<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
The Securities Exchange Act of 1934)
(Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
................................................................................
(Name of Registrant as Specified In Its Charter)
Lydall, Inc.
................................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Lydall, Inc.
................................................................................
Payment of Filing Fee (Check the appropriate box):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
...........................................................................
2. Aggregate number of securities to which transaction applies:
...........................................................................
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
...........................................................................
(4) Proposed maximum aggregate value of transaction:........................
(5) Total fee paid:.........................................................
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
---------------------------------------------------
2. Form, Schedule or Registration Statement No.:
---------------------------------------------------
3. Filing Party:
---------------------------------------------------
4. Date Filed:
---------------------------------------------------
<PAGE>
[LOGO OF LYDALL, INC. APPEARS HERE]
Notice of Annual Meeting, to be held
May 15, 1996
Proxy Statement
<PAGE>
LEONARD R. JASKOL
Chairman, President and Chief
Executive Officer
One Colonial Road
P.O. Box 151
Manchester, Connecticut 06045-0151
(203) 646-1233
[LOGO OF LYDALL, INC. APPEARS HERE]
April 4, 1996
Dear Lydall Stockholders:
I am pleased to enclose Lydall's Annual Report describing the Company's
operations and results for the past year. We hope you find it to be an
informative summary of major developments during 1995.
I appreciate your continuing interest in Lydall and invite you to attend the
Company's Annual Meeting to be held on Wednesday, May 15, 1996 at 11:00 a.m. at
The Hartford Club located at 46 Prospect Street in Hartford, Connecticut. For
your convenience, Lydall will validate stockholders' parking tickets from the
parking garage adjacent to The Hartford Club. It is an underground garage
entered by a driveway to the right of The Hartford Club.
The following pages contain the formal notice of the Annual Meeting and the
Proxy Statement. PLEASE BE SURE TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED
PROXY CARD PROMPTLY TO ENSURE THAT YOUR SHARES WILL BE VOTED.
Sincerely,
/s/ Leonard R. Jaskol
<PAGE>
LYDALL, INC.
- -------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING To Be Held May 15, 1996
To: The Owners of Common Stock
The Annual Meeting of Stockholders of Lydall, Inc. will be held at The
Hartford Club, 46 Prospect Street, Hartford, Connecticut, on Wednesday, May
15, 1996, at 11:00 a.m. E.D.T. for the following purposes:
1. To elect 11 Directors to serve for one-year terms until the next Annual
Meeting to be held in 1997.
2. To transact any other business which may properly come before the
meeting.
The Board of Directors urges you to complete, date and sign the accompanying
proxy and return it promptly in the enclosed envelope. All stockholders are
cordially invited to attend the meeting, and your right to vote in person will
not be affected if you mail your proxy.
YOUR VOTE IS IMPORTANT
Sincerely,
(ART)
Manchester, CT Mary Adamowicz
April 4, l996 General Counsel and Secretary
<PAGE>
LYDALL, INC.
- -------------------------------------------------------------------------------
PROXY STATEMENT
GENERAL
This Proxy Statement of Lydall, Inc. ("Lydall" or the "Company"), a Delaware
corporation, is being mailed or otherwise furnished to stockholders on or
about April 4, 1996 in connection with the solicitation by the Board of
Directors of Lydall of proxies to be voted at the Annual Meeting of
Stockholders. The Annual Meeting will be held on Wednesday, May 15, 1996 at
11:00 a.m. at The Hartford Club located at 46 Prospect Street in Hartford,
Connecticut.
Enclosed with this Proxy Statement and Notice of Annual Meeting is a proxy
card on which the Board of Directors requests that you vote in favor of the
election of all nominees for Directors of the Company to serve for terms of
one year until the Annual Meeting in 1997. We would appreciate the return of
your completed proxy card AS SOON AS POSSIBLE for use at the Annual Meeting or
at any adjournments of the Annual Meeting. Properly executed proxies received
by Lydall's Secretary before the meeting will be voted as directed unless
revoked. A proxy may be revoked at any time before it is exercised by a)
notifying Lydall's Secretary in writing, b) delivering a proxy with a later
date or c) attending the meeting and voting in person. Unless you indicate on
your proxy otherwise, shares properly represented by proxies SIGNED AND
RETURNED to the Company will be voted "FOR" the nominees for the Board of
Directors named in the proxy.
Under the applicable provisions of the Company's By-laws, the presence,
either in person or by proxy, of the holders of a majority of the voting power
of the issued and outstanding stock is necessary to constitute a quorum for
the transaction of business at the Annual Meeting. The election of directors
requires the affirmative vote of the holders of a majority of the shares
present in person or represented by proxy at the Annual Meeting and entitled
to vote on the matter. For purposes of determining the number of affirmative
votes cast with respect to any matter submitted to stockholders, only those
votes cast "For" the matter are included. Abstentions will be treated as
shares present and entitled to vote for purposes of determining the presence
of a quorum but will not be considered as votes cast in determining whether a
matter has been approved by stockholders. Abstentions, therefore, will have
the same effect as a negative vote. If a broker or other holder of record or
nominee indicates on a proxy that it does not have authority as to certain
shares to vote on a particular matter, those shares will not be considered as
present and entitled to vote with respect to that matter. As a result, these
so-called "broker non-votes" will have no effect on the outcome of the voting
with respect to the election of directors.
All costs of solicitation of proxies will be borne by the Company. Lydall
has engaged the services of the outside proxy solicitation firm of Morrow &
Company, Inc. in the interests of increasing the number of shares represented
at the meeting. The anticipated cost of the engagement is approximately
$3,500. The contract provides for consultation regarding the written
solicitation materials as well as the actual solicitation of proxies. Other
costs anticipated are those ordinarily incurred in connection with the
preparation and mailing of proxy material. In addition to solicitations by
mail and the outside soliciting firm, the Company's Directors, officers and
other employees, without additional remuneration, may solicit proxies by
telephone and personal interviews.
Only holders of record of Lydall's common stock, par value $.10 per share
("Common Stock"), at the close of business on March 18, 1996 are entitled to
vote at the meeting. On that date there were 17,393,626 shares of Common Stock
outstanding, the holders of which are entitled to one vote per share.
<PAGE>
ELECTION OF LYDALL DIRECTORS
The Board of Directors has nominated Messrs. Lee A. Asseo, Paul S.
Buddenhagen, Samuel P. Cooley, W. Leslie Duffy, Leonard R. Jaskol, William P.
Lyons, Joel Schiavone, Roger M. Widmann and Albert E. Wolf to serve as
Directors of the Company for a term of one year until the next Annual Meeting
to be held in 1997.
Also, management has proposed and the Board of Directors has unanimously
voted to nominate two senior management officers, Elliott F. Whitely and James
P. Carolan for election as Directors to serve for one-year terms, until the
next Annual Meeting to be held in 1997. The addition of these two senior
managers to the Board of Directors marks the continuation of the Company's
program to include senior management participation at the Board level. At the
end of the one-year term, these two individuals are expected to be re-elected
for an additional year after which they will be replaced by two other senior
managers. This rotation of senior managers on the Board for two-year periods
will be on a continuing basis. The Company feels that having senior management
on the Board has been beneficial because it allows outside Directors to work
with and observe the skills of the Company's managers, and it provides the
Board with valuable input regarding the details of the operation of the
Company. The Company has no intention of further expanding management
participation on the Board. The Company intends to maintain its Board with a
majority of outside Directors.
