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 (ss.)240.14a-11(c) or (ss.)240.14a-12
ELJER INDUSTRIES, INC.
(Name of Registrant as Specified in Its Charter)
ELJER INDUSTRIES, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each part 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:/1/
(4) Proposed maximum aggregate value of transaction:
- ----------
/1/Set forth the amount on which the filing fee is calculated and state how it
was determined.
[ ] 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 No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
17120 Dallas Parkway
Dallas, Texas 75248
Tel: (214) 407-2600
ELJER
INDUSTRIES
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held On April 16, 1996
Dallas, Texas
March 15, 1996
To the Shareholders of ELJER INDUSTRIES, INC.:
Notice is hereby given that the annual meeting of shareholders of
Eljer Industries, Inc., a Delaware corporation (the "Company"), will be held at
The Addison Conference & Theatre Centre at 15650 Addison Road, Addison, Texas,
on Tuesday, April 16, 1996, at 8:00 a.m., local time, for the following
purposes:
1. To elect two directors to serve for a term of three years;
2. To consider and vote upon a proposal to amend the Company's
Long-Term Executive Incentive Compensation Plan to increase from
850,000 to 1,200,000 the number of shares of Common Stock of the
Company reserved for issuance pursuant to the Plan;
3. To ratify the appointment of Arthur Andersen LLP as the
independent auditors of the Company; and
4. To transact any other business which may properly come before
the meeting or any adjournment thereof.
Shareholders of record at the close of business on February 20,
1996 are entitled to notice of and to vote at the annual meeting or any
adjournment thereof. A complete list of such shareholders will be available for
examination at the offices of the Company in Dallas, Texas, during normal
business hours for a period of 10 days prior to the meeting.
A record of the Company's activities during 1995 and financial
statements for the fiscal year ended December 31, 1995 are contained in the
Company's 1995 Annual Report. The Annual Report, which is being delivered to
shareholders herewith, does not form any part of the material for solicitation
of proxies.
By Order of the Board of Directors
George W. Hanthorn
Vice President - General Counsel
and Secretary
<PAGE>
[MAP OF MEETING LOCATION]
Place of Annual Meeting
The Addison Conference & Theatre Centre is located at 15650 Addison Road,
Addison, Texas, approximately 18 miles northeast of Dallas/Ft. Worth
International Airport.
Shareholders attending the meeting who will be using LBJ Freeway (I-635)
should exit north onto the Dallas North Tollway, travel north to the Beltline
Road exit. Turn west (left) on Beltline to Addison Road, turn north (right) on
Addison Road. The Addison Conference & Theatre Centre is located on the right.
<PAGE>
17120 Dallas Parkway
Dallas, Texas 75248
Tel: (214) 407-2600
ELJER
INDUSTRIES
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1996
This proxy statement is furnished to shareholders of Eljer
Industries, Inc. (the "Company") in connection with the solicitation by the
Board of Directors of the Company of proxies for use at the annual meeting of
shareholders to be held at the time and place and for the purposes set forth in
the accompanying notice. The approximate date of mailing of this proxy statement
and the accompanying proxy is March 15, 1996.
The Company will bear the cost of soliciting proxies. In addition
to solicitations by mail, certain officers, directors or employees of the
Company or its subsidiaries may solicit proxies in person or by mail, telephone,
facsimile telecommunication or telegraph without special compensation for their
services. Arrangements will also be made with brokerage firms and other
custodians, nominees and fiduciaries to forward solicitation material to the
beneficial owners of the Company's common stock, par value $1.00 per share
("Common Stock") held of record by such brokerage firms and other custodians,
nominees and fiduciaries and the Company will reimburse such firms and persons
for reasonable out-of-pocket expenses incurred by them in connection therewith.
The Company has retained Morrow & Co., Inc. to assist in the solicitation of
proxies at a fee of $3,500 plus certain expenses.
Proxy Cards. The enclosed proxy card serves to appoint proxies
for record holders of Common Stock of the Company. Shares represented by a proxy
in such form, duly executed and returned to the Company and not revoked, will be
voted at the meeting in accordance with the directions given. IF NO INSTRUCTIONS
ARE INDICATED, THE PROXY WILL BE VOTED FOR ELECTION OF THE DIRECTORS NAMED IN
THE PROXY, FOR APPROVAL OF THE PROPOSAL TO AMEND THE COMPANY'S LONG-TERM
EXECUTIVE INCENTIVE COMPENSATION PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON
STOCK RESERVED FOR ISSUANCE PURSUANT TO THE PLAN AND FOR RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS. Any shareholder
giving a proxy may revoke it at any time before it is exercised by giving
written or oral notice of such revocation to the Secretary of the Company.
Voting Procedures and Tabulation. The Company will appoint two
inspectors of election to act at the meeting and to make a written report
thereof. Prior to the meeting, the inspectors will sign an oath to perform their
duties in an impartial manner and according to the best of their ability. The
inspectors will ascertain the number of shares outstanding and the voting power
of each, determine the shares represented at the meeting and the validity of
proxies and ballots, count all votes and ballots and perform certain other
duties as required by law.
The inspectors will tabulate (i) the number of votes cast for or withheld
as to the vote on each nominee for director, (ii) the number of votes cast for,
against or abstaining, as well as the number of abstentions and non-votes, as to
the proposal on the Long-Term Executive Incentive Compensation Plan and (iii)
the number of votes casts for, against or abstaining, as well as the number of
broker abstentions and non-votes, as to the ratification of the appointment of
independent auditors. The treatment and effect of abstentions and broker
non-votes under Delaware law and the Company's Certificate of Incorporation and
By-laws are described below. An abstention or broker non-vote with respect to
the election of directors will have no effect on the outcome of the voting on
such matter, provided a quorum is present, because directors are elected by a
plurality of the shares of Common Stock present in person or by proxy at the
meeting and entitled to vote. An abstention with respect to the proposals on the
Long-Term Executive Incentive Compensation Plan and on ratification of the
appointment of auditors will effectively count as a vote against the proposals.
The shares represented by a broker non-vote (or other limited proxy) as to such
proposals will be counted toward the meeting quorum but will not be entitled to
be voted on the proposals at the meeting and therefore will not be
<PAGE>
considered a part of the voting power present with respect thereto. This
will have the effect of reducing the number of shares required to be voted in
favor of the proposal in order to approve it.
YOUR VOTE IS IMPORTANT TO THE COMPANY. EVEN IF YOU EXPECT TO
ATTEND THE 1996 ANNUAL MEETING, WE URGE YOU TO COMPLETE, DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED. COMPLETING THE
ENCLOSED PROXY WILL NOT PREVENT YOU FROM VOTING YOUR SHARES IN PERSON IF YOU DO
ATTEND THE MEETING.
VOTING SECURITIES
The only voting security of the Company outstanding is its Common
Stock. Only holders of record of Common Stock at the close of business on
February 20, 1996, the record date for the meeting, are entitled to notice of
and to vote at the meeting. On the record date for the meeting, there were
7,152,252 shares of Common Stock outstanding and entitled to be voted at the
meeting. A majority of such shares, present in person or represented by proxy,
is necessary to constitute a quorum. Each share of Common Stock is entitled to
one vote.
ELECTION OF DIRECTORS
The Company's by-laws provide that the directors are to be
divided into three classes with respect to the time for which they hold office.
