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SCHEDULE 14A
(RULE 14A)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant. / /
Check the appropriate box:
/X/ Preliminary Proxy Statement / / CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED
/ / Definitive Proxy Statement BY RULE 14A-6(E)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
MEDUSA CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MEDUSA CORPORATION
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $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>
PRELIMINARY DRAFT OF 3/4/96
(MEDUSA LOGO)
LEE AND MONTICELLO * CLEVELAND HEIGHTS, OHIO * 216/371-4000
MAIL ADDRESS
P.O. BOX 5668
CLEVELAND, OHIO 44101
March 29, 1996
DEAR MEDUSA CORPORATION SHAREHOLDER:
You are cordially invited to attend the Annual Meeting of the Shareholders
of Medusa Corporation, to be held at 2:00 P.M. Eastern Daylight Time on
Monday, May 6, 1996, at the Sheraton Stamford Hotel, One First Stamford Place,
Stamford, Connecticut. We hope that many of our shareholders will be able to
attend.
At the meeting, management will report on current operations and there will
be an opportunity for a discussion of the Company and its activities. The
formal Notice of Meeting and Proxy Statement are attached. Our Annual Report
for fiscal 1995, which accompanies this Proxy Statement, gives additional
background material for the meeting.
If you are unable to attend in person, we urge you to participate by voting
your shares by proxy. You may do so by filling out and returning the enclosed
Proxy Card.
Sincerely,
R. S. Evans
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
<PAGE>
MEDUSA CORPORATION
P.O. BOX 5668, CLEVELAND, OHIO 44101
____________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 6, 1996
DATED: MARCH 29, 1996
____________________
The 1996 Annual Meeting of Shareholders of Medusa Corporation will be held at
the Sheraton Stamford Hotel, One First Stamford Place, Stamford, Connecticut,
on Monday, May 6, 1996, at 2:00 P.M. Eastern Daylight Time, for the following
purposes:
1. To elect three Directors to serve three-year terms;
2. To consider and act upon a proposal to approve an amendment to the
Company's 1991 Long-Term Incentive Plan to increase the number of Common
Shares available for grant by 800,000;
3. To consider and act upon a proposal to approve the material terms of
performance goals for Performance Restricted Shares awarded under the
Company's 1991 Long-Term Incentive Plan; and
4. To transact such other business as may properly come before the meeting.
Shareholders of record at the close of business on March 18, 1996 are
entitled to notice of and to vote at the meeting. Please sign, date and return
the enclosed Proxy Card promptly.
By Order of the Board of Directors
John P. Siegfried
SECRETARY
WE HOPE YOU WILL RETURN THE ENCLOSED PROXY IN THE ADDRESSED ENVELOPE WHICH
REQUIRES NO POSTAGE. IF YOU DESIRE FOR ANY REASON TO WITHDRAW YOUR PROXY, YOU
MAY DO SO PRIOR TO THE VOTE BY GIVING NOTICE TO MEDUSA IN WRITING OR AT THE
ANNUAL MEETING. IF YOU EXPECT TO ATTEND THE MEETING IN PERSON, WE REQUEST THAT
YOU WRITE FOR YOUR CARD OF ADMISSION TO THE SECRETARY, MEDUSA CORPORATION, P.O.
BOX 5668, CLEVELAND, OHIO 44101. YOU MAY USE THE ENCLOSED ENVELOPE.
<PAGE>
MEDUSA CORPORATION
P.O. BOX 5668, CLEVELAND, OHIO 44101
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 6, 1996
DATED: MARCH 29, 1996
PROXY STATEMENT
This Proxy Statement and the accompanying proxy are furnished in connection
with the solicitation by the Board of Directors of Medusa Corporation ("Medusa"
or the "Company") of proxies to be voted at the Annual Meeting of Shareholders
to be held at the Sheraton Stamford Hotel, One First Stamford Place, Stamford,
Connecticut, on Monday, May 6, 1996, at 2:00 P.M., Eastern Daylight Time. The
Board of Directors has fixed the close of business on March 18, 1996, as the
record date for the determination of shareholders entitled to notice of and to
vote at the annual meeting.
OUTSTANDING SHARES AND REQUIRED VOTES
On March 18, 1996, Medusa had outstanding and entitled to vote at the Annual
Meeting [ ] Common Shares without par value ("Common Shares"). All
Common Shares are to be voted as shares of a single class. Each Common Share
is entitled to one vote. In accordance with the General Corporation Law of
Ohio and the Company's Code of Regulations, the holders of shares entitling
them to exercise a majority of the voting power of the Company, present by
person or by proxy, will constitute a quorum for the meeting. Proxies returned
by shareholders will be voted in accordance with the instructions indicated
thereon. Those Nominees for Director receiving the highest number of votes
will be elected Directors. The two management proposals require the
affirmative vote of a majority of the Common Shares represented and entitled to
vote at the meeting. An abstention will have the effect of a vote against each
such proposal. A broker non-vote will not be counted for the purpose of
determining the number of shares represented and entitled to vote at the
meeting, and will not represent a vote either for or against each such
proposal. Therefore, a broker non-vote will not have any effect on the passage
or failure to pass of each such proposal.
The proxy may be revoked at any time before it is voted by giving notice to
Medusa in writing, and shareholders who execute proxies may, nevertheless,
attend the meeting and vote their shares in person.
ELECTION OF DIRECTORS
The Board of Directors of Medusa consists of ten members divided into three
classes. Three Directors have been nominated to hold office for three-year
terms until the 1999 Annual Meeting and until their successors are elected and
qualified. Unless instructed otherwise, the proxy will be voted for election
of the three Nominees for Director named in the following table, whose
election has been proposed and recommended by the Board of Directors. In the
event of the unavailability of any nominee, management will either vote all
shares represented by management proxies in favor of a resolution reducing the
size of the Board of Directors in order to eliminate the position for which
that person was nominated, or without further notice to the shareholders,
nominate a new candidate for election to the Board of Directors in place of
the person who is unavailable.
The respective ages, positions with Medusa, periods of service as Directors
of Medusa, business experience during the past five years and directorships in
other companies of both the Nominees for Director and those Directors whose
terms will continue, are set forth below:
<PAGE> 1
NOMINEES FOR DIRECTOR TO BE ELECTED FOR TERMS TO EXPIRE IN 1999
E. THAYER BIGELOW, JR.
Age 54; Director since 1988; President and Chief Executive Officer, Time
Warner Cable Programming, Inc., Stamford, CT, a subsidiary of Time Warner
Inc. (Basic Cable Television Program Services), 1991 to present;
President, Home Box Office, Inc., a subsidiary of Time Warner Inc., 1988
to 1991. Other Directorships: Crane Co., Lord Abbett Mutual Funds.
CHARLES J. QUEENAN, JR.
Age 65; Director since 1988; Senior Counsel, Kirkpatrick & Lockhart LLP,
Pittsburgh, PA. (Attorneys-at-Law). Other Directorships: Crane Co.,
Allegheny Ludlum Corporation, Fansteel, Inc.
BORIS YAVITZ
Age 72; Director since 1988; Paul Garrett Professor of Public Policy and
Business Responsibility, 1982 to present; Dean Emeritus, Columbia
University, Graduate School of Business, New York, NY. Other
Directorships: Crane Co., Israel Discount Bank of New York.
DIRECTORS WHOSE TERMS WILL EXPIRE IN 1997
R. S. EVANS
Age 52; Director since 1979; Chairman and Chief Executive Officer of
Medusa, 1987 to present; Chairman and Chief Executive Officer of Crane
Co., Stamford, CT (Diversified Manufacturer of Engineered Products), 1984
to present; President of Crane Co., 1987 to 1991 and 1992 to 1995. Other
Directorships: Crane Co., Fansteel Inc., HBD Industries, Inc.
DWIGHT C. MINTON
Age 61; Director since 1988; Chairman of the Board, Church & Dwight Co.,
Inc., Princeton, NJ (Manufacturers of Consumer and Specialty Products).
Other Directorships: Church & Dwight Co., Inc., Crane Co., First Brands
Corporation.
GEORGE E. UDING, JR.
Age 64; Director since 1993; President and Chief Operating Officer of
Medusa since 1994; Consultant, 1992 to 1993; Senior Vice President,
ESSROC Corporation through 1992.
DIRECTORS WHOSE TERMS EXPIRE IN 1998
MONE ANATHAN, III
Age 57; Director since 1992; President of Filene's Basement Corp.,
Wellesley, MA (Retailer), 1984 to present. Other Directorships: Filene's
Basement Corp., Crane Co., Brookstone, Inc..
RICHARD S. FORTE
Age 51; Director since 1988; President, Forte Cashmere Company, Inc.,
Woonsocket, RI (Processor and Dealer of Luxury Natural Fibers), 1987 to
present. Other Directorships: Crane Co.
DORSEY R. GARDNER
Age 53; Director since 1989; President, Kelso Management Company, Inc.,
Boston, MA. (Investment Management). Other Directorships: Crane Co.
<PAGE> 2
JEAN GAULIN
Age 53; Director since 1995; Chairman and Chief Executive Officer of
Ultramar Corporation, Greenwich, CT (Petroleum Refining and Marketing),
1992 to present; Chief Executive Officer of Ultramar PLC and President,
Chief Executive Officer and Chairman of American Ultramar Limited
(Refining and Marketing of Gas and Petroleum Products, Oil and Gas
Exploration), 1989 to 1992. Other Directorships: Ultramar Corporation,
Crane Co., Consolidated Hydro, Inc., Quebec Telephone.
MEETINGS AND BOARD COMMITTEES
The Board of Directors met ten times during 1995. The average attendance
of Directors at those meetings was approximately 90%. Each Director attended
75% or more of the Board and Committee meetings which he was scheduled to
attend.
Medusa's Board of Directors has standing Audit and Organization and
Compensation Committees. Medusa's Board of Directors does not have a standing
nominating committee. The Audit Committee, the members of which are Messrs.
