 to the Trust. Profit sharing expense for 1994 totaled $18.3
million and was paid in 1995.
INCOME TAXES
The Company's effective tax rate on income from continuing operations was 46
percent and 43 percent for the years ended December 31, 1995 and 1994,
respectively. These rates are higher than the U.S. federal statutory tax rate
principally due to higher foreign effective tax rates and state taxes.
DISCONTINUED OPERATIONS
Income from discontinued operations, net of tax and minority interest, reflects
the operating results of Riverwood through October 1995, the date of adoption
of a formal plan to dispose of the Company's 81.3 percent interest in
Riverwood. Riverwood's income from operating activities was higher in 1995 than
1994 generally due to higher selling prices and volume. Additionally,
Riverwood's 1994 results reflect a $27.5 million income tax charge related to
the sale of a portion of its Brazilian operations.
In the fourth quarter of 1995, the Company recorded an estimated loss on
disposal of discontinued operations of $42.5 million. This loss primarily
relates to deferred taxes on the Company's investment in Riverwood that had not
been recognized previously. The Company recorded these taxes when it became
apparent the taxes would be incurred due to the planned disposition of
Riverwood.
29
<PAGE> 10
Schuller Corporation 1996 Annual Report
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
===============================================================================
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENTS OF DEBT
In the third and fourth quarters of 1994, the Company completed two debt
refinancings, described below, that resulted in an aggregate extraordinary loss
on early extinguishments of debt of $28.4 million, net of taxes of $13 million.
Riverwood completed a refinancing program in the third quarter of 1994 and
prepaid approximately $179 million principal of notes. The extraordinary charge
for this early retirement of debt was $7.9 million, net of taxes of $5 million.
In conjunction with the 1994 prepayment of substantially all of its
remaining outstanding bond obligations (the "Trust Bonds") to the Trust, the
Company recorded an extraordinary loss of $26.8 million, net of taxes of $11.4
million, in the third quarter of 1994. In the fourth quarter of 1994, the
extraordinary loss on the Trust Bonds was reduced by $6.3 million, net of taxes
of $3.4 million, due to an agreed upon adjustment contained in the prepayment
agreement. This resulted in a total extraordinary loss on the Trust Bonds
prepayment in 1994 of $20.5 million, net of taxes of $8 million.
EARNINGS PER COMMON SHARE
Primary and fully diluted earnings per common share for 1995 were $0.73 as
compared with the primary and fully diluted earnings per common share of $0.10
for 1994. The loss on disposal of discontinued operations decreased primary and
fully diluted earnings per share by $0.34 in 1995 while income from
discontinued operations increased earnings per share by $0.29 and $0.08 in 1995
and 1994, respectively. The extraordinary net loss from the early
extinguishments of debt described above decreased primary and fully diluted
earnings per common share by $0.23 in 1994.
Earnings per common share amounts are calculated after the deduction for
preference stock dividends.
LIQUIDITY AND CAPITAL RESOURCES
The Company broadly defines liquidity as the ability to generate sufficient
cash flow to satisfy operating requirements, fund capital expenditures and meet
existing obligations and commitments. In addition, liquidity also includes the
ability to obtain appropriate financing and convert into cash those assets that
are no longer required to meet the Company's strategic objectives. Therefore,
liquidity should not be considered separately from capital resources, which
consist of currently or potentially available funds for use in achieving
long-range business objectives and meeting debt service commitments.
The Company's agreements with its lenders contain a number of financial and
general covenants. These include, among others, restrictions on borrowings,
investments, stock issuances and repurchases, dividends and other distributions
by Schuller International Group, Inc. ("Schuller International"), the Company's
wholly-owned subsidiary, and restrictions on intercompany transactions,
including transfers of cash. As of December 31, 1996 and 1995, the maximum
amount available for dividends to be paid to
30
<PAGE> 11
Schuller Corporation 1996 Annual Report
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
===============================================================================
the Company by Schuller International under debt covenants of the Company's
Senior Notes was approximately $227 million and $172 million, respectively.
Noncompliance with these or other covenants, or the occurrence of any other
event of default, could result in the termination of existing credit agreements
and the acceleration of debt owed by the Company and its subsidiaries. At
December 31, 1996, the Company was in compliance with these covenants.
The Company's cash and marketable securities balances decreased $178.5
million during 1996 to $249.3 million at December 31, 1996, from $427.8 million
at December 31, 1995. At December 31, 1996, $217.2 million of the cash and
marketable securities balances was available for domestic operating purposes.
Cash provided by operations decreased $52.2 million during 1996 to $165.4
million at December 31, 1996, from $217.6 million at December 31, 1995. Cash
disbursements relating to final profit sharing obligations and expenses
associated with discontinued operations during 1996 and the inclusion of cash
flows from discontinued operations during 1995 more than offset cash flow
generated by improved operating results. During 1996, most of the Company's
businesses reported increased sales volume, offset in part by lower selling
prices for building insulation.
Cash provided by investing activities totaled $935.4 million and cash used
in investing activities totaled $88.3 million for the years ended December 31,
1996 and 1995, respectively. During 1996 and 1995, the Company's cash flows
from investing activities included proceeds of $1.08 billion from the
disposition of Riverwood and $110.5 million from the sale of Stillwater,
respectively. The Company's investing activities also included the combined
cash purchase prices for acquisitions and contributions to a joint venture
which totaled $153.1 million during 1996. Capital expenditures during 1996
totaled $103 million, of which approximately $45 million related to capacity
expansion projects. Capital expenditures during 1995 totaled $111.3 million, of
which approximately $60 million related to capacity expansion projects.
The Company's financing activities for 1996 included a payment of a special
cash dividend of $6.00 per common share, totaling $968.1 million; redemption of
its preference stock for $230.8 million, along with final dividend payments
totaling $10.3 million, or $1.12 per share; redemption of its 9 percent Sinking
Fund Debentures with a carrying value of $24.7 million; and receipt of $64.8
million from the exercise of stock warrants for seven million shares of the
Company's common stock. Financing activities for 1996 also include the initial
regular quarterly cash dividend on its common stock of three cents per share,
totaling $4.9 million, declared for the third quarter of 1996 and paid on
October 10, 1996. Financing activities for 1995 included preference stock
dividends of $24.9 million, or $2.70 per share.
The Company's total outstanding debt increased to $459.9 million at December
31, 1996 from $449 million at December 31, 1995. This increase was primarily
attributable to the assumption of debt in connection with the Company's 1996
acquisitions, partially offset by the redemption of the 9 percent Sinking Fund
Debentures. During January 1997, the Company repaid approximately $30 million
of debt assumed in connection with acquisitions. This debt, all of which was
classified as short-term debt at December 31, 1996, consisted of a line of
credit and industrial revenue bonds with original maturities through 2007.
31
<PAGE> 12
Schuller Corporation 1996 Annual Report
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
===============================================================================
At December 31, 1996, the Company had $84 million available under a
receivables sale facility (the "Receivables Facility") for its domestic
short-term working capital requirements. Amounts available for borrowing under
the Receivables Facility, up to a maximum of $100 million, are based on the
daily balance of certain outstanding trade accounts receivable, adjusted for
various factors as defined under the terms of the Receivables Facility. There
were borrowings and repayments totaling $5 million during 1996. The Company's
international subsidiaries also had borrowing and working capital facilities
totaling $85 million at December 31, 1996. These facilities, of which
approximately $84 million was available for borrowing at December 31, 1996,
are principally secured by the Company's equity ownership in certain
international subsidiaries and joint ventures.
CYCLICALITY OF DEMAND/COMPETITIVE ENVIRONMENT
Demand for the Company's products has historically been cyclical due to
macroeconomic factors affecting residential and commercial construction
markets. Due to their specific market niches, the Company's replacement
roofing, filtration and specialty products are less sensitive to business
cycles. Selling prices are subject to factors influenced by the competitive
environment in which the Company operates, including fluctuations in overall
capacity utilization.
During 1996, sales volumes increased due to continued strength in U.S.
construction markets, businesses acquired in 1996 and increases in operating
capacity, partially offset by softness in European construction markets. The
Company's building insulation business continued to experience price declines
which began in the second quarter of 1995 due to new industry capacity. Building
insulation benefited from strong housing starts for most of 1996. While pricing
for the Company's mats and fibers was strong in 1996 as industry production was
constrained, recently added capacity may adversely impact future pricing.
INCOME TAXES
The cash taxes paid by the Company in the U.S. were substantially lower than
statutory rates due to the Company's deductions related to the Trust and net
operating loss carryforwards. As of December 31, 1996, the Company will need a
cumulative total of approximately $700 million of U.S. federal taxable income
to realize its net U.S. deferred tax asset of $241.3 million. Based on the
Company's historical earnings levels, projected future earnings, and the
expected timing of the taxable deductions principally related to amounts paid
by the Trust or transferred to a specific settlement fund, the Company believes
it will realize its net deferred tax asset. The Company's valuation allowance
on all deferred tax assets is subject to change as forecasts of future years'
earnings and the estimated timing of the utilization of the Company's tax
benefits are revised.
The Company will receive a tax deduction when the Trust sells some or all of
its shares of common stock and distributes the proceeds to its beneficiaries or
transfers the proceeds to a specific settlement fund. If the Trust were to sell
the stock at a price greater than the Company's carrying value, the Company may
receive a tax benefit in excess of the deferred tax asset reflected for
financial reporting purposes. Likewise, if the Trust were to sell the stock at
a price lower than the carrying value, the Company would receive a tax benefit
less than the deferred tax asset reflected for financial reporting purposes. To
illustrate, using the December 31, 1996 closing market price of $10.625 per
share, and assuming full realization, the deferred tax asset related to the
Company's stock held by the Trust would
32
<PAGE> 13
Schuller Corporation 1996 Annual Report
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
===============================================================================
total approximately $470 million, which exceeds the carrying value by over $300
million. In addition, the Company will receive a tax deduction for the amount
of any dividends paid on shares of the Company's common stock held by the
Trust.
CAPITAL SPENDING AND CAPACITY EXPANSION
In order to increase its U.S. production of continuous filament fiber glass to
meet the demand for its mats and fibers products, the Company recently expanded
existing capacity and is in the process of reconstructing a furnace, with
completion expected by mid-1997. In addition, the Company entered into a joint
venture in China and began expansion of an existing fiber glass mat facility,
with completion also expected in 1997. The Company completed the expansion of
its filtration business' ultra-fine fiber production capacity during 1996
through capital spending programs. The Company estimates capital spending in
1997 of approximately $120 million excluding acquisitions, of which
approximately $65 million will be used primarily in the capacity expansion
programs described above. As of December 31, 1996, outstanding purchase
commitments relating to capital spending and capacity expansion projects
totaled $24.8 million. The Company plans to fund these projects from existing
cash balances and cash flows generated by operations. The Company's capacity
expansion programs are periodically revised to reflect changes in demand,
industry capacity and the results of productivity improvements and
technological innovations.
In response to the implementation of the 1990 Amendments to the federal
Clean Air Act and requirements of various state air emissions regulations, the
Company will be obligated to monitor and reduce air emissions at its
manufacturing sites. Because many of the anticipated regulations have not yet
been proposed, neither the costs nor timing of compliance can be reasonably
anticipated at this time. Provisions of Titles III and VII of the 1990
Amendments and the related regulations will likely require capital expenditures
in the years 1997-2001, with most of the expenditures occurring in the latter
part of that time frame.
ACQUISITIONS
The Company completed several acquisitions in 1996 with combined cash purchase
prices totaling $153.1 million. The 1996 acquisitions consisted of NRG
Barriers, Inc.; the assets of Dibiten USA and Dibiten Mexico; Nord Bitumi SpA,
Nord Bitumi U.S., Inc. and Nord de Mexico S.A. de C.V.; all manufacturers of
commercial roofing products. The Company also acquired Web Dynamics
Corporation, a manufacturer of polymer filtration products and entered into a
joint venture to operate and expand an existing fiber glass mat facility in
China.
During January 1997, the Company acquired the assets of Ergon Nonwovens,
Inc., a manufacturer of synthetic meltblown nonwoven products. During February
1997, the Company announced it had signed an agreement to acquire the Mitex
group of companies subject to certain conditions, including regulatory
approvals. Mitex is a leading manufacturer of fiber glass wall covering fabrics
used primarily in commercial and industrial buildings, and has manufacturing
facilities in Sweden and the United Kingdom. These 1997 transactions will be
financed from existing cash balances and borrowings from international credit
facilities. The Company intends to continue its acquisition strategy and is
considering additional acquisitions, some of which could be significant and may
require the Company to access capital markets for financing.
33
<PAGE> 14
Schuller Corporation 1996 Annual Report
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
===============================================================================
CONTINGENT PRODUCT LIABILITY
Between 1988 and 1992, the Company manufactured phenolic roofing insulation
which may, under certain circumstances, contribute to the corrosion of metal
decks on which it is installed. Subsequently, the Company began a voluntary
program to inspect such metal decks and remediate where appropriate. The
Company has accrued for costs relating to future inspections, remediation and
anticipated claims. These accruals are based on the Company's historical
experience regarding the incidence of corrosion and the cost of remediation and
include a number of assumptions related to the types of roofs on which phenolic
insulation has been installed as well as the assumption that the Company's past
remediation experience will continue over the remaining lives of roofs
insulated with the Company's phenolic roofing insulation.
