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:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive additional Materials
[ ] Soliciting Material pursuant to Rule 14a-11(c) of Rule 14a-12
O'SULLIVAN CORPORATION
(Name of Registrant as Specified In Its Charter)
C. Bryant Nickerson
Secretary, Treasurer & CFO
O'Sullivan Corporation
1944 Valley Avenue
Winchester, Virginia 22601
(540) 667-6666
(Name of Person(s) Filing Proxy Statement)
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.2
[ ] $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 O-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:
____________________________________________________________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held Wednesday, April 29, 1998
To The Holders of O'Sullivan Corporation Common Stock:
Notice is hereby given that the annual meeting of stockholders of O'Sullivan
Corporation will be held on Wednesday, April 29, 1998, at 11:00 a.m., at the
Winchester Country Club, 1300 Senseny Road, County of Frederick, Virginia,
for the purpose of:
(a) Election of directors for the ensuing year;
(b) Approval of the appointment of Yount, Hyde & Barbour, P.C.,
of Winchester, Virginia, as auditors for the 1998 fiscal year; and
(c) Transaction of such other business as may properly come before the
meeting.
Enclosed you will find a proxy form, a proxy statement and the Company's 1997
annual report.
Only stockholders of record at the close of business on March 9, 1998, will
be entitled to vote at the meeting and any adjournments thereof.
The Board of Directors would like to have as many stockholders as possible
attend the meeting in person. However, whether or not you plan to be
present, please date, sign and mail the enclosed proxy promptly in the
enclosed stamped return envelope.
If you plan to attend the meeting in person this year, please complete and
return the enclosed Annual Meeting Registration card so that we may better
plan the necessary arrangements for the meeting.
/s/ C. BRYANT NICKERSON
-----------------------
C. BRYANT NICKERSON
Secretary, Treasurer & CFO
1
March 27, 1998
O'Sullivan Corporation
1944 Valley Avenue
Winchester, Virginia 22601
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
APRIL 29, 1998
The enclosed proxy is solicited by and on behalf of the Board of Directors of
O'Sullivan Corporation (the "Company") for the 1998 annual meeting of
stockholders of the Company to be held on April 29, 1998, or any adjournments
thereof, for the purposes set forth in the attached notice of annual meeting.
This proxy statement and enclosed proxy are being mailed to stockholders on or
about March 27, 1998.
Any stockholder executing a proxy may revoke it at any time before it is
voted by delivering another proxy or written notice of revocation to the
Company's Secretary. The giving of this proxy will not affect the right of
the stockholder to attend the meeting and vote in person. However, attendance
at the meeting will not, without notice of revocation, revoke a proxy for the
meeting.
Each holder of record of the Common Stock of the Company, $1.00 par value
(the "Common Stock"), at the close of business on March 9, 1998, will be
entitled to one vote for each share registered in his or her name on each
matter brought before the meeting. At the close of business on March 9,
1998, 15,742,942 shares of the Common Stock were outstanding and entitled to
vote.
The enclosed proxy, if executed and not revoked, will be voted for the
election of the nominees for director named herein and for the appointment of
Yount, Hyde & Barbour, P.C. as auditors, unless it contains specific
instructions to the contrary, in which event it will be voted in accordance
with such instructions. At this time, no matters other than those specified
are expected to come before the meeting. If any other matters are properly
presented to the meeting for action, the proxy holders will vote the proxies,
which confer discretionary authority to vote on such matters, in accordance
with their best judgment.
Except for the election of directors, action on a matter submitted to the
stockholders at the meeting will be approved if a quorum is present at the
meeting and the votes cast in favor of the action exceed the votes cast
against it. With respect to the election of directors, the ten nominees
receiving the greatest number of votes cast for the election of directors
will be elected, assuming a quorum is present at the meeting. Presence in
person or by proxy of the holders of a majority of the outstanding shares of
Common Stock entitled to vote at the meeting will constitute a quorum.
Shares for which the holder has elected to abstain or to withhold the
proxies' authority to vote (including broker non-votes) on a matter will
count toward a quorum but will have no effect on the action taken with
respect to such matter.
2
In addition to the solicitation of proxies by mail, the Company's officers
and regular employees may solicit proxies by telephone, facsimile
transmission or personal interview. The Company will bear the cost of all
solicitation.
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as to the beneficial
ownership of the Company's Common Stock by any person known to the Company
to be the beneficial owner of more than five percent of such stock as of
January 31, 1998.
NAME AND ADDRESS OF NUMBER OF SHARES PERCENT
BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
Arthur H. Bryant II (1) 2,708,084 17.2%
P. O. Box 2929
Winchester, VA 22604
Magalen O. Bryant (1) 975,548 6.2%
Locust Hill Farm
Middleburg, VA 22117
John C. O. Bryant 809,239 5.1%
P. O. Box 247
Middleburg, VA 20118-0247
Dimensional Fund (2) 830,278 5.3%
Advisors, Inc.
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
(1) To the best knowledge of the Company, and except as described in the
footnotes to the table of ownership of Common Stock by directors set
forth below, Mr. Arthur H. Bryant II and Mrs. Magalen O. Bryant have
have sole voting and investment powers with respect to shares shown as
owned by them. The information in this table relating to ownership of
shares of Common Stock by Mr. Arthur H. Bryant II and Mrs. Magalen O.