Anathan, Bigelow, Forte, Gardner and Queenan (Chairman), met four times in 1995
with management and with Medusa's independent auditors to review matters
relating to the quality of financial reporting and internal accounting controls
and the nature, extent and results of their audits. The Organization and
Compensation Committee, the members of which are Messrs. Gardner, Gaulin,
Minton and Yavitz (Chairman), met three times in 1995. (See the Organization
and Compensation Committee Report beginning on page 12.)
COMPENSATION OF DIRECTORS
STANDARD ARRANGEMENTS
Medusa's standard retainer payable to each non-employee Director is $15,000
per annum. Pursuant to the Medusa Corporation 1988 Non-Employee Director
Restricted Stock Plan, non-employee Directors are awarded Common Shares with a
fair market value equal to the annual retainer. All Directors who are not
full-time employees of Medusa, of which there are currently eight, are
eligible to participate in the 1988 Non-Employee Director Restricted Stock
Plan. Once awarded, the Common Shares are subject to forfeiture if the
Director ceases to remain a Director until Medusa's next annual meeting, except
in the case of death, permanent disability or change in control, and may not be
sold for a period of five years thereafter. In May of 1995, each non-employee
Director received 640 restricted Common Shares pursuant to the 1988 Non-
Employee Director Restricted Stock Plan. Non-employee Directors also receive
$250 for each Board meeting attended. Further, non-employee Directors who are
members of Committees of the Board receive $250 for each Committee meeting
attended.
OTHER ARRANGEMENTS
In fiscal 1995, there were no other arrangements pursuant to which any
Director of Medusa was compensated for any service provided as a Director.
<PAGE> 3
OWNERSHIP BY MANAGEMENT OF EQUITY SECURITIES
The following table shows beneficial ownership, reported to Medusa as of
December 31, 1995, of Common Shares, including Common Shares as to which a
right to acquire ownership exists (including, without limitation, through the
exercise of stock options) within the meaning of Rule 13d-3(d)(1) under the
Securities Exchange Act of 1934, of each Director, Nominee for Director, the
Chief Executive Officer and the four other most highly compensated executive
officers (which five persons constitute the "Named Executive Officers") and, as
a group, of such persons and other executive officers:
<TABLE>
BENEFICIAL OWNERSHIP AT DECEMBER 31, 1995
<CAPTION>
COMMON PERCENT
NAME SHARES OF CLASS
----------------------------------------------- -------- --------
<S> <C> <C>
Mone Anathan, III ............................. 2,590 ---
E. Thayer Bigelow, Jr. ........................ 6,959 ---
R. S. Evans ................................... 659,301 [ ]
Richard S. Forte .............................. 7,524 ---
Dorsey R. Gardner ............................. 4,442 ---
Jean Gaulin ................................... 2,140 ---
Dwight C. Minton .............................. 20,147 [ ]
Charles J. Queenan, Jr. ....................... 15,975 [ ]
George E. Uding, Jr. .......................... 81,953 [ ]
Boris Yavitz .................................. 11,007 ---
Robert J. Kane ................................ 97,873 [ ]
R. Breck Denny ................................ 17,635 [ ]
John P. Siegfried ............................. 86,435 [ ]
All of the above and other executive officers
as a group (16 persons) .................... 1,054,601 [ ]
</TABLE>
Notes:
- --------
-- Each person has sole voting and investment power with respect to the
Common Shares listed, unless otherwise indicated.
-- The number of Common Shares owned by each person, or by the group, has
been adjusted and the percentage owned (where such percentage exceeds
0.1%) has been computed, in accordance with Rule 13d-3(d)(1) of the
Securities Exchange Act.
-- Includes Common Shares held jointly, or in other capacities, as to which,
in some cases, beneficial ownership is disclaimed.
-- The shareholdings shown in the above table do not include Common Share
equivalents held under the Medusa Corporation Savings and Investment Plan
(the "401(k) Plan") for Messrs. Uding, Kane, Denny, Siegfried and all
executive officers as a group, which are 488, 1,044, 101, 3,112 and 6,167
Common Shares, respectively.
-- The shareholdings shown in the above table do not include Common Shares
subject to non-qualified stock options ("Stock Options") exercisable
within 60 days of March 18, 1996 by Messrs. Evans, Uding, Kane, Denny,
Siegfried and all executive officers as a group, which are 37,500,
37,500, 16,500, 10,500, 13,875 and 167,125 Common Shares, respectively.
<PAGE> 4
-- The shareholdings shown in the above table do not include 1,560,370
Common Shares owned by The Crane Fund, a charitable trust, which are
voted by the trustees thereof, all of whom are officers of Crane Co. (see
Principal Shareholders); nor the Common Shares held by trusts for the
pension plans of Medusa and certain of its subsidiaries which may be
voted or disposed of at the discretion of the trustees unless the sponsor
of the particular plan directs otherwise. None of the Directors,
Nominees for Director, executive officers or trustees have direct
beneficial interest in, and all disclaim beneficial ownership of the
Common Shares held by the trusts.
PRINCIPAL SHAREHOLDERS
The following table shows information with respect to the only persons known
to Medusa to be beneficial owners who have the sole voting and investment power
of more than five percent of the Common Shares outstanding at March 18, 1996:
<TABLE>
<CAPTION>
NUMBER OF PERCENT
NAME AND ADDRESS COMMON SHARES OF CLASS
------------------------------- ------------- --------
<S> <C> <C>
FMR Corporation
82 Devonshire St.
Boston, MA 02109 .......... 2,424,154(1) [ ]
The Crane Fund
100 First Stamford Place
Stamford, CT 06902 ........ 1,560,370(2) [ ]
- ---------------
<FN>
(1) As reported in a Schedule 13G received by Medusa on February 26, 1996 from
FMR Corporation ("FMR"). FMR filed the Schedule 13G for certain affiliates,
Fidelity Management & Research Company, Fidelity Management Trust Company,
Fidelity Magellan Fund and Fidelity International Limited, which entities
are the beneficial owners of the Common Shares. In the Schedule 13G, FMR
and its principals indicated that they had filed on a voluntary basis and
disclaimed that they were a "group" and thus, that their shares did not
need to be aggregated for purposes of Section 13(d) of the Securities
Exchange Act.
(2) As reported in a Schedule 13D received by Medusa on October 31, 1988.
The Crane Fund is a charitable trust managed by trustees appointed by the
Board of Directors of Crane Co. On March 29, 1996, the trustees of The
Crane Fund were G. A. Dickoff, A. I. du Pont, R. B. Phillips, M. L.
Raithel and D. S. Smith, all of whom are officers of Crane Co. Pursuant
to the trust instrument, Common Shares held by such trust shall be voted
by the trustees as directed by the Board of Directors of Crane Co., the
distribution of the income of the trust for its charitable purposes is
subject to the control of the Crane Co. Board of Directors, and Common
Shares may be sold by the trustees only upon the direction of the Crane
Co. Board of Directors acting by a two-thirds vote. None of the trustees
of The Crane Fund, Directors of Crane Co. or Directors or Nominees for
Director of Medusa have any direct beneficial interest in, and all
disclaim beneficial ownership of Common Shares held by The Crane Fund.
</FN>
</TABLE>
<PAGE> 5
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The table below shows information concerning annual and long-term
compensation for the fiscal years ended December 31, 1995, 1994 and 1993 for
the Chief Executive Officer and the four other Named Executive Officers:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------- -----------------------
AWARDS PAYOUTS
----------------------- -------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
OTHER ANNUAL ALL OTHER
COMPENSATION RESTRICTED STOCK OPTIONS/ LTIP COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) AWARDS($)(2) SAR'S(#) PAYOUTS($) ($)(3)
- --------------------------- ---- --------- --------- ------------ ---------------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R. S. Evans 1995 $250,000 $139,466 $397,117 $-0- 30,000 $275,625 $8,047
Chairman of the Board & 1994 250,000 175,000 209,725 -0- 30,000 225,000 -0-
Chief Executive Officer 1993 186,300 185,000 245,003 -0- -0- 296,719 -0-
George E. Uding, Jr.(4) 1995 300,000 167,360 169,764 99,181(5) 30,000 -0- 7,536
President & 1994 220,000 154,000 22,500 -0- 30,000 -0- 4,686
Chief Operating Officer 1993
Robert J. Kane 1995 162,000 86,469 157,339 -0- 15,000 91,875 5,395
Senior Vice President 1994 118,333 82,833 99,356 -0- 12,000 75,000 4,008
1993 106,600 32,000 87,685 -0- -0- 98,906 3,780
R. Breck Denny(6) 1995 150,000 83,680 37,626 -0- 12,000 -0- -0-
Vice President-Finance 1994 78,598 29,167 -0- -0- 9,000 -0- 102,609
and Treasurer 1993
John P. Siegfried 1995 130,000 72,522 173,326 -0- 12,000 91,875 5,527
Vice President, Secretary 1994 115,000 80,500 112,224 -0- 10,500 75,000 5,237
and General Counsel 1993 97,400 39,001 87,685 -0- -0- 98,906 3 651
- ---------------
<FN>
(1) Other Annual Compensation reported in Column (e) includes non-preferential
dividends paid on restricted shares, for which the restrictions have not
lapsed ("Restricted Shares"). As noted below, where the performance
restricted shares ("Performance Restricted Shares") achieve an established
target on an established test date and the restrictions lapse, the
participant qualifies for a cash award equal to the taxes payable with
respect to income on the award, as well as a gross-up of income to cover
such taxes ("Tax Gross-up"). On November 10, 1995, the 2 1/2-year test
date for the May 10, 1993 award, Messrs. Evans, Kane and Siegfried received
Tax Gross-ups of $215,000, $81,155 and $81,155, respectively. On January
23, 1995, the Committee (as defined below) authorized officers to elect to
take their 1994 bonuses in Common Shares, instead of cash, accepting a two-
year Common Share restriction period, making an election under Section
83(b) of the Internal Revenue Code (the "Code") and receiving a Tax Gross-
up. Messrs. Evans, Uding, Kane, Denny and Siegfried elected to take Common
Shares and received Tax Gross-ups of $139,819, $138,790, $59,716, $31,008
and $76,332, respectively. No other perquisites or other personal
benefits, securities or property have been reported, unless the aggregate
amount of such compensation is the lesser of either $50,000 or 10% of the
total of annual salary and bonuses reported to the Named Executive Officers,
or unless a particular perquisite or personal benefit exceeds 25% of the
value of the perquisites reported in the table for a Named Executive
Officer.