Under the current Certificate of Incorporation, the Board of Directors is
empowered to establish the number of directorships between 3 and 15. The Board
of Directors has currently fixed the number of directorships at 12. There
remains one vacancy. The Board of Directors is seeking a candidate to fill the
vacancy.
Additional nominations for Directors may be made from the floor by
stockholders who attend the meeting, including nominations for persons to fill
the present Board vacancy. It is the intention of the Proxy Committee of the
Board of Directors to vote only for the Director nominees described on pages 5
through 7 of this Proxy Statement. Proxies cannot be voted for a greater
number of persons than the number of nominees named.
All nominees have indicated that they are willing and able to serve as
Directors if elected. If any of such nominees should become unable or
unwilling to serve, the Proxy Committee intends to vote for the replacement or
replacements nominated by the Company's management.
VOTE REQUIRED FOR ADOPTION
In order to be elected, the nominees must be approved by the affirmative
votes of a majority of the shares of Common Stock represented, and entitled to
vote, at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS
THAT STOCKHOLDERS VOTE
FOR THE ELECTION OF NOMINEES REFERRED TO IN THIS SECTION.
2
<PAGE>
BOARD OF DIRECTORS
Nominees for election at the next Annual Meeting to serve for a term of one
year, until 1997:
LEE A. ASSEO, 58, has been Chairman of the Board and Chief Executive Officer
of The Whiting Company, a manufacturer of synthetic fibers for the brush
industry, since 1983. Mr. Asseo has been a Lydall Director since 1985. During
1995, Mr. Asseo served as Chairman of the Nominating Committee and as a member
of the Compensation and Stock Option Committee.
PAUL S. BUDDENHAGEN, 50, is a Vice President of Mercer Management
Consulting, Inc., formerly Temple, Barker & Sloane, Inc., and a member of its
general management consulting practice. Mercer Management Consulting, Inc. is
a financial services and consulting firm headquartered in Boston,
Massachusetts. From 1986 to 1988, Mr. Buddenhagen was President of TBS
Capital, an investment management and investment banking subsidiary of the
former Temple, Barker & Sloane, Inc. Prior to 1986, he also served as a senior
consultant in Temple, Barker & Sloane Inc.'s Corporate Planning and
Development Group. A Lydall Director since 1989, Mr. Buddenhagen served as
Chairman of the Executive Committee and a member of the Nominating Committee
during 1995.
SAMUEL P. COOLEY, 64, is a retired Executive Vice President and Senior
Credit Approval Officer of Shawmut Bank Connecticut, N.A., which he joined in
1955, and a position from which he retired in 1993. He has been a Lydall
Director since 1966. During 1995, he served as Chairman of the Audit Committee
and as a member of the Pension Committee.
W. LESLIE DUFFY, 56, is a partner in the law firm of Cahill Gordon &
Reindel. He has been with that firm since 1965. He has been a Lydall Director
since 1992. During 1995, Mr. Duffy served as Chairman of the Pension Committee
and a member of the Development Committee.
LEONARD R. JASKOL, 59, was elected Chairman of the Board on October 9, 1991.
He also serves as President and Chief Executive Officer of Lydall, positions
he has held since July 1, 1988. He has been a Lydall Director since May 25,
1988. Prior to July 1, 1988, Mr. Jaskol had been a Vice President of Lydall
and Group President of its Fiber Materials Group since 1977. Mr. Jaskol joined
Lydall in 1973 as Vice President--Industrial Products of Lydall's Composite
Materials Division, formerly the Colonial Fiber Division. In 1976, Mr. Jaskol
was appointed Vice President--Division Manager of the Composite Materials
Division, and in 1977 he was named President of that division and Group
Executive of Lydall's Fiber Materials Group. Mr. Jaskol serves as a Director
of Rogers Corporation and Eastern Enterprises. During 1995, Mr. Jaskol served
as Chairman of the Development Committee and as a member of the Executive and
Nominating Committees.
WILLIAM P. LYONS, 54, has been Chairman of JVL Corp., a generic drug
manufacturer, since 1992. Mr. Lyons is also Chairman of Holmes Protection
Group, Inc. a security alarm and systems company since 1995. Mr. Lyons has
also been President of William P. Lyons & Co., Inc., an investment banking and
financial consulting firm since 1975. He served as Chairman and Chief
Executive Officer of Duro-Test Corporation from 1988 to 1991. From 1973
through 1989, Mr. Lyons was a faculty member of Yale University Schools of
Management and Law. A Lydall Director since 1983, Mr. Lyons is also a Director
of DeSoto, Inc., Video Lottery Technologies, Inc. and Holmes Protection Group,
Inc. During 1995, Mr. Lyons served as a member of the Pension Committee and a
member of the Audit Committee.
JOEL SCHIAVONE, 59, has been Chief Executive Officer of The Schiavone
Corporation, a diversified holding company, since 1981, and a Lydall Director
since 1983. During 1995, Mr. Schiavone served as a member of the Executive
Committee.
3
<PAGE>
ROGER M. WIDMANN, 56, is Senior Managing Director, Castle, Harlan & Widmann
Energy Partners, L.L.C., a merchant banking firm. Formerly, Mr. Widmann was
Senior Managing Director, Corporate Finance, of Chemical Securities, Inc. He
joined Chemical Bank in May 1986. Prior to that, he had been a founder and
Managing Director of First Reserve Corporation, an energy investment and
finance firm, since 1981. In addition, Mr. Widmann serves as a Director of
Weatherford Enterra Corp. Mr. Widmann has been a Lydall Director since 1974.
During 1995, Mr. Widmann served as Chairman of the Compensation and Stock
Option Committee and as a member of the Development Committee.
ALBERT E. WOLF, 66, is Chairman of the Board and a Director of Checkpoint
Systems, Inc., which manufactures and markets electronic security systems. Mr.
Wolf has held his present position with Checkpoint since 1972. He has been a
Lydall Director since 1977. During 1995, Mr. Wolf served as a member of the
Compensation and Stock Option Committee and as a member of the Audit
Committee.
- -------------------------------------------------------------------------------
NOMINEES FROM SENIOR MANAGEMENT:
JAMES P. CAROLAN, 53, is the President of the Manning Nonwovens Division of
Lydall, located in Green Island, New York, a position he has held since 1993.
Before the position at Manning, he was President of Lydall International, Inc.
located in France. Prior to his affiliation with Lydall International, Inc.,
Mr. Carolan served as President of the Westex Division of Lydall from 1983 to
l991. He joined Lydall in 1980 as Vice President of Marketing of the Technical
Papers Division.
ELLIOTT F. WHITELY, 52, is the President of the Technical Papers Division of
the Company located in Rochester, New Hampshire, a position he has held since
1987. He joined Lydall in 1974 and later served as Vice President of
Development and Technology for that Division, until he became President of
that Division.