At each annual meeting of shareholders of the Company, successors of the class
whose term of office expires in that year are to be elected for a three-year
term or until their successors have been duly elected and qualified. The terms
of two directors, Frank J. Morgan and John H. Deininger, will expire at the 1996
Annual Meeting. Messrs. Morgan and Deininger have each been nominated for
re-election. If re-elected, Messrs. Morgan and Deininger will each serve until
the 1999 annual meeting of shareholders of the Company or until his successor
has been duly elected and qualified.
The Company's by-laws establish certain procedures for
shareholder nominations of candidates for directors. Those procedures are set
forth below in the section entitled "Notice Provisions for Shareholder Proposals
and Shareholder Nominations of Directors."
The parties named in the enclosed proxy intend to vote the shares
represented thereby FOR the election of Messrs. Morgan and Deininger unless the
proxy is marked otherwise. Messrs. Morgan and Deininger have each agreed to
serve as a director if elected and the Company has no reason to believe that a
nominee will be unable to serve. In the event a nominee becomes unwilling or
unable to serve, however, the persons named in the enclosed proxy will vote such
proxy for such other person as the Board of Directors may nominate for director.
Set forth below is information regarding each of the directors
and the nominees for director of the Company. Directors in each class are
elected at the annual meeting of shareholders held in the year in which the term
for such class expires and will serve thereafter for three years.
-2-
<PAGE>
CLASS WHOSE TERM EXPIRES IN 1996
<TABLE>
<S> <C>
Frank J. Morgan,
age 70, director since April 1989 Mr. Morgan has served as Chairman of the Board of the Company since
December 1990. Mr. Morgan served as President and Chief Operating
Officer of The Quaker Oats Company, an international marketer of foods,
pet foods and toys, from 1983 to 1990. Prior thereto, he held various
positions with Quaker Oats since 1964. He is also a director of The
Molson Companies Limited.
John H. Deininger,
age 64, director since April 1989 Mr. Deininger serves as a consultant to and/or an investor in a number of
companies. His business is conducted under the name J.D. Investments,
Inc. He also serves as the Chairman of the Board of Pawnee Rotation
Molding Co., L.P. since May 1995. He served as President, Chief
Executive Officer and a director of Union City Body Co., L.P., from
October 1993 to October 1994. He served as Executive Vice President of
Illinois Tool Works, Inc., a manufacturer of industrial products and
components from 1986 through 1990.
CLASS WHOSE TERM EXPIRES IN 1997
C. A. Rundell, Jr.,
age 64, director since October 1992 Mr. Rundell serves as a consultant to and/or as a member of the boards of directors
of a number of companies. His business is conducted under the name
Rundell Enterprises, a sole proprietorship. Mr. Rundell is also a
director of Inter-Regional Financial Group, Inc., NCI Building Systems,
Inc., Redman Industries, Inc., Tandy Brands Accessories, Inc. and Tyler
Corporation.
CLASS WHOSE TERM EXPIRES IN 1998
Scott G. Arbuckle,
age 64, director since February 1990 Mr. Arbuckle has served as President and Chief Executive Officer of the Company
since February 1990. Mr. Arbuckle previously served as Executive Vice
President of the Company and President of the HVAC Group from April 1989
to February 1990. He joined U.S. Brass, the Company's indirect,
wholly-owned subsidiary, in 1963.
Walter C. Minnick,
age 53, director since April 1993 Mr. Minnick served until February 1995 as President and Chief Operating
Officer, Chief Executive Officer and a director of TJ International Inc.,
a manufacturer and distributor of specialty building products. From 1974
to 1979, Mr. Minnick was employed by TJ International in various other
capacities, including Corporate Secretary, National Manufacturing Manager
and Vice President, Division Operations. He is also a director of
MacMillan Bloedel, Ltd.
-3-
<PAGE>
Paul E. Price,
age 61, director since February 1993 Mr. Price served in various capacities with The Quaker Oats Company from 1972 until
his retirement in June 1991 and most recently, served as its Senior
Vice-President, Finance and Chief Financial Officer from 1988 until his
retirement. He also served as President of the Fisher Price Toys
division during 1990 and as Executive Vice-President of the International
Grocery Products division of Quaker Oats in 1987 and 1988. Mr. Price is
also a director of DeSoto, Inc. and Xytronyx, Inc.
</TABLE>
Board Meetings and Committees
During 1995, the Board of Directors of the Company held 6
meetings. Each of the directors of the Company attended at least 75 percent of
the aggregate total number of meetings of the Board of Directors and meetings of
any committee of the Board on which that director served and which took place
subsequent to his election as a director. The Board of Directors has standing
Audit, Compensation and Executive Committees. It does not have a standing
Nominating Committee.
The Audit Committee reviews the scope and results of the audit by
the Company's independent auditors, makes recommendations to the Board as to the
selection of independent auditors and has approval authority with respect to
services provided by the independent auditors. In addition, it reviews systems
of internal control, reviews accounting policies and procedures and directs and
supervises investigations into matters within the scope of its duties. The
members of this committee are Messrs. Deininger (chairperson), Morgan, Rundell,
Minnick and Price. The Audit Committee met 2 times in 1995.
The Compensation Committee reviews the cash compensation of
management personnel and takes action on all salary changes for certain
management personnel. In addition, it administers all aspects of the various
management stock incentive plans and awards stock-based compensation to
executive officers and employees of the Company. The members of this committee
are Messrs. Minnick (chairperson), Morgan, Deininger, Rundell and Price. The
Compensation Committee met 4 times in 1995.
The Executive Committee has, and may exercise, when the Board of
Directors is not in session, the powers of the Board of Directors in the
management of the business and affairs of the Company. The Executive Committee
does not have the power to change the membership or fill vacancies in the Board
of Directors or in the Executive Committee. The members of the Committee are
Messrs. Morgan (Chairperson), Rundell and Arbuckle. The Executive Committee met
5 times in 1995.
-4-
<PAGE>
Directors' Fees and Compensation
Directors who are not employees of the Company or any of its
subsidiaries receive for their services a retainer fee of $16,000 per annum
payable in cash or in shares of the Company's Common Stock and a fee of $800 in
cash for each Board or committee meeting attended. In addition, each chairperson
of a committee of the Board who is not an employee of the Company or any
subsidiary receives for his services as chairperson a retainer fee of $2,000 per
annum payable in cash or in shares of the Company's Common Stock. If a director
elects to receive the retainer fee in shares of Common Stock, the Company
transfers shares of treasury stock to the directors in payment of such fees at
the time of, or shortly after, the first meeting of the Board of Directors
following the annual meeting of shareholders of the Company based on the market
value of the Company's Common Stock at that time. Cash payments, if elected, are
also made at that time. Non-employee directors who are elected to the Board
between annual shareholder meeting dates are entitled to receive a pro rata
portion of the retainer fees for their services based on the number of days from
the date of their election until the next annual meeting of shareholders.
Directors who are employees of the Company or any subsidiary do not receive any
fees for Board or committee service. The Company reimburses all directors for
travel, lodging and related expenses they may incur in attending Board and
committee meetings.
In 1992, the Company adopted a retirement plan for directors of
the Company who are not employees of the Company or any of its subsidiaries.
Under the plan, an eligible director who has three or more years of credited
service as a director is entitled to receive upon his or her retirement from the
Board of Directors an annual payment in cash equal to the amount of the per
annum director retainer fee in effect for the year in which he or she retired.
The annual retirement entitlement is payable for a period of years equal to the
number of years he or she served as a Board member but not to exceed 10 years.
Frank J. Morgan currently serves as Chairman of the Board as a
non-employee director and is compensated at the rate of $100,000 annually for
his services. Mr. Morgan also receives the retainer fee and cash payments for
meetings as a non-employee director of the Company. As a non-employee director,
Mr. Morgan participates in the retirement plan for directors of the Company.