(2) The number of Restricted Shares for which the restrictions have not lapsed,
held by each of the Named Executive Officers and the aggregate value
thereof, as of December 31, 1995 were as follows:
<PAGE> 6
# OF
RESTRICTED AGGREGATE
SHARES HELD VALUE
----------- ----------
R. S. Evans ................ 81,158 $2,176,049
George E. Uding, Jr. ....... 72,450 1,942,566
Robert J. Kane ............. 32,623 874,704
R. Breck Denny ............. 15,235 408,488
John P. Siegfried .......... 30,865 827,568
Non-preferential dividends are paid on Restricted Shares for which the
restrictions have not lapsed. The "Aggregate Value" in the above chart
has been calculated based upon the fair market value of one Medusa
Corporation Common Share, which, on December 29, 1995, was $26.8125 (the
"Fair Market Value"). Included in the above are Performance Restricted
Shares granted to the Named Executive Officers since fiscal 1991, which
are reported either in the above table or in the Summary Compensation
Table as "LTIP Payouts." (See also pages 9, 13, 14 and 17 of the Proxy
Statement for additional information on LTIP awards made in fiscal 1995.)
(3) All Other Compensation reported in column (i) includes; a) amounts
contributed for fiscal 1995 for the Named Executive Officers, except for
Mr. Evans, under the 401(k) Plan (50% of the voluntary plan savings of the
Named Executive Officers, on up to $9,240, which was the maximum amount of
compensation which could have been deferred in a 401(k) Plan in fiscal
1995, the 401(k) Plan ("Company Match")), and b) imputed cost of group term
life insurance in fiscal 1995 for Messrs. Evans, Uding, and Siegfried of
$552, $3,036, and $1,175, respectively. On March 1, 1995, the Company
implemented a Supplemental Executive Savings Plan to the 401(k) Plan (the
"Top Hat Plan") which includes as participants the Named Executive
Officers. Other than the Top Hat Plan Company Match received by Messrs.
Evans and Kane of $7,495 and $775, respectively, the only benefit which
participants receive from the Company is interest at the 10-year Treasury
rate on compensation which the participants elect to defer under the Top
Hat Plan. In fiscal 1994, Mr. Denny received a reimbursement from Medusa
of moving expenses of $98,234.
(4) Mr. Uding was elected President of Medusa as of January 1, 1994.
(5) In May of 1995, Mr. Uding received 4,069 SERP-Equivalent (as defined below)
shares, the restrictions upon which shares immediately lapsed under the
terms of the plan, because he had attained age 62.
(6) Mr. Denny was elected Vice President-Finance and Treasurer of Medusa as
of September 1, 1994.
</FN>
</TABLE>
STOCK OPTION GRANTS IN LAST FISCAL YEAR:
The table below shows all individual grants of Stock Options to the Named
Executive Officers of the Company during the fiscal year ended December 31,
1995:
<PAGE> 7
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E) (F)
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SAR'S
OPTIONS/ (1) GRANTED TO EXERCISE OR GRANT DATE
SAR'S(1) EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME (#)GRANTED FISCAL YEAR ($/SH)(2) DATE VALUE($)(3)
- ---------------------- ---------- -------------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
R. S. Evans .......... 30,000 12.15% $24.375 05/08/05 $326,400
George E. Uding, Jr. . 30,000 12.15% 24.375 05/08/05 326,400
Robert J. Kane ....... 15,000 6.07% 24.375 05/08/05 163,200
R. Breck Denny ....... 12,000 4.86% 24.375 05/08/05 130,560
John P. Siegfried .... 12,000 4.86% 24.375 05/08/05 130,560
- ---------------
<FN>
(1) Since fiscal 1990, the Company has not granted any stock appreciation
rights ("SAR's").
(2) All Stock Options were granted at the fair market value of the Common
Shares on the date of grant. Options granted become exercisable 50% one
year, 75% two years and 100% three years after grant and unless exercised
(with respect to fiscal 1995 awards), expire ten years after grant. Except
with respect to Senior Executive Officers (the Chairman and the President),
if employment terminates, the participant may exercise his or her Stock
Options only to the extent such could have been exercised on the date the
participant's employment terminated and within three months thereof. In
the event a participant's employment terminates by reason of death,
retirement, permanent disability or change in control, Stock Options become
fully exercisable. The exercise price may be paid by delivery of Common
Shares owned by the participant for more than six months and the
participant's income tax obligations related to exercise may be satisfied
by surrender of Common Shares received upon exercise, subject to certain
conditions.
(3) The Stock Options were valued using the Black-Scholes Method which
indicated a value of $10.88 per option. The assumptions used were:
Volatility .3660, Risk-Free Interest Rate 6.28% based on the Bear, Stearns
& Co.'s Treasury Strip Rate Maturing May 2005; Dividend Yield 2.06% and a
ten-year time of exercise. Since the actual value, if any, which an
optionee may realize depends on the excess of the stock price over the
exercise price on the date the option is exercised, there is no assurance
that the value will be at or near the value estimated using the Black-
Scholes Method.
</FN>
</TABLE>
OPTION / SAR'S EXERCISES AND UNEXERCISED VALUES AT YEAR-END
The table below shows aggregated information with respect to the exercise(s)
of Stock Options and SAR's which were granted in fiscal 1990 and prior years
under the Medusa Corporation 1988 Stock Option Plan and the Medusa Corporation
1988 Stock Appreciation Rights Plan to the Named Executive Officers and the
value realized in fiscal 1995 as a result of such exercise(s). The table below
also shows information with respect to the Stock Options which were granted to
the Named Executive Officers in fiscal 1994 and fiscal 1995 under the Medusa
Corporation 1991 Long-Term Incentive Plan (the "1991 LTIP") and which remained
unexercised at December 31, 1995 and the value thereof:
<PAGE> 8
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
SHARES OPTIONS/SAR'S AT THE-MONEY OPTIONS/SAR'S
ACQUIRED ON VALUE DECEMBER 31, 1995(#) AT DECEMBER 31, 1995($)
EXERCISE REALIZED -------------------------- --------------------------
NAME (#)(1) ($)(2) EXERCISABLE UNEXERCISABLE EXERCISALBE UNEXERCISABLE
- --------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
R. S. Evans ......... 7,093 $190,175 15,000 45,000 $38,437 $111,562
George E. Uding, Jr.. -0- -0- 15,000 45,000 38,437 111,562
Robert J. Kane ...... -0- -0- 6,000 21,000 15,375 51,937
R. Breck Denny ...... -0- -0- 4,500 16,500 -0- 29,250
John P. Siegfried ... 563 15,104 5,250 17,250 13,453 42,703
- ---------------
<FN>
(1) As shown in column (b) of the above table, where appropriate, the "Shares
Acquired" from SAR's have been theoretically calculated by dividing fiscal
1995 proceeds by the Fair Market Value.
(2) The Medusa Corporation 1988 Stock Appreciation Rights Plan provides for
payment of one-third of the value realized at time of valuation (exercise)
and delayed payments of one-third of the value realized on each of the
first and second anniversaries of the date of valuation and only if the
participant is employed by Medusa on such anniversaries. Thus, in column
(c) of the above table, the Value Realized as a result of SAR valuations
might not correlate with the Value Realized as a result of Stock Option
exercises.
</FN>
</TABLE>
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
The table below shows information with respect to Performance Restricted
Shares awarded pursuant to the 1991 LTIP to the Named Executive Officers during
the fiscal year ended December 31, 1995:
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK PRICE
BASED PLANS
----------------------------------------------
(A) (B) (C) (D) (E) (F)
NUMBER OF PERFORMANCE OR
SHARE UNITS OTHER PERIOD UNTIL
OR OTHER MATURATION OR THRESHOLD TARGET MAXIMUM
NAME RIGHTS (#)(1) PAYOUT (2) ($ OR #) ($ OR #) ($ OR #)
- ----------------------- ------------- --------------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
R. S. Evans ........... 17,546 20% per year; 3,510 shares 3,509 shares; 17,546 shares
from 5/9/96 to 5/8/00 on 5/9/96 next 3 years on 5/8/00
George E. Uding, Jr. .. 15,931 20% per year; 3,187 shares 3,186 shares; 15,931 shares
from 5/9/96 to 5/8/00 on 5/9/96 next 3 years on 5/8/00
Robert J. Kane ........ 9,585 20% per year; 1,917 shares 1,917 shares; 9,585 shares
from 5/9/96 to 5/8/00 on 5/9/96 next 3 years on 5/8/00
R. Breck Denny ........ 7,187 20% per year; 1,439 shares 1,437 shares; 7,187 shares
from 5/9/96 to 5/8/00 on 5/9/96 next 3 years on 5/8/00
John P. Siegfried ..... 6,056 20% per year; 1,212 shares 1,211 shares; 6,056 shares
from 5/9/96 to 5/8/00 on 5/9/96 next 3 years on 5/8/00
- ---------------
<FN>
(1) The fair market value (the average of the high and low prices on the New
York Stock Exchange Composite Transactions Tape) of the Common Shares of
Medusa Corporation on the May 8, 1995 award date (the "Award Date") was
$24.375.