ACTIVITIES OF THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES OF THE BOARD
The Board of Directors held six meetings during 1995. All Directors attended
all of the meetings of the Board, with the exception of Mr. Duffy and Mr. Wolf
who attended all but one of the meetings. All Directors attended all meetings
of any committees on which they served, except for Mr. Wolf and Mr. Lyons who
attended all but one meeting of their respective committees.
The Company's Board of Directors has six standing committees: Audit,
Development, Compensation and Stock Option, Pension, Nominating and Executive.
The Audit Committee considers and reviews all matters connected with internal
and external audit reports, the external auditors' management report, and
similar matters. The Development Committee reviews management proposals for
possible mergers and acquisitions and approves investments made in connection
with the Company's development program. The Compensation and Stock Option
Committee (i) reviews the executive compensation of officers of the Company at
the division president level and above; (ii) approves various employment
contracts with officers; (iii) approves nonqualified deferred compensation
arrangements with Directors and officers of the Company upon recommendation of
the Company's officers; and (iv) approves the granting of restricted stock
awards, stock options and stock bonus awards to key employees pursuant to the
Lydall, Inc. 1992 Stock Incentive Compensation Plan. The Pension Committee
makes recommendations concerning the pension and profit sharing plans of the
Company. The Nominating Committee recommends persons to be nominated as
Directors and considers nominees recommended by stockholders. (See "Deadline
for Submission of Stockholder Proposals"). The Executive Committee acts on
behalf of the Board of Directors in the interval between its meetings on all
matters other than those specifically assigned by the Board of Directors to
its other committees.
4
<PAGE>
During 1995, the Audit Committee held three meetings; the Development
Committee held no meetings; the Compensation and Stock Option Committee held
one meeting and acted by unanimous written consent on three occasions; the
Pension Committee held no meetings and acted by unamimous written consent on
three occasions; the Nominating Committee and the Executive Committee held no
meetings.
During 1995, Directors who were not employees of the Company or otherwise
compensated by the Company were paid a retainer of $3,000 per quarter, $1,000
for each meeting of the Board of Directors attended, and $500 for any
committee meeting held on a day other than the day on which a Board meeting
was held. In addition, the 1992 Stock Incentive Compensation Plan ("the Plan")
provides for the automatic grant of nonqualified stock options covering 9,000
(as adjusted for the 1995 stock split) shares of Common Stock to each person
serving as a Director on May 7, 1996, May 7, 1999 and May 7, 2002. In
addition, new Directors upon joining the Board receive an automatic grant of
nonqualified options covering the lessor of (i) 9,000 (as adjusted for the
1995 stock split) shares of Common Stock, (ii) a number of shares of Common
Stock having an aggregate fair market value on the date of grant equal to
$100,000 or (iii) the number of shares then available for such purpose under
the Plan. This provision allows outside Directors to serve on the Compensation
and Stock Option Committee as disinterested persons under the regulations
promulgated under Section 16 of the Securities Exchange Act of 1934.
Since 1991, the Company has maintained a deferred compensation plan for
outside Directors and the Chairman. Under this plan, those Directors will
receive a lump-sum cash payment upon the later of the date they cease to serve
as a Director or their attaining 62 years of age. For each of those Directors,
the total amount of the payment will be equal to $3,000 multiplied by the
number of full or partial calendar years of service as a Director completed
prior to January 1, 1991, plus $6,000 for each full or partial calendar year
of service as a Director completed after December 31, 1990. Benefits
attributable to service as a Director after December 31, 1990 will vest and
accrue immediately. Benefits attributable to service as a Director prior to
January 1, 1991 will vest immediately provided the Director has held such
position for at least five years and accrue over a seven-year period starting
December 31, 1990 unless a Director is at least 62 years of age, in which case
the benefits automatically will become fully vested. Benefits also will vest
and accrue fully upon ceasing to serve as a Director within one year following
a change in control, as defined in the Plan document, of the Company.
From 1984 through 1992, the Company maintained the Lydall, Inc. 1984 Outside
Directors Warrant Plan (the "Warrant Plan"). The Warrant Plan provided for the
grant of warrants to purchase shares of Common Stock to outside Directors. It
was terminated by the Board of Directors on May 13, 1992 because no remaining
shares were available under the Warrant Plan to be awarded, and because the
1992 Stock Incentive Compensation Plan provides for automatic option grants to
Directors of the Company.
As of March 1, 1996, there was an aggregate of 30,330 authorized but
unissued shares of the Company's Common Stock reserved for issuance under the
Warrant Plan upon exercise of the warrants, all of which shares are subject to
outstanding warrants. There was no activity in 1995. Directors Cooley, Widmann
and Wolf are the only directors who have warrants outstanding. Each of them
hold warrants for 10,110 shares at an exercise price of $1.855 per share.
TRANSACTIONS WITH DIRECTORS
The Company maintains a $5 million line of credit with Chemical Bank. Roger
M. Widmann, a Director of the Company, was formerly Senior Managing Director,
Corporate Finance, of Chemical Securities, Inc., an affiliate of Chemical
Bank. The line of credit is renewed annually and is scheduled to expire on
June 30, 1996 unless renewed for an additional one-year period. Outstanding
borrowings bear interest at the prime rate. The Company has never utilized any
portion of this credit facility.
5
<PAGE>
During 1995, Mercer Management Consulting, Inc., of which Director Paul S.
Buddenhagen is Vice President, was engaged by several subsidiaries of Lydall
as consultants in connection with strategic planning and market research
issues. A total of $191,788.01 was paid to Mercer Management Consulting in
1995 in connection with such services.
During 1995, Cahill Gordon & Reindel, of which Director W. Leslie Duffy is a
partner, was engaged by the Company as special counsel for limited matters.
SECURITIES OWNERSHIP OF DIRECTORS, CERTAIN EXECUTIVE OFFICERS
AND 5 PERCENT BENEFICIAL OWNERS
The following table lists, to the Company's knowledge, the ownership of
Common Stock and the nature of such ownership for each Director and nominee
for Director, for each executive officer named in the Summary Compensation
Table, for all executive officers and Directors of Lydall as a group and for
each person who owns in excess of 5 percent of the outstanding shares of
Common Stock. Unless otherwise noted, each holder has sole voting and
dispositive power with respect to the shares listed. All information is given
as of March 1, 1996.