Bryant is based on a review of filings with the Securities Exchange
Commission.
(2) Dimensional Fund Advisors, Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership as of December, 31, 1997
of the shares of Common Stock listed above, all of which shares are held
in portfolios of DFA Investment Dimensions Group Inc., a registered
open-end investment company, or in series of the DFA Investment Trust
Company, a Delaware business trust, or the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified employee
benefit plans, all of which Dimensional Fund Advisors Inc. serves as
investment manager. The Company has also been advised that Dimensional
disclaims beneficial ownership of all such shares. The foregoing is
based on review of a filing with the Securities Exchange Commission and
on other information provided by Dimensional to the Company.
3
ITEM ONE-ELECTION OF DIRECTORS
A Board of ten directors of the Company is to be elected at the meeting to
serve until the next annual meeting or until their successors are elected.
Each of the nominees listed below is presently a director of the Company.
With the exception of Mr. Sandker, who was appointed by the Board of
Directors at the July 28, 1997 Board of Directors meeting, each director was
elected by the stockholders at the last annual meeting for a term expiring at
the 1998 annual meeting.
Each director nominee has agreed to serve if elected. If any nominee is
unable or unavailable to serve, a circumstance which is not expected, the
proxy may be voted for the election of other persons that may be nominated
during the meeting, except that any proxy that is marked to withhold
authority to vote for election of directors will not be voted for any nominee.
The names of the nominees and certain information concerning their business
experience and other matters are set forth below.
NAME, AGE, COMPANY POSITIONS, DIRECTOR COMMON STOCK PERCENT
PRINCIPAL OCCUPATION AND SINCE BENEFICIALLY OF CLASS
DIRECTORSHIPS IN PUBLIC OWNED AS OF
CORPORATIONS 1/31/98
C. Hugh Bloom, Jr., 64 1990 16,403(3) 0.1%
Easton, PA,
Retired
Vice President, C.F. Martin & Co., Inc.
Arthur H. Bryant, II, 55 1967 2,708,084(1)(2) 17.2%
Winchester, VA, (3)
Chairman of the Board;
Chairman and Chief Executive Officer of the
Company 1986-1995
Magalen O. Bryant, 69 1982 975,548(3) 6.2%
Middleburg, VA,
Private Investor; Director, Carlisle
Companies, Incorporated and Dover Corporation
Robert L. Burrus, Jr., 63 1995 13,000(3) 0.1%
Richmond, VA,
Partner, McGuire, Woods, Battle
& Boothe, LLP, a law firm
retained by the Company for a number
of years; Director, CSX Corporation, Concepts
Direct, Inc., Heilig-Meyers Company,
S & K Famous Brands, Inc. and
Smithfield Foods, Inc.
Max C. Chapman, Jr., 54 1989 138,002(1)(3) 0.9%
Scarborough, NY,
Chairman, Nomura Holding
America Inc.; Director,
The Nomura Securities Co., Ltd.
4
James T. Holland, 57 1984 145,675(1)(3) 0.9%
Winchester, VA,
President and Chief Executive Officer
of the Company since 1995;
President and Chief Operating
Officer 1986-1995; Executive Vice
President, 1984-1986;Vice President
and Treasurer,1979-1984
R. Michael McCullough 59 1995 12,000(3) 0.1%
McLean, VA,
Retired Senior Chairman,
Booz Allen & Hamilton, a Delaware Corporation;
Director, Host Marriott Services Corp,
Interstate Hotel Corporation and
Watson-Wyatt Worldwide, Corp.
Stephen P. Munn, 55 1995 12,000(3) 0.1%
Syracuse, NY,
Chairman and Chief Executive Officer,
Carlisle Companies Incorporated;
Director, Carlisle Companies
Incorporated; Trustee, Prudential Securities
Mutual Funds
Timothy J. Sandker, 49 1997 10,000(3) 0.1%
Madison, IN,
President, Rotary Lift Division
of Dover Corporation
Leighton W. Smith, Jr., 58 1997 10,000(3) 0.1%
Fairfax, VA,
Admiral, United States Navy,
Retired
All Executive Officers and Directors as a
group (19 persons) 4,187,075(1)(2) 26.6%
(3)
In addition to Mr. Holland, the remaining executive officers named in the
summary compensation table had the following beneficial ownership of shares
at January 31, 1998:
COMMON STOCK
BENEFICIALLY
OWNED AS OF PERCENT
NAME AND TITLE 1/31/98 OF CLASS
John S. Campbell,
Vice President 29,351(3) 0.2%
Michael J. Meissner,(A)
Vice President 24,703(1) 0.2%
C.Bryant Nickerson,
Secretary, Treasurer & CFO 25,010(1)(3) 0.2%
Ewen A. Campbell,
Vice President 11,500(3) 0.1%
5
(1) Includes the following shares held by the spouses, children or
associates of the following directors and officers, which shares may be
deemed held subject to shared investment and voting powers: Arthur H.
Bryant,II, 15,466 shares; Max C. Chapman, 3,000 shares; James T.
Holland, 32,435 shares; Michael J. Meissner, 604 shares; C. Bryant
Nickerson, 100 shares.