<PAGE> 9
(2) In respect to fiscal 1995 awards, the number of Restricted Shares was
divided into two portions, as follows: a) a Supplemental Executive
Retirement Plan ("SERP-Equivalent") portion, consisting of actuarially-
determined time-based Restricted Shares which for Messrs. Evans, Uding,
Kane, Denny and Siegfried were 2,454, 4,069, 415, 813 and 1,944,
respectively; and b) a Performance Restricted Share portion, the balance
of the award, which consisted of the performance-based shares listed on the
chart above. A 20% portion of the Performance Restricted Share award is
tested annually during the 5-year restriction period on each anniversary of
the Award Date (the "Test Date"). In order for the share restrictions to
fully lapse, two requirements must be met: (i) the value of one Common
Share (adjusted for stock distributions, but not reflecting dividends) may
not decline from the Award Date to a Test Date; and (ii) the Common Share
growth rate must meet or exceed 110% of the growth rate of the Cement
Industry Peer Group (see page 16 of the Proxy Statement), when measured
from the Award Date to a Test Date. There is also a provision for "Partial
Lapses" with respect to proportionate amounts of the shares in 10%
increments, if more than 101%, but less than 110% of the performance
objective is attained. (i.e., a 101% growth rate causes the restrictions to
lapse with respect to 10% of the shares, etc.). If the restrictions on all
or part of the 20% portion of the share award fail to lapse, then such
portion or portions are not forfeit until they are retested, as applicable,
during the 5-year restriction period. Upon the lapse of restrictions on
Performance Restricted Shares, the participant will receive a Tax Gross-up.
During the performance period, the Performance Restricted Shares may be
voted and pay non-preferential dividends to the participant.
</FN>
</TABLE>
RETIREMENT BENEFITS
The Medusa Corporation Pension Plan for Certain Covered Employees (the
"Pension Plan") is a defined benefit pension plan. The amount of contribution
with respect to a specified person is not, and cannot be, individually
calculated. Benefits under the Pension Plan are based on the participant's
base salary, which includes overtime, but excludes annual and long-term
incentive compensation and commissions and reflects credited years of service
up to a maximum of 35 years of service. The table below sets forth estimated
annual benefits under the Pension Plan which are payable to an employee upon
normal retirement in 1995 at age 65 with selected periods of service and
assumes payments are made on a straight life annuity basis:
<TABLE>
<CAPTION>
PENSION PLAN TABLE
ESTIMATED ANNUAL BENEFITS UPON RETIREMENT IN 1995
REMUNERATION WITH YEARS OF SERVICE INDICATED(1)
- ------------ --------------------------------------------------------------------------
5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$100,000 $ 6,786 $13,571 $20,357 $27,143 $ 33,929 $ 40,714 $ 47,500
125,000 8,482 16,964 25,446 33,929 42,411 50,893 59,375
150,000 10,179 20,357 30,536 40,714 50,893 61,071 71,250
175,000 11,875 23,750 35,625 47,500 59,375 71,250 83,125
200,000 13,571 27,143 40,714 54,286 67,857 81,429 95,000
225,000 15,268 30,536 45,804 61,071 76,339 91,607 106,875
250,000 16,964 33,929 50,893 67,857 84,821 101,786 118,750
275,000 18,661 37,321 55,982 74,643 93,304 111,964 130,625
300,000 19,728 39,455 59,183 78,911 98,638 118,366 138,094
325,000 21,021 42,043 63,064 84,086 105,107 126,129 147,150
350,000 22,618 45,237 67,855 90,474 113,092 135,711 158,329
375,000 24,280 48,560 72,840 97,120 121,401 145,681 169,961
400,000 25,890 51,780 77,671 103,561 129,451 155,341 181,232
- ---------------
<FN>
<PAGE> 10
(1) The amounts shown exclude any benefits under the Pension Plan provided
solely through optional employee contributions. In accordance with
amendments to the Code made by the Tax Reform Act of 1986 and the Omnibus
Budget Reconciliation Act of 1993 ("OBRA"), the maximum amount of
compensation which may be included in the determination of any
participant's benefit under the Pension Plan in 1996 is $150,000 and the
maximum annual benefit payable under the Pension Plan in 1996 is $120,000.
However, these limitations may not reduce a participant's accrued benefit
under the Pension Plan below such participant's accrued benefit under the
Pension Plan as of December 31, 1988.
</FN>
</TABLE>
The above table covers all of the Named Executive Officers, other executive
officers and other salaried employees on a non-contributory basis. The Pension
Plan also provides for the payment of benefits to an employee's surviving
spouse or other beneficiary and various other optional methods of payment. The
calculation of retirement benefits under the Pension Plan is based upon average
earnings for the highest five consecutive years in the ten years preceding
retirement. The benefits listed in the above table are not subject to any
deductions for Social Security or other offset amounts. As of March 29, 1996,
the years of credited service for Messrs. Evans, Uding, Kane, Denny and
Siegfried were: 8 years, 2 years, 16 years, 1 year and 16 years, respectively.
Effective as of January 1, 1995, the Board of Directors approved a
Supplemental Executive Retirement Equivalent Plan (the "SERP-Equivalent Plan")
for executive officers. The SERP-Equivalent Plan awards to the Named Executive
Officers in fiscal 1995 are described on page 10 of the Proxy Statement. In
fiscal 1995, the Board of Directors, with respect to Mr. Evans, and the
Committee (as defined below), with respect to the other Named Executive
Officers, awarded approximately the same 1991 LTIP awards as in fiscal 1994.
With respect to the executive officers, an actuarially-based number of shares
were "carved-out" from the total award and restricted for a period of five
years, or until the participant reaches age 62, whichever occurs sooner. The
SERP-Equivalent Plan awards are designed to supplement the Medusa qualified
pension plan by providing the maximum pension benefit at 15 rather than 35
years of service, and are based upon the Annual Incentive Plan (the "AIP")
compensation in addition to base salary. The balance of the 1991 LTIP award to
each of the Named Executive Officers was in Performance Restricted Shares (see
page 9 of the Proxy Statement) or stock options (see page 8 of the Proxy
Statement).
SEVERANCE AGREEMENTS
Medusa has special termination agreements with each of its executive officers
including the Named Executive Officers. Prior to a change of control of
Medusa, the beneficiaries are employees at will and as such may be discharged
without being entitled to contractual benefits (change of control includes
tender offers and certain other change of control transactions). The
agreements provide for a lump sum cash payment of three times the amount of the
employee's annual base salary and a pro-rata portion of any annual incentive
compensation from the previous year if: (a) within two years from the date of
a change of control such employee is terminated without cause by Medusa; (b)
within such two-year period such employee terminates his or her employment for
good reason; or (c) at the end of a one-year period from the date of a change
of control such employee terminates his or her employment within a 30-day
period for any reason. All of the agreements provide for reimbursement of the
employee on an after-tax basis in the event excise taxes are imposed on
employee benefits under Section 4999 of the Code, irrespective of whether such
benefits are paid by reason of the agreement or otherwise.
<PAGE> 11
ORGANIZATION AND COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
INTRODUCTION
The responsibilities of the Organization and Compensation Committee (the
"Committee") of the Board of Directors of the Company (the "Board") currently
include: the organization of the Company, the Company's compensation plans, and
the specific forms and levels of compensation granted to executive officers and
division presidents. The Board is responsible for the compensation of the
Chief Executive Officer. The Committee has been delegated authority by the
Board with respect to the compensation of the other Named Executive Officers.
The Committee, which is comprised of four members, each of whom is a non-
employee Director, makes this report to the shareholders of the Company, as
follows:
COMPENSATION PHILOSOPHY
The fundamental compensation philosophy of the Board (and the Committee)
is to provide compensation levels which are sufficient to attract and retain
highly qualified executive officers, and to motivate such executive officers to
provide superior products and services to the Company's customers, thereby
maximizing the financial returns to the Company's shareholders. To the
greatest extent possible, the Company bases compensation upon objective Company
and individual performance criteria.
The executive officers of the Company currently receive compensation from
four "quadrants," as follows: a) base salary; b) awards under the AIP; c)
awards under the 1991 LTIP; and d) a "security package" which includes
miscellaneous other executive compensation benefits. The Committee's executive
compensation policies provide for competitive levels of compensation which
integrate base salary with the AIP, the 1991 LTIP and the security package,
make executive compensation dependent upon corporate performance and recognize
individual initiative and achievement. The Committee obtains and monitors
formal surveys of executive compensation, both generally and for the
construction products industry, from public and private sources, in order to
ensure that the compensation paid under the Committee's executive compensation
policy is competitive.
The Committee believes that the compensation of the Chief Executive
Officer and the other executive officers (including the Named Executive
Officers) should be primarily dependent on the Company's performance.
Consistent with this philosophy, executive compensation from two quadrants, the
AIP and the 1991 LTIP, is contingent upon corporate and individual performance.
The Committee also endorses the view that stock ownership by management and
stock-based performance compensation arrangements are beneficial in aligning
the interests of management with those of the shareholders of the Company, in
order to provide management with a direct financial incentive to enhance
shareholder value. Since 1988, the Committee has utilized stock-based
arrangements, and since 1991, such arrangements have been tied to stock
performance. Thus, over time, stock-based arrangements have become an
increasingly important element in the compensation of the executive officers of
the Company.
EXECUTIVE COMPENSATION
ANNUAL BASE SALARY. In 1995, the Company budgeted 3.7% for merit salary
increases during calendar 1996. This merit increase "pool" was only available
because of the Company's satisfactory performance. On occasion, the Company
has not granted increases because of the Company's unsatisfactory performance.
In those years when the Company's performance justifies establishing a merit
increase pool, the Committee reviews and makes recommendations with regard to
changes in each executive officer's salary, including in the Committee's review
process, without limitation, such factors as job performance for the prior year
(generally by way of an annual written performance review conducted by the
person to whom the individual reports), comparable levels of salary both
generally and in the construction products industry, internal compensation
equity considerations, level of current responsibilities, future growth
potential in the Company, changes in cost of living expense since the prior
year and maximization of after-tax income. In its 1996 executive officer
compensation review, the
<Page 12>
Committee assigned the highest weight to the individual's job performance in
the prior year and a lesser weight to the individual's future growth potential
in the Company.