Pursuant to settlement agreements with the Company's liability carriers and
former owner of the phenolic roofing insulation business, the Company has been
reimbursed for a portion of historical costs incurred and is entitled to
receive reimbursement for a substantial portion of future costs to be incurred
by the Company for inspection and remediation.
In 1996, the Company and a third party were named as defendants in two class
action cases filed in U.S. District Court in Boston, Massachusetts. The
plaintiffs purport to represent all building owners in the United States with
phenolic insulation installed on their roof decks and seek damages and
injunctive relief, including an order requiring the removal and replacement of
the phenolic insulation and remediation of any deck corrosion. The Company
intends to defend these allegations vigorously.
The Company has reviewed its historical inspection and remediation
experience and the terms and collectibility of amounts payable under the
reimbursement agreements in light of the contingencies described above. Based
on the information available to date and subject to the assumptions described
above, if additional costs are incurred in excess of the accrued amounts, such
costs are not expected to have a material adverse effect on the Company's
financial condition, liquidity or results of operations.
ENVIRONMENTAL CONTINGENCIES
At December 31, 1996, the Company had remediation activities in progress at 11
sites, out of a total of 23 such sites for which the Company has identified
environmental conditions requiring remediation. In addition, the Company has
been identified as a potentially responsible party at 20 non-Company owned or
operated sites under the federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") or similar state legislation, and as
such could be jointly and severally liable for costs of remediating these
sites.
In 1994, the U.S. government and the Company settled certain litigation
concerning the Company's disposal activities prior to consummation of its plan
of reorganization. The settlement agreement, which was made an order
34
<PAGE> 15
Schuller Corporation 1996 Annual Report
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
===============================================================================
of the court, limits the Company's future liability under both CERCLA and the
Resource Conservation and Recovery Act ("RCRA") to 55 percent of its share of
site-wide response costs and natural resources damages without regard to joint
and several liability for disposals made by the Company prior to consummation
of the Company's plan of reorganization. The agreement resolved the Company's
liability at certain historical sites and also covers CERCLA and RCRA liability
for other disposal sites at which the Environmental Protection Agency ("EPA")
has incurred or may incur response costs and which were used by the Company
prior to consummation of the plan of reorganization. The agreement provides
that the amount the Company will be obligated to pay, in the aggregate, for
such sites shall never exceed $850,000 during any given year. The EPA and others
from time to time commence cleanup activities at such sites and in the future
the EPA and others may assert claims against the Company with respect to such
sites. The Company believes that all such activities and claims, if any, will
be subject to the agreement.
At December 31, 1996 and 1995, the Company's balance sheet included
undiscounted accruals for environmental remediation costs, including ongoing
compliance, maintenance and monitoring costs, of $31.1 million and $30.3
million, respectively. The Company paid $1.8 million each year for
environmental cleanup in 1996 and 1995. The Company believes that amounts paid
in 1996 and 1995 are representative of the Company's future annual
environmental cleanup costs and anticipates expenditures relating to costs
currently accrued to be made over the next 15 years.
As a result of factors such as changes in federal and state regulations, the
application and effectiveness of remedial actions, the difficulty in assessing
the extent of environmental contamination, and the allocation of costs among
potentially responsible parties, actual costs to be incurred for environmental
cleanup may vary from previous estimates. Subject to the uncertainties inherent
in evaluating environmental exposures, and based on information presently
available, including the Company's historical remediation experience, currently
enacted environmental laws and regulations, and existing remediation
technology, the Company believes that if additional costs are incurred in
excess of the accrued amounts, such costs are not expected to have a material
adverse effect on the Company's financial condition, liquidity or results of
operations.
The Company believes that its current cash position, cash generated from
operations, the Receivables Facility and foreign working capital facilities
will enable it to satisfy debt service requirements, ongoing capital spending
and capacity expansion program, other ongoing operating costs and dividend
policy. However, the Company may need to access capital markets to pay the
principal of the Schuller International Senior Notes due in 2004.
35
<PAGE> 16
Schuller Corporation 1996 Annual Report
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
===============================================================================
FORWARD-LOOKING STATEMENTS
This report contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Statements of the Company
contained in this report concerning matters that are not historical facts,
including, without limitation, statements concerning (i) the Company's
estimates concerning nonrecurring charges taken in 1996, (ii) the Company's
ability to realize its net deferred tax asset, (iii) the Company's expectations
as to contingencies related to phenolic roofing insulation and environmental
liabilities, (iv) possible price decreases due to increased capacity in the
mats and fibers industry, (v) the Company's planned expansion of production
capacity of continuous filament fiber glass and fiber glass mat and (vi) the
Company's expectations concerning levels of capital spending and funding of
current operations, debt service, dividends and future acquisitions, constitute
such forward-looking statements. See "Liquidity and Capital Resources."
Forward-looking statements of the Company are subject to risks and
uncertainties that could cause actual results to differ materially from those
expressed in such statements. Important factors relating to such risks and
uncertainties are set forth below.
Factors that could affect the forward-looking statements generally are
related to demand for the Company's products and to overall capacity levels in
the industry. Demand for such products is generally cyclical and is influenced
by macroeconomic factors that affect demand in residential and commercial
construction and replacement markets and demand from original equipment
manufacturers, including the general rate of inflation, interest rates,
employment rates and overall consumer confidence. Approximately half of the
Company's annual sales are made to customers in commercial and industrial
construction markets, while approximately one-third are made to customers in
residential construction markets. The remainder of the Company's annual sales
are made to original equipment manufacturers.
Overall capacity levels in the industry directly affect prices for the
Company's products. Other factors that may affect prices include the overall
competitive environment in which the Company operates, the availability and
pricing of raw materials, rates of technological development and changes in
productivity. In addition, overall demand for the Company's products could be
affected by the factors described in "BUSINESS - Occupational Health and Safety
Aspects of the Company's Products" in the Company's Annual Report on Form 10-K
for the year ended December 31, 1996.
Factors relating to the Company's estimates concerning nonrecurring charges
are discussed in "1996 vs 1995 Results of Operations" and factors relating to
the Company's net deferred tax asset are discussed in "Liquidity and Capital
Resources - Income Taxes." For a discussion of factors concerning contingencies
related to phenolic roofing insulation and environmental matters, see
"Liquidity and Capital Resources - Contingent Product Liability and
Environmental Contingencies."
Other factors also could affect the Company's expected levels of capital
spending and funding of current operations, debt service and dividends,
including, without limitation, the contingencies and commitments discussed in
the Company's financial statements included in this report for the year ended
December 31, 1996. In addition, the Company's ability to make future
acquisitions depends upon the ability of the Company to identify and reach
agreement with viable acquisition candidates and the availability of sources of
financing for such acquisitions on terms which are acceptable to the Company.
36
<PAGE> 17
<TABLE>
<CAPTION>
Schuller Corporation 1996 Annual Report
CONSOLIDATED BALANCE SHEET
========================================================================================
In thousands of dollars
DECEMBER 31, 1996 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and equivalents $ 206,605 $ 310,809
Marketable securities, at cost, which approximates market 42,690 116,958
Receivables 229,665 195,780
Inventories 101,041 77,121
Prepaid expenses 7,921 5,807
Deferred tax assets 30,001 31,233
- ----------------------------------------------------------------------------------------
Total Current Assets 617,923 737,708
- ----------------------------------------------------------------------------------------
Property, Plant and Equipment, at cost
Land and improvements 47,977 43,442
Buildings 237,132 218,750
Machinery and equipment 1,115,649 1,035,240
- ----------------------------------------------------------------------------------------
1,400,758 1,297,432
Less accumulated depreciation and depletion 630,338 580,022
- ----------------------------------------------------------------------------------------
Property, Plant and Equipment, net 770,420 717,410
- ----------------------------------------------------------------------------------------
Deferred Tax Assets 212,161 414,711
Other Assets 346,222 228,629
Net Assets Held for Sale (Note 21) 375,601
- ----------------------------------------------------------------------------------------
Total Assets $ 1,946,726 $ 2,474,059
========================================================================================
LIABILITIES
Current Liabilities
Short-term debt $ 31,748 $ 2,042
Accounts payable 120,851 93,240
Compensation and employee benefits 105,629 104,550
Income taxes 35,837 28,768
Other accrued liabilities 68,888 103,005
- ----------------------------------------------------------------------------------------
Total Current Liabilities 362,953 331,605
Long-Term Debt, less current portion 428,160 447,007
Deferred Income Taxes 41,242 47,362
Postretirement Benefits Other Than Pensions 200,822 204,445
Other Noncurrent Liabilities 333,087 262,333
- ----------------------------------------------------------------------------------------
Total Liabilities 1,366,264 1,292,752
- ----------------------------------------------------------------------------------------
Commitments and Contingencies (Notes 2, 9, 16 and 21)
- ----------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Cumulative Preference Stock, Series B, redeemed 1996 178,638
Common Stock, $.01 par value, authorized
175,000,000 shares; issued and outstanding
162,712,576 shares and 161,495,930 shares, respectively,
in 1996; and issued and outstanding 122,966,974 shares
and 122,785,753 shares, respectively, in 1995 1,627 1,228
Treasury Stock, at cost, 1,216,646 shares in 1996 and
181,221 shares in 1995 (16,241) (1,999)
Capital in Excess of Par Value 539,423 1,013,505
Unearned Restricted Stock Compensation (9,124) (3,427)
Retained Earnings (Accumulated Deficit) 38,106 (39,322)
Cumulative Currency Translation Adjustment 26,671 32,684
- ----------------------------------------------------------------------------------------
Total Stockholders' Equity 580,462 1,181,307
- ----------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 1,946,726 $ 2,474,059
========================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
37
<PAGE> 18
Schuller Corporation 1996 Annual Report
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
====================================================================================================================
In thousands of dollars, except per share amounts
FOR THE YEARS ENDED DECEMBER 31, 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $ 1,552,429 $ 1,391,522 $ 1,277,818
Cost of Sales 1,111,811 993,111 935,951
Selling, General and Administrative 171,027 150,135 148,797
Research, Development and Engineering 32,663 29,988 29,738
Nonrecurring Charges 49,156
Other Income (Expense), net (345) (17,005) (21,033)
- --------------------------------------------------------------------------------------------------------------------
Income from Operations 187,427 201,283 142,299
Gain on Sale of Equity Investment 74,889 13,455
Interest Income 18,897 24,177 7,214
Interest Expense 48,242 48,265 47,741
Profit Sharing Expense (Note 19) 6,648 27,661 18,259
- --------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations before Income Taxes 151,434 224,423 96,968
Income Tax Expense (Benefit) (39,091) 102,417 41,362
- --------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations 190,525 122,006 55,606
Income from Discontinued Operations,
net of tax and Minority Interest (Note 21) 36,491 9,810
Gain (Loss) on Disposal of Discontinued Operations, net of tax (Note 21) 216,246 (42,502)
- --------------------------------------------------------------------------------------------------------------------
Income before Extraordinary Items 406,771 115,995 65,416
Extraordinary Loss on Trust Settlements, net of tax (314,296)
Extraordinary Loss on Early Extinguishments of Debt, net of tax (1,989) (28,420)
- --------------------------------------------------------------------------------------------------------------------
Net Income 90,486 115,995 36,996
Preference Stock Dividends (8,215) (24,923) (24,923)
Premium on Preference Stock Redemption (52,126)
- --------------------------------------------------------------------------------------------------------------------
Net Income Applicable to Common Stock $ 30,145 $ 91,072 $ 12,073
====================================================================================================================
Earnings Per Common Share
(After Preference Stock Dividends and Premium
on Preference Stock Redemption)
- --------------------------------------------------------------------------------------------------------------------
Primary and Fully Diluted:
Income from Continuing Operations $ .85 $ .78 $ .25
Income from Discontinued Operations,
net of tax and Minority Interest (Note 21) .29 .08
Gain (Loss) on Disposal of Discontinued Operations, net of tax (Note 21) 1.42 (.34)
- --------------------------------------------------------------------------------------------------------------------
Income before Extraordinary Items 2.27 .73 .33
Extraordinary Loss on Trust Settlements, net of tax (2.06)
Extraordinary Loss on Early Extinguishments of Debt, net of tax (.01) (.23)
- --------------------------------------------------------------------------------------------------------------------
Net Income Applicable to Common Stock $ .20 $ .73 $ .10
====================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
38
<PAGE> 19
Schuller Corporation 1996 Annual Report
CONSOLIDATED STATEMENT OF CASH FLOWS
===============================================================================
<TABLE>
<CAPTION>
In thousands of dollars
FOR THE YEARS ENDED DECEMBER 31, 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 90,486 $ 115,995 $ 36,996
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 71,175 63,833 59,342
Deferred taxes (67,178) 82,123 26,675
Product guarantee income 8,651 9,352 7,857
Provision for furnace rebuilds 8,270 8,349 8,657
Pension and postretirement benefits expense 12,251 22,645 22,294
Nonrecurring charges 49,870
Net gain on sale of assets (74,889) (15,573)
Interest expense 2,047 1,808 30,812
Profit sharing expense 6,648 27,661 18,259
Income from discontinued operations (36,491) (9,810)
(Gain) loss on disposal of discontinued operations (216,246) 42,502
Extraordinary losses 314,296 20,548
Other, net 20,534 12,450 10,344
Profit sharing paid (34,309) (18,259) (12,933)
(Increase) decrease in current assets:
Receivables 11,411 4,798 (24,554)
Inventories (2,680) (19,327) 6,099
Prepaid expenses (1,732) 1,237 223
Increase (decrease) in current liabilities:
Accounts payable (7,681) (45) 37,528
Compensation and employee benefits (13,022) (12,247) (2,495)
Income taxes (14,186) (22,556) (13,110)
Other accrued liabilities (40,412) 6,737 (1,302)
Decrease in postretirement benefits other than pensions (16,347) (19,742) (24,895)
Decrease in other noncurrent liabilities (16,450) (7,697) (29,773)
Net cash provided by discontinued operations 29,339 35,667
- --------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 165,396 217,576 186,856
- --------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (103,041) (111,329) (73,895)
Acquisitions (153,113)
Proceeds from sales of assets 15,386 112,672 33,286
Proceeds from disposition of Riverwood 1,081,341
Purchases of available-for-sale marketable securities (31,332) (68,691)
Purchases of held-to-maturity marketable securities (33,458) (164,406) (143,749)
Proceeds from sales of available-for-sale marketable securities 55,035 10,000 2,077
Proceeds from maturities of held-to-maturity marketable securities 84,446 135,966 120,221
(Increase) decrease in other assets 20,177 (2,561) 17,581
- --------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 935,441 (88,349) (44,479)
- --------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of debt 63 6,622 30,806
Payments on debt (42,786) (3,464) (12,950)
Redemption of preference stock (230,764)
Dividends on preference stock (10,292) (24,923) (22,845)
Dividends on common stock (972,988)
Stock warrants exercised 64,794
Purchases of treasury stock (14,242)
Other stock transactions 2,514 (882) 132
- --------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (1,203,701) (22,647) (4,857)
- --------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (1,340) (62) (320)
- --------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (104,204) 106,518 137,200
CASH AND EQUIVALENTS AT BEGINNING OF YEAR 310,809 204,291 67,091
- --------------------------------------------------------------------------------------------------------------
CASH AND EQUIVALENTS AT END OF YEAR $ 206,605 $ 310,809 $ 204,291
==============================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
39
<PAGE> 20
Schuller Corporation 1996 Annual Report
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
=============================================================================================================================
In thousands of dollars
- -----------------------------------------------------------------------------------------------------------------------------
Cumulative
Preference
Stock, Common Treasury
Series B Stock Stock
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCES AT DECEMBER 31, 1993 $ 105,947 $ 1,224
Net income for the year
Currency translation
Initial public offering of Stillwater common shares
Stock compensation plan transactions 4
Reversal of dividends accrued not declared 72,691
Preference stock dividends
Purchase of treasury stock $ (407)
- -----------------------------------------------------------------------------------------------------------------------------
BALANCES AT DECEMBER 31, 1994 178,638 1,228 (407)
Net income for the year
Currency translation
Exercise of warrants for common stock
Stock compensation plan transactions
Preference stock dividends
Purchase of treasury stock (1,592)
- -----------------------------------------------------------------------------------------------------------------------------
BALANCES AT DECEMBER 31, 1995 178,638 1,228 (1,999)
Net income for the year
Currency translation
Exercise of warrants for common stock 69
Stock compensation plan transactions 5
Common stock dividends
Preference stock dividends
Redemption of preference stock (178,638)
Purchase of treasury stock (14,242)
Issuance of common stock in connection
with the profit sharing exchange 325
- -----------------------------------------------------------------------------------------------------------------------------
BALANCES AT DECEMBER 31, 1996 $ 1,627 $ (16,241)
=============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
40
<PAGE> 21
Schuller Corporation 1996 Annual Report
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
===================================================================================================================================
In thousands of dollars
- -----------------------------------------------------------------------------------------------------------------------------------
Unearned Retained Cumulative
Capital in Restricted Earnings Currency Total
Excess of Stock (Accumulated Translation Stockholders'
Par Value Compensation Deficit) Adjustment Equity
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1993 $ 900,562 $ (2,663) $ (142,467) $ 20,511 $ 883,114
Net income for the year 36,996 36,996
Currency translation 5,908 5,908
Initial public offering of Stillwater common shares 3,144 3,144
Stock compensation plan transactions 4,842 (3,350) 1,496
Reversal of dividends accrued not declared 102,762 175,453
Preference stock dividends (24,923) (24,923)
Purchase of treasury stock (407)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCES AT DECEMBER 31, 1994 1,011,310 (6,013) (130,394) 26,419 1,080,781
Net income for the year 115,995 115,995
Currency translation 6,265 6,265
Exercise of warrants for common stock 324 324
Stock compensation plan transactions 1,871 2,586 4,457
Preference stock dividends (24,923) (24,923)
Purchase of treasury stock (1,592)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCES AT DECEMBER 31, 1995 1,013,505 (3,427) (39,322) 32,684 1,181,307
Net income for the year 90,486 90,486
Currency translation (6,013) (6,013)
Exercise of warrants for common stock 64,725 64,794
Stock compensation plan transactions 14,989 (5,697) 9,297
Common stock dividends (972,988) (4,843) (977,831)
Preference stock dividends (8,215) (8,215)
Redemption of preference stock (52,126) (230,764)
Purchase of treasury stock (14,242)
Issuance of common stock in connection
with the profit sharing exchange 471,318 471,643
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCES AT DECEMBER 31, 1996 $ 539,423 $ (9,124) $ 38,106 $ 26,671 $ 580,462
====================================================================================================================================
</TABLE>
41
<PAGE> 22
Schuller Corporation 1996 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===============================================================================
NOTE 1:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Schuller Corporation ("Schuller" or the "Company") manufactures and markets
insulation for buildings and equipment, commercial roofing systems, high
efficiency filtration media, and fibers and nonwoven mats used as
reinforcements in building and industrial applications. The Company estimates
that approximately half of its annual sales are to commercial and industrial
construction markets, while approximately one-third are to residential markets,
and the remainder are to original equipment manufacturers. The Company's
products are sold to contractors, mass merchants, wholesale distributors and
fabricators throughout North America, Europe and Asia.
In March 1996, the Company disposed of its 81.3 percent interest in
Riverwood International Corporation ("Riverwood"). Accordingly, the assets and
liabilities of Riverwood and related parent company deferred taxes, goodwill
and minority interest have been classified as net assets held for sale at
December 31, 1995 and Riverwood's results of operations have been shown as
discontinued operations through the first quarter of 1996.
Manville Personal Injury Settlement Trust (the "Trust") owns approximately
80 percent of the Company's common stock.
(A) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Schuller
Corporation and its majority-owned subsidiaries. All significant intercompany
transactions have been eliminated.
(B) USE OF ESTIMATES
The preparation of the Company's consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in these
financial statements, including disclosures of contingent liabilities.
(C) CASH AND EQUIVALENTS
Cash and equivalents include time deposits, certificates of deposit and other
marketable securities with original maturities of three months or less.
(D) FINANCIAL INSTRUMENTS
The Company uses the amortized cost method of accounting for investments in
held-to-maturity debt securities for which it has the positive intent and
ability to hold to maturity. Fair value accounting is used for debt securities
that are classified as available-for-sale securities. Realized gains and losses
are computed on the specific identification method.
The Company does not obtain collateral or other security to support
financial instruments subject to credit risk, but monitors the credit standing
of counterparties.
(E) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
principally on the last-in, first-out (LIFO) basis for all domestic
subsidiaries. The first-in, first-out (FIFO) basis is used to determine the
cost of inventories for all foreign subsidiaries.
42
<PAGE> 23
Schuller Corporation 1996 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===============================================================================
(F) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation expense is
computed using the straight-line method, based upon the estimated useful lives
of the assets. Buildings are depreciated principally over 20 to 40 years, and
machinery and equipment are depreciated principally over 20 years.
Maintenance and repairs are charged to current period earnings, while
replacements and betterments are capitalized.
(G) GOODWILL
Goodwill associated with acquisitions in excess of fair value of net assets
acquired is amortized on a straight-line basis generally over 20 years.
Included in other assets is goodwill of $128 million and $2 million at December
31, 1996 and 1995, respectively. The Company evaluates the recoverability of
goodwill through its annual strategic planning process.
(H) PROVISION FOR REBUILDING FURNACES
The Company's glass furnaces have an estimated useful life of approximately 30
years. During that time, the refractory components of the glass furnaces are
periodically rebuilt, typically every six to seven years. The timing of the
periodic rebuilds is dependent upon a number of variables including production
volumes, product mix, and the extent and timing of interim repair and
maintenance work performed.
The estimated cost to rebuild the refractory components of the Company's
glass furnaces is credited to an allowance and charged to operations on a
straight-line basis over the estimated period to the next rebuild date.
Unusual, nonrecurring adjustments to previously established allowances, if
required, are included in operating results.
(I) REVENUE RECOGNITION
The Company recognizes revenue from product sales upon shipment. The Company
estimates and records provisions for cash discounts, quantity rebates, sales
returns, allowances and original warranties in the period the sale is reported,
based on its experience.
The Company also sells extended roofing product guarantees for periods of 5
to 20 years. These extended guarantees cover the water tightness of roofing
systems resulting from defects in materials or deficiencies in workmanship.
Revenue on these product guarantees is recognized over the contract period in
proportion to costs incurred.
(J) WORKERS' COMPENSATION
The Company accrues a liability for workers' compensation claims at present
value, due to the fixed and determinable nature of the claim payments, based
upon an evaluation of historical claims data and expected future claims. In
addition, the Company records a receivable at present value for the portion of
outstanding claims covered by third-party insurers.
(K) INCOME TAXES
Tax credits granted by various countries are accounted for as reductions of
income tax expense in the year in which the related expenditures become
eligible for investment benefit under applicable tax regulations.
(L) RECLASSIFICATIONS
Certain prior year information has been reclassified to conform with the
current year presentation.
43
<PAGE> 24
Schuller Corporation 1996 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===============================================================================
NOTE 2:
FINANCIAL INSTRUMENTS
The Company has only limited involvement with derivative financial instruments
and does not use them for trading purposes. The Company enters into foreign
exchange forward contracts to hedge against currency fluctuations on certain
material foreign currency exposures and records a receivable/payable which is
classified consistently with the related outstanding foreign currency exposure.
At December 31, 1995, the Company had forward contracts maturing through July
1996 to sell deutsche marks in exchange for $10.8 million. The carrying value
of these contracts approximated their fair value at December 31, 1995.
Gains and losses on foreign currency transactions and forward exchange
contracts are included in other income (expense), net, for the period in which
the exchange rate changes. The discount or premium on forward contracts is
accounted for separately from the gain or loss on the contracts and is
amortized to other income (expense), net, over the life of the contract.
The Company had outstanding letters of credit totaling $15.1 million and
$10.8 million as of December 31, 1996 and 1995, respectively. All letters of
credit are collateralized by cash.
The Company maintains cash and cash equivalents and certain other financial
instruments with various financial institutions throughout the world. The
Company invests excess cash in a diversified portfolio of high-quality money
market instruments consistent with the preservation of capital and the
maintenance of liquidity. The Company's investment policies require
diversification of investments and include restrictions on maturity and credit
quality. The Company monitors compliance with these restrictions on an ongoing
basis. The Company has not experienced any material losses related to these
investments.
The Company is exposed to credit losses in the event of nonperformance by
the counterparties to its financial instruments, but does not anticipate any
significant off-balance-sheet credit risk of accounting loss. The Company
anticipates that counterparties will be able to fully satisfy their obligations
under the contracts.
At December 31, 1996, the Company held investments in debt securities that
were classified as held-to-maturity with an amortized cost basis of $120.6
million, which approximated fair value. The Company's investments in
held-to-maturity debt securities at December 31, 1996 were classified on the
balance sheet as cash equivalents of $103.3 million, marketable securities of
$7.7 million and other assets of $9.6 million, depending upon the nature and
maturity of the investments. Of these securities, $105.8 million had
contractual maturities within one year; the remainder mature in one to five
years. Additionally, at December 31, 1996, the Company had investments in
available-for-sale debt securities that were classified on the balance sheet as
marketable securities of $35 million and other assets of $5 million. The
amortized cost basis of these
44
<PAGE> 25
Schuller Corporation 1996 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===============================================================================
securities approximated fair value. Of these securities, $19.8 million had
contractual maturities within one year; the remaining $20.2 million have
contractual maturities of one to five years.
At December 31, 1995, the Company held investments in debt securities that
were classified as held-to-maturity with an amortized cost basis of $319.8
million, which approximated fair value. The Company's investments in
held-to-maturity debt securities at December 31, 1995, were classified on the
balance sheet as cash equivalents of $251.4 million, marketable securities of
$59.4 million and other assets of $9 million, depending upon the nature and
maturity of the investments. Of these securities, $310.8 million had
contractual maturities within one year; the remainder mature in one to five
years. Additionally, at December 31, 1995, the Company had investments in
available-for-sale debt securities that were classified on the balance sheet as
marketable securities of $57.6 million and other assets of $6.1 million. The
amortized cost basis of these securities approximated fair value. Of these
securities, $63.6 million had contractual maturities of one to five years; the
remainder mature in less than one year.