(2) Includes 1,429,860 shares held by the Bryant Foundation, of which Mr.
Bryant is President and a Trustee.
(3) Includes the following shares that may be acquired under stock
options which are exercisable on January 1,1998 or within 60 days
thereafter: James T. Holland, 40,660 shares; all executive officers and
directors as a group, 249,120 shares; John S. Campbell, 29,200 shares;
C. Bryant Nickerson, 24,060 shares; and Ewen A. Campbell, 11,000 shares.
Also includes for each director (other than Mr. Holland) the following
shares which may be acquired under currently exercisable stock options
granted under the Company's 1995 Outside Directors Stock Option Plan:
Mrs. M.O. Bryant and Messrs. Bloom, A.H. Bryant, Burrus, Chapman,
McCullough and Munn, 12,000 shares; Messrs. Smith and Sandker,
10,000 shares.
(A) Retired from the Company as of December 31, 1997.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, the Company's
directors, certain officers, and any persons holding more than ten percent
of the Company's Common Stock are required to report their ownership of the
Common Stock and any changes in that ownership to the Securities and Exchange
Commission ("Commission"). Specific due dates for these reports are
established by the Commission, and the Company is required to report in this
proxy statement any failure to file such reports on a timely basis for the last
comleted fiscal year. During January, February, March and April of 1997,
James L. Tremoulis, an officer of the Comapny, acquired 20 shares of Common
Stock each month (for a total of 80 shares) pursuant to an employee stock
purchase plan maintained by the Company. Mr. Tremoulis failed to timely file
the four Form 4 reports that he was required to file for these acquisitions.
The acquisitions were reported on a Form 4 that was filed by Mr. Tremoulis in
June of 1997. There were no other known failures of any officer, director or
greater than ten percent shareholder to file in a timely manner the required
reports. In making this statement, the Company has relied on the written
representations of its directors, such officers and greater than ten percent
shareholders, and on copies of the reports that they have filed with the
Commission.
COMMITTEES OF THE BOARD OF DIRECTORS
AND MEETING ATTENDANCE
During 1997, four regular quarterly Board meetings were held. Each of the
incumbent Board members attended at least 75% of the meetings of the Board and
any of the committees on which they served, except for Mrs. M.O. Bryant, who
did not attend any regularly scheduled meeting of the Audit Committee.
6
The Board has an Audit Committee which consists of Messrs. Burrus, McCullough
and Bloom and Mrs. M.O. Bryant. All members of the Audit Committee are
outside directors. Mr. Burrus serves as Chairman of the Audit Committee. The
Committee met two times during 1997. The principal responsibilities of the
Audit Committee are to direct the activity of the external audit functions,
recommend the selection of external auditors to the Board, provide for the
continuing review of the underlying internal controls of the Company, and
review published financial reports of the Company.
There is a Compensation and Stock option Committee of the Board which consists
of Messrs. A.H. Bryant, Chapman, McCullough and Munn. All members of the
Compensation and Stock Option Committee are outside directors. Mr. McCullough
serves as Chairman of this Committee. The Committee met two times during 1997.
The Committee is responsible for reviewing and making recommendations to the
Board with respect to compensation of executive officers and directors. A
subcommittee of the Committee, the Stock Option Plan Subcommittee, administers
the 1995 Stock Option Plan, determines the key employees who should receive
awards under the 1995 Stock Option Plan and the number of shares to be granted
under such awards.
There is a Nominating Committee of the Board which consists of Messrs. A.H.
Bryant, Chapman and Holland and Mrs. M.O. Bryant. All members of the
Nominating Committee are outside directors except Mr. Holland. Mr. Chapman
serves as Chairman of this Committee. The Nominating Committee, if so
requested by the Board, recommends to the Board candidates for election as
directors. The Committee met two times during 1997. The Nominating Committee
will consider nominations from stockholders. Any stockholder who wishes to
make a nomination for a director must advise the Secretary of the Company in
writing, mailed no later than ten days before the date of the stockholders'
meeting, of the name, address and business background of the nominee.
COMPENSATION OF DIRECTORS
A fee of $2,500 per quarter is currently paid to each outside director as a
retainer. An additional $2,250 attendance fee is paid to each outside
director for regular directors' meetings, which are held four times a year.
Outside directors who are committee members are paid $500 for each meeting
attended. Expenses incurred in connection with attending meetings are
normally borne by the directors. Each outside director automatically receives
in the first year that he becomes an outside director an option to purchase
10,000 shares of Common Stock of the Company under the 1995 Outside Directors
Stock Option Plan. On each April 25 thereafter, each outside director
receives an option to purchase an additional 1,000 shares of the Common Stock.
The price of each option is equal to the fair market value of the Common Stock
on the date the option is granted. All options awarded under the plan are
nonstatutory stock options.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table provides certain information concerning annual and long-
term compensation paid to or accrued on behalf of the President and the four
other most highly compensated executive officers of the Company (the "Named
Executive Officers") for the years 1997, 1996 and 1995.