-5-
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information with respect to the
only persons known to the Company to be the beneficial owners of more than five
percent of the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
Common Stock
Beneficially Owned
---------------------------
Name and Address of Number Percent
Beneficial Owner of Shares of Class(1)
- ----------------------- ----------- -----------
<S> <C> <C>
Gabelli Funds, Inc.......................... 829,800(2) 11.6%
655 Third Avenue
New York, New York 10017
James P. Lennane............................ 641,100(3) 9.0%
4820 Bayshore Drive
Suite D
Naples, Florida 33962
</TABLE>
(1) As of February 20, 1996, there were outstanding 7,152,252 shares of
Common Stock, the only class of voting stock of the Company outstanding.
(2) The number of shares is based on information contained in a Schedule 13D,
as amended through Amendment No. 13 thereto, filed with the Securities and
Exchange Commission (the "SEC") by Gabelli Funds, Inc. and certain of its
affiliates, which reflects their beneficial ownership of shares of Common
Stock as of December 4, 1995. According to the filing, Gabelli Funds and
such affiliates reported that they may be deemed to have sole voting power
with respect to 804,800 shares and sole dispositive power over 829,800
shares.
(3) The number of shares is based on information contained in a Schedule 13D,
as amended through Amendment No. 4 thereto, filed with the SEC by James P.
Lennane, Bette M. Byouk and Susan Kahl Lennane which reflects their
beneficial ownership of shares of Common Stock as of March 23, 1995.
According to the filing, Mr. Lennane reported that he may be deemed to
have sole voting and dispositive power over 637,100 shares and Ms. Byouk
and Ms. Lennane each reported that they may be deemed to have sole voting
and dispositive power over 2,000 shares each.
-6-
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of February 20, 1996 the
beneficial ownership of Common Stock (the only equity security of the Company)
by each director of the Company, each named executive officer listed in the
Summary Compensation Table appearing in this Proxy Statement and all directors
and executive officers as a group.
<TABLE>
<CAPTION>
Common Stock
Beneficially Owned
------------------
Number Percent
of Shares of Class
--------- ---------
<S> <C> <C>
Directors
Scott G. Arbuckle .................................. 172,779(2) 2.4%
John H. Deininger .................................. 21,553(1) *
Walter C. Minnick .................................. 9,561(1) *
Frank J. Morgan .................................... 34,805(1) *
Paul E. Price ...................................... 2,804(1) *
C. A. Rundell, Jr .................................. 8,469(1) *
Named Executive Officers (excluding
any director named above) and Group
James A. Harris .................................... 50,642(3) *
James F. Thomason .................................. 56,500(4) *
George W. Hanthorn ................................. 3,750(5) *
G. Michael Morrell ................................. 21,500(6) *
All directors and executive
officers as a group (14 persons) ................. 442,196(7) 6.2%
- ------------
</TABLE>
* Beneficial ownership represents less than one percent of the outstanding
Common Stock.
(1) The beneficial owner has sole voting and investment power with respect to
all shares listed.
(2) Includes 141,073 shares Mr. Arbuckle currently has the right to acquire
pursuant to stock options; 9,456 shares held for the account of Mr.
Arbuckle under the Eljer Tax Reduction Investment Plan ("TRIP"), with
respect to which Mr. Arbuckle has sole voting power and dispositive power,
subject to the terms of the TRIP; 16,600 shares held jointly by Mr.
Arbuckle and his wife with respect to which they share voting and
dispositive power; and 5,650 shares with respect to which Mr. Arbuckle has
sole voting and dispositive power.
(3) Includes 38,100 shares Mr. Harris currently has the right to acquire
pursuant to stock options; 2,392 shares held for the account of Mr. Harris
under the TRIP with respect to which Mr. Harris has sole voting power and
dispositive power, subject to the terms of the TRIP; 5,150 shares with
respect to which Mr. Harris has sole voting and dispositive power; and
5,000 shares of restricted stock, with respect to which Mr. Harris has
sole voting power, but no dispositive power. The restricted period for the
5,000 shares of the restricted stock, which were granted in 1994,
terminates on February 15, 1997.
(4) Includes 41,800 shares Mr. Thomason currently has the right to acquire
pursuant to stock options; 3,105 shares held for the account of Mr.
Thomason under the TRIP, with respect to which Mr. Thomason has sole
voting power and dispositive power, subject to the terms of the TRIP;
3,695 shares with respect to which Mr. Thomason has sole voting and
dispositive power; 1,300 shares held by Mr. Thomason's wife with respect
to which she has sole voting and dispositive power; and 6,600 shares of
restricted stock, with respect to which Mr. Thomason has sole voting
power, but no dispositive power. The restricted period for those 6,600
shares of restricted stock, which were granted in 1996, terminates on
February 20, 1999.
-7-
<PAGE>
(5) Includes 3,750 shares Mr. Hanthorn currently has the right to acquire
pursuant to stock options.
(6) Includes 2,500 shares Mr. Morrell currently has the right to acquire
pursuant to stock options; 5,000 shares with respect to which Mr. Morrell
has sole voting and dispositive power; and 14,000 shares of restricted
stock, with respect to which Mr. Morrell has sole voting power, but no
dispositive power. The restricted period for 10,000 shares of the
restricted stock, which were granted in 1994, terminates on April 19, 1997
and the restricted period for the remaining restricted shares, which were
granted in 1996, terminates on February 20, 1999.
(7) Includes 264,198 shares with respect to which executive officers and
directors have the right to acquire pursuant to exercisable stock options;
22,603 shares held for the account of such persons under the TRIP; and
35,600 shares of restricted stock.
EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by
the Compensation Committee. The Board designates the members and the Chairman of
the committee. At the present time, the Compensation Committee consists of all
of the directors who are not employees of the Company. The Compensation
Committee establishes the general compensation policies of the Company,
establishes the compensation plans and specific compensation levels for
executive officers and administers the Company's Executive Incentive
Compensation Program, 1991 Long-Term Performance Plan, 1995 Long-Term Incentive
Plan and the Long-Term Executive Incentive Compensation Plan and awards
stock-based compensation to executive officers and employees of the Company.
The following is a report submitted by members of the
Compensation Committee addressing the Company's compensation policy as it
related to the executive officers for fiscal 1995. The report and the
information herein under "Executive Compensation - Performance Graph" shall not
be deemed to be "soliciting material" or to be "filed" with the SEC or subject
to the SEC's proxy rules, except for the required disclosure herein, or to the
liabilities established under Section 18 of the Securities Exchange Act of 1934
(the "Exchange Act") and such information shall not be deemed to be incorporated
by reference into any filing made by the Company under the Securities Act of
1933 or the Exchange Act.
-8-
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
To the Shareholders of Eljer Industries, Inc.:
As members of the Compensation Committee of the Board of
Directors (the "Committee") it is our responsibility to review and set
compensation levels of the executive officers of the Company, evaluate the
performance of management and consider management succession and related
matters.
The Committee retains the services of Hewitt Associates LLC, a
compensation and benefits consulting firm ("Hewitt Associates"), to provide
information to the Committee to assist it in connection with the performance of
its duties. Hewitt Associates provides advice to the Committee with respect to
the compensation of executive officers of the Company. The Committee takes into
account the performance of the Company and how compensation paid by the Company
compares to compensation paid by a comparator group of companies. Members of the
Committee also review various compensation surveys provided during the year by
Hewitt Associates and other firms specializing in executive compensation. In
1995, these surveys included reports of middle market manufacturing and service
companies, and the market data of general industry companies of similar size.