During 1996, 1995 and 1994, the Company sold securities that had been
classified as available-for-sale, resulting in proceeds of $55 million, $10
million and $2.1 million, respectively, which approximated carrying value each
year.
NOTE 3:
RECEIVABLES
<TABLE>
<CAPTION>
In thousands of dollars
1996 1995
- -------------------------------------------------------
<S> <C> <C>
Trade $ 242,530 $ 194,484
Less allowances 30,016 27,110
- -------------------------------------------------------
212,514 167,374
Other 17,151 28,406
- -------------------------------------------------------
$ 229,665 $ 195,780
=======================================================
</TABLE>
Included in allowances are doubtful accounts of $7.6 million and $6.5
million at December 31, 1996 and 1995, respectively. The Company generally
requires no collateral on receivables. The provision for doubtful accounts
charged to costs and expenses related to continuing operations was $1.1 million
for 1996, $0.8 million for 1995, and $1.4 million for 1994.
NOTE 4:
INVENTORIES
<TABLE>
<CAPTION>
In thousands of dollars
1996 1995
- -------------------------------------------------------
<S> <C> <C>
Finished goods $ 60,456 $ 46,432
Work-in-process 8,472 7,345
Raw materials 23,383 15,569
Supplies 8,730 7,775
- -------------------------------------------------------
$ 101,041 $ 77,121
=======================================================
</TABLE>
Inventories in the amounts of $29.5 million and $18.3 million at December
31, 1996 and 1995, respectively, were valued using FIFO. The balance of the
inventories was valued using LIFO. The excess of current values over amounts
for financial reporting purposes was $51.5 million and $54.4 million at
December 31, 1996 and 1995, respectively.
NOTE 5:
SHORT-TERM DEBT AND CREDIT FACILITIES
<TABLE>
<CAPTION>
In thousands of dollars
1996 1995
- -------------------------------------------------------
<S> <C> <C>
Short-term borrowings $ 22,634 $ 70
Current portion of
long-term debt 9,114 1,972
- -------------------------------------------------------
$ 31,748 $ 2,042
=======================================================
</TABLE>
45
<PAGE> 26
Schuller Corporation 1996 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===============================================================================
At December 31, 1996, the Company had $84 million available under a
receivables sale facility (the "Receivables Facility") for its domestic
short-term working capital requirements. Amounts available for borrowing under
the Receivables Facility, up to a maximum of $100 million, are based on the
daily balance of certain outstanding trade accounts receivable, adjusted for
various factors as defined under the terms of the Receivables Facility. The
Company's international subsidiaries also had borrowing and working capital
facilities totaling $85 million at December 31, 1996. These facilities, of
which approximately $84 million was available for borrowing at December 31,
1996, are principally secured by the Company's equity ownership in certain
international subsidiaries and joint ventures.
NOTE 6:
COMPENSATION AND EMPLOYEE BENEFITS
<TABLE>
<CAPTION>
In thousands of dollars
1996 1995
- --------------------------------------------------------
<S> <C> <C>
Vacation, compensation and
payroll deductions $ 54,709 $ 50,353
Self insured medical and
group life coverage 35,032 36,634
Other 15,888 17,563
- --------------------------------------------------------
$ 105,629 $ 104,550
========================================================
</TABLE>
NOTE 7:
LONG-TERM DEBT
<TABLE>
<CAPTION>
In thousands of dollars
1996 1995
- ------------------------------------------------------------------
<S> <C> <C>
UNSECURED
10.875 percent Schuller International
Senior Notes, payable 2004 $ 400,000 $ 400,000
Bonds payable to the Trust 17,502 15,454
9 percent Sinking Fund Debentures 24,677
COLLATERALIZED
Industrial revenue bonds
with interest at floating rates,
from 2 percent to 8.625 percent,
payable through 2009,
collateralized by a letter of credit,
real property and equipment 15,702 8,639
Notes payable with interest from
5.98 percent to 9.25 percent,
payable through 2008 4,070 209
- ------------------------------------------------------------------
437,274 448,979
Less current portion 9,114 1,972
- ------------------------------------------------------------------
$ 428,160 $ 447,007
==================================================================
</TABLE>
10.875 PERCENT SCHULLER INTERNATIONAL SENIOR NOTES
In the fourth quarter of 1994, Schuller International issued $400 million of
10.875 percent Senior Notes, due 2004. Interest on these notes is payable
semiannually. These notes may be redeemed on or after December 15, 1999 at
prices ranging from 100 percent to 105 percent of the principal amount, plus
accrued interest.
BONDS PAYABLE TO THE TRUST
At December 31, 1996, the bonds payable to the Trust (the "Trust Bonds") of
$17.5 million consist of a series of fixed payments totaling $75 million per
year in 2013 and 2014, discounted at 13 percent.
46
<PAGE> 27
Schuller Corporation 1996 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===============================================================================
Long-term debt maturities at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
In thousands of dollars
- ------------------------------------------------------
<S> <C>
1997 $ 9,114
1998 5,841
1999 230
2000 165
2001 166
Thereafter 530,979
- ------------------------------------------------------
Total 546,495
Less interest accruing to principal (109,221)
- ------------------------------------------------------
$ 437,274
======================================================
</TABLE>
The Company's agreements with its lenders contain a number of financial and
general covenants. These include, among others, restrictions on borrowings,
investments, stock issuances and repurchases, dividends and other distributions
by Schuller International Group, Inc. ("Schuller International"), the Company's
wholly-owned subsidiary, and restrictions on intercompany transactions,
including transfers of cash. As of December 31, 1996 and 1995, the maximum
amount available for dividends to be paid to the Company by Schuller
International under debt covenants of the Company's Senior Notes was
approximately $227 million and $172 million, respectively. Noncompliance with
these or other covenants, or the occurrence of any other event of default,
could result in the termination of existing credit agreements and the
acceleration of debt owed by the Company and its subsidiaries. At December 31,
1996, the Company was in compliance with these covenants.
At December 31, 1996, the Company's long-term debt totaled $437.3 million
and had an estimated fair value of $494.4 million. At December 31, 1995, the
Company's long-term debt totaled $449 million and had an estimated fair value
of $510 million. Generally, the fair value of the Company's long-term debt is
an estimate based on quoted market prices, when available, or the discounted
cash flow method.
NOTE 8:
ALLOWANCE FOR FURNACE REBUILDS
The activity in the allowance for furnace rebuilds, included in other
noncurrent liabilities, for the years ended December 31, was as follows:
<TABLE>
<CAPTION>
In thousands of dollars
1996 1995
- ------------------------------------------------------
<S> <C> <C>
Balance at beginning of year $22,405 $ 26,356
Provisions for estimated costs 8,270 8,349
Rebuild expenditures (8,375) (12,300)
- ------------------------------------------------------
22,300 22,405
Less current portion 1,947 10,763
- ------------------------------------------------------
$20,353 $ 11,642
======================================================
</TABLE>
NOTE 9:
COMMITMENTS AND CONTINGENCIES
Total rental expense related to continuing operations was $11.9 million in
1996, $14.6 million in 1995 and $16.8 million in 1994.
At December 31, 1996, minimum rental commitments of the Company under
long-term, noncancelable operating leases are as follows:
<TABLE>
<CAPTION>
In thousands of dollars
- ------------------------------------------------------
<S> <C>
1997 $ 5,894
1998 5,151
1999 1,300
2000 894
2001 755
- ------------------------------------------------------
$ 13,994
======================================================
</TABLE>
Minimum rental commitments of the Company have not been reduced by
anticipated sublease income of approximately $3.7 million.
47
<PAGE> 28
Schuller Corporation 1996 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===============================================================================
The Company has various purchase commitments for items used in the ordinary
conduct of business. In the aggregate, such commitments do not exceed current
market prices or anticipated usage requirements.
CONTINGENT PRODUCT LIABILITY
Between 1988 and 1992, the Company manufactured phenolic roofing insulation
which may, under certain circumstances, contribute to the corrosion of metal
decks on which it is installed. Subsequently, the Company began a voluntary
program to inspect such metal decks and remediate where appropriate. The
Company has accrued for costs relating to future inspections, remediation and
anticipated claims. These accruals are based on the Company's historical
experience regarding the incidence of corrosion and the cost of remediation and
include a number of assumptions related to the types of roofs on which phenolic
insulation has been installed as well as the assumption that the Company's past
remediation experience will continue over the remaining lives of roofs
insulated with the Company's phenolic roofing insulation.
Pursuant to settlement agreements with the Company's liability carriers and
former owner of the phenolic roofing insulation business, the Company has been
reimbursed for a portion of historical costs incurred and is entitled to
receive reimbursement for a substantial portion of future costs to be incurred
by the Company for inspection and remediation.
In 1996, the Company and a third party were named as defendants in two class
action cases filed in U.S. District Court in Boston, Massachusetts. The
plaintiffs purport to represent all building owners in the United States with
phenolic insulation installed on their roof decks and seek damages and
injunctive relief, including an order requiring the removal and replacement of
the phenolic insulation and remediation of any deck corrosion. The Company
intends to defend these allegations vigorously.
The Company has reviewed its historical inspection and remediation
experience and the terms and collectibility of amounts payable under the
reimbursement agreements in light of the contingencies described above. Based
on the information available to date and subject to the assumptions described
above, if additional costs are incurred in excess of the accrued amounts, such
costs are not expected to have a material adverse effect on the Company's
financial condition, liquidity or results of operations.
ENVIRONMENTAL CONTINGENCIES
At December 31, 1996, the Company had remediation activities in progress at 11
sites, out of a total of 23 such sites for which the Company has identified
environmental conditions requiring remediation. In addition, the Company has
been identified as a potentially responsible party at 20 non-Company owned or
operated sites under the
48
<PAGE> 29
Schuller Corporation 1996 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===============================================================================
federal Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") or similar state legislation, and as such could be jointly and
severally liable for costs of remediating these sites.
In 1994, the U.S. government and the Company settled certain litigation
concerning the Company's disposal activities prior to consummation of its plan
of reorganization. The settlement agreement, which was made an order of the
court, limits the Company's future liability under both CERCLA and the Resource
Conservation and Recovery Act ("RCRA") to 55 percent of its share of site-wide
response costs and natural resources damages without regard to joint and
several liability for disposals made by the Company prior to consummation of
the Company's plan of reorganization. The agreement resolved the Company's
liability at certain historical sites and also covers CERCLA and RCRA liability
for other disposal sites at which the Environmental Protection Agency ("EPA")
has incurred or may incur response costs and which were used by the Company
prior to consummation of the plan of reorganization. The agreement provides
that the amount the Company will be obligated to pay, in the aggregate, for
such sites shall never exceed $850,000 during any given year. The EPA and others
from time to time commence cleanup activities at such sites and in the future
the EPA and others may assert claims against the Company with respect to such
sites. The Company believes that all such activities and claims, if any, will
be subject to the agreement.
At December 31, 1996 and 1995, the Company's balance sheet included
undiscounted accruals for environmental remediation costs, including ongoing
compliance, maintenance and monitoring costs, of $31.1 million and $30.3
million, respectively. The Company paid $1.8 million each year for
environmental cleanup in 1996 and 1995. The Company believes that amounts paid
in 1996 and 1995 are representative of the Company's future annual
environmental cleanup costs and anticipates expenditures relating to costs
currently accrued to be made over the next 15 years.
As a result of factors such as changes in federal and state regulations, the
application and effectiveness of remedial actions, the difficulty in assessing
the extent of environmental contamination, and the allocation of costs among
potentially responsible parties, actual costs to be incurred for environmental
cleanup may vary from previous estimates. Subject to the uncertainties inherent
in evaluating environmental exposures, and based on information presently
available, including the Company's historical remediation experience, currently
enacted environmental laws and regulations, and existing remediation
technology, the Company believes that if additional costs are incurred in
excess of the accrued amounts, such costs are not expected to have a material
adverse effect on the Company's financial condition, liquidity or results of
operations.
49
<PAGE> 30
Schuller Corporation 1996 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===============================================================================
NOTE 10:
STOCKHOLDERS' EQUITY
During April 1996, an additional 32.5 million common shares were issued as part
of the profit sharing exchange (see Note 19). In addition, warrants were
exercised to purchase 6.9 million shares of common stock during 1996.
Schuller declared a special cash dividend to all common stockholders on
March 27, 1996, of $6.00 per share which represents a substantial portion of
the proceeds from the disposition of Riverwood. The dividend, which totaled
$968.1 million, was paid April 12, 1996.
On April 30, 1996, the Company redeemed its preference stock with cash of
$230.8 million, plus accrued dividends of $4.1 million. The excess of the
redemption price over the carrying value of the preference stock of $52.1
million was charged directly to capital in excess of par value and was deducted
from net income to compute earnings and earnings per share applicable to common
stockholders. Preference stock dividends paid in 1996, 1995 and 1994 totaled
$10.3 million, $24.9 million and $22.8 million, respectively.
