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
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
O'SULLIVAN CORPORATION
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Name of Registrant as Specified In Its Charter
----------------------------------------------------------------------
Name of Person(s) Filing Proxy Statement, if other than the Registrant
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:_____________________________________________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held Wednesday, April 28, 1999
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 28, 1999, 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 1999; 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
1998 annual report.
Only stockholders of record at the close of business on March 8, 1999 will
be entitled to notice of and 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 and
Chief Financial Officer
1
March 26, 1999
O'Sullivan Corporation
1944 Valley Avenue
Winchester, Virginia 22601
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
APRIL 28, 1999
The enclosed proxy is solicited by and on behalf of the Board of Directors
of O'Sullivan Corporation (the "Company") for the 1999 annual meeting of
stockholders of the Company to be held on April 28, 1999, 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 26, 1999.
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 8, 1999, 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 8,
1999, 15,594,952 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, management is not aware of any matters
(other than those specified) that 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 judgement.
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 eleven 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 quorom 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 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, 1999.
NAME AND ADDRESS OF NUMBER OF SHARES PERCENT
BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
Arthur H. Bryant II (1) 2,409,084 15.4%
P. O. Box 2929
Winchester, VA 22604
Magalen O. Bryant (2) 940,148 6.0%
Locust Hill Farm
Middleburg, VA 22117
John C. O. Bryant (1) 822,549 5.3%
P. O. Box 247
Middleburg, VA 20118-0247
Dimensional Fund (3) 840,178 5.4%
Advisors, Inc.
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
Tweedy Browne Co. L.L.C.(4) 858,330 5.5%
52 Vanderbilt Avenue
New York, NY 10017
(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 Mr. John C. O. Bryant have
sole voting and investment powers with respect to shares shown as owned
by them. The information in this table relating to beneficial
ownership of shares of Common Stock by Mr. Arthur H. Bryant II and Mr.
John C. O. Bryant is based solely on a review of filings with the
Securities and Exchange Commission (the "Commission").
(2) To the best knowledge of the Company, Mrs. Bryant has sole voting and
investment powers with respect to 231,287 shares of Common Stock and
shared voting and investment powers with respect to 708,861 shares of
Common Stock (which shares are held in a trust of which Mrs. Bryant is
co-trustee). This information is based on a review of filings by Mrs.
Bryant with the Commission and on certain other information provided by
Mrs. Bryant.
(3) Dimensional Fund Advisors, Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership as of December, 31, 1998
of the shares of Common Stock set forth above, all of which shares are
3
held in portfolios of DFA Investment Dimensions Group Inc., a registered
open-end investment company, in series of the DFA Investment Trust
Company, a Delaware business trust, or by the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified employee
benefit plans, with respect to all of which Dimensional serves as
investment manager. The Company has also been advised that Dimensional
disclaims beneficial ownership of all such shares. The foregoing is
based on a review of a filing with the Commission and on certain other
information provided by Dimensional to the Company.
(4) Tweedy Browne Co. L.L.C., a registered investment advisor, is deemed to
have beneficial ownership of the shares of Common Stock set forth above,
all of which shares are held in the accounts of various customers of
Tweedy Browne Co. L.L.C., with respect to which accounts Tweedy Browne
Co. L.L.C. has investment discretion (the "TBC Accounts"), and with
respect to certain of which it has obtained sole or shared voting power.
The Company has also been advised that Tweedy Browne Co. L.L.C.
disclaims beneficial ownership of the shares of Common Stock held in
the TBC Accounts. The foregoing is based on review of a filing with the
Commission dated as of April 3, 1998.
ITEM ONE-ELECTION OF DIRECTORS
A Board of eleven directors of the Company is to be elected at the meeting
to serve until the next annual meeting or until their successors are elected.