Salaries for the executives are reviewed by the Committee on an annual basis and
may be increased at that time on the basis of salary increase guidelines
established each year by the Company, the individual performance, and changes in
pay levels at the comparator companies and in industry in general. This group is
referenced for establishing all components of pay. The Committee believes that
this group is the most representative comparator group of companies for
establishing competitive levels of executive pay. Competitors chosen for
comparison purposes in the compensation area generally are not the same
companies which comprise the peer group index in the performance graph included
in this Proxy Statement. The Committee believes that the Company's most direct
competitors for executive talent are not necessarily those companies that would
be included in the peer group established for comparing shareholder returns.
In establishing executive compensation, the Committee neither
bases its decisions entirely on quantitative relative weights of various
factors, nor does it follow a mathematical formula. Rather, the Committee
exercises discretion and makes judgments after considering all factors that are
deemed relevant, including the achievement of certain objective targets set by
the Committee relating to the Company's financial performance. In establishing
each component of pay, the Committee considers the entire pay package.
Executive compensation policies are designed to use executive pay
as incentive to promote the Company's overall business strategies, values and
management initiatives. The policies are intended to (i) attract and retain
those kinds of executives who are considered essential to the long-term success
of the Company through the salaried administration program; (ii) support a
performance-based environment that rewards achievement of established Company
goals and corporate performance through the payment of cash awards annually; and
(iii) reward executives for long-term strategic management and the enhancement
of shareholder value through stock-based and long-term incentive awards. The
total compensation program emphasizes variable compensation opportunities over
time and encourages long-term stock ownership.
Section 162(m) of the Omnibus Budget Reconciliation Act of 1993
(the "1003 Act") limits the deductibility of compensation in excess of $1
million paid to the Company's chief executive officer and the next four highest
paid officers during any fiscal year, beginning with 1994, unless such
compensation meets certain requirements.
The Compensation Committee believes that the current Executive
Compensation program is generally fully deductible. However, the Committee may
occasionally grant restricted shares or compensation regarding the long-term
incentive programs that are in excess of the $1 million limit and may not be
deductible. Therefore, the Committee's policy is to retain the discretion to pay
non-deductible compensation if that would be in the best interests of the
Company and shareholders under the circumstances. Nonetheless, all taxable
income for 1995 of the Chief Executive Officer and other named executive
officers qualified as deductible by the Company.
-9-
<PAGE>
For 1995, as in years past, the Company's executive compensation
program consisted of three elements of a total compensation program: base
salary, annual incentive bonus and long-term, primarily stock-based, incentive
compensation. This approach emphasizes the management of total compensation
rather than the administration of separate components of pay. In its
compensation decisions with respect to 1995, the Committee took particular note
of the management skills, abilities and dedication needed in order for the
Company to continue to make progress in resolving financial, legal and operating
difficulties facing the Company. The Committee attempts to structure executive
compensation packages so that the compensation paid to the Company's executive
officers, both individually and collectively, will rank in the median range of
the compensation reported by the comparator companies, and actual pay in 1995
fell within this range.
Base Salaries
In establishing the base salaries for executive officers, the
Committee considers the individual executive's level of responsibility. That
responsibility is compared to compensation surveys provided in large part by
Hewitt Associates. The Committee feels that a larger portion of executive
compensation opportunity should consist of performance-based incentives.
Consequently, the Company's salaries continue to average at the mid-point range
of base salaries reported by comparator companies for the year 1995.
On February 22, 1995, the salary of Scott G. Arbuckle, the
Company's chief executive officer ("CEO"), was raised, by the Committee, from
$371,000 to $400,000 -- an increase of approximately 8%. In fixing the CEO's
salary, the Committee took into account the Company's continued financial and
operational progress and determined that a merit base salary increase was in
order. The Committee based the amount of the increase partly on industry
comparative salaries for chief executive officers, which were higher than the
CEO, and partly on industry averages for pay increases (3-1/2% to 4-1/2%) for
chief executive officers.
Annual Incentives
Bonuses awarded under the Executive Compensation Program consist
of a discretionary portion and a non-discretionary portion that is based on the
achievement of objectives established each year by the Committee. Bonus
opportunities are established to approximate median practices among the
comparator companies. Under the annual incentive plans, financial targets are
set at levels approved by the Board of Directors and include specific accounting
measures of success. In February 1995, the Committee established 1995
performance goals for the Company's executive officers. The Committee determined
that 30% of each officer's bonus would be based on whether an earnings per share
target was met; 30% on whether a return on net assets target was met; 20% on
whether a net operating income (excluding unusual items) target was met; and,
20% would be discretionary with consideration given to the achievement of
certain individual performance objectives established for each officer. This
discretionary portion of annual earned awards was based on discretionary factors
that reflected differences in individual contributions to the Company's success
for the year.
In February 1996, the Committee met, reviewed the continued
improved operating performance of the Company in fiscal 1995, but determined
that the net operating income target established by the Committee under the
bonus program had not been met. Partial awards were given for achievement toward
return on net assets and earnings per share objectives. The Committee also
reviewed the CEO's and the other executive officers' success in meeting
individual performance objectives. Based on its evaluation of all factors, the
Committee concluded that the CEO and other executive officers achieved
improvements in long-term financial performance and continued to position the
Company for stability and future growth, and awarded commensurate bonuses. In
total, the bonus payments either met or were slightly below target levels
because the operating performance of the Company, and the executives'
performance, averaged target performance levels. The Committee believes that the
bonuses paid to the CEO and other executives for services in 1995, as a
percentage of base salary, are in keeping with the improvements made to
operations.
-10-
<PAGE>
Long-Term Incentives
Long-term incentives provide a significant portion of total
compensation for executives and encourage long-term stock ownership. Stock-based
awards under the Long-Term Executive Incentive Compensation Plan strengthen the
ability of the Company to attract, motivate and retain capable executives and
more closely align the interests of management with those of shareholders.
Long-term awards granted in 1995 under this plan consisted of non-qualified
stock options. Unlike cash, the value of stock options, and to a lesser extent
restricted stock, will not be immediately realized by the executive. Stock
options are granted with exercise prices equal to the prevailing market value of
the underlying stock on the date of grant, and will only have value if the
Company's stock price increases, resulting in a commensurate benefit for the
Company's shareholders. Options granted in 1995 vest in equal amounts over four
years and executives must be employed by the Company or an affiliate at the time
of vesting in order to exercise the options. Restricted stock is subject to a
restricted period during which the stock will be forfeited if the executive's
employment is terminated and during which the stock cannot be transferred. The
restricted period for awards granted is three years. Restricted stock awards are
made for the hiring and retention of key executives. In establishing relative
levels of stock options and restricted stock grants the Committee references
marketplace practices in this regard.
The Committee considers the grant of stock-based compensation to
executive officers and key managers on an annual basis. The amount of
stock-based compensation awarded is based upon the position held by an
executive, his expected contribution to the Company's future growth and
profitability and his current equity holdings. In granting stock-based
compensation, the Committee considers awards reflected in compensation surveys
and attempts to base awards at the mid-level indicated by the practices among
the comparator companies. The Committee did not reprice any options in 1995, and
has not considered it necessary to establish target stock ownership levels for
its executive officers.
In accordance with the foregoing guidelines, the CEO was granted
options to purchase 25,000 shares of Common Stock in 1995. The Committee
believes that top executives are best motivated by the opportunity for equity
ownership and that fact, coupled with practices at the comparator companies,
suggested these shares as an appropriate size of the option grant to the CEO.