ANNUAL INCENTIVE PLAN. Each executive officer is eligible for additional
cash or stock compensation under Medusa's AIP, awards which are contingent upon
the Company's performance against specific pre-established financial goals,
with discretionary awards for extraordinary individual performance. Certain
key employees of the Company are also eligible for awards under the AIP. And,
discretionary awards may also be made to non-AIP participants who make
extraordinary contributions to the success of the Company. At the beginning of
each fiscal year, the Committee, in consultation with management, approves the
AIP financial target for the Company. Currently, the Return on Capital
Employed by the Company ("ROCE") is the threshold indicator of financial
performance used by the Committee to determine whether awards are paid under
the AIP and the amount of incentive compensation for each executive officer for
the year. Each executive officer's award is based: (a) 70% upon Company
performance; and (b) an additional discretionary award of 30% which is awarded
only if the individual made an extraordinary contribution to the success of the
Company. For fiscal 1995, the ROCE selected for which 100% of the bonus pool
would be awarded was 41.5% (the "AIP Target"). As of December 31, 1995, the
Company's ROCE (for AIP purposes) was 42.5%, which exceeded the AIP Target.
Generally, AIP compensation does not exceed 50% of the base salary of an
executive officer. As of December 31, 1995, the actual amount of AIP awards
awarded to the Named Executive Officers was about 113% of the AIP Target. For
key employee AIP participants, the threshold bonus is generally either 50%, 40%
or 30% of such employee's base salary, based upon each participant's
responsibilities, subject to the same adjustments described above. If the
Company's performance threshold is not achieved, the Committee has the
discretion to pay a smaller percentage than the threshold amount. However, by
policy, no awards under the AIP are made unless the Company is profitable.
LONG-TERM INCENTIVE PLAN. In 1991, the shareholders of the Company
approved the 1991 LTIP, and in 1994, the shareholders approved an amendment to
the 1991 LTIP. The 1991 LTIP is an "omnibus plan," which allows the Committee
significant flexibility and discretion in granting restricted shares, stock
options, stock appreciation rights, performance awards and other awards. Since
1991, the Committee has made five consecutive annual grants of Performance
Restricted Shares under the 1991 LTIP. In fiscal 1995, the Company did not
adjust or amend the exercise price of any Stock Options previously awarded to
the Named Executive Officers. In fiscal 1995, the Committee granted Stock
Options to executive officers. Stock Options were also awarded to certain key
employees of the Company under the 1991 LTIP. (See page 9 and page 8 of the
Proxy Statement for a more detailed description of Performance Restricted Share
and Stock Option awards.)
Awards of Performance Restricted Shares to executive officers have been
made consistent with the Committee's philosophy to align the interests of
management with those of our shareholders. On November 10, 1995, the first
(2 1/2-year) test date for the 1993 award, the Performance Restricted Shares
had grown by 136% more than the Standard and Poor's 500 Composite (the
performance objective was 125%). In the opinion of the Committee, the
excellent stock growth achieved on that test date is a strong indication of the
success of awards under the 1991 LTIP in aligning the interests of management
with those of the shareholders of the Company.
With respect to awards of Performance Restricted Shares under the 1991
LTIP, the Committee has generally not considered prior grants of stock-based
awards and/or other stock holdings, as the Committee does not feel that the
objective of aligning the interests of management with those of shareholders is
consistent with setting an upper limit on the percent of shareholdings by
management. Further, such Committee philosophy is consistent with the
executive compensation policy of the federal government, which is to allow
"performance-based compensation," when approved by shareholders, to be excluded
from compensation deductibility limits.
<PAGE> 13
In 1995, as noted in greater detail below, the Committee amended its
criteria for Performance Restricted Share awards by changing the peer group
comparison, the test date intervals, and providing for greater flexibility over
the five-year restriction period. These changes will continue to allow
shareholders to monitor the performance of Performance Restricted Shares, since
the Cement Industry Peer Group comparison is a required market measure in the
Performance Graph which appears on page 16 of the Proxy Statement. In May of
1996, the Committee will consider whether it is appropriate to make additional
awards under the 1991 LTIP to the Named Executive Officers for fiscal 1996.
SECURITY PACKAGE. One of the reasons why the Committee retains outside
executive compensation consultants is the Committee's desire for assurance that
the Company's executive compensation remains sufficient to attract, retain and
motivate highly qualified executive officers. In fiscal 1995, the substantive
elements in Medusa's executive compensation security package were the qualified
Pension Plan (See Page 10 of the Proxy Statement), Severance Agreements (See
Page 11 of the Proxy Statement), and the 401(k) Plan (See Page 7 of the Proxy
Statement). During fiscal 1995, the Committee reviewed two additions to the
security package in response to federal laws which have eroded the benefits
payable to executive officers under qualified plans. In February 1995, the
Board of Directors approved the Top Hat Plan. Participants include executive
officers and certain key employees. The Top Hat Plan supplements the existing
401(k) Plan. The Top Hat Plan allows executive officers to increase their pre-
tax income deferrals. Any overflow of the Company Match from the Company's
401(k) Plan is paid in Common Share equivalents. Income deferrals receive
interest at the 10-year Treasury rate, adjusted annually. Since the Top Hat
Plan is not separately funded by Medusa, participants have an unsecured claim
against the Company's assets with respect to their income deferrals, Company
Match (where applicable) and interest, which benefits are paid in a lump sum at
retirement, termination of a participant's employment, plan termination or
change of control. Effective as of January 1, 1995, the Board of Directors
approved the SERP-Equivalent Plan. The SERP-Equivalent Plan is funded with
time-based restricted shares, rather than cash, with an actuarially-based
number of shares "carved-out" of Performance Restricted Share awards made under
the Committee's prior practices.
DETERMINATION OF THE COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The compensation for the Chief Executive Officer, R. S. Evans, is reviewed
and recommended by the Committee for approval by the Board of Directors,
following a process similar to that described above for the executive officers,
except that the full Board of Directors is included in the approval process for
the Chief Executive Officer's compensation. In January of 1996, the Board met
in executive session to conduct a comprehensive review of the performance of
the Chief Executive Officer. Subsequently, the Board had a dialogue with the
Chief Executive Officer. Outlined below, are the performance criteria and the
action taken with respect to such review.
ANNUAL BASE SALARY. In determining the annual compensation for the Chief
Executive Officer, the Board seeks not only to be competitive with other
companies, both generally and in the construction products industry, but also
to have a significant percentage of the compensation of the Chief Executive
Officer based upon the Company's attainment of objective performance goals,
including ROCE and the fair market value growth of Company stock. This
arrangement provides an incentive for the Chief Executive Officer to provide
the leadership necessary to attain the Company's strategic objectives, while
providing compensation stability in the form of the base salary quadrant of the
total compensation of the Chief Executive Officer. In January of 1996, the
Board increased Mr. Evans' base salary for fiscal 1996 from $250,000 to
$275,000.
ANNUAL INCENTIVE PLAN. In January of 1996, in evaluating the performance
of the Chief Executive Officer, the Board also considered the Company's
accomplishments during fiscal 1995. Further, the Board generally noted that in
fiscal 1995, the Company had achieved record profits and the Company's stock
had substantially maintained its value since the prior year. Therefore, for
fiscal 1995, the Board granted Mr. Evans an AIP award of $139,466.
<PAGE> 14
LONG-TERM INCENTIVE PLAN. In May of 1995, the Board awarded Mr. Evans 20,000
restricted shares. Of these, 2,454 were SERP-Equivalent Plan restricted
shares, the restriction upon which lapse after five years, and 17,546 were
Performance Restricted Shares with five annual test dates from May 9, 1996 to
May 8, 2000. In May of 1995, the Board also awarded Mr. Evans 30,000 non-
qualified Stock Options at an option price of $24.375. In May of 1996, the
Board will evaluate whether it is appropriate to make additional 1991 LTIP
awards to the Chief Executive Officer for fiscal 1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Organization and Compensation Committee is now or
was formerly an officer or employee of Medusa, or any of Medusa's subsidiaries.
During fiscal 1995, none of the executive officers of Medusa served as a member
of the board of directors, or a member of the compensation committee (or other
board committee performing equivalent functions or, in the absence of any such
committee, the entire board of directors) of another entity, any of whose
executive officers served on the Committee, or on the Board of Directors of
Medusa (such relationships are commonly known as "interlocks").
TAX MATTERS
One of the executive compensation factors which the Committee regularly
reevaluates is the anticipated tax treatment for the Company and for the
executive officers of various forms of compensation. To the greatest extent
possible, the Committee's general objectives are to both maximize the
deductibility as a business expense of executive compensation for the Company
and maximize the after-tax income for executive officers. On occasion, these
dual objectives diverge, and the Committee is faced with a difficult choice.
Section 162(m) of the Code (the so-called "Million Dollar Compensation Cap")
may confront the Committee with such a choice. It should be noted that in
1994, in order to exclude such compensation from Section 162(m), the Board
obtained shareholder approval of the performance goals for Performance
Restricted Shares awarded under the 1991 LTIP, and in 1995, the Board of
Directors amended the 1991 LTIP in order to exclude stock option compensation
from Section 162(m). While to-date, the Committee has not been required to
confront this issue in practice, the Committee recognizes that deferral of
compensation to a future tax year would be an acceptable method to preserve the
deductibility of any compensation to the Named Executive Officers which exceeds
the Million Dollar Compensation Cap.
GENERAL MATTERS
The Committee continues to make regular evaluations, both by itself and with
the advice of independent incentive compensation consultants, and may from
time-to-time in the future, either change the type of incentive compensation
awards granted to executive officers and key employees under the 1991 LTIP, or
(with shareholder approval, as appropriate) recommend the adoption of new
incentive compensation plans.
The purpose of this report is to inform shareholders of the responsibilities
and the philosophy of the Committee with respect to executive compensation.
Neither this report nor the Performance Graph which follows is intended to be
used for any other purpose or to be incorporated by reference in any of the
Company's past or future filings with the Securities and Exchange Commission.