The following is a summary of shares outstanding:
<TABLE>
<CAPTION>
CUMULATIVE
PREFERENCE
STOCK, COMMON
SERIES B STOCK
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
BALANCE AT DECEMBER 31, 1993 9,230,583 122,335,722
Issuance of common stock in connection with compensation plans 627,902
Forfeiture of common stock issued in connection with compensation plans (89,000)
Treasury stock acquired (46,863)
- ------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1994 9,230,583 122,827,761
Issuance of common stock in connection with compensation plans 89,300
Forfeiture of common stock issued in connection with compensation plans (31,500)
Issuance of common stock upon exercise of warrants 34,550
Treasury stock acquired (134,358)
- ------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995 9,230,583 122,785,753
Redemption of Cumulative Preference Stock, Series B (9,230,583)
Issuance of common stock in connection with compensation plans 325,504
Issuance of common stock upon exercise of warrants 6,892,988
Treasury stock acquired (1,035,425)
Issuance of common stock in connection with the profit sharing exchange 32,527,110
- ------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 161,495,930
======================================================================================================
</TABLE>
50
<PAGE> 31
Schuller Corporation 1996 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===============================================================================
NOTE 11:
STOCK COMPENSATION PLANS
The Company's stock compensation plans grant eligible employees deferred stock
rights, restricted stock and options to purchase shares of the Company's common
stock. During 1996, an additional 7.9 million shares of the Company's common
stock were registered and reserved for issuance.
RESTRICTED AND DEFERRED STOCK
During 1996, 1.1 million deferred stock rights were issued at a weighted
average market value at grant date of $10.48 per share, with vesting through
December 31, 2000. Deferred stock rights entitle participants to receipt of
shares of common stock upon vesting and dividend equivalents, but no voting
rights prior to vesting, and are restricted as to disposition and are subject
to forfeiture upon certain circumstances. Also during 1996, 43,000 shares of
restricted common stock were granted at a market price of $10.75 per share.
Pursuant to provisions of these plans, the vesting of 2.1 million shares of
restricted stock previously issued was accelerated during 1996 due to the
disposition of Riverwood. In 1995, 4,500 shares of restricted common stock were
issued to employees at a market grant price of $9.25 per share. During 1994,
approximately 522,000 shares of restricted common stock were issued to
employees at a weighted average market value at grant date of $9.14 per share.
STOCK OPTIONS
The Company applies APB Opinion 25 and related interpretations in accounting
for its fixed stock options. Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("SFAS No. 123") was issued in
1995, and if fully adopted, changes, among other things, the methods for
recognition of expense on the Company's plans involving stock options.
The Company's common stock options were granted at exercise prices equal to,
or in excess of, market prices on the grant dates, and therefore no
compensation cost was recognized. The majority of the options outstanding at
December 31, 1996 will vest by December 31, 1997 and expire ten years from the
grant date.
The weighted average fair values of options granted during 1996 were $3.02
per share for options with exercise prices equal to market prices on grant
dates, and $2.71 per share for options with exercise prices exceeding market
prices on grant dates.
A summary of the status of the Company's stock option plans as of December
31, 1996, 1995 and 1994 is presented below:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------- -------------------------- --------------------------
Weighted Weighted Weighted
Average Average Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at Beginning of Year 548,900 $ 9.00 318,400 $ 7.54 402,800 $7.52
Granted 5,260,440 $11.69 325,000 $10.00
Exercised (252,800) $ 7.14 (84,800) $ 7.18 (84,400) $7.46
Forfeited (321,315) $ 7.56 (9,700) $10.38
- ------------------------------------------------ --------- ---------
Outstanding at End of Year 5,235,225 $11.51 548,900 $ 9.00 318,400 $7.54
================================================ ========= =========
Options Exercisable at Year-End 2,075,515 223,900 318,400
===================================================================================================================================
Options Available for Future Grant 3,706,244 1,855,525 2,143,825
===================================================================================================================================
</TABLE>
51
<PAGE> 32
Schuller Corporation 1996 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===============================================================================
The following table summarizes information about stock options outstanding at
December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Weighted Average Remaining Options Exercisable
Exercise Prices at December 31, 1996 Contractual Life (Years) at December 31, 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 4.00 123,400 8.27 44,200
$10.63 3,067,302 9.49 1,218,885
$13.28 2,044,523 9.49 812,430
- -------------------------------------------------------------------------------------------------
5,235,225 2,075,515
=================================================================================================
</TABLE>
The amount of compensation expense recognized for stock-based compensation
was $2.8 million, $1.8 million and $1 million for the years ended December 31,
1996, 1995 and 1994, respectively.
Recognition of compensation expense under SFAS No. 123 is optional; however,
pro forma disclosures as if the Company adopted the expense recognition
requirements under SFAS No. 123 in 1996 are required. Had compensation cost
been determined based on the fair value at grant dates for stock option awards
consistent with SFAS No. 123, the Company's net income and earnings per share
for the years ended December 31, 1996 and 1995 would have been reduced to the
pro forma amounts indicated below:
<TABLE>
<CAPTION>
In thousands of dollars,
except per share amounts
1996 1995
- ------------------------------------------------------
<S> <C> <C>
Net income
applicable to
common stock: As reported $30,145 $91,072
Pro forma $25,926 $90,919
Primary and fully
diluted earnings
per share: As reported $ 0.20 $ 0.73
Pro forma $ 0.17 $ 0.73
======================================================
</TABLE>
The pro forma compensation expense based on the fair value of the options is
estimated on the grant date using the Black-Scholes option-pricing model with
the following weighted-average assumptions used for grants: dividend yield of
$0.12 per share; expected volatility of 32 percent; a risk free rate of return
of 6.6 percent and an expected life of the options of four years. The effects
of applying SFAS No. 123 in this pro forma disclosure are not indicative of
future amounts. SFAS No. 123 does not apply to awards prior to 1995, and
additional awards in future years are possible.
52
<PAGE> 33
Schuller Corporation 1996 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===============================================================================
NOTE 12:
EARNINGS PER COMMON SHARE
Primary and fully diluted earnings per common share amounts are based on the
weighted average number of common and common equivalent shares outstanding
during the year. The fully diluted earnings per common share computation
further assumes that the common stock equivalents were outstanding at the
beginning of the year. The 1996, 1995 and 1994 primary and fully diluted
earnings per common share amounts are determined using the following common
equivalent shares:
<TABLE>
<CAPTION>
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------
Primary and Fully Fully
Fully Diluted Primary Diluted Primary Diluted
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Common stock outstanding 152,201,000 122,886,000 122,886,000 122,424,000 122,424,000
Common stock equivalents:
Warrants, stock options,
deferred stock rights
and stock appreciation rights 1,169,000 1,662,000 2,179,000 68,000 87,000
Treasury stock (871,000) (105,000) (105,000) (46,000) (46,000)
- ---------------------------------------------------------------------------------------------------------------
152,499,000 124,443,000 124,960,000 122,446,000 122,465,000
===============================================================================================================
</TABLE>
Earnings per common share amounts are calculated after the deduction for
preference stock dividends and the premium on the preference stock redemption.
NOTE 13:
PENSIONS
The Company maintains noncontributory defined benefit pension plans for its
U.S. and German employees. Pension expense (income) and projected benefit
obligations under each of these plans are determined using assumptions
regarding discount rates, rates of increase in future compensation levels and
expected long-term rates of return on assets. These assumptions are subject to
prevailing economic conditions and, accordingly, the Company believes it is
reasonably possible that a change in these assumptions may occur in the
near-term.
U.S. PENSION PLANS
Substantially all of the Company's U.S. employees are covered by
noncontributory defined benefit pension plans. Pension benefits are based
primarily on years of service and the employee's compensation or pension rate
near retirement. The Company's funding policy is to contribute funds to a trust
as necessary to at least meet the minimum funding requirements of the Internal
Revenue Code. Plan assets are invested primarily in fixed income and equity
securities.
53
<PAGE> 34
Schuller Corporation 1996 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===============================================================================
(A) PENSION EXPENSE (INCOME)
The Company's pension expense (income) related to the U.S. defined benefit
pension plans, exclusive of amounts related to discontinued operations, for the
years ended December 31 consists of the following:
<TABLE>
<CAPTION>
In thousands of dollars
1996 1995 1994
- ----------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits
earned during the year $ 8,506 $ 6,866 $ 9,311
Interest cost on projected
benefit obligation 44,480 46,248 42,851
Estimated return on assets
- actual (gain) loss (46,778) (146,437) 27,837
- deferred gain (loss) (6,168) 101,651 (78,349)
Net amortization (3,297) (4,028) (2,520)
- ----------------------------------------------------------------
Total pension expense
(income) $ (3,257) $ 4,300 $ (870)
================================================================
</TABLE>
Assumptions used in determining the pension expense (income) for the years
ended December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- ----------------------------------------------------------------
<S> <C> <C> <C>
Discount rates 7.00% 9.00% 7.00%
Rates of increase in future
compensation levels 5.50% 6.50% 5.50%
Expected long-term rates
of return on assets 8.00% 8.00% 8.00%
================================================================
</TABLE>
(B) FUNDED STATUS
The funded status of the Company's defined benefit plans covering U.S.
employees as of December 31 is as follows:
<TABLE>
<CAPTION>
In thousands of dollars
1996 1995
- -----------------------------------------------------------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation $ 583,115 $ 603,515
===========================================================
Accumulated benefit obligation $ 610,947 $ 624,328
===========================================================
Projected benefit obligation $ 632,407 $ 655,177
Plan assets at fair value 691,591 684,594
- -----------------------------------------------------------
Plan assets in excess of projected
benefit obligation 59,184 29,417
Unrecognized net loss 68,559 89,833
Unrecognized prior service costs 12,204 12,535
Unrecognized transition adjustment (20,095) (27,573)
- -----------------------------------------------------------
Prepaid pension asset $ 119,852 $ 104,212
===========================================================
</TABLE>
The projected benefit obligations for the U.S. plans were determined in 1996
and 1995 using discount rates of 7.5 percent and seven percent, respectively,
and rates of increase in future compensation levels for salary-related plans of
5.5 percent. The Company utilizes a discount rate based on available
high-quality corporate bonds. The vested U.S. benefit obligation is calculated
on the benefits the employees are entitled to receive if they were to separate
immediately.
As of December 31, 1996 and 1995, accrued U.S. retirement contributions
included in compensation and employee benefits on the balance sheet were $11
million and $12.3 million, respectively.
GERMAN PENSION PLAN
The German subsidiary of the Company provides a defined benefit plan. This plan
is noncontributory and is unfunded. The pension or termination benefits are
based primarily on years of service and the employee's compensation.
54
<PAGE> 35
Schuller Corporation 1996 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===============================================================================
(A) PENSION EXPENSE
The pension expense, determined using a discount rate of seven percent and a
rate of increase in future compensation of five percent for each year, for the
years ended December 31 consists of the following:
<TABLE>
<CAPTION>
In thousands of dollars
1996 1995 1994
- -----------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits
earned during the year $ 881 $ 909 $ 751
Interest cost on projected
benefit obligation 1,861 1,869 1,580
Net amortization 105 111 117
- -----------------------------------------------------------
Total pension expense $ 2,847 $ 2,889 $ 2,448
===========================================================
</TABLE>
(B) FUNDED STATUS
The status of the Company's unfunded German plan as of December 31 is as
follows:
<TABLE>
<CAPTION>
In thousands of dollars
1996 1995
- ---------------------------------------------------------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation $ 24,691 $ 24,910
=========================================================
Accumulated benefit obligation $ 25,861 $ 26,272
=========================================================
Projected benefit obligation $ 28,204 $ 28,676
Unrecognized net gain 2,972 3,052
Unrecognized transition adjustment (863) (1,057)
- ---------------------------------------------------------
Pension liability $ 30,313 $ 30,671
=========================================================
</TABLE>
Projected benefit obligations were determined using a discount rate of seven
percent for both 1996 and 1995. The rate of increase in future compensation
levels for salary-related plans was five percent for both 1996 and 1995. The
vested benefit obligation is calculated on the benefits the employees are
entitled to receive if the employees were to separate immediately.
VOLUNTARY SAVINGS PLANS
The Company provides voluntary savings plans in which eligible U.S. employees
of the Company may participate. Employees may make contributions of up to 16
percent of their compensation. The Company matches up to six percent of certain
contributions at rates ranging from 15 percent to 100 percent, depending on the
Company's performance. Company contributions to the savings plans were $7.5
million in 1996, $7.6 million in 1995 and $6.8 million in 1994.
NOTE 14:
OTHER POSTRETIREMENT BENEFITS
Medical and life insurance coverage is provided to eligible U.S. and Canadian
retirees of the Company and their dependents under defined benefit plans. The
postretirement benefit expense for the years ended December 31 consists of the
following:
<TABLE>
<CAPTION>
In thousands of dollars
1996 1995 1994
- -----------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits
earned during the year $ 1,373 $ 1,560 $ 3,349
Interest cost on accumu-
lated postretirement
benefit obligation 12,955 15,434 17,797
Net amortization (1,604) (2,478) 34
- -----------------------------------------------------------
Total postretirement
benefit expense $ 12,724 $ 14,516 $ 21,180
===========================================================
</TABLE>
The postretirement benefit expense was calculated using a discount rate of
seven percent in 1996, nine percent in 1995 and seven percent in 1994.