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name Beneficial Ownership of Class
- ---------------------------------------------------------------
<S> <C> <C> <C>
Lee A. Asseo 15,000 Direct
Director 18,000 (Exercisable under 1982
Stock Incentive
Compensation Plan)
4,500 (Exercisable under 1992
Stock Incentive
Compensation Plan)
------
37,500 *
======
- ---------------------------------------------------------------
Paul S. Buddenhagen 30,000 Direct
Director 18,000 (Exercisable under 1982
Stock Incentive
Compensation Plan)
4,500 (Exercisable under 1992
Stock Incentive
Compensation Plan)
------
52,500 *
======
- ---------------------------------------------------------------
Carole F. Butenas 44,166 Direct
Vice President-- 6,000 (Exercisable under 1982
Investor Relations, Stock Incentive
Director Compensation Plan)
8,876 (Exercisable under 1992
Stock Incentive
Compensation Plan)
16,855 (Allocated under Lydall
Profit Sharing Plan) (1)
------
75,897 *
======
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name Beneficial Ownership of Class
- ------------------------------------------------------------------
<S> <C> <C> <C>
James P. Carolan 108,734 Direct
Division President, 8,371 Indirect (Spouse)
Nominee for Director 83,314 (Exercisable under 1982
Stock Incentive
Compensation Plan)
16,700 (Exercisable under 1992
Stock Incentive
Compensation Plan)
20,955 (Allocated under Lydall
Profit Sharing Plan) (1)
-------
238,074 1.4
=======
- ------------------------------------------------------------------
Samuel P. Cooley 3,000 Direct
Director 10,110 (Exercisable under
Warrant Plan)
18,000 (Exercisable under 1982
Stock Incentive
Compensation Plan)
4,500 (Exercisable under 1992
Stock Incentive
Compensation Plan)
-------
35,610 *
=======
- ------------------------------------------------------------------
W. Leslie Duffy 0 Direct
Director 9,000 (Exercisable under 1982
Stock Incentive
Compensation Plan)
4,500 (Exercisable under 1992
Stock Incentive
Compensation Plan)
-------
13,500 *
=======
- ------------------------------------------------------------------
Alan J. Gnann 134,613 Direct
Vice President-- 18,000 (Exercisable under 1982
Corporate Development Stock Incentive
Compensation Plan)
16,750 (Exercisable under 1992
Stock Incentive
Compensation Plan)
12,345 (Allocated under Lydall
Profit Sharing Plan) (1)
-------
181,708 1.0
=======
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name Beneficial Ownership of Class
- --------------------------------------------------------------------
<S> <C> <C> <C>
Leonard R. Jaskol 482,369 Direct
Chairman of the Board 241,000 (Exercisable under 1982
Chief Executive Officer Stock Incentive
Compensation Plan)
13,440 (Exercisable under 1992
Stock Incentive
Compensation Plan)
58,778 (Allocated under Lydall
Profit Sharing Plan) (1)
-------
795,587 4.6
=======
- --------------------------------------------------------------------
Raymond J. Lanzi 273,117 Direct
Division President 4,500 (Exercisable under 1982
Stock Incentive
Compensation Plan)
9,362 (Exercisable under 1992
Stock Incentive
Compensation Plan)
33,648 (Allocated under Lydall
Profit Sharing Plan) (1)
-------
320,627 1.8
=======
- --------------------------------------------------------------------
William P. Lyons 23,154 Direct
Director 4,500 (Exercisable under 1992
Stock Incentive
Compensation Plan)
-------
27,654 *
=======
- --------------------------------------------------------------------
William J. Rankin 8,141 Direct
Division President, 30,000 (Exercisable under 1982
Director Stock Incentive
Compensation Plan)
30,962 (Exercisable under 1992
Stock Incentive
Compensation Plan)
9,171 (Allocated under Lydall
Profit Sharing Plan) (1)
-------
78,274 *
=======
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name Beneficial Ownership of Class
- -----------------------------------------------------------------
<S> <C> <C> <C>
Joel Schiavone 0 Direct
Director 4,528 Indirect (Spouse)
18,000 (Exercisable under 1982
Stock Incentive
Compensation Plan)
4,500 (Exercisable under 1992
Stock Incentive
Compensation Plan)
-------
27,028 *
=======
- -----------------------------------------------------------------
Elliott F. Whitely 164,313 Direct
Division President, 70,800 (Exercisable under 1982
Nominee for Director Stock Incentive
Compensation Plan)
19,516 (Exercisable under 1992
Stock Incentive
Compensation Plan)
31,785 (Allocated under Lydall
Profit Sharing Plan) (1)
-------
286,414 1.6
=======
- -----------------------------------------------------------------
Roger M. Widmann 44,526 Direct
Director 450 Indirect (Spouse)
10,110 (Exercisable under
Warrant Plan)
18,000 (Exercisable under 1982
Stock Incentive
Compensation Plan)
4,500 (Exercisable under 1992
Stock Incentive
Compensation Plan)
-------
77,586 *
=======
- -----------------------------------------------------------------
Albert E. Wolf 0 Direct
Director 6,000 Indirect (Spouse)
10,110 (Exercisable under
Warrant Plan)
18,000 (Exercisable under 1982
Stock Incentive
Compensation Plan)
4,500 (Exercisable under 1992
Stock Incentive
Compensation Plan)
-------
38,610 *
=======
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name Beneficial Ownership of Class
- -------------------------------------------------------------------
<S> <C> <C> <C>
Lydall Profit Sharing Plan 1,217,465 (1) 7.0
c/o CoreStates Bank NA
1500 Market Street
P.O. Box 13839
Philadelphia, PA 19101-13839
- -------------------------------------------------------------------
Scudder, Stevens & Clark, Inc. 1,061,400 (2) 6.1
345 Park Avenue
New York, NY 10154
- -------------------------------------------------------------------
Stein, Roe & Farnham, Inc. 970,800 (3) 5.6
One South Wacker Drive
Chicago, IL 60606
- -------------------------------------------------------------------
All Directors and 2,519,031 (4) 14.9
Executive Officers as a
Group (19 persons)
</TABLE>
* Indicates that the Director/Officer owns less than 1 percent of the
outstanding shares of Common Stock.
(1) Shares also listed as beneficially owned by the Lydall Profit Sharing Plan
which has the sole power to dispose of the shares. Voting power with
respect to the shares is exercised by the participating employee.
(2) As reported in Schedule 13G filed with the Securities and Exchange
Commission on February 7, 1996.
(3) As reported in Schedule 13G filed with the Securities and Exchange
Commission on February 12, 1996.
(4) Of the 2,591,031 shares, 30,330 are exercisable under the Warrant Plan,
645,964 are exercisable under the 1982 Stock Incentive Compensation Plan,
and 205,448 are exercisable under the 1992 Stock Incentive Compensation
Plan.
10
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION AND STOCK OPTION COMMITTEE REPORT TO STOCKHOLDERS
Based on a management proposal, the Compensation and Stock Option Committee
(the "Committee") approves the compensation levels of Lydall's executives at
the division president level and above, subject to ratification by the Board
of Directors. The Committee also administers the Company's Individual
Performance Plan, or cash bonus program, and the Lydall, Inc. Stock Incentive
Compensation Plans as approved by stockholders. Each of the three members of
the Committee is a nonemployee Director. All decisions by the Committee
relating to the compensation of the Company's senior executives are reviewed
by the full Board except for decisions about awards under the Company's stock-
based compensation plans which must be made solely by the Committee in order
for the grants or awards under such plans to satisfy applicable requirements
of the federal securities laws.
The Committee is guided by the following principles in determining the
compensation levels of the senior executives named in the Summary Compensation
Table--Messrs. Carolan, Lanzi, Whitely, and Gnann, and the Chief Executive
Officer, Mr. Leonard R. Jaskol.
PHILOSOPHY
Lydall ties its executive compensation to the long-term goals and strategy
of the Company, which is to build a strong, profitable business and to protect
and grow stockholder value. Lydall's incentive compensation plans are directly
based on Company performance, progress made toward long-term goals and, in
turn, on the value received and reasonably anticipated by stockholders.