No awards previously granted under the Company's 1991 Long-Term
Performance Plan were earned during the three-year performance period ended
December 31, 1993 because performance targets were not achieved. In 1993, the
Committee established new long-term incentive awards under the Company's 1991
Long-Term Performance Plan for the performance period ending December 31, 1995,
and established the cumulative earnings per share targets (excluding certain
unusual items) relating to those awards. Payouts to the Named Executive Officers
for the 1993-1995 award period are shown in the Summary Compensation Table. The
Committee has established a new long-term incentive program, the 1995 Long-Term
Incentive Plan, designed to further strengthen the relationship between
executive pay and shareholder value creation. The incentive awards under the
1995 Long-Term Incentive Plan will replace the annual grants of performance
awards under the 1991 Long-Term Incentive Plan for the performance period
beginning in 1995. Award opportunities under the 1995 Long-Term Incentive Plan
will be directly tied to stock price growth. The Committee believes that the
flexibility provided under the 1995 Long-Term Incentive Plan will best
complement the existing stock option and restricted stock components of the
Company's long-term incentive program, and will provide an effective means for
further tieing the incentive opportunities of the Company's executives to
shareholder value creation.
-11-
<PAGE>
Summary
The Committee believes that executive compensation levels during
fiscal 1995 adequately reflect the Company's compensation goals and policies.
Compensation Committee
Walter C. Minnick, Chairman
Frank J. Morgan
John H. Deininger
C.A. Rundell, Jr.
Paul E. Price
-12-
<PAGE>
Compensation Summary
The following table sets forth certain summary information concerning
the compensation awarded to, earned by, or paid to the CEO and the other four
most highly compensated executive officers of the Company whose combined salary
and bonus for 1995 exceeded $100,000 (collectively, the "named executive
officers") for the years indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
-------------------------------------
Annual Compensation Awards Payouts
--------------------------------- ------------------------- --------
Other
Annual Restricted Securities
Name and Compen- Stock Underlying LTIP All Other
Principal Bonus($) sation($) Awards Options/ Payouts Compen-
Position Year Salary($) (3) (4) ($)(5) SARs (#) ($) sation($)(6)
- -------- ---- --------- -------- --------- ---------- --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Scott G. Arbuckle, 1995 400,000 200,000 25,954 25,000 577,500 387,227(7)
President and CEO 1994 371,000 194,775 35,115 -- 35,000 -- 153,963(7)
1993 350,000 250,000 41,970 -- 50,000 -- 392,216(7)
James A. Harris, 1995 156,343 56,596 13,629 -- 10,000 137,830 6,506
Executive V.P. & 1994 144,095 60,520 13,629 44,688 15,000 -- 6,578
President of Eljer 1993 125,300 75,180 13,359 38,438 8,000 -- 5,049
Manufacturing, Inc.
James F. Thomason, V. P. 1995 198,278 79,708 15,267 -- 10,000 196,900 8,339
Manufacturing 1994 189,740 79,691 15,522 -- 15,000 -- 8,914
1993 179,000 107,400 15,149 -- 8,000 -- 7,512
George W. 1995 200,000 66,400 12,790 -- -- 88,612 --
Hanthorn, V.P. General 1994 41,667 10,416 3,135 -- 15,000 -- --
Counsel 1993 -- -- -- -- --- -- --
& Secretary(1)
G. Michael Morrell 1995 145,043 68,837 3,528 -- 10,000 95,286 --
Managing Director, 1994 103,965 72,236 2,521 70,000 -- -- --
European Operations(2) 1993 -- -- -- -- -- -- --
</TABLE>
(1) Mr. Hanthorn became an employee of the Company in November 1994.
(2) Mr. Morrell became an employee of the Company in April 1994.
Amounts indicated were paid in British pounds sterling and have been
converted to United States dollars on the basis of $1.578 per pound
sterling.
(3) Annual bonus amounts are earned and accrued during the fiscal years
indicated and paid in the following year.
(4) Amounts consist of automobile lease payments made by the Company, tax
planning services and club dues for certain of the executives.
-13-
<PAGE>
(5) As of December 31, 1995, the only shares of restricted stock
outstanding that were granted to the named executive officers were as
follows: Mr. Harris, 5,000 in 1993 and 5,000 in 1994; and Mr. Morrell,
10,000 in 1994. The aggregate value of these shares of restricted
stock is based on the closing sales price of the Company's Common
Stock on the date of the grant. The restricted period with respect to
such shares for Mr. Harris terminated on February 16, 1996 for those
granted in 1993, and will terminate on February 15, 1997 for those
granted in 1994. The restricted period with respect to such shares for
Mr. Morrell will terminate on April 19, 1997.
(6) Except as noted in footnote 7 below, these amounts represent
matching contributions by the Company to the TRIP and the defined
contribution portion of the Supplemental Plan payments (see
"Defined Benefit Plans" below) on behalf of the named
individuals.
(7) With respect to Mr. Arbuckle, these amounts include lump sum
retirement payments of $369,834 in 1995, $135,333 in 1994,
$377,816 in 1993 earned pursuant to pension benefits accrued
under the Eljer Supplemental Benefit Plan. The payments reflect
benefits as of December 31, 1995, December 31, 1994 and December
31, 1993, respectively, a significant amount of which Mr.
Arbuckle earned prior to becoming President and Chief Executive
Officer of the Company.
-14-
<PAGE>
Option/SAR Grants
The following table sets forth certain information with respect to options
to purchase Common Stock granted during the year ended December 31, 1995 to each
of the named executive officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
- ----------------------------------------------------------- Potential
Number of % of Total Realizable Value at
Securities Options/ Assumed Annual Rates
Underlying SARs of Stock Price Appreciation
Options/ Granted to Exercise for Option Term(1)
SARs Employees Price -------------------
Granted in Fiscal Per Expiration
Name (#)(2) Year Share Date 5%(3) 10%(4)
- ---- ----- --------- ------- --------- ----- --------
<S> <C> <C> <C> <C> <C>
Scott G. Arbuckle 25,000 22.3% $5.88 2/22/05 $ 92,369 $234,080
James A. Harris 10,000 8.9% $5.88 2/22/05 $ 36,947 $ 93,632
James F. Thomason 10,000 8.9% $5.88 2/22/05 $ 36,947 $ 93,632
George W. Hanthorn(5) -- -- -- -- -- --
G. Michael Morrell 10,000 8.9% $5.88 2/22/02 $ 23,917(6) $ 55,737(7)
</TABLE>
(1) The values shown are based on the indicated assumed annual rates of
appreciation compounded annually. Actual gains realized, if any, on stock
option exercises and Common Stock holdings are dependent on the future
performance of the Common Stock and overall stock market conditions. There
can be no assurance that the values shown in this table will be achieved.
(2) Options granted in 1995 did not include stock appreciation rights ("SARs").
(3) Represents an assumed market price per share of Common Stock of $9.57,
unless otherwise noted.
(4) Represents an assumed market price per share of Common Stock of $15.24,
unless otherwise noted.
(5) George W. Hanthorn was awarded no options in 1995. His most recent
award was October 17, 1994, which is Mr. Hanthorn's initial hire date.
(6) Represents an assumed market price per share of Common Stock of $8.27.
(7) Represents an assumed market price per share of Common Stock of $11.45.