7
Long Term
Compensation
------------
Annual Compensation Awards
------------------- ------
Securities
Underlying
Name and Principal Options All Other
Position Year Salary($) Bonus ($) (#) Compensation ($)
James T. 1997 345,390 -- -- 13,636 1,949,543(1)
Holland 1996 345,390 -- -- 5,000 87,197
President and Chief 1995 329,400 187,244 15,000 80,268
Executive Officer
John S. 1997 190,100 13,178 7,521 14,603(2)
Campbell 1996 190,100 -- -- 4,000 12,980
Vice President 1995 181,000 133,868 12,000 13,109
Michael J. 1997 175,000 75,000 3,099 532,077(3)
Meissner 1996 175,000 75,000 2,000 24,052
Vice President 1995 175,000 75,000 3,000 18,231
C. Bryant 1997 153,100 -- -- 5,922 14,442(4)
Nickerson 1996 153,100 -- -- 3,000 14,062
Secretary, 1995 136,000 52,861 9,500 12,578
Treasurer and Chief
Financial Officer
Ewen A. 1997 143,100 15,000 5,579 12,756(5)
Campbell 1996 138,100 -- -- 2,000 12,980
Vice President 1995 131,000 55,252 7,000 12,446
(1) This amount consists of Company contributions under the Retirement Savings
Plan ($8,000), split dollar life insurance premiums paid by the Company
($2,138), and amounts accrued for the annuity ($974,724), accumulated
vacation pay ($31,731), consulting fee retainer ($25,000) and additional
deferred compensation benefits ($907,860) that will become payable to Mr.
Holland in 1998 under the terms of his retirement agreement, as described
on page 9 under the caption "Retirement and Employment Continuity
Agreements."
(2) This amount consists of Company contributions under the Retirement
Savings Plan ($8,000) and amounts accrued under the Company's deferred
compensation program ($6,603).
(3) This amount consists of Company contributions under the Retirement
Savings Plan ($4,800), and amounts accrued for the salary continuation
benefits ($250,000), lump sum payment of the value of certain health,
life insurance and pension benefits ($43,893), car allowance ($9,600)
and additional deferred compensation benefits ($223,784) payable
to Mr. Meissner in 1998 and 1999 under the terms of his retirement
agreement, as described on page 9 under the caption "Retirement and
Employment Continuity Agreements."
8
(4) This amount consists of Company contributions under the Retirement
Savings Plan ($7,322) and amounts accrued under the Company's deferred
compensation program ($7,120).
(5) This amount consists of Company contributions under the Retirement
Savings Plan ($6,826) and amounts accrued under the Company's deferred
compensation program ($5,930).
Deferred Compensation Program
The Company maintains a deferred compensation program for key employees of
the Company. Under this program, the Company has agreed to pay to each
covered employee a certain sum annually for fifteen years upon his retirement
or, in the event of his death, to his designated beneficiary. The annual
amount payable to each of the Named Executive Officers upon retirement at age
65 is as follows: Mr. Holland, $150,000, Mr. J.S. Campbell, $30,000, Mr.
Meissner, $30,000, Mr. Nickerson, $30,000 and Mr. E.A. Campbell, $20,000. A
benefit is also paid if the employee terminates employment (other than by the
executive's voluntary action or discharge for cause) after at least 10 years
of employment with the Company. The program also provides that benefits in
specified amounts may be paid to executives who retire after reaching the age
of 50 and completing at least 20 years of service with the Company. In each
event, the amount of the benefit depends on the employee's years of service
with the Company (with the full benefit paid only if the employee has
completed 25 years of service).
The Company has purchased individual life insurance contracts with respect to
each employee covered by this program. The Company is the owner and
beneficiary of these insurance contracts. The employees are general
creditors of the Company with respect to these benefits.
Retirement and Employment Continuity Agreements
Retirement Agreements
The Company and Mr. Holland entered into a retirement agreement in 1997. Under
the terms of the agreement, Mr. Holland will retire as an officer and employee
of the Company, and as director, officer and employee of any affiliate of the
Company, on a date that will be determined by the Board of Directors, which
will be no later than September 30, 1998. On or before Mr. Holland's
retirement date, the Company will purchase a commercial annuity in the
principal amount of $974,724, which will provide for 180 equal monthly payments
to the Company. The Company will pay to Mr. Holland 180 monthly payments,
beginning on the first day of the month following his retirement date, each
equal in amount to the amount of the monthly annuity payments that the Company
receives under the commercial annuity. The annuity will be owned exclusively
by the Company.
In addition, Mr. Holland will be treated upon his retirement as having
completed 25 years of service with the Company for purposes of the Company's
deferred compensation program, and will be entitled to receive the full
benefit payable under the deferred compensation program. The Company will make
a lump sum payment to Mr. Holland within 30 days of his retirement of accrued
and unsued vacation pay, and will pay him a $25,000 retainer for his agreement
to be available to provide consulting services to the Company. Mr. Holland
9
also will be entitled to receive a bonus of up to $100,000 based on a percen-
tage of the payments that the Company receives in 1999 and 2000 (if any)
under an escrow agreement with the purchaser of a subsidiary that the
Company sold in 1997. Mr. Holland is released under the agreement for any
claims relating to his employment. Finally, the Company expects, but is not
required, to nominate Mr. Holland for reelection to the Board at the 1999
meeting of shareholders and at subsequent annual meetings, assuming that he is
eligible for reelection under the Company's standard policies and the
Company determines that such reelection would be in the best interests of
the Company and its shareholders.