The Committee's executive compensation policies are designed to provide
competitive levels of compensation that are closely integrated with the
Company's annual and long-term performance goals. Lydall's goal is to achieve
above-average, consistent corporate performance and it recognizes individual
initiative and achievements that lead to the accomplishment of that goal. The
Company seeks to attract and retain the highest qualified executives and seeks
to ensure its compensation levels are competitive.
Senior executives' compensation packages are intended to be consistent with
those of executives in comparable positions with diversified manufacturers
similar in size to Lydall. Because Lydall directly ties a large portion of its
executive compensation to corporate performance, however, executives may be
paid more in a particular year of good results and less in a year of
disappointing results.
The Committee believes that stock ownership by management serves to align
management's and stockholders' interests. The Company's stock-based incentive
plans are an important component of its executive compensation and are
intended to retain and motivate executives to improve the long-term operating
results and growth of the Company. The Committee believes that there is a
direct correlation between the accomplishment of these objectives and the
value of Lydall's Common Stock.
ELEMENTS OF COMPENSATION
The following describes each of the three components of Lydall's executive
compensation packages.
Base Salary. Base salary is compared with the competitive median for
diversified manufacturers of similar size, as determined by independently
published compensation surveys.
Salaries for executives are reviewed by the Committee every two years and
are based on the Committee's agreement that the individual's contribution to
the Company has increased or decreased relative to operating performance and
that competitive pay levels have changed.
11
<PAGE>
Mr. Jaskol's base salary was approved at the December 1995 Board meeting to
be effective January 1, 1996 through 1997. Mr. Jaskol's salary will be
reviewed at the end of 1997. In determining Mr. Jaskol's compensation, the
Committee considers pay levels among Chief Executive Officers of diversified
manufacturers similar in size to Lydall as well as the Board's agreement on
Mr. Jaskol's contributions to the successful operating performance and
financial management of the Company over the past several years. The Committee
measures Mr. Jaskol's contributions by the Company's long-term earnings
growth, balance sheet strength, management development, and new product
opportunities. A similar process is followed for Messrs. Carolan, Lanzi,
Whitely and Gnann. Salary levels for all of these senior officers were set at
the end of 1995 for the two years 1996 and 1997. Their salaries will be
reviewed at the end of 1997.
Individual Performance Awards. The bonus portion of Lydall's executive
compensation is a key component of its management's total compensation
packages. Individual Performance Award agreements (IPAs) are based on
earnings-per-share targets and the accomplishment of individually defined
milestones. Threshold, superior, and outstanding earnings-per-share targets
are determined by the Committee at the beginning of each year. Individual
milestones are also established annually.
Companywide, the amounts for individual awards range from 5 percent to 75
percent of base salary. The senior executives named in the Summary
Compensation Table, excluding Mr. Jaskol, are eligible to receive a bonus of
up to 62.5 percent of their base salary.
In 1995, Mr. Jaskol was eligible to receive a bonus of up to 75 percent of
his base salary provided that Lydall's performance reached or surpassed the
outstanding target levels. Mr. Gnann was eligible to receive a bonus of up to
62.5 percent of his base salary provided that Lydall's performance reached or
surpassed the outstanding target levels. These levels were attained in 1995
and thus, Mr. Jaskol and Mr. Gnann each received his maximum bonus for the
year.
Individual performance awards, or bonuses, for all division presidents are
based two-thirds on personal milestones relating to the results of their
division together with each division's contribution to the overall results of
the Company, and one-third on corporate earnings-per-share targets. Mr.
Carolan, Mr. Lanzi and Mr. Whitely's bonuses were based on this formula for
1995. Not all of the divisions met 1995's performance targets, and thus,
individual bonuses varied for the year.
Stock Option Awards. The Committee has determined certain appropriate levels
of ownership for Lydall's senior executives and has granted stock options
towards achieving those predetermined levels. These targets are based on
comparison studies of executive stock ownership in other public companies
similar in size to Lydall. Outstanding historical performance by an individual
is additionally recognized through larger than normal option grants. In
addition to the senior executives named in the Summary Compensation Table, a
large number of Lydall's managers participate in the Company's stock option
program.
Stock options are granted at the prevailing market price and will only have
value if the Company's stock price increases. Generally, grants vest over four
years; individuals must be employed by the Company at the time of vesting in
order to exercise the options.
Mr. Jaskol received option grants covering 15,000 shares of Lydall, Inc.
Common Stock in 1995. He now holds options covering a total of 313,000 shares
of Common Stock, 254,440 of which were vested as of the record date. Mr.
Jaskol's option holdings are reviewed annually to ensure that his relative
stock ownership in the Company adequately reflects his contributions to
maximizing stockholder value for the long term. Option awards to Mr. Jaskol
are also tied to his level of base salary and to the long-term performance of
the Company.
In 1995, Mr. Carolan, Mr. Whitely and Mr. Lanzi each received option grants
covering 7,500 shares of Common Stock and Mr. Gnann received an option grant
covering 6,000 shares of Common Stock.
12
<PAGE>
LIMITATION ON DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to the
Internal Revenue Code of 1986, as amended. Section 162(m) generally denies a
publicly held corporation, such as the Company, a federal income tax deduction
for compensation in excess of $1 million per year paid or accrued for each of
its chief executive officer and four other most highly compensated executive
officers. Certain "performance based" compensation is not subject to the
limitation on deductibility provided that certain stockholder approval and
independent director requirements are met.
Because of the fact that the compensation paid to each of the Company's
executive officers has not exceeded $1 million per year, the Committee does
not believe that the new limitation on deductibility of executive compensation
is currently material to the Company. The Committee will continue to review
the situation in light of the final regulations and future events with the
objective of achieving deductibility to the extent appropriate.
COMPENSATION AND STOCK OPTION
COMMITTEE
Roger M. Widmann, Chairman
Lee A. Asseo and Albert E. Wolf
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the Compensation and Stock Option Committee members, Roger M.
Widmann, Lee A. Asseo, and Albert E. Wolf have interlocking relationships with
the Company and all are outside directors.
13
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Company's
shares over the past five years with the cumulative total return on shares of
companies comprising the Standard & Poor's Industrials Index and the Russell
2000 Index. Cumulative total return is measured assuming an initial investment
of $100 and the reinvestment of dividends.