On January 12, 1999, Mrs. Magalen O. Bryant resigned from the Board of
Directors. She will not seek reelection in 1999. The Board of Directors
elected Mr. John C. O. Bryant, Mrs. Bryant's son, to fill the vacancy created
by Mrs. Bryant's resignation. Each of the nominees listed below is presently
a director of the Company. Each nominee was elected by the stockholders at
the last annual meeting for a term expiring at the 1999 annaul meeting, except
for Mr. John C. O. Bryant who was appointed by the Board of Directors on
January 12, 1999, and John S. Campbell, President and Chief Executive Officer
of the Company, who was appointed as a director by the Board of Directors on
October 27, 1998.
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 1/31/99
C. Hugh Bloom, Jr., 65 1990 17,403(3) 0.1%
Easton, Pennsylvania,
Retired
Vice President, C.F. Martin & Co., Inc.
4
Arthur H. Bryant, II, 56 1967 2,409,804(1)(2) 15.4%
Winchester, Virginia, (3)
Chairman of the Board;
Chairman and Chief Executive Officer of the
Company, 1986-1995
John C. O. Bryant, 32 1999 822,549(1)(3) 5.3%
Nokesville, Virginia,
President and Chief Executive Officer,
Atlantic Computing Services
Robert L. Burrus, Jr., 64 1995 14,000(3) 0.1%
Richmond, Virginia,
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.
John S. Campbell, 48 1998 76,953(1)(3) 0.5%
Winchester, Virginia,
President and Chief Executive Officer
of the Company, 1998 - present;
Vice President, 1986-1998
Max C. Chapman, Jr., 55 1989 141,002(1)(3) 0.9%
Scarborough, New York,
Chairman, Nomura Holding
America Inc.; Director,
The Nomura Securities Co., Ltd.
James T. Holland, 58 1984 115,015(1)(3) 0.7%
Winchester, Virginia,
President and Chief Executive Officer
of the Company, 1995-1998;
President and Chief Operating
Officer, 1986-1995; Executive Vice President,
1984-1986; Vice President and Treasurer,
1979-1984
R. Michael McCullough, 60 1995 13,000(3) 0.1%
McLean, Virginia,
Retired Senior Chairman,
Booz Allen & Hamilton,
Director, Host Marriott Services Corp.,
Interstate Hotel Corporation and
Watson-Wyatt Worldwide, Corp.
Stephen P. Munn, 56 1995 13,000(3) 0.1%
Syracuse, New York,
Chairman, Chief Executive Officer and
Director, Carlisle Companies
Incorporated; Trustee, Prudential Securities
Mutual Funds
5
Timothy J. Sandker, 50 1997 11,000(3) 0.1%
Madison, Indiana,
President, Rotary Lift Division
of Dover Corporation
Leighton W. Smith, Jr., 59 1997 11,000(3) 0.1%
Fairfax, Virginia,
Admiral, United States Navy,
Retired
All Executive Officers and Directors as a
group (17 persons) 3,737,773(1)(2) 24.0%
(3)
In addition to Mr. Holland and Mr. J.S. Campbell, the remaining executive
officers named in the summary compensation table beneficially owned the
following shares of Common Stock at January 31, 1999:
COMMON STOCK
BENEFICIALLY
OWNED AS OF PERCENT
NAME AND TITLE 1/31/99 OF CLASS
John P. Crowther,
Vice President 14,059(1)(3) 0.1%
C.Bryant Nickerson,
Secretary, Treasurer and 22,510(1)(3) 0.1%
Chief Financial Officer
Ewen A. Campbell,
Vice President 11,616(3) 0.1%
James L. Tremoulis,
Vice President 15,976(3) 0.1%
(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 voting and investment powers: Arthur H.
Bryant,II, 16,466 shares; Max C. Chapman, Jr., 5,000 shares; James T.
Holland, 18,119 shares; John C. O. Bryant, 2,810 shares; John P.
Crowther, 1,000 shares; C. Bryant Nickerson, 100 shares.