-15-
<PAGE>
Option/SAR Exercises
The following table sets forth certain information with respect to the
exercise of options to purchase Common Stock and SARs during the year ended
December 31, 1995, and the unexercised options held and the value thereof at
that date, by each of the named executive officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAREND OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities Value of
Underlying Unexercised Unexercised
Options/SARs at In-the-Money
Shares Fiscal Yearend Options/SARs at
Acquired (#) Fiscal Yearend ($)
on Exercise Value --------------------------- ---------------------------
Name (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ------------------ ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Scott G. Arbuckle -0- -0- 106,046 85,000 78,670 249,764
James A. Harris -0- -0- 27,725 27,375 20,327 90,984
James F. Thomason -0- -0- 31,300 27,500 20,421 91,015
George W. Hanthorn -0- -0- 3,750 11,250 13,593 40,781
G. Michael Morrell -0- -0- -0- 10,000 -0- 48,750
</TABLE>
Long-Term Incentive Plan Awards
The Long-Term Incentive Plan provides for awards based on performance
units to key executives. Units are earned based on the achievement of Corporate
performance goals established by the Compensation Committee.
The Performance Target for the three-year period ended December 31, 1995
Performance Period was based on cumulative earnings per share excluding certain
unusual items. Results achieved were 110% of the target level.
<TABLE>
<CAPTION>
Payout Amount
Target Award @110% of Target
<S> <C> <C>
Scott G. Arbuckle $525,000 $577,500
James A. Harris 125,300 137,830
James F. Thomason 179,000 196,900
George W. Hanthorn 80,555 88,611
G. Michael Morrell 86,624 95,286
</TABLE>
-16-
<PAGE>
Defined Benefit Plans
The following table illustrates the amount of annual pension benefits on a
straight-life annuity basis for eligible employees retiring at age 65 in the
specified remuneration and years-of-service classifications under the Retirement
Plan, the Excess Plan and Supplemental Plan discussed below. Offsets for Social
Security payments and other offsets provided for in the plans are reflected in
this table.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Years of Service at Retirement
---------------------------------------------------------------------------------------
Remuneration 15 20 25 30 35
- ------------ -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
$ 150,000.......... $ 30,662 $40,883 $51,103 $61,324 $71,545
200,000......... 41,912 55,883 69,853 83,824 97,795
300,000......... 64,412 85,883 107,353 128,824 150,295
400,000......... 86,912 115,883 144,853 173,824 202,795
500,000......... 109,412 145,883 182,353 218,824 255,295
750,000......... 165,662 220,883 276,103 331,324 386,545
1,500,000......... 334,412 445,883 557,353 668,824 780,295
</TABLE>
The Retirement Plan for Salaried Employees of Eljer Manufacturing, Inc.
(the "Retirement Plan") is a noncontributory, defined benefit plan for certain
of its salaried employees. The amount of a participant's pension benefits
depends primarily on years of employment, age at retirement and average annual
compensation (salary plus bonus, whether paid in cash or stock) for the five
successive highest-paid employment years out of the employee's last 10 years of
employment. Participants become fully vested in their accrued pension benefits
after five years of service.
The Retirement Plan was amended effective December 31, 1995, to freeze
compensation for benefit purposes at 1995 levels. In addition, benefit service
for participants under age 50 as of December 31, 1995, has been frozen;
participants age 50 or over continue to accrue service for benefit purposes. All
compensation received after 1995 is excluded in the determination of benefits;
all service after 1995 is excluded except for participants over the age 50 on
December 31, 1995.
The Company maintains two non-qualified, unfunded benefit plans (the
"Excess Plan" and the "Supplemental Plan") pursuant to which benefits of certain
participants under the Retirement Plan and a qualified defined contribution
401(k) plan (the "TRIP" Plan), are supplemented to account for limitations
imposed on benefits under these plans by the Internal Revenue Code of 1986, as
amended (the "Code"). Benefits under the Excess Plan are determined by reference
to an employee's benefits under the Retirement Plan and benefits under the
Supplemental Plan are determined by reference to an employee's benefits under
the Retirement Plan and TRIP calculated in each case without regard to the
contribution and benefit limitations contained in the Code. Generally, benefits
under the Excess Plan and the Retirement Plan related portion of the
Supplemental Plan are payable at the time and in the form benefits are payable
to an employee under the Retirement Plan and benefits under the TRIP related
portion of the Supplemental Plan are payable in a single sum payment following
an employee's termination of employment with the Company or its participating
subsidiaries, death or disability. The Board has authorized the Eljer Pension
Committee to administer the Excess Plan and the Retirement Plan portion of the
Supplemental Plan and the Eljer TRIP Administrative and Investment Committee to
administer the TRIP related portion of the Supplemental Plan; provided that the
Board determines in each case the methods by which benefits are accumulated and
distributed (such as the timing and form of benefit payments) under the Excess
Plan and the Supplemental Plan. The amendment to the Retirement Plan discussed
above is also applicable to the Excess Plan in the same manner it affects
benefits and service earned under the Retirement Plan.
For purposes of determining the benefits under the Retirement Plan, the
Excess Plan and the Supplemental Plan for the named executive officers, credited
years of service and the amount of covered compensation (salary plus bonuses
paid in cash or stock) for 1995 are as follows: Mr. Arbuckle, 32 years and
$594,775; Mr. Harris, nine years and $216,863; Mr. Thomason, five years and
$277,969; and Mr. Hanthorn,
-17-
<PAGE>
one year and $210,416. In calculating credited years of service, years of
service with Household International, Inc. prior to the spin-off of the Company
have been taken into account.
Mr. Morrell is covered by a retirement plan of Selkirk Manufacturing
Limited, an indirect wholly-owned subsidiary of the Company. The plan provides
for an annual retirement benefit to Mr. Morrell, beginning at age 60, equal to
two-thirds of his final average compensation. Final average compensation means
the average annual compensation during the last three years of Mr. Morrell's
employment. The amount of covered compensation for 1995 to Mr. Morrell was
$217,279.
Executive Compensation (Including Termination of Employment) Agreements
Mr. Arbuckle entered into an agreement with the Company in 1991 that
provides for, among other things, certain continued compensation in the event of
(i) termination of Mr. Arbuckle's employment by the Company prior to age 65 for
any reason other than willful and deliberate misconduct or disability for a
specified period that prevents him from reasonably performing his duties or (ii)
resignation of employment prior to age 65 by reason of reassignment to a lesser
rank or status, reduction of salary, benefits or target bonus, or reassignment
to a geographic area more than 50 miles from his residence as of the date the
agreement was executed.
In the event Mr. Arbuckle's employment is terminated or he resigns for any
such reason described above, he will be entitled for 18 months thereafter to (i)
continued salary (prorated for the partial year), (ii) continued target bonuses
(prorated for the partial year) and (iii) continuation of pension accrual,
savings plan contributions, deferred compensation (if any) and medical and life
insurance benefits or, in each case under this clause (iii), the economic
equivalent thereof. Benefit plan accruals that would be payable on a deferred
basis were he to continue in employment, may, at the Company's option, be
deferred or payable in an actuarially equivalent lump sum at the end of the
18-month period.