Research Data Group Total Return - Data Summary
LDL
<TABLE>
<CAPTION>
Cumulative Total Return
----------------------------------------------
12/90 12/91 12/92 12/93 12/94 12/95
<S> <C> <C> <C> <C> <C> <C> <C>
Lydall Inc LDL 100 195 236 254 386 541
S & P INDUSTRIALS IIND 100 131 138 151 156 211
RUSSELL 2000 IR20 100 146 173 206 202 260
</TABLE>
14
<PAGE>
SUMMARY COMPENSATION TABLE
The following table shows the compensation either paid or allocated by the
Company for the past three years through December 31, 1995 to the Chief
Executive Officer of the Company and each of the four other most highly
compensated executive officers of the Company.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
Awards Payouts
- ---------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Securities
Other Re- Under- All
Name Annual stricted lying LTIP Other
and Compen- Stock Options/ Pay- Compen-
Principal Salary Bonus sation Awards SARs out sation
Position Year ($) ($) ($)(/1/) ($) (#)(/2/) ($) ($)(/3/)
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
L.R. JASKOL 1995 400,000 300,000 40,654 0 15,000/0 0 54,804
CEO & 1994 400,000 300,000 35,319 0 24,000/0 0 53,499
Chairman of the Board 1993 350,000 262,500 12,224 0 33,000/0 0 28,573
- ---------------------------------------------------------------------------------------------
J.P. CAROLAN 1995 200,000 125,000 59,321 0 7,500/0 0 53,154(4)
Division 1994 200,000 125,000 71,776 0 21,000/0 0 68,488(4)
President 1993 170,000 106,250 0 0 27,000/0 0 31,211(5)
- ---------------------------------------------------------------------------------------------
R.J. LANZI 1995 200,000 125,000 24,964 0 7,500/0 0 25,757
Division 1994 200,000 41,666 11,525 0 12,000/0 0 25,623
President 1993 170,000 106,250 0 0 34,000/0 0 15,271
- ---------------------------------------------------------------------------------------------
E.F. WHITELY 1995 200,000 125,000 5,701 0 7,500/0 0 22,560(6)
Division 1994 200,000 125,000 5,640 0 12,000/0 0 20,954(6)
President 1993 164,000 102,500 0 0 34,000/0 0 15,208(6)
- ---------------------------------------------------------------------------------------------
A.J. GNANN 1995 180,000 112,500 4,716 0 6,000/0 0 19,392
V. President 1994 180,000 112,500 3,984 0 10,000/0 0 16,337
Development 1993 164,000 34,167 0 0 21,000/0 0 14,150
</TABLE>
(1) None of the named executive officers received perquisite and other
personal benefits in excess of the lesser of $50,000 or 10 percent of his
total annual salary and bonus.
(2) Share amounts prior to the 1995 stock split have been restated to reflect
the two-for-one stock split distributed June 21, 1995.
(3) The items reported in column (i) include amounts paid on behalf of the
named individuals by the Company for:
Defined contribution plans (401(k) Plan & ESOP):
L.R. Jaskol 1995 ($12,000), 1994 ($10,500), 1993 ($16,509); J.P. Carolan
1995 ($8,690), 1994 ($7,711), 1993 ($13,217); R.J. Lanzi ($12,000), 1994
($10,500), 1993 ($13,217); E.F. Whitely 1995 ($12,000), 1994 ($10,500),
1993 ($12,917); A.J. Gnann 1995 ($12,000), 1994 ($10,500), 1993
($12,171).
The Employee Stock Purchase Plan:
L.R. Jaskol 1995 ($600),1994 ($400), 1993 ($400); J.P. Carolan 1995
($400), 1994 ($400), 1993 ($400); R.J. Lanzi 1995 ($600), 1994 ($400),
1993 ($400); E.F. Whitely 1995 ($583), 1994 ($400), 1993 ($400); A.J.
Gnann 1995 ($600), 1994 ($400), 1993 ($400).
Life Insurance premiums:
L.R. Jaskol 1995 ($31,337), 1994 ($31,892), 1993 ($11,664); J.P. Carolan
1995 ($6,037), 1994 ($6,399), 1993 ($1,654); R.J. Lanzi 1995 ($9,971),
1994 ($10,232), 1993 ($1,654); E.F. Whitely 1995 ($5,499), 1994 ($5,892),
1993 ($1,579); A.J. Gnann 1995 ($3,219), 1994 ($2,775), 1993 ($1,579).
Long-Term Disability premiums:
L.R. Jaskol 1995 ($10,867), 1994 ($10,707); J.P. Carolan 1995 ($4,308),
1994 ($3,978); R.J. Lanzi 1995 ($3,186), 1994 ($4,491); E.F. Whitely 1995
($4,166), 1994 ($3,850); A.J. Gnann 1995 ($3,573), 1994 ($2,662).
(4) Forgiveness of bridge loans provided to Mr. Carolan to reimburse him when
he was required by the Company to relocate from France are included in
this total: 1995 ($33,719); 1994 ($50,000). These loans are described in
more detail below in this Proxy Statement and in the 1994 Proxy Statement.
(5) In 1993, Mr. Carolan, received compensation for foreign exchange rate
losses of $15,940 while employed as President of Lydall International,
Inc. in France.
(6) In 1995, 1994 and 1993, Mr. Whitely received a nonsmoking bonus of $312 in
accordance with the policy for his location.
15
<PAGE>
PLAN DESCRIPTIONS
While not required by the Securities and Exchange Commission rules in every
case, the Company believes a brief description of each compensation plan will
enable stockholders to understand better the information presented in the
tables.
DEFINED BENEFIT PENSION PLAN
The Company provides a noncontributory, "career average" defined benefit
pension plan (the "Pension Plan") to most salaried employees of Lydall. The
Pension Plan provides that benefits, in the amount of 2 percent of the
participant's annual eligible earnings, (subject to limitations imposed by the
Internal Revenue Code) will accrue annually. The Pension Plan benefits are not
determined primarily by final or average final compensation. The Company pays
the entire cost of the Pension Plan which is administered by a committee
appointed by the Board of Directors.
A participant's compensation for purposes of determining pension benefits is
the participant's W-2 compensation (less bonus and other similar compensation
payments) plus pretax employee contributions to the pretax plans of Lydall,
Inc.
The normal retirement age under the Pension Plan is 65 and actuarially
reduced benefits are available at age 55 if the participant has ten years of
service. Messrs. Jaskol, Carolan, Lanzi, Whitely, and Gnann are expected to
receive annual benefits upon retirement at normal retirement age (assuming
salary increases of 4 percent per year for Mr. Jaskol and 5 percent per year
for the others) in the amounts of $80,309, $59,864, $67,185, $85,903, and
$110,685, respectively. The aforementioned amounts are not subject to any
further reductions for Social Security benefits or for any other offset
amounts.
SALARIED PROFIT SHARING PLAN
The Company has a noncontributory profit sharing plan (the "Profit Sharing
Plan") covering most salaried employees and full-time hourly employees at
certain Lydall locations. The Board of Directors has discretionary authority
to determine the amount of contributions (if any) to be made each year by the
Company. Each employee receives a percentage of his or her W-2 compensation,
as determined by the Board of Directors, (subject to the limitations imposed
by the Internal Revenue Code) less bonus and other similar compensation
payments plus employee pretax contributions. Contributions are made either in
shares of Common Stock or in cash. If cash, the trustee of the Profit Sharing
Plan uses it to purchase Common Stock, so that the Profit Sharing Plan is
invested primarily in Lydall Common Stock. The Profit Sharing Plan provides
that an employee's Profit Sharing Plan account shall be distributed to an
employee who terminates employment with a vested benefit, or who retires at
normal retirement age.
STOCK INCENTIVE PLAN
The Company maintains the Lydall, Inc. 1992 Stock Incentive Compensation
Plan (the "1992 Plan"), which expires on May 12, 2002. The 1992 Plan presently
authorizes an aggregate of 790,000 shares of Common Stock for issuance under
the terms of incentive awards that may be granted to Directors, officers and
other key employees of the Company. Incentive awards granted under the 1992
Plan may take the form of nonqualified stock options, incentive stock options,
restricted stock awards, or stock bonus awards.