THE ORGANIZATION AND COMPENSATION COMMITTEE
Boris Yavitz, Chairman
Dorsey R. Gardner
Jean Gaulin
Dwight C. Minton
<PAGE> 15
PERFORMANCE GRAPH
Set forth below is a line graph which compares the yearly change in the
cumulative total shareholder return of Medusa Corporation Common Shares against
the cumulative total return of the S&P 500 and a "Cement Industry Peer Group"
for the period using December 31, 1990 as the base and showing the total return
for five fiscal years commencing January 1, 1991 and ending December 31, 1995:
<TABLE>
Comparison of Five-Year Cumulative Total Return
Medusa Common Shares, S&P 500 and Cement Industry Peer Group Indices
<CAPTION>
1990 1991 1992 1993 1994 1995
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Medusa 100 123.68 146.33 392.57 303.28 334.57
S&P 500 100 130.47 140.41 154.56 156.60 215.45
Peer Group 100 107.29 120.08 186.54 151.15 184.28
- ---------------
<FN>
(1) The Performance Graph assumes that the value of the investment in Medusa
Common Shares and each other index was $100 on December 31, 1990 and that
all dividends were reinvested.
(2) In selecting a representative Cement Industry Peer Group, Medusa was
limited by the small number of U.S.-based, publicly-traded companies
which principally manufacture portland cement. The above peer group
index includes most of the publicly-traded U.S. cement companies; Giant
Group, Ltd. (through August 1994) and its cement business successor,
Giant Cement Holding, Inc. (September 1994 through December 1995)
(collectively, "Giant Cement"), Lafarge Corporation, Lone Star
Industries, Puerto Rican Cement Co., Inc., Southdown, Inc. and Texas
Industries. In order to prepare the peer group index, the cumulative
total returns of the companies were weighted at the beginning of each
measurement period on the basis of the companies' market capitalization.
</FN>
</TABLE>
<PAGE> 16
OTHER TRANSACTIONS AND RELATIONSHIPS
The law firm of Kirkpatrick & Lockhart LLP, of which Mr. Queenan is a Senior
Counsel, furnished legal services to Medusa in fiscal 1995. Such legal fees did
not exceed five percent of the gross revenues of Kirkpatrick & Lockhart LLP in
1995. Apart from the standard director compensation arrangements (annual
retainer and meeting fees) which Mr. Queenan received, as described above on
page 3, Mr. Queenan did not personally receive any fees for legal services
which Kirkpatrick & Lockhart LLP provided to Medusa in fiscal 1995.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires Medusa's
Officers and Directors and persons who own more than 10% of a registered class
of the Company's equity securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (the "S.E.C.") and the
New York Stock Exchange. Executive officers, Directors and greater than 10%
shareholders are required by S.E.C. regulation to furnish Medusa with copies of
all Section 16(a) forms which they file (Form 3, Form 4 or Form 5). Medusa
believes that during the period from January 1, 1994 to December 31, 1995 all
Section 16(a) filing requirements applicable to Medusa's executive officers,
Directors and 10% shareholders were materially complied with. In making the
above statement, Medusa has relied upon the written representations of its
executive officers and Directors.
SELECTION OF AUDITORS
Medusa is incorporated under the laws of the State of Ohio. The General
Corporation Law of the State of Ohio, Section 1701.01 ET SEQ. does not require
approval by shareholders of the selection of auditors. The firm of Deloitte &
Touche LLP acted as independent auditors for Medusa for the year ended December
31, 1995, and the firm or its predecessors have acted as auditors of Medusa
since 1979. As allowed by law, the Board of Directors will select the auditors
for Medusa for 1996. In accordance with Medusa's practice, a member of the
firm of Deloitte & Touche LLP will attend the Annual Meeting, have an
opportunity to make a statement if he or she so desires and to respond to
appropriate questions which may be asked by shareholders.
PROPOSED AMENDMENT TO THE 1991 LONG-TERM INCENTIVE PLAN
INTRODUCTION
On January 22, 1996, the Board of Directors adopted a resolution approving an
amendment to the Medusa Corporation 1991 Long-Term Incentive Plan (the "1991
LTIP"), which would increase, as of May 6, 1996, the number of Common Shares
available for grant by 800,000 shares (the "Amendment"). Implementation of the
Amendment is subject to shareholder approval. The Board of Directors
separately seeks shareholder approval of the material terms of performance
goals of Performance Restricted Shares awarded under the 1991 LTIP, which were
amended by the Board of Directors on May 8, 1995. (See the proposal below at
page 22.)
The purpose of the 1991 LTIP is to provide the Company with a means to
attract and retain individuals of outstanding ability, and to motivate, reward
and retain executive officers and key employees who have made and are
anticipated to continue to make significant contributions to the Company's
success. Awards under the 1991 LTIP are intended to increase the proprietary
interest of the Company's executive officers and key employees and to increase
their personal interest in the continued success of the Company. In its five
years of operation, the 1991 LTIP has become the foundation of the Company's
long-term compensation program which is aimed at
<PAGE> 17
making executive officers and key employees significant shareholders of the
Company and thus align the interests of management with those of shareholders
in order to provide management with a direct financial incentive to enhance
shareholder value.
If the Amendment is approved, the maximum number of shares or options which
may be awarded by the Organization and Compensation Committee (the "Committee")
under the 1991 LTIP will be increased by 800,000. There were 279,257 shares
available for grant under the 1991 LTIP as of December 31, 1995. This figure
may increase or decrease prior to the Annual Meeting by reason of cancel-
lations, forfeitures or additional grants in the interim. The Committee
customarily selects recipients and makes awards annually, immediately prior to,
or at the Annual Meeting. Other than the SERP-Equivalent Restricted Shares and
the AIP Restricted Shares, the restrictions on the awards to the Named
Executive Officers lapse solely on the satisfaction of performance-based
criteria. Awards of Performance Restricted Shares are reported on pages 6 and
9 of the foregoing tables as LTIP Payouts and as Long-Term Incentive Plan
Awards, respectively.
NEW PLAN BENEFITS
The Committee does not intend to make any awards under the 1991 LTIP until
May of 1996 to executive officers and key employees with respect to the
proposed increase of 800,000 shares. Since the level and amount of awards for
the fiscal year 1996 have not been determined, the dollar value and number of
units shown in the table below are those which were received during fiscal
1995, as follows:
<TABLE>
NEW PLAN BENEFITS
<CAPTION>
Name Dollar Value(1) Number of Units(2)
- -------------------------------------------------------- --------------- ------------------
<S> <C> <C>
R. S. Evans ............................................ $1,061,277 57,408
George E. Uding, Jr. ................................... 1,037,441 56,519
Robert J. Kane ......................................... 501,842 27,630
R. Breck Denny ......................................... 378,173 21,235
John P. Siegfried ...................................... 436,437 23,408
All Executive Officers as a Group (8 Persons) .......... 4,461,146 244,820
Non-Executive Director Group ........................... None None
Non-Executive Officers (Key Employees) Group (22 Persons) 1,251,200 115,000
_______________
<FN>
(1) The dollar values shown above are based upon the fair market value of one
Medusa Corporation Common Share at December 29, 1995, which was $26.8125.
Such valuation does not reflect any diminution of value attributable to
the restrictions on the shares. The stock options were valued at $10.88
per option in accordance with the Black-Scholes method.
(2) Includes 26,770 AIP Restricted Shares received by executive officers on
February 6, 1995, 11,857 SERP-Equivalent Plan Restricted Shares, 76,143
Performance Restricted Shares and 247,000 stock options which were
awarded to the executive officers and key employees on May 8, 1995.
</FN>
</TABLE>
<PAGE> 18
PRINCIPAL PROVISIONS OF THE 1991 LTIP
Recipients of benefits awarded under the 1991 LTIP are not required to make
any payment or provide consideration other than the rendering of service to the
Company as employees. The maximum aggregate number of additional shares
(including Restricted Shares, stock options or other share-equivalent employee
benefits) which may be awarded under the 1991 LTIP is 800,000. The 1991 LTIP
has a provision permitting adjustments of the number of shares in order to
reflect the effect of stock splits, dividends, distributions, combinations and
reorganizations. Shares which are reacquired by the Company as a result of
forfeitures prior to the 1991 LTIP's expiration are not regarded as having been
previously awarded and therefore may be regranted to employees. Other than an
annual award limit per participant of 100,000 stock options or SAR's, no limit
is imposed on the number of shares which may be awarded to any given
individual. The closing price of Medusa Corporation Common Shares on March 18,
1996, the record date, as reported by the New York Stock Exchange Composite
Transactions Tape, was $[ ] per share. The 1991 LTIP is administered by
the Organization and Compensation Committee of the Board of Directors, which is
composed of four non-employee Directors. Non-employee Directors are not
eligible to participate in the 1991 LTIP. Since 1991, under the 1991 LTIP,
only Performance Restricted Shares, SERP-Equivalent Restricted Shares, AIP
Restricted Shares and stock options have been awarded to the executive
officers, including those members of the Board of Directors who are also
executive officers of the Company and to certain key employees of the Company
and its subsidiaries. As of December 31, 1995, there were 32 participants in
the 1991 LTIP. Subject to the specific terms of the 1991 LTIP, the Committee
has sole discretion and authority to select the recipients and to determine the
size, performance criteria and timing of awards.
RESTRICTED SHARES Upon an award of Restricted Shares, a share certificate is
registered in the name of each participant, with an appropriate legend
referring to the applicable terms, conditions and restrictions. Shares
awarded pursuant to the 1991 LTIP may not be sold, transferred, assigned or
pledged until the restrictions lapse. The lapse of restrictions may be
conditioned upon performance criteria, the expiration of a restriction period
or such other criteria as are established by the Committee on the award date.
With respect to outstanding awards, the Committee has the power to modify the
period of restriction, any vesting schedule and the other terms and conditions
of the award, provided that no such modification may increase the benefit under
the award beyond that which the Committee could originally have granted at the
time of the award or impair the rights of a participant without the
participant's consent. As owner of the awarded shares, the recipient has all
other rights of a shareholder, including the right to vote the shares and
receive dividends and other distributions during the restriction period.