Messrs. Harris and Thomason entered into agreements with the Company in
1991. Mr. Hanthorn entered into an agreement with the Company in 1994. They are
identical to Mr. Arbuckle's agreement, except that (i) the continuation of
compensation provisions apply if the officer's employment is terminated or he
resigns (for the same reasons set forth in Mr. Arbuckle's agreement) prior to
the termination of the agreement (rather than at any time prior to age 65) and
(ii) the period of continued compensation post-employment is 12 months (rather
than 18 months). The agreements with Messrs. Harris and Thomason were originally
scheduled to terminate on May 1, 1995, and the agreement with Mr. Hanthorn was
originally scheduled to terminate on October 17, 1995. The term of each of the
agreements with Messrs. Harris, Thomason and Hanthorn is, however, renewed
automatically for successive one-year periods unless the Company notifies the
officer at least 90 days prior to the scheduled termination date of the
agreement (as originally fixed or as extended) of the Company's election not to
extend the agreement beyond such date. The term of the agreements with Messrs.
Harris, Thomason and Hanthorn were automatically extended the additional one
year period.
Mr. Morrell entered into an agreement with the Company in 1994 with terms
that are substantially the same as those contained in the agreements with the
contracts of Messrs. Harris, Thomason and Hanthorn, with one exception. The term
of the agreement has no expiration date.
Change-in-Control Agreements
The Company has entered into agreements with Messrs. Harris, Thomason,
Hanthorn and Morrell and three other officers of the Company, providing
severance benefits in the event their employment is terminated within two years
following a change-in-control of the Company. The provisions of these agreements
supersede the provisions of the compensation agreements described above to the
extent that those provisions would apply following a change-in-control of the
Company.
Under these agreements, a "change-in-control" is defined as the occurrence
of any one of the following: (i) the acquisition by a person or entity of shares
of stock of the Company representing 25 percent or more of the combined voting
power of the stock of the Company; (ii) a change in the majority of the Board of
Directors; or (iii) shareholder approval of a liquidation of the Company, a sale
or disposition of all or substantially all of the Company's assets or a merger,
consolidation or reorganization of the Company.
-18-
<PAGE>
If the employment of an officer who is a party to a change-in-control
agreement is terminated by the Company other than for "cause" within two years
following a change-in-control, or if such an officer voluntarily terminates his
or her employment within such time period for "good reason", then the officer
will be entitled to the following severance benefits: (i) two times the
officer's highest annual base salary while employed by the Company; (ii) two
times the greater of (a) the officer's average annual bonus over the preceding
three years or (b) the officer's target bonus for the year in which the
change-in-control occurs; (iii) the officer's unpaid base salary and accrued
vacation pay through the date of employment termination; and (iv) two years of
continued coverage under welfare benefit plans, pension plans and profit sharing
plans (however, in the event an officer receives substantially similar benefits
from a subsequent employer, the coverage under the officer's change-in-control
agreement will be discontinued).
Mr. Arbuckle also has entered into a change-in-control agreement with
terms similar to those summarized above. However, in addition to the methods of
termination entitling officers to payment under the agreements described above,
Mr. Arbuckle's severance benefits also will be payable upon any voluntary
termination of his employment within the two-year period following a
change-in-control. Mr. Arbuckle's severance benefits will consist of the
following: (i) three times his highest annual base salary while employed by the
Company; (ii) three times the greater of (a) his average annual bonus over the
preceding three years or (b) his target bonus for the year in which the
change-in-control occurs; (iii) his unpaid base salary and accrued vacation pay
through the date of employment termination; and (iv) three years of continued
coverage under welfare benefit plans, pension plans, and profit sharing plans
(except that if Mr. Arbuckle receives substantially similar benefits from a
subsequent employer, the continued coverage under his change-in-control
agreement will be discontinued).
Upon a change-in-control of the Company, all outstanding awards granted
under the Company's Long-Term Executive Incentive Compensation Plan and the 1995
Long-Term Incentive Plan shall also become fully vested, exercisable and/or
payable.
The Company's obligations under the change-in-control agreements with all
of the officers of the Company are partially secured by a cash-collateralized
letter of credit in the amount of $2,500,000.
Repricing of Options
In 1995, the Company did not adjust or amend the exercise price of stock
options or SARs previously granted to any of the named executive officers.
Compensation Committee Interlocks and Insider Participation
Frank J. Morgan, who served on the Compensation Committee in 1995, served
in a salaried executive office as Chairman of the Board in 1992. In 1993, the
position of Chairman of the Board became a non-employee position.
-19-
<PAGE>
Performance Graph
The following graph sets forth the cumulative total shareholder return for
the Common Stock, the New York Stock Exchange Market Index and a Competitor
Group Index for the years indicated as prescribed by SEC rules.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN (1)
AMONG ELJER INDUSTRIES, INC., NYSE MARKET INDEX AND COMPETITOR
GROUP INDEX(2)
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Company....................... 91.23 126.32 92.98 80.70 150.88
NYSE Market................... 129.41 135.50 153.85 150.86 195.61
Competitor Group.............. 140.77 189.36 238.01 166.79 229.89
</TABLE>
(1) Total return assuming reinvestment of dividends. Assumes $100 invested
on January 1, 1991, in the Common Stock, the NYSE Market Index and a
Company constructed competitor group index.
(2) The Company constructed competitor group consists of the
following companies: Hughes Supply, Inc., Manville Corporation,
Masco Corporation, Morgan Products Ltd., Noland Company, Nortek,
Inc., Owens-Corning Fiberglass Corporation, Ply Gem Industries,
Inc. and Waxman Industries, Inc. Total return calculations were
weighted according to the respective company's market
capitalization.
PROPOSED AMENDMENT TO LONG-TERM EXECUTIVE
INCENTIVE COMPENSATION PLAN
On December 19, 1995, the Board of Directors adopted a proposal to amend
the Long-Term Executive Incentive Compensation Plan (the "Plan") to increase
from 850,000 to 1,200,000 the number of shares of Common Stock of the Company
reserved for issuance under the Plan. The proposal to amend the Plan is subject
to stockholder approval. The Plan provides for the grant of qualified and
nonqualified stock options, stock appreciation rights, restricted stock and
restricted stock rights to key employees of the Company. The material features
of the Plan are described below.
-20-
<PAGE>
Reasons and Principal Effect of the Proposal
The Plan authorizes the grant to employees of the Company and its
subsidiaries of options (both incentive stock options and nonqualified stock
options) to purchase Common Stock, Stock Appreciation Rights ("SARs"),
Restricted Stock and Restricted Stock Rights ("RSRs"). As of December 31, 1995,
there were outstanding options, SARs, Restricted Stock and RSRs covering 625,907
shares of Common Stock held by 52 persons and only 214,688 shares of Common
Stock remained available for future awards under the Plan. Many of these shares
were awarded on February 20, 1996, as described below. The purpose of the
proposal is to continue the Plan by increasing by 350,000 shares the aggregate
number of shares of Common Stock that may be issued pursuant to the Plan. If the
proposal is adopted, the employees of the Company who are eligible to
participate in the Plan could receive more benefits under the Plan than they
could if the proposal were not adopted.
On February 20, 1996, the Stock Option Committee of the Board of
Directors (the "Committee") awarded options to certain officers and key
employees of the Company. The following table sets forth certain information
relating to awards granted under the Plan on February 20, 1996 to the named
executive officers and the specified groups and persons. All options expire on
February 20, 2006 and were granted with an exercise price of $9.4375 per share.
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
Name and Title Awards Granted
or Group (No. of Shares)(1)
- --------------- ------------------
<S> <C>
Scott G. Arbuckle .................................................................... 30,000
President and Chief Executive Officer
James A. Harris ...................................................................... 15,800
Executive Vice President & President of Eljer Manufacturing, Inc.