16
<PAGE>
STOCK OPTION TABLES
The following table provides information regarding stock options granted to
the named executive officers during 1995. In addition, in accordance with
Securities and Exchange Commission rules, the values assigned to each reported
option are shown using gains based on assumed rates of annual compound stock
price appreciation of 5 percent and 10 percent from the date the options were
granted over the full option term. In assessing these values, it should be
kept in mind that no matter what theoretical value is placed on a stock option
on the date of grant, its ultimate value will be dependent on the market value
of the Company's stock at a future date, and that value will depend on the
efforts of such executives to foster the future success of the Company for the
benefit of not only the executives, but all stockholders.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential
Realizable Value at
Assumed Annual
Rates of Stock Price
Appreciation
Individual Grants for Option Term(*)
- ------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees Base Price Expiration
Granted (#) in Fiscal Year ($/Sh) Date 5%($) 10%($)
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
L.R.
Jaskol 15,000(1)/0 10.6/0 $26.000 12/6/05 635,250 1,011,600
- ------------------------------------------------------------------------------------
J.P.
Carolan 7,500(1)/0 5.3/0 $26.000 12/6/05 317,625 505,800
- ------------------------------------------------------------------------------------
R.J.
Lanzi 7,500(1)/0 5.3/0 $26.000 12/6/05 317,625 505,800
- ------------------------------------------------------------------------------------
E.F.
Whitely 7,500(1)/0 5.3/0 $26.000 12/6/05 317,625 505,800
- ------------------------------------------------------------------------------------
A.J.
Gnann 6,000(1)/0 4.2/0 $26.000 12/6/05 254,100 404,640
</TABLE>
(*) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises and Common Stock holdings are
dependent on the future performance of the Common Stock and overall stock
market conditions.
(1) Exercisable 25% 12/7/96; 50% 12/7/97; 75% 12/7/98; 100% 12/7/99
The following table shows stock option exercises by the named officers
during 1995, including the aggregate value of gains on the date of exercise.
In addition, this table includes the number of shares covered by both
exercisable and nonexercisable stock options as of December 31, 1995. Also
reported are the values for "in-the-money" options which represent the
positive spread between the exercise price of any such existing stock options
and the year-end price of Common Stock.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of Value of
Securities Under- Unexercised
lying Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End(#) FY-End($)
Shares Acquired Exercisable/ Exercisable/
Name on Exercise(#) Value Realized($) Unexercisable Unexercisable
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
L.R.
Jaskol 60,000 1,649,679 245,974/52,026 4,694,537/548,921
- ---------------------------------------------------------------------------------
J.P.
Carolan 58,882 1,570,682 91,764/39,550 1,619,278/422,051
- ---------------------------------------------------------------------------------
R.J.
Lanzi 25,307 434,250 5,612/34,774 50,981/387,461
- ---------------------------------------------------------------------------------
E.F.
Whitely 60,168 1,650,359 79,458/37,342 1,292,133/421,499
- ---------------------------------------------------------------------------------
A.J.
Gnann 21,600 479,011 24,092/24,908 313,793/274,723
</TABLE>
17
<PAGE>
INDIVIDUAL PERFORMANCE AWARD PLAN
Lydall's Individual Performance Award Plan provides individual cash awards
for improvement in annual operating results. The performance award plan is
administered by the Stock Option and Compensation Committee of the Board of
Directors. Performance awards depend upon individual performance and
achievement of specified objectives. Individual awards, which may vary from 5
to 75 percent of base salary, are paid during the first quarter of the
following year. Amounts earned in 1995, whether paid to or deferred by the
persons included in the Summary Compensation Table, are included in the
amounts shown in such Table.
STOCK PURCHASE PLAN
The Lydall Employee Stock Purchase Plan (the "Stock Purchase Plan") gives
certain full-time, nonunion and union (if negotiated) Lydall employees the
opportunity to purchase Common Stock through regular payroll deductions.
Lydall contributes 33 1/3 percent of each employee's contribution up to $150 a
month. Purchases are made on the open market by a brokerage firm.
401(K) PLAN
Lydall's 401(k) Plan is available to certain full-time, nonunion employees
with at least three months of service and certain union employees as
negotiated. In accordance with Section 401(k) of the Internal Revenue Code,
the 401(k) Plan provides participants with the option to reduce their gross
income for federal income tax purposes to the extent of their pretax
contributions. Generally, participants may contribute up to 10 percent of
their total compensation on a pretax basis (subject to limitations imposed by
the Internal Revenue Code). Lydall matches the nonunion employees' pretax
contributions up to 4 percent of each employee's annual compensation. The
first 2 percent is matched dollar for dollar, and the next 2 percent is
matched by 50 cents for every dollar. Lydall's matching contribution is
immediately fully vested. The union facilities have not negotiated a matching
contribution on their 401(k) plan.
OTHER EMPLOYEE BENEFIT PLANS REMUNERATION
Lydall provides group life insurance of two to five times salary, and
Accidental Death & Dismemberment Insurance for all eligible salaried
employees. With respect to all executive officers named in the Summary
Compensation Table and certain other officers of the Company, such life
insurance coverage, consists of an individual Universal Life Policy which is
owned by the covered individual. With respect to Mr. Jaskol, the only senior
officer eligible for insurance coverage of five times his salary, a portion of
this coverage is in the form of an individual whole life policy owned by him.
Lydall provides under a group plan long term disability coverage of 60
percent of base salary to all eligible salaried employees. The Company
provides all executive officers named in the Summary Compensation Table and
certain other officers of the Company with long term disability coverage equal
to their base salary.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Company has a supplemental retirement plan intended to provide
retirement benefits, supplementing those provided under other Company-related
retirement plans to certain officers and key employees. All of the officers
named in the compensation table are participants. Upon retirement and for a
period of up to fifteen years, a participant is entitled to receive a monthly
retirement benefit. That benefit is equal to the lesser of (i) 60 percent of
the participant's final average pay less the participant's benefits
(attributable to Company contributions) under all of the Company's qualified
plans or (ii) an amount equal to the sum each year of the excess benefits for
such participant under each plan attributable to the participant's
compensation in excess of the limitation imposed by the Internal Revenue Code.
18
<PAGE>
The participant is deemed vested in the supplemental benefits when they have
attained age 55 and the sum of their age and service equal or exceed 70. Mr.
Jaskol and Mr. Lanzi are the only participants named in the compensation table
who are fully vested. Messrs. Jaskol, Carolan, and Gnann are expected to
receive annual benefits upon retirement at normal retirement age in the amount
of $168,678 $68,068, and $27,827 respectively.