55
<PAGE> 36
Schuller Corporation 1996 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
The Company's unfunded postretirement benefit obligation reconciled with the
amounts shown in the Company's consolidated balance sheet as of December 31 is
as follows:
<TABLE>
<CAPTION>
In thousands of dollars
1996 1995
- --------------------------------------------------------
<S> <C> <C>
Actuarial present value of the
accumulated postretirement
benefit obligation:
Retirees $ 151,206 $ 160,807
Fully eligible plan
participants 8,563 8,015
Other active plan
participants 25,212 35,199
- --------------------------------------------------------
184,981 204,021
Unrecognized net gain 8,912 4,480
Unrecognized prior
service costs 26,376 17,858
- --------------------------------------------------------
Postretirement
benefit obligation $ 220,269 $ 226,359
========================================================
</TABLE>
The current portions of $19.5 million and $21.9 million of the
postretirement benefit obligation were recorded in compensation and employee
benefits as of December 31, 1996 and 1995, respectively. The accumulated
postretirement benefit obligations were determined in 1996 and 1995 using
discount rates of 7.5 percent and seven percent, respectively. The Company
utilizes a discount rate based on available high-quality corporate bonds. For
measurement purposes, a six percent annual rate of increase in the per capita
cost of covered medical benefits was assumed for 1997; the rate was assumed to
decrease gradually to 5.5 percent in 2002 and remain at that level thereafter.
The Company's assumptions regarding the discount rate and annual rate of
increase in the per capita cost of covered medical benefits are subject to
prevailing economic conditions. Accordingly, the Company believes it is
reasonably possible that a change in these assumptions may occur in the near
term. To illustrate, increasing the assumed health care cost trend rates by one
percentage point in each year would increase the accumulated benefit obligation
as of December 31, 1996, by $7.8 million, and the aggregate of the service and
interest cost components of the periodic cost for the year then ended by $0.8
million.
NOTE 15:
WORKERS' COMPENSATION
The workers' compensation liability and related receivable at gross and present
value at December 31 are:
<TABLE>
<CAPTION>
In thousands of dollars
1996 1995
- ----------------------------------------------------------
<S> <C> <C>
Workers' Compensation Liability:
Gross $ 123,569 $ 130,724
Present Value 69,002 69,484
Insurance Receivable:
Gross $ 7,765 $ 7,245
Present Value 4,818 4,460
==========================================================
</TABLE>
The liability and receivable were measured using risk-free discount rates of
6.4 percent and 6.2 percent at December 31, 1996 and 1995, respectively, which
reflect rates of return on available U.S. Treasury securities with maturities
similar to the timing of expected claim payments. Although the Company is
exposed to credit losses in the event of nonperformance by its insurers, the
Company anticipates claims for insurance coverage will be fully satisfied.
56
<PAGE> 37
Schuller Corporation 1996 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===============================================================================
Discount rates of 6.2 percent, 8.2 percent and seven percent were used to
measure expense for the years ended December 31, 1996, 1995 and 1994,
respectively.
The Company expects to pay the following amounts for its workers'
compensation obligations:
<TABLE>
<CAPTION>
In thousands of dollars
- -------------------------------------------------------
<S> <C>
1997 $ 8,300
1998 7,700
1999 7,400
2000 7,000
2001 6,600
Thereafter 86,569
- -------------------------------------------------------
$123,569
=======================================================
</TABLE>
NOTE 16:
NONRECURRING CHARGES
In 1996, the Company recorded the following pretax nonrecurring charges
totaling $49.2 million.
During the fourth quarter of 1996, the Company completed an evaluation of a
manufacturing facility with both current and former operations and determined
that its best course of action is closure of the facility. Consequently, the
Company recorded nonrecurring charges of $41.7 million for the shutdown of
current operations, demolition of facilities and site restoration, of which $30
million and $11.7 million related to corporate and eliminations and the
Building Products segment, respectively. Of these charges, $7.5 million are
noncash asset write-downs, and $3 million are classified as other current
liabilities. Upon completion of these actions, the Company intends to
relinquish the remaining properties and does not expect to incur significant
future monitoring and maintenance costs. The Company expects to fund the
charges requiring cash outlays from existing cash balances and cash generated
from operations. Pending federal and state regulatory agency approval, the
demolition phase of the project is expected to begin in 1997 and be
substantially completed during 1998, with the majority of the liabilities
settled over the next two years. The nonrecurring charges are based on
estimates and, therefore, are subject to risks and uncertainties related to the
Company's ability to secure agreements with third parties, relinquish the
properties and obtain regulatory approvals to execute the actions described
above. As a result, the Company believes it is reasonably possible that these
estimates may be revised in the near-term. However, the impacts of such
revisions, if any, are not expected to be material.
The Company also recorded nonrecurring charges in the Engineered Products
segment of $7.5 million consisting of asset write-downs to estimated fair
values in the automotive molded parts business, which is expected to be
disposed of in 1997, partially offset by a gain on the sale of other
manufacturing assets.
57
<PAGE> 38
Schuller Corporation 1996 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===============================================================================
NOTE 17:
OTHER INCOME (EXPENSE), NET
<TABLE>
<CAPTION>
In thousands of dollars
1996 1995 1994
- --------------------------------------------------------------------
<S> <C> <C> <C>
Postretirement benefits
other than pensions $ (5,219) $ (5,468) $ (7,547)
Amortization of
intangible assets (4,457) (677) (698)
Interest accretion on
workers' compensation
liabilities (3,567) (3,910) (4,400)
Phenolic legal expenses (600) (2,921) (8,898)
Settlement of pension plans 7,216
Write-off/disposition
of nonproductive assets (6,723) (3,558)
Other 6,282 2,694 4,068
- --------------------------------------------------------------------
$ (345) $(17,005) $(21,033)
====================================================================
</TABLE>
Postretirement benefit expenses are benefits other than pensions
attributable to retirees of the Company's former business operations. Interest
accretion on workers' compensation liabilities primarily relates to previous
asbestos operations.
During 1996, the Company recognized a gain of $7.2 million related to the
receipt of surplus pension assets in connection with the settlement of defined
benefit pension plans in which the Company's Canadian employees previously
participated.
NOTE 18:
GAIN ON SALE OF EQUITY INVESTMENT
In August 1995, the Company sold its remaining equity investment in Stillwater
Mining Company ("Stillwater") for net cash proceeds of $110.5 million,
resulting in a pretax gain on the sale of equity investment of $74.9 million.
During 1994, the Company sold a portion of its investment in Stillwater for
net cash proceeds of approximately $25.5 million, resulting in a pretax gain on
the sale of equity investment of $13.5 million.
NOTE 19:
PROFIT SHARING OBLIGATION
During 1996, the Company exchanged approximately 32.5 million shares of the
common stock of the Company for the Trust's profit sharing right to 20 percent
of the Company's net earnings (as adjusted). As a result, the Company recorded
an extraordinary loss of $314.3 million, net of taxes of $169.2 million. The
extraordinary loss was based on the New York Stock Exchange closing price of
the Company's common stock on April 4, 1996 of $14.50 per share, plus related
expenses of the transaction and other trust related settlements.
The Company's profit sharing payment for 1996 was $6.6 million. This
represents 20 percent of net earnings (as adjusted) through April 5, 1996 and
is the final profit sharing payment. The 1995 profit sharing expense of $27.7
million was also paid in 1996.
58
<PAGE> 39
Schuller Corporation 1996 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===============================================================================
NOTE 20:
INCOME TAXES
Income taxes payable consists of the following:
<TABLE>
<CAPTION>
In thousands of dollars
1996 1995
- ---------------------------------------------------------
<S> <C> <C>
U.S. federal and foreign income taxes $20,857 $12,994
Deferred income taxes 14,316 15,136
State and local taxes 664 638
- ---------------------------------------------------------
$35,837 $28,768
=========================================================
</TABLE>
The approximate tax effect of the temporary differences and carryforwards
giving rise to the net deferred tax asset is as follows:
<TABLE>
<CAPTION>
In thousands of dollars
1996 1995
- ---------------------------------------------------------
<S> <C> <C>
U.S. DEFERRED TAX ASSETS:
Trust deductions $ 215,994 $ 318,691
Employee benefit accruals 108,613 110,851
Reserves 62,027 44,293
Credit for prior year minimum
tax carryforward 22,596 18,637
General business credit
carryforward 18,188 18,241
Provision for furnace rebuilds 7,805 7,842
Deferred state and local taxes 7,488 6,146
Net operating loss carryforward 120,854
Foreign tax credit carryforward 12,272
Other 18,791 14,509
- ---------------------------------------------------------
461,502 672,336
- ---------------------------------------------------------
FOREIGN DEFERRED TAX ASSETS 842 444
- ---------------------------------------------------------
Total Deferred Tax Assets 462,344 672,780
- ---------------------------------------------------------
U.S. DEFERRED TAX LIABILITIES:
Property, plant and equipment 97,764 97,628
Prepaid pension asset 45,555 40,791
Other 6,675 5,905
- ---------------------------------------------------------
Total Deferred Tax Liabilities 149,994 144,324
- ---------------------------------------------------------
Net Deferred Tax Asset, before
valuation allowances 312,350 528,456
Valuation Allowances (70,188) (82,512)
- ---------------------------------------------------------
Net Deferred Tax Asset $ 242,162 $ 445,944
=========================================================
</TABLE>
The Trust deductions deferred tax asset primarily represents stock and Trust
Bonds issued to the Trust that are not yet deductible for income tax purposes.
The charge related to the Trust Bonds becomes deductible as principal and
interest payments are made to the Trust, or when the Trust Bonds are sold by
the Trust, and funds are distributed to claimants or deposited in a specific
settlement fund. The Trust deductions deferred tax asset includes $206.7
million (exclusive of any related valuation allowance) generated from the
issuance of stock to the Trust. The Company will receive a tax deduction when
the Trust sells some or all of its shares of common stock and distributes the
proceeds to its beneficiaries or transfers the proceeds to a specific
settlement fund. If the Trust were to sell the stock at a price greater than
the Company's carrying value, the Company may receive a tax benefit in excess
of the deferred tax asset reflected for financial reporting purposes. Likewise,
if the Trust were to sell the stock at a price lower than the carrying value,
the Company would receive a tax benefit less than the deferred tax asset
reflected for financial reporting purposes. To illustrate, using the December
31, 1996 closing market price of $10.625 per share, and assuming full
realization, the deferred tax asset related to the Company's stock held by the
Trust would total approximately $470 million, which exceeds the carrying value
by over $300 million.
In addition, the Company will receive a tax deduction for the amount of any
dividends paid on shares of the Company's common stock held by the Trust. The
Trust transferred approximately $1.1 billion and $165 million in 1996 and 1995,
respectively, to the specific settlement fund within the Trust or to claimants
generating corresponding current tax deductions for the Company. In addition,
the monies transferred and use of operating loss carryforwards were adequate to
eliminate substantially all alternative minimum tax liability in those years.
59
<PAGE> 40
Schuller Corporation 1996 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===============================================================================
The Company estimates, that as of December 31, 1996, $70.2 million of the
deferred tax asset may not be realized. This amount primarily relates to
general business credits and future deductible amounts that may expire unused.
Accordingly, a valuation allowance has been provided for these amounts. The
$12.3 million and $13.9 million decrease in the valuation allowance in 1996 and
1995, respectively, primarily relate to the expiration of foreign tax credit
carryforwards and general business credit carryforwards which were fully
reserved in prior years. In accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," the Company's valuation
allowance on all deferred tax assets is subject to change as forecasts of
future years' earnings and the estimated timing of the utilization of the
Company's tax benefits and credit carryforwards are revised (including the
timing and amounts received by the Trust for its investment in Company stock).
The approximate tax effect of the temporary differences giving rise to the
net deferred tax liability is as follows:
<TABLE>
<CAPTION>
In thousands of dollars
1996 1995
- -----------------------------------------------------
<S> <C> <C>
FOREIGN DEFERRED TAX ASSETS $ 2,244 $ 2,526
- -----------------------------------------------------
FOREIGN DEFERRED TAX LIABILITIES:
Property, plant and equipment 43,486 44,637
Undistributed earnings of
foreign subsidiaries 14,316 15,136
Pensions 5,251
- -----------------------------------------------------
Total Deferred Tax Liabilities 57,802 65,024
- -----------------------------------------------------
Net Deferred Tax Liability $55,558 $62,498
=====================================================
</TABLE>
The U.S. and foreign components of income from continuing operations before
income taxes consist of the following:
<TABLE>
<CAPTION>
In thousands of dollars
1996 1995 1994
- --------------------------------------------------------
<S> <C> <C> <C>
U.S. $103,491 $182,056 $ 57,723
Foreign 47,943 42,367 39,245
- --------------------------------------------------------
$151,434 $224,423 $ 96,968
========================================================
</TABLE>
The provision for income tax expense (benefit) on continuing operations
consists of the following:
<TABLE>
<CAPTION>
In thousands of dollars
1996 1995 1994
- --------------------------------------------------------
<S> <C> <C> <C>
CURRENT:
U.S. federal $ 2,049
U.S. state and local $ 3,595 1,642 $ 1,924
Foreign 24,492 16,603 12,763
- --------------------------------------------------------
28,087 20,294 14,687
- --------------------------------------------------------
DEFERRED:
U.S. (61,203) 72,526 23,321
Foreign (5,975) 9,597 3,354
- --------------------------------------------------------
(67,178) 82,123 26,675
- --------------------------------------------------------
$(39,091) $102,417 $41,362
========================================================
</TABLE>
60
<PAGE> 41
Schuller Corporation 1996 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===============================================================================
The reported amount of income tax expense on consolidated pretax income from
continuing operations differs from the amount of income tax expense that would
result from applying domestic federal statutory tax rates to consolidated
pretax income from continuing operations for the following reasons:
<TABLE>
<CAPTION>
In thousands of dollars
1996 1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. federal statutory expense $ 53,002 $ 78,543 $ 33,938
Increase (decrease) resulting from:
Foreign income taxed at higher rates 11,246 17,978 5,310
Adjustment of estimated income tax (benefit) expense
for prior years 3,312 (1,440)
U.S. state and local taxes, net of federal benefit 1,293 1,466 4,760
Change in income tax rates 1,789
Deduction for dividends to the Trust (107,213)
Other, net 2,581 1,118 (2,995)
- --------------------------------------------------------------------------------------------
$ (39,091) $ 102,417 $ 41,362
============================================================================================
</TABLE>
As of December 31, 1996, the Company had $18.2 million of general business
credit carryforwards and $22.6 million of U.S. federal credit for prior year
minimum tax carryforwards. The general business credits expire at various dates
beginning in 1997. There is no expiration date on the prior year minimum tax
credit; however, it can only be applied against regular tax.