The Company also entered into a retirement agreement with Mr. Meissner in
1997. Mr. Meissner retired from employment with the Company on December 31,
1997, and, pursuant to the terms of the retirement agreement, will receive
semi-monthly installment payments totaling $129,800 in each of 1998 and
1999. Mr. Meissner will receive in 1998 a lump sum payment of approximately
$44,000 for the value of certain health, life insurance and pension benefits,
and a car allowance payment. In addition, Mr. Meissner will be entitled to
receive the full benefit payable under the Company's deferred compensation
program.
Employment Continuity Agreements
The Company has entered into employment continuity agreements with key
management executives, including Messrs. J.S. Campbell, Nickerson and E.A.
Campbell, which provide certain compensation and benefits in the event of a
change of control. Each agreement is effective for three years and is
automatically extended for an additional three-year period, unless the
Company notifies the executive that the agreement will not be extended. Mr.
Holland's employment continuity agreement was terminated when he entered into
the retirement agreement described above.
The agreements provide that, in the event of a change of control of the
Company, each executive will continue to be employed by the Company for a one-
year period following the change of control and will continue to receive
a salary and annual bonus at least equal to twelve times the highest monthly
salary and bonus that were paid or are payable to the executive for the
twelve-month period immediately preceding the change of control. The
executive will also be entitled during this one-year period to employee
benefits, fringe benefits, expense reimbursements, vacation, and office
support that are at least as favorable as were provided to the executive
during the 90-day period immediately preceding the change of control. If,
during the one-year employment period following the change of control (the
"Employment Period"), the Company terminates the executive's employment
without cause or the executive voluntarily terminates employment "for good
reason", the Company will pay to the executive a lump sum cash amount equal
to the sum of the following amounts: (i) any salary, elective nonqualified
deferred compensation, and accrued vacation that have not yet been paid to
the executive, (ii) the largest annual salary paid or payable to the
executive for the Employment Period as annualized, and (iii) the greater of
the largest bonus paid or payable to the executive for the Employment Period
(as annualized) or the bonus paid to the executive for the twelve-month
period immediately preceding the change of control. In addition, the Company
will continue the executive's automobile allowance for twelve months
following his termination of employment. An executive shall be deemed to
have terminated employment "for good reason" if he is assigned duties
inconsistent with his position, authority or responsibilities, the Company
10
fails to provide him with the salary, bonus, benefits, support staff and
vacation to which he is entitled during the Employment Period, he is assigned
to an office or location that is located more than 35 miles from the office
where he was assigned at the time of the change of control, or the Company
attempts to terminate his employment other than as permitted under the
agreement or fails to require a successor to assume the agreement.
If the executive's employment is terminated on account of his disability or
death, or he voluntarily terminates employment other than "for good reason"
during the Employment Period, the executive (or his legal representative)
will be paid any salary which has not yet been paid, any elective nonqualified
compensation and accrued vacation that has not yet been paid, and a pro-rated
bonus. In the event the executive is terminated for cause during the
Employment Period, he will be paid any base salary that has not yet been paid
and any compensation previously deferred by the executive. If the executive
continues in employment with the Company through the last day of the
Employment Period, the executive will receive a lump sum payment equal to the
largest annual salary (as annualized) that was paid or payable to the executive
during the Employment Period.
A change of control is deemed to have occurred under the agreement if (i) any
individual, entity or group acquires, other than from the Company, 20% or more
of the outstanding shares of common stock of the Company or the combined
voting power of the Company's voting securities (subject to certain
exceptions), (ii) the individuals who constitute the Board as of the date of
the agreement cease to constitute at least a majority of the Board, other
than as a result of an election of a director by the stockholders, whose
election or nomination for election was approved by a majority of the
members of the Board (unless in connection with an actual or threatened
election contest), (iii) the Company's stockholders approve a
reorganization, merger, share exchange, or consolidation in which all or
substantially all of the individuals or entities who were stockholders
immediately prior to such transaction cease to own (directly or
indirectly) more than 60% of the outstanding shares of common stock or the
combined voting power of the voting securities of the corporation resulting
from such transaction in substantially the same proportion as their ownership
in the Company before the transaction, or (iv) a complete liquidation of the
Company, or a sale or disposition of all or substantially all of the assets of
the Company occurs (other than to a corporation of which more than 60% of the
outstanding shares of common stock and the combined voting power following
such sale or disposition is owned by all or substantially all of the
stockholders of the outstanding shares of common stock or combined voting
power of the Company before the sale in substantially the same proportion as
their ownership in the Company immediately before the sale or disposition).
Split-Dollar Life Insurance
The Company maintains a split-dollar insurance program for certain key
employees, including Mr. Holland. The face amount of each policy is $100,000.
The premium is split between the Company and the employee. No portion of the
premium is expensed for financial reporting purposes since the Company will
recoup its cost in full.