(2) Includes 1,129,860 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 31, 1999 or within 60 days
thereafter: John S. Campbell, 76,802 shares; all executive officer and
directors as a group, 264,988 shares; John P. Crowther, 2,310 shares;
C. Bryant Nickerson, 21,560 shares; Ewen A. Campbell, 11,116 shares; and
James L. Tremoulis, 15,700 shares. Also includes for each director
(other than Mr. Campbell) the following shares which may be acquired under
currently exercisable stock options granted under the Company's 1995
Outside Directors Stock Option Plan: Messrs. Bloom, A.H. Bryant, Burrus,
6
Chapman, McCullough and Munn, 13,000 shares each; Messrs. Smith and
Sandker, 11,000 shares each and Messrs. Holland and John C. O. Bryant,
10,000 shares each.
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 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 completed fiscal year. Mr. John
C. O. Bryant failed to timely file a Form 3 with the Commission following his
election to the Board of Directors. He filed a Form 3 thirty-one days late.
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 1998, four regular quarterly Board of Directors meetings were held.
Each of the incumbent directors attended at least 75% of the meetings of the
Board of Directors and any of the committees on which they served.
The Board of Directors has an Audit Committee which consists of Messrs.
Burrus, McCullough, Bloom, Sandker and Smith. All members of the Audit
Committee are outside directors. Mr. Burrus serves as Chairman of the Audit
Committee. The Committee met two times during 1998. 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 of Directors, 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 of Directors
which consists of Messrs. A.H. Bryant, Chapman, McCullough and Munn. No
member of the Compensation and Stock Option Committee is an employee of the
Company. Mr. McCullough serves as Chairman of this Committee. The
Committee met three times during 1998. The Committee is responsible for
reviewing and making recommendations to the Board of Directors with respect
to compensation of executive officers and directors. Mr. Holland was
appointed to the Committee in January of 1999. The Stock Option Plan
Subcommittee of the Committee, which consists of Messrs. Chapman and Munn,
administers the 1995 Stock Option Plan and 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 of Directors which consists of
Messrs. A. H. Bryant, Chapman and Holland. No member of the Nominating
Committee is an employee of the Company, except that Mr. Holland served as
President and Chief Executive Officer of the Company until July 31, 1998.
7
Mr. Chapman serves as Chairman of this Committee. The Committee, if so
requested by the Board of Directors, recommends to the Board of Directors
candidates for election as directors. The Committee did not meet in 1998.
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 $2,500 attendance fee is paid to each outside
director for attendance at regularly scheduled meetings of the Board of
Directors, which are held four times a year. Non-employee directors who are
committee members are paid $500 for each committee meeting held on the date
of a regularly scheduled Board of Directors meeting and $750 for each
meeting held on a date other than the date of a regularly scheduled Board of
Directors meeting. Expenses incurred in connection with attending meetings
are normally borne by the directors. Each non-employee director
automatically receives in the first year that he becomes a non-employee
director an option to purchase 10,000 shares of Common Stock of the Company
under the 1995 Outside Directors Stock Option Plan. On every April 25th
thereafter, each non-employee director receives an option to purchase an
additional 1,000 shares of the Common Stock. The price of each option is
equal to the fair market value of the Common Stock on the date the option is
granted. All options awarded under the plan are nonstatutory stock options.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table provides certain information concerning annual and
long-term compensation paid to or accrued on behalf of the President and the
four other most highly compensated executive officers of the Company (the
"Named Executive Officers") for the years 1998, 1997, and 1996.