Undistributed earnings intended to be reinvested indefinitely by the foreign
subsidiaries totaled $149.6 million at December 31, 1996. The determination of
the deferred tax liability related to these undistributed earnings is not
practicable. Accordingly, no U.S. deferred income tax has been recorded.
61
<PAGE> 42
Schuller Corporation 1996 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===============================================================================
NOTE 21:
DISCONTINUED OPERATIONS
The Company disposed of its 81.3 percent interest in Riverwood on March 27,
1996. As a result, the Company received gross cash proceeds of $1.08 billion
and recorded a gain of $177.2 million, net of estimated tax expense of $177.8
million, during the first quarter of 1996. In the fourth quarter of 1996, an
additional gain of $39.1 million was recognized, adjusting the estimated taxes
previously recorded from $177.8 million to $138.7 million. The Company adjusted
the estimated taxes on the gain in the fourth quarter of 1996 due to the
Company's determination that it would be able to utilize foreign tax credits
applicable to the gain and other adjustments to the estimated taxes of the
transaction. Accordingly, the Company recognized a gain of $216.2 million, net
of tax, for the full year of 1996. The overall gain may be further adjusted
when the Company's 1996 U.S. income tax returns are completed in 1997 and
indemnities, if any, (discussed below) are known. Included in this gain is the
Company's portion of Riverwood's net loss for the first quarter of 1996
totaling $0.3 million.
The assets and liabilities related to Riverwood have been classified as net
assets held for sale at December 31, 1995 and Riverwood's results of operations
have been shown as discontinued operations through the disposition in the first
quarter of 1996. The components of Riverwood's net assets held for sale at
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
In thousands of dollars
- ---------------------------------------------------------
<S> <C>
Current Assets $ 460,552
Property, Plant and Equipment, net 1,466,090
Other Noncurrent Assets 278,195
- ---------------------------------------------------------
Total Assets 2,204,837
- ---------------------------------------------------------
Current Liabilities 294,552
Long-Term Debt, less current portion 1,053,794
Other Noncurrent Liabilities 385,960
- ---------------------------------------------------------
Total Liabilities 1,734,306
- ---------------------------------------------------------
Minority Interest 105,263
Cumulative Currency Translation Adjustment 10,333
- ---------------------------------------------------------
Net Assets Held for Sale $ 375,601
=========================================================
</TABLE>
Summarized information on the discontinued operations of Riverwood is as
follows:
<TABLE>
<CAPTION>
In thousands of dollars
1995 1994
- -------------------------------------------------------------
<S> <C> <C>
Net Sales $ 1,342,304 $ 1,282,788
=============================================================
Income Before Income Taxes $ 25,485 $ 64,437
Income Tax Expense 11,214 54,188
- -------------------------------------------------------------
Income Before Equity in Earnings
of Affiliate, Minority Interest
and Extraordinary Item 14,271 10,249
Equity in Earnings of Affiliate,
net of taxes 30,609
Minority Interest in Riverwood (8,389) (439)
- -------------------------------------------------------------
Income from Discounted
Operations, net of tax
and Minority Interest 36,491 9,810
Extraordinary Loss on Early
Extinguishment of Debt,
net of tax (7,872)
- -------------------------------------------------------------
Net Income from Discontinued
Operations $ 36,491 $ 1,938
=============================================================
</TABLE>
62
<PAGE> 43
Schuller Corporation 1996 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===============================================================================
In the fourth quarter of 1995, the Company recorded an estimated loss on the
disposal of discontinued operations of $42.5 million. This loss primarily
relates to deferred taxes on the Company's investment in Riverwood that had not
been recognized previously. The Company recorded these taxes when it became
apparent the taxes would be incurred due to the planned disposition of
Riverwood. Included in this loss is the Company's portion of Riverwood's net
income for November and December 1995 totaling $0.5 million.
The Company has agreed to indemnify the purchaser of Riverwood and certain
affiliated parties against losses resulting from a breach of representations or
warranties with respect to (i) certain Riverwood filings with the Securities
and Exchange Commission, (ii) the absence of undisclosed Riverwood liabilities
and (iii) certain Riverwood environmental matters. The Company will not be
required to indemnify the purchaser for losses until the aggregate amount of
all losses exceeds $20 million. In addition, the Company's obligation to
indemnify is limited to 80 percent of the amount of losses in excess of $20
million. The aggregate liability of the Company will not exceed $100 million.
In addition, the Louisiana Department of Environmental Quality notified
Riverwood in December 1995 that it may be liable for the remediation of the
release or threat of release of hazardous substances at two sites that
Riverwood or its predecessor previously operated in Shreveport, Louisiana and
Caddo Parish, Louisiana. Schuller has consented to be responsible, subject to
the provisions of the preceding paragraph, for losses incurred in connection
with these matters to the extent such losses exceed $1 million.
The Company's obligation to indemnify is limited to claims made on or prior
to May 31, 1997. To date, the Company has not received any such claims for
indemnification.
In addition, the Company may be responsible for certain Riverwood U.S.
federal, state and local income tax liabilities to the extent, if any, they are
attributable to audit adjustments for tax periods ending prior to the
disposition of Riverwood.
NOTE 22:
EARLY EXTINGUISHMENTS OF DEBT
During the second quarter of 1996, the Company redeemed its 9 percent Sinking
Fund Debentures, due through 2003, with cash of $27.7 million, plus accrued
interest of $1.6 million, resulting in an extraordinary loss on early
extinguishment of debt of $2 million, net of taxes of $1.1 million.
In the third and fourth quarters of 1994, the Company completed two debt
refinancings that resulted in an aggregate extraordinary loss on early
extinguishments of debt of $28.4 million, net of taxes of $13 million.
Riverwood completed a refinancing program in the third quarter of 1994 and
used the proceeds of the new borrowings to prepay approximately $179 million
principal of notes payable. The extraordinary charge for this early retirement
of debt was $7.9 million, net of taxes of $5 million.
63
<PAGE> 44
Schuller Corporation 1996 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===============================================================================
In September 1994, the Company prepaid $343 million of the Trust Bonds,
including accrued interest, to the Trust, with the exchange of an aggregate
principal amount of $379 million of 10.375 percent Senior Notes due 2004 of the
Company's wholly owned subsidiary, Schuller International. The transaction
resulted in an extraordinary loss on the early extinguishment of debt of $26.8
million, net of taxes of $11.4 million. In the fourth quarter of 1994 the
extraordinary loss on the Trust Bonds was reduced by $6.3 million, net of taxes
of $3.4 million. This reduction was due to an adjustment in the interest rate
on the Senior Notes to 10.875 percent finalized in the fourth quarter in
accordance with the prepayment agreement. This resulted in a total
extraordinary loss in 1994 on the Trust Bonds prepayment of $20.5 million, net
of taxes of $8 million.
NOTE 23:
SUPPLEMENTAL CASH FLOW INFORMATION
In connection with the consolidated statement of cash flows, cash paid for
interest related to continuing operations during 1996, 1995 and 1994 was $46.4
million, $47.8 million and $6.9 million, respectively. Cash paid for income
taxes related to continuing operations during 1996, 1995 and 1994 was $27.8
million, $18.9 million and $12.8 million, respectively.
As discussed in Note 22, the Company made a prepayment on the Trust Bonds
in 1994 that included the exchange of $379 million of Schuller International
Senior Notes held by the Company in satisfaction of a portion of the Trust
Bonds.
NOTE 24:
ACQUISITIONS
In the third quarter of 1996, the Company acquired NRG Barriers, Inc., a U.S.
manufacturer of commercial roofing insulation, and the assets of Dibiten USA
and Dibiten Mexico, manufacturers of commercial roofing products, in separate
transactions. Nord Bitumi SpA, Nord de Mexico S.A. de C.V. and Nord Bitumi
U.S., Inc., manufacturers of commercial roofing products, were acquired in the
first quarter of 1996. Also during the first quarter of 1996, the Company
acquired Web Dynamics Corporation, a manufacturer of polymer filtration
products. The acquisitions were accounted for under the purchase method, and
accordingly, the purchase prices were allocated on the basis of the estimated
fair value of assets acquired and liabilities assumed. In addition, a joint
venture, in which the Company has a 60 percent interest, to operate and expand
an existing fiber glass mat facility in China, became effective January 1,
1996, and is accounted for under the equity method. The combined cash purchase
price for the 1996 acquisitions and the Company's contribution to the joint
venture totaled $153.1 million. In connection with these acquisitions, the
Company assumed $52 million of debt, $34 million of which was outstanding at
December 31, 1996. The operating results of the acquired businesses have been
included in the consolidated statement of income from the dates of acquisition.
During January 1997, the Company acquired the assets of Ergon Nonwovens,
Inc., a U.S. manufacturer of synthetic meltblown nonwoven products. This
acquisition is associated with businesses of the Engineered Products segment
and will be accounted for under the purchase method.
During February 1997, the Company announced it had signed an agreement to
acquire the Mitex group of companies, subject to certain conditions, including
regulatory
64
<PAGE> 45
Schuller Corporation 1996 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===============================================================================
approvals. The acquisition is expected to complement existing businesses of the
Engineered Products segment. Mitex is a leading manufacturer of fiber glass
wall covering fabrics used primarily in commercial and industrial buildings and
has manufacturing facilities in Sweden and the United Kingdom.
NOTE 25:
BUSINESS SEGMENTS AND GEOGRAPHIC AREA INFORMATION
The Company reports separately the results of the Building Products and
Engineered Products segments. The Building Products segment consists of the
Company's building insulation business, which manufactures fiber glass wool
insulation for walls, attics and floors in residential and commercial buildings
and polyisocyanurate foam sheathing for residential structures; commercial and
industrial roofing systems business, which supplies roofing membranes,
insulations, accessories and related guarantees; and mechanical insulations
business, which manufactures pipe and duct insulation for use in commercial
buildings, factories, refineries and other industrial applications.
The Engineered Products segment consists of the Company's mats and fibers
business, which manufactures continuous filament fiber glass-based products
used for reinforcing roofing, flooring, wall covering and plastic products. The
mats and fibers business includes the Company's German subsidiary, Schuller
GmbH. The Engineered Products segment also includes the Company's specialty
insulations and filtration business, which manufactures thermal and acoustic
insulation for aircraft, marine vessels, automobiles and heating, ventilating
and air conditioning ("HVAC") and other equipment; filtration media for
commercial and industrial buildings; ultra-fine fibers for clean room air
filters and battery separators; liquid filtration cartridges and media for use
in commercial and industrial applications; and synthetic meltblown products
used in various other applications.
<TABLE>
<CAPTION>
In thousands of dollars
DECEMBER 31, 1996 1995 1994
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Building Products $ 789,778 $ 556,172 $ 514,873
Engineered Products 604,806 573,739 532,159
Corporate (Note E) 605,461 1,397,051 1,320,666
Eliminations and Adjustments (Note B) (53,319) (52,903) (50,200)
- --------------------------------------------------------------------------------------
Total $ 1,946,726 $ 2,474,059 $ 2,317,498
- --------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
- --------------------------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION
Building Products $ 36,806 $ 28,765 $ 24,751
Engineered Products 31,679 31,507 28,642
Corporate 2,690 3,561 5,949
- --------------------------------------------------------------------------------------
Total $ 71,175 $ 63,833 $ 59,342
- --------------------------------------------------------------------------------------
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
Building Products $ 76,985 $ 48,428 $ 53,621
Engineered Products 75,658 60,787 26,991
Corporate 357 2,114 2,221
- --------------------------------------------------------------------------------------
Total $ 153,000 $ 111,329 $ 82,833
======================================================================================
</TABLE>
See notes on page 67.