11
Retirement Savings Plan
On January 31, 1989, the Board approved a trusteed Retirement Savings Plan
(the "Plan"), effective march 1, 1989, that covers all employees of the
Company and its subsidiaries whose employment is not governed by the terms of
a collective bargaining agreement between employee representatives and the
Company or its subsidiaries and who satisfy certain minimum age and service
requirements. The Plan was amended and restated effective as of January 1,
1997. Under the restated plan, participants may make pre-tax contributions
of a portion of their annual compensation pursuant to the provisions of
Section 401(k) of the Internal Revenue Code. The Company may, in its
discretion, make a matching contribution for those participants who make
pre-tax contributions. Such matching contributions may equal up to 100% of a
particpant's pre-tax contributions, but may not exceed 2% of each participant's
compensation for the year. The Company may also make, in its discretion, a
contribution equal to 3% of a participant's compensation for the year, without
regard to whether the participant made a contribution to the Plan. The Plan
also permits participants to make after-tax contributions of a portion of their
annual compensation.
During 1997, total Company contributions to the Plan for eligible employees
consisted of a contribution of 3% of each eligible participant's annual
compensation, plus a matching contribution on each participant's pre-tax or
after-tax contributions of up to 2% of the participant's annual compensation.
Stock Option Plans
The Company maintains a 1995 Stock Option Plan. The following tables provide
information with respect to stock options that were granted to and are held by
the Named Executive Officers under the 1995 Stock Option Plan and a
predecessor stock option plan. No stock appreciation rights ("SARS") have
been granted to the Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
Potential
Realizable Value
At Assumed Annual
Rates of Stock
Price Appreciation
Individual Grants For Option Term (2)
------------------------------------ --------------------
Percent
Number of Of Total
Securities Options
Underlying Granted To
Options Employees Exercise Expir-
Granted In Fiscal Price ation
Name (#) (1) Year ($/Share) Date 5% ($) 10% ($)
James T. Holland 13,636 18% 9.81 2-02-07 217,896 346,963
John S. Campbell 7,521 10% 9.81 2-02-07 120,181 191,369
Michael J. Meissner 3,099 4% 9.81 2-02-07 49,520 78,853
C. Bryant Nickerson 5,922 8% 9.81 2-02-07 95,749 152,464
Ewen A. Campbell 5,579 7% 9.81 2-02-07 89,149 141,956
12
(1) Stock options were awarded in 1997 to the Named Executive Officers at
an exercise price equal to the fair market value of Common Stock on the
date the options were granted. The options were subject to a
performance-based vesting formula which was based on the total amount of
the bonus payable to the Named Executive Officer for 1997, the
percentage increase in the value of Common Stock from the date the
option was granted to December 31, 1997, and the exercise price for the
stock option. As a result of an increase in the market value of Common
Stock from the date the option was granted to December 31, 1997, those
Named Executive Officers who earned a bonus for 1997 became vested in at
least a portion of their 1997 stock option grants. The vested portion of
each stock option became immediately exercisable. The unvested portion of
each stock option was forfeited.
(2) Each option was granted for a ten-year term. The amounts disclosed
as the potential realizable value are the result of calculations at the
5% and 10% assumed rates of appreciation permitted by the Securities and
Exchange Commission. These amounts are not intended to forecast potential
future appreciation of the price of the Common Stock. The amounts
disclosed are based on assumed rates of appreciation in the value of the
Common Stock over a ten-year period.
AGGREGATED OPTION EXERCISES
IN LAST FISCAL YEAR
AND FY-END OPTION VALUES (1)
Number Of
Securities
Underlying Value Of
Unexercised Unexercised In-
Options the-Money Options
At FY-End (#) At FY-End ($)
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
James T. Holland 40,660 / 13,636 29,259 / 11,113
John S. Campbell 29,200 / 7,521 22,651 / 6,130
Michael J. Meissner - - - -
C. Bryant Nickerson 24,060 / 5,992 18,090 / 4,883
Ewen A. Campbell 11,000 / 5,579 6,798 / 4,457
(1) No stock options were exercised by any of the Named Executive Officers
during 1997. The Company has not granted any stock appreciation rights
to the Named Executive Officers.
Report of Compensation and Stock Option Committee on Executive Compensation
The Compensation and Stock Option Committee (the "Committee") is composed
solely of Directors who are not employees of the Company. The Committee
reviews and recommends to the Board of Directors actions to implement a
13
compensation structure that is intended to enhance the profitability of the
Company. The compensation of the Company's senior executives is structured
as a combination of salary, annual cash bonuses dependent on profitability
and other objective and subjective performance-based criteria, stock
options, and a deferred compensation program. This compensation structure
is intended to allow the Company to attract and retain qualified senior
executives and align the financial interests of senior executives with those
of the Company's shareholders.
At the beginning of the 1997 fiscal year, the Committee reviewed proposals
submitted by management for annual salaries and bonuses for the President and
the Company's other senior executives. The Committee determined the amount
of the salary and projected bonus to be paid to the President and the other
senior executives for the year based on management's recommendations and
subjective factors. In making its determination, the Committee reviewed
information from an annual survey of executive compensation for a group of
public and private companies in the chemicals, plastics and related
industries that was prepared by a national compensation consulting firm.
The Committee reviewed composite salary and bonus amounts that were derived
from salary and bonus data for executives of companies in this industry group
with sales similar to the Company's 1996 sales and its projected sales for
1997, as presented by management. The Committee also reviewed publicly
available information concerning executive compensation for a principal
competitor.