TRANSACTIONS WITH MANAGEMENT
The Company currently has outstanding two loans to Leonard R. Jaskol, both
of which were made to facilitate his acquisition of a greater equity stake in
the Company. Mr. Jaskol is Chairman of the Board, President and Chief
Executive Officer of the Company. The first such loan is scheduled to mature
on January 1, 1998, or whenever Mr. Jaskol terminates his employment,
whichever is sooner. The loan is an unsecured term loan that is currently
bearing interest at the rate of 8.75 percent. During 1995, the highest unpaid
principal balance of this loan was $24,340, which also was the unpaid
principal balance as of March 18, 1996. The other loan is for $150,000,
bearing interest at 8.75 percent per annum on the unpaid balance of the note
and maturing on January 1, 1998. The note is secured by 27,414 shares of
Lydall Common Stock owned by Mr. Jaskol. During the period from January 1,
1995 through December 31, 1995, the highest unpaid principal balance of this
loan was $150,000, which also was the unpaid principal balance as of March 18,
1996. The Company grosses up Mr. Jaskol's salary to reimburse him for the
amount of the interest due and payable under the loans, as well as the
additional taxes incurred by Mr. Jaskol as a result of the interest
reimbursement.
During 1995, the Company forgave an outstanding loan to Division President
James P. Carolan. The loan was made to advance him the equity in his home in
France, when he was required to relocate to the United States by the Company,
to be used in purchasing a replacement home in the United States. The loan was
for $33,719 and was non-interest bearing.
The Company has entered into employment agreements with (i) Mr. Jaskol; (ii)
each of the Division Presidents of the Company, including those named in the
Summary Compensation Table; (iii) Vice President Corporate Development Alan J.
Gnann; (iv) Vice President Finance and Treasurer John E. Hanley; (v) Vice
President Investor Relations Carole F. Butenas; (vi) General Counsel and
Secretary Mary Adamowicz and (vii) Manager of Human Resources and Employee
Benefits Mona G. Estey. The agreements are intended to provide for continuity
of management in the event of a change in control of the Company. The
agreements generally provide for the continued employment of each such
executive officer in the event that he or she is forced to resign or is
otherwise replaced (unless he or she resigns or is replaced for "cause," as
defined in the agreements) after a change in control of the Company. Certain
of the agreements also provide for the continued employment of certain
executive officers in the event of termination before a change in control. The
agreements define a change in control of the Company to mean (a) an
acquisition of the Company by means of a merger or consolidation or purchase
of substantially all of its assets if incident thereto the composition of the
Company's Board of Directors changes with the result that a majority of the
Board consists of new members or the Company's stockholders receive cash or
other consideration in exchange for their Lydall stockholdings, (b) the
acquisition of 25 percent or more of the outstanding shares of Common Stock by
an entity or a person who was not an officer or a Director of the Company on
the dates of the respective agreements or (c) the election or appointment to
the Board of any director(s), where that appointment or election was not
approved by a vote of at least a majority of the Directors then in office. Mr.
Jaskol's current agreement is dated March 1, 1995, and each of the remaining
current agreements are dated March 10, 1995.
The period during which the Company would be obligated to continue to employ
the covered executives is defined in the agreements as the "Employment
Period." During the Employment Period, each covered executive would be
entitled to receive an annual salary equal to one-third of the
19
<PAGE>
aggregate of the base salary and bonuses he or she received during the three
years prior to the Employment Period. With respect to Mr. Jaskol, the Company
would be obligated to pay such amount to him for a period of two years if he
is forced to resign or is otherwise replaced prior to a change in control of
the Company or three years if he resigns (including a voluntary resignation)
or is otherwise replaced following a change in control of the Company. With
respect to each of the Division Presidents, the Vice President-Corporate
Development and the Vice President-Finance and Treasurer, the period during
which the Company would be obligated to pay such amount would be one year if
forced resignation or replacement occurs prior to a change in control and two
years if forced resignation or other replacement occurs following a change in
control. With respect to Ms. Butenas, Ms. Adamowicz and Ms. Estey the period
during which the Company would be obligated to pay such amount would be one
year if termination occurs within one year following a change of control. Each
of the agreements provides that the covered executive officers will not be
entitled to any benefits after their normal retirement date.
APPOINTMENT OF AUDITORS
The Board of Directors approved, upon recommendation of the Audit Committee,
Coopers & Lybrand, LLP as independent accountants to the Company for the year
ended December 31, 1995. It is expected that the Board of Directors will
appoint Coopers & Lybrand, LLP as the Company's independent accountants for
the current year. Representatives of Coopers & Lybrand, LLP will be present at
the Annual Meeting and will be available to respond to questions.
OTHER MATTERS
The Board of Directors does not know of other matters which may come before
the meeting. However, if other matters are properly presented at the meeting,
it is the intention of the proxy committee to vote or otherwise to act in
accordance with their judgment on such matters.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Any proposals or recommendations for Directors by stockholders which are to
be presented at the Annual Meeting to be held in May, 1997 must be received by
the Company by December 7, 1996 in order to be included in the Proxy Statement
and on the proxy card relating to the 1997 Annual Meeting.
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR 1995 WILL BE PROVIDED
WITHOUT CHARGE, UPON REQUEST. REQUESTS MAY BE DIRECTED TO: CAROLE F. BUTENAS,
VICE PRESIDENT-INVESTOR RELATIONS, LYDALL, INC., P.O. BOX 151, MANCHESTER,
CONNECTICUT 06045-0151.
20
<PAGE>
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PROXY
LYDALL, INC.
The undersigned hereby appoints Samuel P. Cooley, Leonard R. Jaskol and
Roger M. Widmann, or any one of them, with full power of substitution, as
attorneys and proxies, to vote all shares of stock of Lydall, Inc. which the
undersigned may be entitled to vote at the Annual Meeting of Stockholders of
the Company to be held at The Hartford Club, 46 Prospect Street, Hartford,
Connecticut on May 15, 1996 at 11:00 a.m. E.D.T. and at any adjournments
thereof. The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting and the Proxy Statement dated April 4, 1996 and instructs its attorneys
and proxies to vote as set forth on this Proxy.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
(To be Signed on Reverse Side)
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<PAGE>
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[X] Please mark your votes as in this example. ++++ +
+ +
+ +
+++++
1. ELECTION FOR WITHHELD
OF [_] [_]
DIRECTORS
FOR, EXCEPT vote withheld from the following nominee(s)
- ----------------------------------
NOMINEES: Lee A. Asseo
Paul S. Buddenhagen
James P. Carolan
Samuel P. Cooley
W. Leslie Duffy
Leonard R. Jaskol
William P. Lyons
Joel Schiavone
Elliott F. Whitely
Roger M. Widmann
Albert E. Wolf
2. In their discretion, such other business as may properly come before the
meeting
The shares represented by this Proxy will be voted as specified. IF NO CHOICE IS
SPECIFIED, THE PROXY WILL BE VOTED IN FAVOR OF THE SPECIFIED NOMINEES. THIS
PROXY CARD MUST BE PROPERLY COMPLETED, SIGNED, DATED AND RETURNED IN ORDER TO
HAVE YOUR SHARES VOTED.
PLEASE NOTE ANY CHANGE OF ADDRESS.
SIGNATURE
-----------------------------------
DATE
---------------------------
SIGNATURE
-----------------------------------
DATE
---------------------------
NOTE: Please sign exactly as name appears above. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee, etc., indicate
title. If the signer is a corporation, sign in the corporate name by a duly
authorized officer.
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