Long Term
Compensation
------------
Annual Compensation Awards
------------------- ------
Securities
Underlying
Name and Principal Options All Other
Position Year Salary($) Bonus($) (#) Compensation($)
John S. 1998 $255,367 $ 44,707 50,000 $ 16,856(1)
Campbell 1997 190,100 13,178 7,521 14,603
President and Chief 1996 190,100 - - 4,000 12,980
Executive Officer
8
James T. 1998 $229,894 $ - - - - $ 25,043(2)
Holland 1997 345,390 - - 13,636 1,949,453
Retired President 1996 345,390 - - 5,000 87,197
And Chief Executive
Officer
John P. 1998 $194,600 $ 25,000 - - $ 16,261(3)
Crowther 1997 181,257 40,000 2,107 14,200
Vice President 1996 175,648 37,200 - - 13,349
C. Bryant 1998 $160,426 $ 25,000 - - $ 17,006(4)
Nickerson 1997 153,100 - - 5,922 14,442
Secretary, 1996 153,100 - - 3,000 14,062
Treasurer and Chief
Financial Officer
Ewen A. 1998 $149,850 $ 25,000 - - $ 15,263(5)
Campbell 1997 143,100 15,000 5,579 12,756
Vice President 1996 138,100 - - 2,000 12,980
James L. 1998 $143,100 $ 9,053 - - $ 13,034(6)
Tremoulis 1997 143,100 - - 5,579 13,101
Vice President 1996 143,100 - - 2,000 12,112
(1) This amount consists of Company contributions under the Retirement
Savings Plan ($7,998) and amounts accured under the Company's deferred
compensation program ($8,858).
(2) This amount consists of Company contributions under the Retirement
Savings Plan ($6,777) and the portion of the cash surrender value of a
split dollar life insurance policy that was paid to Mr. Holland's
designated beneficiary under the policy when the policy was terminated
($18,266).
(3) This amount consists of Company contributions under the Retirement
Savings Plan ($7,995) and amounts accrued under the Company's deferred
compensation program ($8,266).
(4) This amount consists of Company contributions under the Retirement
Savings Plan ($7,061) and amounts accrued under the Company's deferred
compensation program ($9,945).
(5) This amount consists of Company contributions under the Retirement
Savings Plan ($6,957) and amounts accrued under the Company's deferred
compensation program ($8,306).
(6) This amount consists of Company contributions under the Retirement
Savings Plan ($6,222) and amounts accrued under the Company's deferred
compensation program ($6,812).
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
9
age 65 is as follows: Mr. J.S. Campbell, $60,000, Mr. Holland, $150,000,
Mr. Crowther, $40,000, Mr. Nickerson, $50,000, Mr. E.A. Campbell, $40,000,
and Mr. Tremoulis, $46,000. 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 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 Agreement
The Company and Mr. Holland entered into a retirement agreement in 1997.
Under the terms of the agreement, Mr. Holland retired as an officer and
employee of the Company, and as director, officer and employee of all
affiliates of the Company, on July 31, 1998. He continues to serve as a
director of the Company. The Company has purchased a commercial annuity in
the principal amount of $974,724, which provides for 180 equal monthly
payments to the Company. The Company has begun to pay Mr. Holland 180
monthly payments, each equal in amount to the amount of the monthly annuity
payments that the Company receives under the commercial annuity. The annuity
is owned exclusively by the Company. Mr. Holland has no claims in or rights
against the annuity or the payments made from the annuity.
Mr. Holland was treated upon his retirement as having completed 25 years of
service with the Company for purposes of the Company's deferred compensation
program, and is entitled to receive the full benefit payable under the
deferred compensation program. The Company made a lump sum payment to Mr.
Holland of his accrued and unused vacation pay when he retired, and paid him
a $ 25,000 retainer to be available to provide consulting services to the
Company. Mr. Holland is released under the retirement agreement for any claims
relating to his employment.
Employment Continuity Agreements
The Company has entered into employment continuity agreements with key
management executives, including Messrs. J.S. Campbell, Crowther, Nickerson,
E.A. Campbell and Tremoulis, 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
10
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 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 sucessor 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
deferred 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 occured 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
11
(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).
Retirement Savings Plan
The Company maintains a Retirement Savings Plan (the "Plan") that covers
all employees of the Company and its Subsidiaries who are not covered under
a collective bargaining agreement and who satisfy certain minimum age and
service requirements. The Plan permits participants to 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 participant'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 permits participants to make after-tax contributions of a
portion of their annual compensation.
During 1998, 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 the Named
Executive Officers under the 1995 Stock Option Plan during 1998. No stock
appreciation rights ("SARS") were granted to the Named Executive Officers
during 1998.