Except for Senior Executive Officers, whose awards continue to survive on a
post-employment basis for the balance of the restriction period, in the event a
participant terminates employment before an established restriction period
ends, all shares still subject to restriction are forfeited by the employee and
revert to the Company. However, in the case of retirement at normal retirement
age, permanent and total disability, death or change in control, the
restrictions automatically terminate. In addition, in cases of special
circumstances, the Committee may, at its discretion, if it is deemed to be in
the best interests of the Company, waive any or all of the remaining
restrictions with respect to the Restricted Share award and allow nonforfeiture
in whole or in part. Further, the Committee may specify additional conditions
which may be placed upon an award. The Committee's decisions in the
administration of the 1991 LTIP is binding upon all parties. The Committee has
the discretion, with respect to any Restricted Share award upon the lapse of
all restrictions, or at such earlier time as a participant may elect, to award
a separate cash amount equal to the income and excise taxes payable thereon.
STOCK OPTIONS The Committee may grant to a participant non-qualified stock
options, Incentive Stock Options under Section 422A of the Internal Revenue
Code or a combination thereof. However, since the inception of the 1991 LTIP,
the Committee has granted only non-qualified stock options to the executive
officers and certain key employees. While the exercise price for stock options
may be determined by the Committee at its discretion, to date, the Committee
has only awarded stock options at 100% of their fair market value on the award
date.
<PAGE> 19
Upon the exercise of an option, the purchase price must be paid in full,
either in cash or in whole or in part with Common Shares previously owned by an
optionee and valued on the basis of fair market value on the date the option is
exercised. The ability to pay the purchase price with Common Shares would
permit possible "pyramiding" in successive exercises. Such pyramiding could
allow an option holder to start with a relatively small number of shares and
exercise all of his or her then exercisable stock options with virtually no
additional cash and no further investment other than the original shares.
However, under the 1991 LTIP, agreements with option holders require a six-
month stock holding period before pyramiding. The Committee may (although it
is not obligated to do so) authorize the acceptance of an optionee's surrender
of his or her right to exercise an option, or portion thereof, and the payment
to the optionee of the difference between the fair market value of the shares
underlying the option or portion thereof and the option price thereof, in cash,
in shares, or partly in cash and partly in shares. Each stock option granted
to date under the 1991 LTIP may be exercised (in lots of ten shares or a
multiple thereof) commencing one year from the date of grant at a cumulative
rate not in excess of 50% of the total shares available during the second year,
75% during the third year and 100% thereafter, and (with respect to fiscal 1995
awards) ending ten years from such date. No options are transferable except by
will or under the laws of descent and distribution.
Except for the Senior Executive Officers, if an optionee terminates his or
her employment with Medusa and its subsidiaries for any reason other than
death, retirement on or after his or her normal retirement date, permanent and
total disability, or after a change in control of Medusa, the optionee may
exercise any then exercisable outstanding options, in whole or in part, and/or
the Committee may authorize the acceptance of a surrender of the right to
exercise such options or any portion thereof, at any time within three months
thereafter, but not after the expiration of the term of the options and only to
the extent that the employee was entitled to exercise the options on the date
of termination of employment. If an optionee dies while employed by Medusa,
the optionee's executor or other successor in interest may exercise any
outstanding options, in whole or in part, and/or the Committee may authorize
the acceptance of a surrender of the right to exercise such options or any
portion thereof, at any time within five years from the date of the optionee's
death, but not after the expiration of the term of the options. If an optionee
terminates his or her employment as a result of permanent and total disability,
at normal retirement date or after a change of control of Medusa, then the
optionee may exercise any outstanding options, at any time within five years
from the date of termination, but not after the expiration of the term of the
options.
OTHER AWARDS Although, to-date under the 1991 LTIP, the Committee has
only granted Performance Restricted Shares, SERP-Equivalent Restricted Shares,
AIP Restricted Shares and non-qualified stock options to the executive officers
and to certain key employees, the Committee retains the authority under the
1991 LTIP to grant stock appreciation rights, performance awards, other
restricted stock awards and other awards.
CHANGE IN CONTROL In general, events which constitute a change in control
include: (a) acquisition by a person, other than Medusa, one of its
subsidiaries or a Medusa benefit plan, of 20% or more of Medusa Corporation
Common Shares; (b) the individuals who are incumbent on the Board no longer
constitute in excess of two-thirds of the Board without prior approval by a
majority vote of the incumbent Board; (c) approval by Medusa's shareholders of
a reorganization, merger or consolidation; or (d) approval by Medusa's
shareholders of a complete liquidation or dissolution of Medusa or sale or
other disposition of all or substantially all of the assets of Medusa. In the
event of a change in control, stock options and SAR's immediately become
exercisable, the restrictions on Performance Restricted Shares, SERP-Equivalent
Restricted Shares and AIP Restricted Shares lapse and such awards immediately
become payable. The 1991 LTIP also contains special provisions regarding the
exercisability of stock options and SAR's in the event of a change in control
by individuals subject to Section 16(b) of the Exchange Act (certain officers
and directors).
<PAGE> 20
AMENDMENT/TERMINATION The Board of Directors may amend, suspend or
terminate the 1991 LTIP at any time. However, no amendment may be made without
shareholder approval which may increase the maximum aggregate number of shares
available for award under the 1991 LTIP, or impair the rights of any
participant under any then outstanding award except in accordance with the 1991
LTIP or any applicable agreement or applicable law, or by consent of the
participant.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal federal income tax consequences
of the 1991 LTIP benefits which have been awarded since 1991 under present tax
law:
RESTRICTED SHARES A participant normally does not recognize taxable income
upon an award of Restricted Shares, and Medusa is not entitled to a deduction
until the lapse of the restrictions. Upon lapse of the restrictions, the
participant then recognizes ordinary taxable income in an amount equal to the
fair market value of the Common Shares as to which the restrictions have
lapsed, and Medusa is entitled to a deduction in the same amount. However, a
participant may elect under Section 83(b) of the Code to recognize taxable
ordinary income in the year the Restricted Shares are awarded in an amount
equal to the fair market value of the shares at that time, determined without
regard to the restrictions. In such event, Medusa is then entitled to a
deduction in the same amount. Any gain or loss subsequently recognized by the
participant is a capital gain or loss. If, after making a Section 83(b)
election, any Restricted Shares are forfeited, or if the fair market value at
the lapse of the restriction is lower than the amount on which the participant
was taxed, the participant cannot then claim a deduction.
STOCK OPTIONS No tax is incurred by the participant (or expense deductible
by Medusa) upon the grant of a non-qualified stock option. At the time of
exercise of such an option, the difference between the fair market value of
Common Shares and the exercise price constitutes ordinary income. Medusa is
allowed a deduction equal to the amount of ordinary income recognized by the
participant. In the case of Incentive Stock Options, although no income is
recognized upon exercise and Medusa is not entitled to a deduction, the
excess of the fair market value of Common Shares on the date of exercise over
the exercise price is treated by the participant as an item of tax preference
for alternative minimum tax purposes. If the participant does not dispose of
the shares acquired on the exercise of an Incentive Stock Option within one
year after their receipt (and within two years after the grant of the stock
option), gain or loss recognized on the disposition of the shares will be
treated as long-term capital gain or loss. In the event of an earlier
disposition, the participant may recognize ordinary income and Medusa would be
entitled to a deduction, equal to the amount of such income, when the
participant recognizes income.
VOTE REQUIRED
The affirmative vote of a majority of the shares present or represented and
entitled to vote at the Annual Meeting is required to approve the Amendment to
the 1991 LTIP to increase the number of Common Shares available for grant by
800,000.
The Board of Directors recommends a vote FOR Approval of the proposed
Amendment to the 1991 LTIP to increase the number of Common Shares available
for grant by 800,000.
<PAGE> 21
MATERIAL TERMS OF PERFORMANCE GOALS
UNDER THE 1991 LONG-TERM INCENTIVE PLAN
INTRODUCTION
On May 8, 1995, the Board of Directors of the Company adopted a resolution
amending the material terms of performance goals for awards of Performance
Restricted Shares under the Medusa Corporation 1991 Long-Term Incentive Plan
(the "1991 LTIP"). Such terms would be applied to any future awards of
Performance Restricted Shares issued under the 1991 LTIP for the purpose of
qualifying such awards as "performance-based compensation" under Section 162(m)
of the Code. The amendment was made subject to shareholder approval. The
Board separately seeks shareholder approval of an 1991 LTIP amendment which
would increase the number of Common Shares available for grant by 800,000.
(See the 1991 LTIP Amendment proposed above at page 17.)
Performance Restricted Shares have been issued under the 1991 LTIP since May
of 1991. Five consecutive annual awards have been issued to the executive
officers of the Company. The number of Performance Restricted Shares awarded
and the eligible individuals have been amended by the Committee from time-to-
time during the above period. The fiscal 1995 awards of Performance Restricted
Shares to the five Named Executive Officers are as stated on page 9 of the
Proxy Statement.
PERFORMANCE GOALS; 1995
In respect to the fiscal 1995 awards, a 20% portion of the Performance
Restricted Share award is tested on the award anniversary in each year during
the five-year restriction period. In order for the share restrictions to fully
lapse, two requirements must be met: (a) the value of one Common Share
(adjusted for stock distributions, but not reflecting dividends) may not
decline from the award date to a test date; and (b) the Common Share growth
rate must meet or exceed 110% of the growth rate of the Cement Industry Peer
Group (see page 16 of the Proxy Statement) when measured from the award date to
a test date. There is also a provision for "Partial Lapses" with respect to
proportionate amounts of the shares in 10% increments if more than 101%, but
less than 110% of the performance objective is attained. (i.e., a 101% growth
rate causes the restrictions to lapse with respect to 10% of the shares, etc.)
If the restrictions on all or part of the 20% portion of the share award fail
to lapse, then such portion or portions are not forfeit until they are
retested, as applicable, during the 5-year restriction period. Upon the lapse
of restrictions on Performance Restricted Shares, the participant will receive
a Tax Gross-up. During the restriction period, the Performance Restricted
Shares may be voted and pay non-preferential dividends to the participant.