The Committee considered the composite compensation data derived from the
annual survey an appropriate basis for reviewing the compensation levels of
the Company's executives because many of the Company's peers are not public
companies and thus do not publicly disclose information concerning the
compensation of their executives, other than through voluntary participation
in surveys. The Committee also considered the compensation information for
the competitor a relevant basis for reviewing the compensation levels of the
Company's executives because the competitor is a peer company that compares its
cumulative total shareholder return to that of the S&P Chemicals (Specialty)
Index, as does the Company. The Company does not use the companies in the
S&P Chemicals (Specialty) Index for comparison of executives compensation
because the Company's most direct business competitors and its competitors
for executive talent are not the same as the companies included in the index.
Neither the President nor any senior executive other than Mr. Meissner was
paid a bonus for 1996. The President's 1996 salary, and the salaries for the
other senior executives (including the bonus paid to Mr. Meissner), were
generally competitive with the comparative salary and bonus standards described
above. In order to place greater emphasis on performance-based bonus pay, the
Committee decided to set the President's 1997 salary and the 1997 salaries of
the Company's other senior executives at the same levels as their 1996 salaries
(except in the case of one senior executive where individual circumstances
warranted an increase in salary level). The President's 1997 projected bonus
was set at a level consistent with the median bonus levels for the comparative
group described above, taking into account the past performance of the
President, the efforts that would be required of the President in a very
competitive business environment and the other criteria described below. The
same process was generally used to set the projected bonuses of other
senior executives.
The 1997 bonus program for the President was structured to give the President
the opportunity to receive a bonus based on the Company's 1997 net profit
before bonuses and income taxes ("PBT"), and based on additional criteria
14
such as increases in earnings and the market value of the Company's stock,
attainment of specified inventory reduction goals, increased profitability of
certain operating divisions and other performance-based criteria (some of
which were subjective in nature). Bonus targets for other senior executives
who are responsible for overall management of the Company were based on the
same PBT target and the same additional criteria. Target bonuses for the
senior executives who are directly responsible for divisions of the Company
were based on PBT targets for their respective divisions and on the same
additional factors. Mr. Meissner's bonus was also based, in part, on
attainment of specified cost-containment targets. The President's
eligibility to receive a bonus, and the eligibility of the Company's other
senior executives, were conditioned on attainment of greater than 75% of the
applicable PBT target.
The threshhold PBT targets established by the Committee for 1997 were only
met with respect to one of the Company's operating divisions. As a result,
the senior executive directly responsible for the management of that division
received a bonus in accordance with the terms of the bonus program. Mr.
Meissner received a bonus based on attainment of his cost-containment targets,
and another executive was paid a special discretionary bonus for outstanding
performance.
The Company has traditionally granted long-term compensation in the form of
stock options. The Committee considers stock options to be an important means
of compensating executives for their efforts and insuring that executives are
provided with an incentive to increase the profitability of the Company and
the market value of the Common Stock. Stock options under the Company's 1995
Stock Option Plan have traditionally been granted with an exercise price equal
to the fair market value of the Common Stock on the date of grant. Stock
options were awarded in 1997 to the Company's executives at an exercise price
equal to the fair market value of the Common Stock on the date of grant,
subject to a vesting formula. Under the formula, and executive had to receive
a bonus for 1997 and the market value of the Common Stock had to increase from
the date the option was granted to the last day of the 1997 fiscal year in
order for the executive to be entitled to exercise any portion of the
executive's option. As a result of an increase in the market value of the
Common Stock over this period, those executives who earned a bonus under
the 1997 bonus program became vested in at least a portion of their 1997
stock option grants. Executives who did not receive a bonus for the year, or
who terminated employment prior to the time at which their options become
vested, forfeited their options.
The Company maintains a deferred compensation program that provides benefits
in specified amounts to the Company's executive officers upon their retirement
at age 65 or death, or upon their termination of employment (other than by
the executive's voluntary action or discharge for cause) after at least 10
years of employment with the Company. The program also provides that
benefits in specified amounts may be paid to executives who retire after
reaching age 50 and completing at least 20 years of service with the Company.
The deferred compensation program is intended to provide executives with an
additional incentive to remain with the Company. Each of the Company's
senior executives participates in the deferred compensation program.
Section 162(m) of the Internal Revenue Code of 1986, as amended, imposes a
$1,000,000 limit on the amount of compensation that will be deductible by
the Company each year with respect to each of the President and the four
other most highly compensated executive officers. The cash compensation
level of the Company's executives is currently below the $1,000,000 limit.
15
The Company's 1995 Stock Option Plan is structured to comply with an
exemption from the Section 162(m) limitation for performance-based
compensation.
When setting compensation, the Committee takes into account the complexity of
the Company's business and the need for strong, involved management. The
Committee also takes into account the substantial changes that have occurred
during recent years in the Company's business and the business environment
in which the Company competes, and the special efforts made by senior
management to continue the Company's profitability despite significant
economic pressures and competition.