12
OPTION GRANTS IN LAST FISCAL YEAR
Potential
Realizable Value
At Assumed Annual
Rates of Stock
Price Appreciation
Individual Grants For Option Terms (2)
----------------- --------------------
Percent
Number of Of Total
Securities Options
Underlying Granted To
Options Employee Exercise Expir-
Granted In Fiscal Price ation
Name (#) Year ($/Share) Date 5% $ 10%$
John S. Campbell 50,000 (1) 100% 7.87 10-26-08 641,377 1,021,286
James T. Holland -- -- -- -- -- -- -- -- -- -- -- --
John P. Crowther -- -- -- -- -- -- -- -- -- -- -- --
C. Bryant Nickerson -- -- -- -- -- -- -- -- -- -- -- --
Ewen A. Campbell -- -- -- -- -- -- -- -- -- -- -- --
James L. Tremoulis -- -- -- -- -- -- -- -- -- -- -- --
(1) The option granted to Mr. Campbell became fully exercisable as of
October 27, 1998. The option will cease to be exercisable upon the earlier
of (i) the date on which the option holder terminates employment for any
reason other than death or disability, (ii) one year from his termination of
employment on account of disability, (iii) three months from termination of
his employment on account of death, or (iv) October 26, 2008. The option is
not transferable by the option holder other than by will or by the laws of
descent and distribution.
(2) The amounts disclosed as the potential realizable value are the result
of calculations at the 5% and 10% assumed rates of appreciation for the full
ten year term of the option, as permitted by the Commission. These amounts
are not intended to forecast potential future appreciation of the price of
the Common Stock.
13
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 ($)
Name Exercisable/Unexercisable Exercisable/Unexercisable
John S. Campbell 79,302 / - - 112,758 / - -
James T. Holland (2) - - / - - - - / - -
John P. Crowther 2,310 / - - 20 / - -
C. Bryant Nickerson 24,060 / - - 10,201 / - -
Ewen A. Campbell 11,116 / - - 3,118 / - -
James L. Tremoulis 18,200 / - - 12,751 / - -
(1) No stock options were exercised by any of the Named Executive Officers
during 1998. The Company has not granted any stock appreciation rights to
the Named Executive Officers.
(2) Mr. Holland's options ceased to be exercisable when he terminated
employment on July 31, 1998.
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
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 1998, the Committee reviewed proposals submitted by
management for annual salaries and bonus opportunities for the Company's
senior executives. The Committee determined the amount of the salary and
projected bonuses to be paid to the Company's senior executives for the year
based on management's recommendations and subjective factors. In making its
determination, the Committee reviewed a report prepared for the Company by a
compensation consulting firm. The report analyzed market cash compensation
levels for executive positions identical or comparable to the positions held
by the Company's senior executives. The analysis was based on executive
compensation data for companies in the chemicals, plastics and non-durable
14
goods manufacturing industries which have annual revenues similar to the
Company's annual revenues and which also have a national recruiting base for
executive talent. The data used by the compensation consulting firm to
prepare its report was obtained from several national executive compensation
surveys. In addition to reviewing the compensation consulting firm's report,
the Committee reviewed publicly available information concerning executive
compensation for a principal competitor and an executive compensation survey.
The Committee considered the composite compensation data used by the
compensation consulting firm and the executive compensation survey as
appropriate bases for analyzing 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 principal
competitor a relevant basis for reviewing the compensation levels of the
Company's executives because such 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 executive
compensation because the Company's most direct business competitors and its
competitors for executive talent are not the same as the companies included
in that index.
Mr. Holland's salary for 1998 was set at the same level as his salary for
1997 and he was not included in any bonus program because of his scheduled
retirement under terms of the retirement agreement that he and the Company
entered into in 1997. The 1998 salaries for the Company's other senior
executives were set at levels generally consistent with the median salary
levels derived from the comparative compensation data described above. The
1998 bonus program for the Company's senior executives (excluding Mr.