PERFORMANCE GOALS; 1993 AND 1994
In respect to the fiscal 1993 and fiscal 1994 awards, 50% of each share award
is restricted until a test date 2 1/2 years from the date of the award and 50%
of the award is restricted until a test date 5 years from the date of the
award. In order for the share restrictions to lapse, two requirements must be
met: a) the value of one Common Share (adjusted for stock distributions, but
not reflecting dividends) may not decline from the award date to a test date;
and b) the Common Share growth rate must meet or exceed 125% of the growth rate
of the Standard and Poor's 500 Composite (See page 16 of the Proxy Statement),
when measured from the award date to a test date. If the restrictions on the
initial 50% of the share award fail to lapse on the 2 1/2-year test date, then
such portion is not forfeit until it is retested on the 5-year test date. Upon
the lapse of restrictions, the participant will receive a Tax Gross-up. On May
9, 1994, the shareholders approved the material terms of performance goals for
the Performance Restricted Share awards made in fiscal 1993 and fiscal 1994.
<PAGE> 22
CHANGE IN TAX LAW
Because of a change in current tax law (Section 162(m) of the Code), employee
remuneration of the Named Executive Officers is subject to limitation on the
tax deductibility of such remuneration as a business expense by the Company, if
such remuneration is "excessive," the definition of which in the law is
$1,000,000. The law also provides for certain allowable exceptions from
remuneration, including "performance-based compensation."
MATERIAL TERMS OF PERFORMANCE GOALS
In order for performance-based compensation to be excepted from remuneration,
the "material terms" under which the remuneration is to be paid must be
disclosed to shareholders and approved by a majority in a separate vote. Such
material terms include: (a) the individuals eligible to receive compensation;
(b) a description of the business criteria on which the performance goals are
based; and (c) the maximum amount of compensation to be paid.
ELIGIBLE INDIVIDUALS
All of the executive officers of the Company, which currently number eight,
would be eligible to receive awards of Performance Restricted Shares in 1996.
Further, by the shareholder action sought herein, the Board of Directors also
seeks a delegation of additional authority from the shareholders to award
Performance Restricted Shares to such executive officers of the Company who are
elected between January 1, 1996 and December 31, 1998, with the quantity of any
shares awarded to such executive officers to be governed by internal
compensation equity considerations. The Board of Directors has no present
plans with respect to the election of any executive officers in addition to the
current eight executive officers.
DESCRIPTION OF THE BUSINESS CRITERIA ON WHICH THE PERFORMANCE GOALS ARE BASED
The performance goals for the period from January 1, 1996 to December 31,
1998 are anticipated to be the same as the performance goals established by the
Committee for the May 8, 1995 awards (see above), namely, the Performance
Restricted Share awards require that: (a) the value of one Common Share may
not decline from the award date to the test date; and (b) (to fully lapse all
of the award) the Common Share growth rate must meet or exceed 110% of the
growth rate for the Cement Industry Peer Group. Awards of Performance
Restricted Shares have been made to executive officers consistent with the
philosophy of the Committee to use performance-based restricted share
compensation arrangements to the greatest possible extent in order to align the
interests of management with those of the shareholders of the Company and
thereby provide management with a direct financial incentive to enhance
shareholder value.
MAXIMUM AMOUNT OF COMPENSATION TO BE PAID
The maximum amount of compensation to be paid to the executive officers as a
result of Performance Restricted Share awards is limited only by the total
return of Medusa Corporation Common Shares (market appreciation, dividends and
distributions) during the performance period. Such, of course, is the same
return which any Medusa shareholder would receive during the same period. In
addition, if the Performance Restricted Shares achieve the performance goals on
the test dates and the restrictions lapse, he or she would also receive a cash
award equal to the taxes payable with respect to the participant's income on
the share award. With respect to future awards, the Committee presently
contemplates that it will generally continue the current award practice.
However, by this shareholder action, the Board of Directors also seeks a
delegation of additional authority from the shareholders to increase or
decrease the number of Performance Restricted Shares awarded to the eligible
individuals (or to any newly-elected executive officers) with such increase or
decrease to be based upon job performance, executive compensation surveys,
internal compensation equity considerations, level of current responsibilities,
future growth potential in the Company, changes in cost of living expense,
maximization of after-
<PAGE> 23
tax income, and other relevant executive compensation factors.
PRINCIPAL LONG-TERM INCENTIVE PLAN PROVISIONS
(See Amendment to the 1991 LTIP on page 19, above.)
FEDERAL INCOME TAX CONSEQUENCES
(See Amendment to the 1991 LTIP on page 21, above.)
VOTE REQUIRED
The affirmative vote of a majority of the shares present or represented and
entitled to vote at the Annual Meeting is required to approve the material
terms of performance goals for Performance Restricted Shares awarded under the
1991 LTIP.
The Board of Directors recommends a vote FOR Approval of the material terms
of performance goals for Performance Restricted Shares awarded under the 1991
LTIP.
MATTERS NOT DETERMINED AT THE TIME OF SOLICITATION
The Board of Directors is not aware of any matters to come before the meeting
other than: (a) the election of three directors to serve three-year terms
ending in 1999; (b) a proposal to approve an amendment to the Company's 1991
Long-Term Incentive Plan to increase the number of Common Shares available for
grant by 800,000; and (c) a proposal to approve the material terms of
performance goals for Performance Restricted Shares awarded under the Company's
1991 Long-Term Incentive Plan. Should any other business be transacted at the
meeting, then the persons named in the enclosed form of proxy will have
discretionary authority to vote all proxies with respect thereto in accordance
with their judgment.
OTHER INFORMATION
SOLICITATION OF PROXIES
The enclosed proxy is being solicited by the Board of Directors of Medusa,
and the entire cost of the solicitation will be paid by Medusa. Solicitations
may be made by personal interview, mail, telephone, and telegram and may
include requests to brokerage houses, banks, custodians, nominees, fiduciaries
and other nominee holders ("Brokers and Nominees") to forward soliciting
materials to the beneficial owners of the Common Shares held of record by such
persons. To aid in the solicitation of proxies, the Company has retained
Beacon Hill Partners, Inc. which will receive a fee for its services of $3,500
plus up to $1,000 in expenses. Brokers and Nominees will be requested to
forward the proxy materials to the beneficial owners of the Company's Common
Shares held of record by such persons and entities and will be reimbursed for
their reasonable expenses in forwarding such material.
<PAGE> 24
NEXT ANNUAL MEETING
Medusa's Regulations provide that the annual meeting of its shareholders
shall be held during the first six months following the end of each fiscal year
at such time as may be designated by the Board of Directors, the Chairman or
the President. Since the 1996 annual meeting is to be held on May 6, 1996, the
comparable date in 1997 will be May 5. Therefore, appropriate proposals of
shareholders intended to be presented at the Annual Meeting of Shareholders to
be held in 1997 must be received by Medusa for inclusion in the Proxy Statement
and form of proxy relating to that meeting no later than November 22, 1996.
VOTING BY PROXY
Shareholders who do not expect to attend in person are urged to sign, date
and return the enclosed proxy in the envelope provided. In order to avoid
unnecessary expense, we ask your cooperation in mailing in your proxy promptly,
irrespective of how large or small your shareholdings may be.
By Order of the Board of Directors
JOHN P. SIEGFRIED
SECRETARY
March 29, 1996
<PAGE> 25
MEDUSA CORPORATION PROXY
P. O. Box 5668 THIS PROXY IS SOLICITED ON BEHALF OF
Cleveland, Ohio 44101 THE BOARD OF DIRECTORS
The undersigned hereby appoints R. S. EVANS and G. E. UDING, JR. as Proxies,
each with the power to appoint his or her substitute, and hereby authorizes
them to represent and to vote, as designated below, all of the Common Shares
of Medusa Corporation held of record by the undersigned on March 18, 1996, at
the Annual Meeting of Shareholders to be held on May 6, 1996, or any
adjournment thereof.
1. ELECTION OF THREE DIRECTORS TO SERVE THREE-YEAR TERMS.
Nominees: E. Thayer Bigelow, Jr.
Charles J. Queenan, Jr.
Boris Yavitz
(CONTINUED, TO BE VOTED AND SIGNED ON THE OTHER SIDE)
No. 00000
<PAGE>
<TABLE>
<S> <C>
X PLEASE MARK SHARES IN YOUR NAME REINVESTMENT SHARES
YOUR VOTES AS IN
THIS EXAMPLE.
FOR WITHHELD 2. Approve an Amendment to FOR AGAINST ABSTAIN
1. Election of / / / / 1991 LTIP to Increase Shares / / / / / / /
Directors Available for Grant by
(see reverse) 800,000.
FOR, except vote withheld with respect to the following nominee(s): 3. Approve Material Terms of FOR AGAINST ABSTAIN
Performance Goals for / / / / / /
Performance Restricted Shares
__________________________________________________________________ Awarded Under 1991 LTIP.
4. In their discretion, the Proxies are authorized to transact
such other business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO
DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION
OF THREE DIRECTORS TO SERVE THREE-YEAR TERMS (ITEM 1) AND FOR
THE PROPOSALS STATED ABOVE (ITEMS 2 AND 3). SINCE
ABSTENTIONS FROM THE PROPOSALS WILL NOT BE RECORDED IN FAVOR
Signature ____________________________ Dated _____________, 1996. OF SUCH PROPOSALS, SUCH ABSTENTIONS WILL HAVE THE EFFECT OF
(Signature of Shareholder or Authorized Representative) NEGATIVE VOTES.
Signature ____________________________ Dated _____________, 1996. PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
(Signature if held jointly) PROMPTLY USING THE ENCLOSED ENVELOPE.
Please sign exactly as name appears above. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such.
If a corporation, please sign in full corporate name by President or
other authorized officer. If a partnership, please sign in partner-
ship name by authorized person.
</TABLE>