65
<PAGE> 46
Schuller Corporation 1996 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
In thousands of dollars
Years Ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
BUILDING PRODUCTS
Net Sales (Note A) $ 960,497 $ 805,615 $ 743,967
Costs and Expenses 810,782 669,732 625,977
Nonrecurring Charges 11,674
Other Income (Expense), net (Note D) (2,604) (2,858) (8,057)
- --------------------------------------------------------------------------------
Income from Operations $ 135,437 $ 133,025 $ 109,933
- --------------------------------------------------------------------------------
ENGINEERED PRODUCTS
Net Sales (Note A) $ 623,231 $ 612,526 $ 558,244
Costs and Expenses 504,085 498,729 481,868
Nonrecurring Charges 7,502
Other Income (Expense), net (Note D) 1,483 (5,578) 127
- --------------------------------------------------------------------------------
Income from Operations $ 113,127 $ 108,219 $ 76,503
- --------------------------------------------------------------------------------
CORPORATE AND ELIMINATIONS
Net Sales (Note A) $ (31,299) $ (26,619) $ (24,393)
Costs and Expenses 634 4,773 6,641
Nonrecurring Charges 29,980
Other Income (Expense), net (Note D) 776 (8,569) (13,103)
- --------------------------------------------------------------------------------
Income from Operations $ (61,137) $ (39,961) $ (44,137)
- --------------------------------------------------------------------------------
CONSOLIDATED TOTAL COMPANY
Net Sales (Note A) $ 1,552,429 $ 1,391,522 $ 1,277,818
Costs and Expenses 1,315,501 1,173,234 1,114,486
Nonrecurring Charges 49,156
Other Income (Expense), net (345) (17,005) (21,033)
- --------------------------------------------------------------------------------
Income from Operations $ 187,427 $ 201,283 $ 142,299
================================================================================
</TABLE>
See notes on page 67.
66
<PAGE> 47
Schuller Corporation 1996 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
In thousands of dollars
Years Ended December 31, 1996 1995 1994
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
UNITED STATES
Net Sales (Note A) $ 1,341,216 $ 1,200,371 $ 1,109,682
Costs and Expenses 1,109,647 993,192 945,844
Nonrecurring Charges 19,176
Other Income (Expense), net 9,863 (6,129) (5,984)
- ---------------------------------------------------------------------------------
Income from Operations $ 222,256 $ 201,050 $ 157,854
- ---------------------------------------------------------------------------------
FOREIGN
Net Sales (Note A) $ 224,232 $ 199,356 $ 170,681
Costs and Expenses 188,770 158,444 138,530
Other Income (Expense), net 1,737 (363) (32)
- ---------------------------------------------------------------------------------
Income from Operations $ 37,199 $ 40,549 $ 32,119
- ---------------------------------------------------------------------------------
CORPORATE AND ELIMINATIONS
Net Sales (Note A) $ (13,019) $ (8,205) $ (2,545)
Costs and Expenses 17,084 21,598 30,112
Nonrecurring Charges 29,980
Other Income (Expense), net (Note C) (11,945) (10,513) (15,017)
- ---------------------------------------------------------------------------------
Income from Operations $ (72,028) $ (40,316) $ (47,674)
- ---------------------------------------------------------------------------------
CONSOLIDATED TOTAL COMPANY
Net Sales (Note A) $ 1,552,429 $ 1,391,522 $ 1,277,818
Costs and Expenses 1,315,501 1,173,234 1,114,486
Nonrecurring Charges 49,156
Other Income (Expense), net (345) (17,005) (21,033)
- ---------------------------------------------------------------------------------
Income from Operations $ 187,427 $ 201,283 $ 142,299
- ---------------------------------------------------------------------------------
DECEMBER 31,
- ---------------------------------------------------------------------------------
ASSETS
United States $ 1,207,303 $ 936,453 $ 890,433
Foreign 187,281 193,458 156,789
Corporate (Note E) 605,461 1,397,051 1,320,666
Eliminations and Adjustments (Note B) (53,319) (52,903) (50,390)
- ---------------------------------------------------------------------------------
Total $ 1,946,726 $ 2,474,059 $ 2,317,498
=================================================================================
</TABLE>
NOTES TO BUSINESS SEGMENTS AND GEOGRAPHIC AREA INFORMATION:
(A) Net sales included in corporate and eliminations relate principally to
the elimination of intersegment and intergeographic sales (at prices
approximating market). Intersegment sales principally relate to sales from the
Engineered Products segment to the Building Products segment.
(B) Includes the elimination of intersegment and intergeographic inventory
profits and the adjustment of business segment and geographic inventories,
which are carried at standard costs, to the historical inventory bases used in
consolidation.
(C) Includes the elimination of intergeographic dividends between the
Company's foreign and U.S. segments.
(D) Other income (expense), net, as reported in each of the business
segments, represents specific operating income and expense items recognized by
the individual business units. Other income (expense), net, included in
corporate and eliminations consists of amounts primarily attributable to
previous business operations.
(E) Corporate assets are principally cash and equivalents and marketable
securities, prepaid income taxes, certain investments (including the Company's
equity investment in Stillwater), the net assets held for sale related to
Riverwood, certain long-term receivables, deferred tax assets, a portion of
prepaid pension assets and a portion of property, plant and equipment.
67
<PAGE> 48
Schuller Corporation 1996 Annual Report
MANAGEMENT'S REPORT
===============================================================================
The accompanying consolidated financial statements have been prepared by
management in conformity with generally accepted accounting principles
appropriate under the circumstances. The representations in the financial
statements and the fairness and integrity of such statements are the
responsibility of management. All of the other financial information in the
Annual Report and Form 10-K is consistent with that in the financial
statements.
The Company maintains internal accounting control systems to provide
reliable financial information for the preparation of financial statements, to
safeguard assets against loss or unauthorized use and to ensure proper
authorization and accounting for all transactions. Management is responsible
for maintenance of these systems, which is accomplished through communication
of established written codes of conduct, systems, policies and procedures;
employee training; and appropriate delegation of authority and segregation of
responsibilities. To further ensure compliance with established standards and
procedures, the Company maintains a substantial program of internal audits.
Oversight of management's financial reporting and internal accounting control
responsibilities is exercised by the Board of Directors, through an Audit
Committee that consists solely of outside directors.
/s/ C.L. HENRY /s/ K.L. JENSEN
C.L. Henry K.L. Jensen
Chairman, President, and Senior Vice President and
Chief Executive Officer Chief Financial Officer
68
<PAGE> 49
Schuller Corporation 1996 Annual Report
REPORT OF INDEPENDENT ACCOUNTANTS
===============================================================================
To the Stockholders and Directors of Schuller Corporation:
We have audited the accompanying consolidated balance sheet of Schuller
Corporation as of December 31, 1996 and 1995 and the related consolidated
statements of income, cash flows and stockholders' equity for each of the three
years in the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Schuller
Corporation as of December 31, 1996 and 1995, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
/s/ COOPERS & LYBRAND L.L.P.
Denver, Colorado
February 4, 1997, except for Note 24,
as to which the date is February 13, 1997
69
<PAGE> 50
Schuller Corporation 1996 Annual Report
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
In thousands of dollars, except per share amounts
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Net Sales $ 326,109 $ 381,403 $ 422,978 $ 421,939 $1,552,429
Gross Profit 93,559 108,502 121,439 117,118 440,618
Income from Operations (Note B) 55,291 56,299 67,615 8,222 187,427
Income before Extraordinary Items (Note A) 305,537 28,150 33,918 39,166 406,771
Net Income (Loss) (Notes A, C and D) (8,759) 26,161 33,918 39,166 90,486
- ---------------------------------------------------------------------------------------------------------------------
PRIMARY AND FULLY DILUTED EARNINGS (LOSS)
PER COMMON SHARE (NOTE E)
Income (Loss) before Extraordinary Items (Note A) $ 2.40 $ (.17) $ .21 $ .24 $ 2.27
Net Income (Loss) (Notes A, C and D) (.12) (.18) .21 .24 .20
- ---------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995
Net Sales $ 328,401 $ 354,051 $ 363,094 $ 345,976 $1,391,522
Gross Profit 99,735 102,269 98,025 98,382 398,411
Income from Operations 52,848 52,991 54,678 40,766 201,283
Income (Loss) before Extraordinary Items (Note A) 29,331 33,491 83,618 (30,445) 115,995
Net Income (Loss) (Note A) 29,331 33,491 83,618 (30,445) 115,995
- ---------------------------------------------------------------------------------------------------------------------
PRIMARY AND FULLY DILUTED EARNINGS (LOSS)
PER COMMON SHARE (NOTE E)
Income (Loss) before Extraordinary Items (Note A) $ .19 $ .22 $ .62 $ (.29) $ .73
Net Income (Loss) (Note A) .19 .22 .62 (.29) .73
=====================================================================================================================
</TABLE>
See notes on page 71.
70
<PAGE> 51
Schuller Corporation 1996 Annual Report
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
===============================================================================
NOTES:
(A) The Company closed on the disposition of its 81.3 percent interest in
Riverwood in the first quarter of 1996 and recorded a gain on the sale of
$177.2 million, net of estimated taxes of $177.8 million. In the fourth quarter
of 1996, an additional gain of $39.1 million was recognized, adjusting the
estimated taxes from $177.8 million to $138.7 million.
The Company recorded an estimated loss on disposal of discontinued
operations of $42.5 million in the fourth quarter of 1995. This loss primarily
relates to deferred taxes on the Company's investment in Riverwood that had not
been recognized previously.
(B) During the fourth quarter of 1996, the Company recorded nonrecurring
charges totaling $49.2 million. These charges include $41.7 million for the
shutdown of current operations, demolition of facilities and site restoration
and $7.5 million of asset write-downs to estimated fair values, partially
offset by a gain on the sale of other manufacturing assets.
(C) In the first quarter of 1996, the Company recorded an extraordinary loss
of $314.3 million, net of taxes of $169.2 million, on the exchange of
approximately 32.5 million shares of the Company's common stock for the Trust's
profit sharing right to 20 percent of the Company's net earnings (as adjusted).
(D) In the second quarter of 1996, the Company redeemed its 9 percent
Sinking Fund Debentures due through 2003 that resulted in an extraordinary loss
on early extinguishment of debt of $2 million, net of taxes of $1.1 million.
The Company also redeemed its Cumulative Preference Stock, Series B, with cash
of $230.8 million, plus accrued dividends of $4.1 million, resulting in a $52.1
million premium on preference stock redemption.
(E) All earnings (loss) per share amounts were calculated after the
deduction for preference stock dividends and the premium on preference stock
redemption.
71
<PAGE> 1
EXHIBIT 23
[COOPERS & LYBRAND LETTERHEAD]
Consent of Independent Accountants
Re: Schuller Corporation Registrations:
on Form S-8 (File No. 33-29389)
and Form S-3 (File No. 33-43912)
and Form S-8 (File No. 333-06375)
and Form S-8 (File No. 333-06313)
and Form S-8 (File No. 333-06321)
Gentlemen:
We consent to the incorporation by reference in the above referenced
registration statements of our report dated February 4, 1997 except for note 24
as to which the date is February 13, 1997, on our audits of the consolidated
financial statements and financial statement schedule of Schuller Corporation
as of December 31, 1996 and 1995 and for the year ended December 31, 1996, 1995
and 1994, which report is incorporated by reference in this Annual Report on
Form 10-K.
/s/ COOPERS & LYBRAND L.L.P.
Denver, Colorado
March 28, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
DECEMBER 31, 1996 FORM 10K OF SCHULLER CORPORATION AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 206,605
<SECURITIES> 42,690
<RECEIVABLES> 242,530
<ALLOWANCES> 7,570
<INVENTORY> 101,041
<CURRENT-ASSETS> 617,923
<PP&E> 1,400,758
<DEPRECIATION> 630,338
<TOTAL-ASSETS> 1,946,726
<CURRENT-LIABILITIES> 362,953
<BONDS> 428,160
0
0
<COMMON> 1,627
<OTHER-SE> 578,835
<TOTAL-LIABILITY-AND-EQUITY> 1,946,726
<SALES> 1,552,429
<TOTAL-REVENUES> 1,552,429
<CGS> 1,111,811
<TOTAL-COSTS> 1,111,811
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,105
<INTEREST-EXPENSE> 48,242
<INCOME-PRETAX> 151,434
<INCOME-TAX> (39,091)
<INCOME-CONTINUING> 190,525
<DISCONTINUED> 216,246
<EXTRAORDINARY> (316,285)
<CHANGES> 0
<NET-INCOME> 90,486
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER
31, 1996 FORM 10-K OF SCHULLER CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995<F1>
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 310,809
<SECURITIES> 116,958
<RECEIVABLES> 194,484
<ALLOWANCES> 6,497
<INVENTORY> 77,121
<CURRENT-ASSETS> 737,708
<PP&E> 1,297,432
<DEPRECIATION> 580,022
<TOTAL-ASSETS> 2,474,059
<CURRENT-LIABILITIES> 331,605
<BONDS> 447,007
0
178,638
<COMMON> 1,228
<OTHER-SE> 1,001,441
<TOTAL-LIABILITY-AND-EQUITY> 2,474,059
<SALES> 1,391,522
<TOTAL-REVENUES> 1,391,522
<CGS> 993,111
<TOTAL-COSTS> 993,111
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 770
<INTEREST-EXPENSE> 48,265
<INCOME-PRETAX> 224,423
<INCOME-TAX> 102,417
<INCOME-CONTINUING> 122,006
<DISCONTINUED> (6,011)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 115,995
<EPS-PRIMARY> .73
<EPS-DILUTED> .73
<FN>
<F1>Certain prior year information has been reclassified to conform with the
current year presentation.
</FN>
</TABLE>