Holland) was structured to give each executive the opportunity to receive a
bonus based on the Company's 1998 net profit before bonuses and income taxes
(PBT), the Company's attainment of target cost savings goals and the
executive's achievement of performance objectives specifically related to
his responsibilities and duties. Executives were not entitled to receive
any bonus under the program unless more than 75% of the PBT target for the
year was achieved.
The threshold PBT target established under the 1998 bonus program was
achieved. As a result, bonuses were paid to the Company's senior executives
(excluding Mr. Holland) in accordance with the terms of the program. In
addition, the bonuses for three of the Company's senior executives were
increased to recognize outstanding individual performance during the year.
Mr. Campbell was chosen by the Board of Directors to succeed Mr. Holland as
President of the Company in July of 1998. After Mr. Campbell became
President, the Committee reviewed his then current compensation and benefits
to determine what adjustments should be made in light of his new position
and responsibilities. The Committee also requested that Mr. Holland provide
recommendations as to what adjustments would be appropriate. Based on
recommendations received by the Committee from Mr. Holland, Mr. Campbell's
salary for 1998 was increased to $250,000. No change was made to his bonus
opportunity under the 1998 bonus program, other than to reflect the increase
in his salary. As a result, Mr. Campbell's bonus under the 1998 bonus
program was computed based on his new salary. Mr. Campbell's salary and
bonus will be reviewed by the Committee in subsequent years based on
comparative compensation data similar to data used to set senior executives'
15
salaries and bonus opportunities for 1998.
The Company has traditionally granted long-term incentive 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 Company's stock. Mr. Campbell
was granted 50,000 stock options under the Company's 1995 Stock Option Plan
after he was appointed President to further align his interests with those
of the Company's shareholders and to create an incentive for him to increase
the profitability of the Company.
The Company maintains a deferred compensation program that provides benefits
in specified amounts to the Company's senior executives 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 ten
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.
During 1998, the Committee reviewed the projected annual benefits payable
under the deferred compensation program to senior executives other than Mr.
Holland (whose deferred compensation benefit had been fixed under the terms
of his retirement agreement). The Committee considered whether the deferred
compensation program, when combined with the other available sources of
postretirement income (such as the Company's Retirement Savings Plan),
provided a level of postretirement income comparable to the level of
postretirement income typically provided by other companies. The Committee
reviewed income replacement targets recommended by the Company's compensation
consulting firm, other available sources of postretirement income for senior
executives and the relative financial impact on the Company of increasing
the benefits payable under the deferred compensation program. The Committee
concluded that the annual deferred compensation benefit payable to each
senior executive should be increased by $10,000 this year, and reviewed for
possible increases in subsequent years.
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.
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. In light of these considerations, the
Company has entered into employment continuity agreements with certain key
executives, including Mr. Campbell. The employment continuity agreements
are designed to insure that the Company's business and operations continue
16
to be managed with a minimum of disruption in the event of a change of
control of the Company.
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
Measurement Period O'Sullivan S&P Chemicals-
(Fiscal Year Covered) Corporation S&P 500 Specialty
- --------------------- ----------- ------- --------------
December 1993 100.00 100.00 100.00
December 1994 107.18 101.32 87.30
December 1995 121.99 139.40 114.75
December 1996 133.11 171.40 117.69
December 1997 132.95 228.59 145.74
December 1998 127.86 293.91 124.11
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 1999 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 2000
Annual Meeting tentatively scheduled for Wednesday, April 26, 2000, must
present such proposal to the Company at its principal office in Winchester,
Virginia not later than November 26, 1999, in order for the proposal to be
considered for inclusion in the Company's proxy statement. Additionally,
17
any stockholder who wishes to make a proposal from the floor at the 1999
annual stockholders' meeting must advise the Secretary of the Company in
writing, mailed no later than April 17, 1999, of the nature of the proposal.
MISCELLANEOUS
The 1998 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 and
Chief Financial Officer
18
[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.S. Campbell 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 28, 1999 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.
This 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 J.C.O. Bryant R.L. Burrus, Jr.
J.S. Campbell 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 lsited above.
B. Approval of the appointment of Yount, Hyde and 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 the 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.