The Company has entered into a retirement agreement with the President under
which the President will retire during the Company's 1998 fiscal year. In
recognition of the President's long period of service with the Company, his
efforts in a highly competitive business environment and in order to ensure
a smooth transition to new senior management, the retirement agreement
provides for the payment of certain benefits to the President upon his
retirement, and requires that the President be available to provide consulting
services to the Company upon the Company's request following his retirement.
The Company entered into a retirement agreement with Mr. Meissner which
provided for Mr. Meissner's retirement at the end of 1997. In addition, the
Company has entered into employemnt continuity agreements with certain other
key executives. The employment continuity agreements are designed to insure
that the Company's business and operations continue to be managed with a
minimum of disruption in the event of a change of control of the Company.
The terms of the retirement agreements and employment continuity agreements
are described at page 9 under the caption "Retirement and Employment
Continuity Agreements."
The foregoing report was furnished by the Compensation and Stock Option
Committee.
R. Michael McCullough, Chairman
Arthur H. Bryant, II
Max C. Chapman, Jr.
Stephen P. Munn
COMPARATIVE PERFORMANCE
The following graph compares the yearly percentage change in the cumulative
total stockholder return of the Common Stock against the cumulative total
return of (i) the S&P Composite 500 Stock Index and (ii) the S&P Chemicals
(Specialty) Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
O'SULLIVAN CORPORATION, S&P 500 AND S&P CHEMICALS-SPECIALTY
Measured Period O'Sullivan S&P Chemicals-
(Fiscal Year Covered) Corporation S&P 500 Specialty
- --------------------- ----------- --------- ----------------
December 1992 100.00 100.00 100.00
December 1993 96.05 110.08 114.02
December 1994 102.94 111.53 99.54
December 1995 117.17 153.45 130.83
December 1996 127.84 188.68 134.19
December 1997 127.70 251.63 166.17
16
ITEM TWO-SELECTION OF AUDITORS
Yount, Hyde & Barbour, P.C., a firm of certified public accountants in
Winchester, Virginia, has served as auditors of the Company for several
years. The Board of Directors recommends their appointment for the 1998
fiscal year and will ask the stockholders to approve such appointment.
Representatives of the auditing firm are expected to be present at the
stockholders' meeting and will have the opportunity to make a statement if
they desire to do so and to respond to appropriate questions.
STOCKHOLDER PROPOSALS
Any stockholder desiring to make a proposal to be acted upon at the 1999
Annual Meeting tentatively scheduled for Wednesday, April 28, 1999, must
present such proposal to the Company at its principal office in Winchester,
Virginia not later than November 27, 1998, in order for the proposal to be
considered for inclusion in the Company's proxy statement. Additionally,
any stockholder who wishes to make a proposal from the floor at the 1998
annual stockholders' meeting must advise the Secretary of the Company in
writing, mailed no later than April 18, 1998, of the nature of the proposal.
MISCELLANEOUS
The 1997 annual report to stockholders, containing financial statements and
pertinent footnotes thereto, is included with the mailing of this proxy
statement.
/s/ C. Bryant Nickerson
------------------------
C. BRYANT NICKERSON
Secretary, Treasurer & CFO
17
[FRONT]
PROXY COMMON STOCK
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF O'SULLIVAN CORPORATION
The undersigned hereby appoints A.H. Bryant II and J.T. Holland and each of
them, proxies for the undersigned, with power of substitution, to vote all the
shares of the Common Stock of O'Sullivan Corporation with the same force and
effect as the undersigned at the annual meeting of the stockholders of
O'Sullivan Corporation on WEDNESDAY, APRIL 29, 1998 and any adjournment
thereof. The matters to be voted upon at this stockholders' meeting are
listed on the other side.
PLEASE READ EACH ITEM CAREFULLY.
The proxy may be revoked at any time before it is voted, and the giving of
this proxy will not affect the right of the stockholder to attend the
meeting and vote in person. This proxy will be voted as specified and in
the absence of direction will be voted FOR each of the matters listed.
The management does not know any other matters which will be presented for
action at the meeting, but the persons named in the proxy intend to vote or
act with respect to any other proposal which may be presented for action
according to their judgement in light of conditions then prevailing.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement attached thereto.
CONTINUED ON OTHER SIDE
[BACK]
THE MATTERS TO BE VOTED UPON ARE: ####
A. The election of directors for the ensuing year:
[ ] For all nominees listed:
C.H. Bloom, Jr. A.H. Bryant II M.O. Bryant R.L. Burrus, Jr.
M.C. Chapman, Jr. J.T. Holland R.M. McCullough S.P. Munn
T.J. Sandker L.W. Smith, Jr.
[ ] For all nominees listed above except as marked to the contrary
below (Instruction: to withhold authority to vote for any
individual nominee, write the nominee's name in the space provided
below.)
------------------------------------------------------------------
[ ] Withhold authority to vote for all nominees listed above.
B. Approval of the appointment of Yount, Hyde & Barbour, P.C. of
Winchester, Virginia as auditors for the company for the ensuing year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
C. Upon such other matters as may properly come before the meeting.
------------------------ ---------
SIGNATURE DATE
------------------------ ---------
SIGNATURE DATE
Please sign, exactly as name appears above, date, and return this proxy
using the enclosed envelope. When shares are owned by joint tenants, both
should sign. When signing as attorney, as 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 partnership name by authorized person.