James F. Thomason .................................................................... 16,500(2)
Vice President Manufacturing
George W. Hanthorn ................................................................... 16,700
Vice President General Counsel
G. Michael Morrell ................................................................... 8,000(3)
Managing Director, European Operations
Current executive officers, as a group (nine persons) ................................ 131,400(4)
Current directors who are not executive officers, as a group ......................... -0-
All current employees, including current officers who are not executive officers, as a
group ............................................................................. 84,950
</TABLE>
(1) Unless otherwise indicated, all awards were granted as stock options.
(2) Includes 6,600 shares of Restricted Stock with respect to which
the restricted period will terminate on February 20, 1999.
(3) Includes 4,000 shares of Restricted Stock with respect to which the
restricted period will terminate on February 20, 1999.
(4) Includes 15,600 shares of Restricted Stock with respect to which the
restricted period will terminate on February 20, 1999.
Information regarding awards made under the Plan in 1995 to the named
executive officers is set forth under the tabulations captioned "Summary
Compensation Table" and "Option/SAR Grants in Last Fiscal Year". The closing
sale price of the Common Stock of the Company on the New York Stock Exchange on
February 20, 1996 was $9.50 per share.
-21-
<PAGE>
Description of the Plan as Currently in Effect
The purpose of the Plan is to further the long-term growth of the Company
by strengthening its ability to attract and retain key employees and by
providing additional motivation and incentives for the performance of key
employees. Selected employees of the Company and its subsidiaries may be chosen
to receive awards under the Plan.
The Committee is responsible for administering the Plan and determines
which employees will receive awards and the amounts, types and terms of such
awards and has the power to interpret the Plan, to establish rules and
regulations thereunder and to make all determinations necessary or advisable in
administering the Plan.
Options and SARs. Under the Plan, the Committee may grant both incentive
stock options, as defined under Section 422 of the Code and non-qualified stock
options. No option granted under the Plan is transferrable other than by will or
the laws of descent and distribution. The terms of each option granted under the
Plan is determined by the Committee, but in no event may such term exceed 10
years from the date of grant. Options are exercisable at the rate of 25 percent
of the shares subject to such option on or after each of the first, second,
third and fourth anniversaries of the date of grant, provided that the option
may be exercisable in full if the Committee so determines in its discretion
during the optionee's employment by the Company. However, upon a
change-in-control of the Company, all outstanding awards granted under the Plan
shall become fully vested and exercisable. The exercise price for the purchase
of shares subject to an option cannot be less than 100 percent of the fair
market value of the Common Stock on the date the option is granted. Upon
exercise of an option, the purchase price must be paid in full in cash, shares
of Common Stock or in both cash and stock. If any award granted under the Plan
terminates or lapses for any reason, the shares of Common Stock subject to such
award will again be available for the grant of an award under the Plan.
Employees who are awarded options under the Plan may also, either when
such options are granted or later, be awarded SARs related to part or all of the
shares subject to options. In exchange for the surrender of the right to
exercise related options, an SAR granted "in tandem" with an option will entitle
the employee to payment of an amount equal to the appreciation in value of the
surrendered option (i.e., the excess of the fair market value of the Common
Stock that is subject to the option at the time of surrender over the exercise
price of such option). The Committee may also grant SARs which are not issued in
tandem with options. Each such "stand-alone" SAR will entitle the holder, upon
exercise, to payment of an amount equal to the difference between the base price
of the SAR (which may not be less than the fair market value of one share of
Common Stock on the date of grant of the SAR) and the fair market value of a
share of Common Stock on the date of exercise. The "stand-alone" SARs may not be
exercised less than one year nor more than 10 years from the date of grant. At
the discretion of the Company, payment by an employee for the exercise of SARs
may be made in cash, shares of Common Stock, or in both cash and stock. When
granting SARs in tandem with the grant of an option or on a stand-alone basis
the Committee may establish a maximum appreciation value payable under such SAR.
Restricted Stock and RSRs. The Plan also authorizes the grant of
Restricted Stock and RSRs. The Committee may grant shares of Common Stock to any
employee, subject to forfeiture of such stock to the Company if such employee
fails to remain an employee of the Company or a subsidiary for the period of
time established by the Committee (the "restricted period"). The Committee may
also grant RSRs, which entitle an employee to receive a stated number of shares
of Common Stock if the employee remains continuously employed by the Company or
a subsidiary for the restricted period specified by the Committee. The Committee
may accelerate the termination of the restricted period with respect to any
Restricted Stock or RSR. A holder of RSRs does not have any of the rights of a
stockholder prior to the termination of the restricted period and the delivery
of such shares; however, the Committee may, in its discretion, cause the Company
to pay an amount of cash equal to the cash dividends declared on Common Stock
for each share of Common Stock subject to an RSR. Restricted Stock and RSRs may
not be transferred except by will or the laws of descent and distribution.
The Board of Directors or the Committee may from time to time amend awards
granted under the Plan, except that the Board or the Committee may not, without
stockholder approval, change the exercise price
-22-
<PAGE>
of any option or the base price of an SAR or increase the number of shares
of Common Stock under the Plan (except as permitted to reflect corporate changes
affecting the Common Stock such as stock dividends, stock splits,
recapitalization, reorganizations, mergers, consolidations and other relevant
changes in capitalization) or make any other amendment which is required by law
to be approved by the Company's stockholders. The Board of Directors may
terminate the Plan at any time by resolution, but such termination shall not
affect awards previously granted under the Plan.
Federal Income Tax Consequences
Nonqualified Stock Options. No income will be recognized by an optionee
for Federal income tax purposes upon the grant of a nonqualified stock option.
Except as described below in the case of an "insider" subject to Section 16(b)
of the Exchange Act who exercises his or her option less than six months from
the date of grant, upon exercise of a nonqualified stock option, the optionee
will recognize ordinary income in an amount equal to the excess of the fair
market value of the shares on the date of exercise over the option price of such
shares. In the absence of an election pursuant to Section 83(b) of the Code, an
"insider" subject to Section 16(b) of the Exchange Act who exercises a
nonqualified stock option less than six months from the date the option was
granted will recognize income on the date six months after the date of grant in
an amount equal to the excess of the fair market value of the shares on such
date over the option price of such shares. An optionee subject to Section 16(b)
of the Exchange Act can avoid such deferral by making an election, pursuant to
Section 83(b) of the Code, no later than 30 days after the date of exercise.
Executive officers, directors and 10 percent shareholders of the Company will
generally be considered to be "insiders" for purposes of Section 16(b) of the
Exchange Act.
Income recognized upon the exercise of nonqualified stock options will be
considered compensation subject to withholding at the time such income is
recognized, and the Company must make the necessary arrangements with the
optionee to ensure that the amount of the tax required to be withheld is
available for payment.
The Company will be entitled to a deduction equal to the amount of
ordinary income recognized by the optionee at the time of such recognition by
the optionee.
The basis of shares transferred to an optionee pursuant to exercise of a
nonqualified stock option is the price paid for such shares plus an amount equal
to any income recognized by the optionee as a result of the exercise of such
option. If an optionee thereafter sells shares acquired upon exercise of a
nonqualified stock option, any amount realized over the basis of such shares
will constitute capital gain to such optionee for federal income tax purposes.
If an optionee uses already owned shares of Common Stock to pay the
exercise price for shares under a nonqualified stock option, the number of
shares received pursuant to the option which is equal to the number of shares
delivered in payment of the exercise price will be considered received in a
nontaxable exchange, and the fair market value of the remaining shares received
by the optionee upon such exercise will be taxable to the optionee as ordinary
income. If such already owned shares of Common Stock are not "statutory option
stock" (which is defined in Section 424(c)(3)(B) of the Code to include any
stock acquired through the exercise of an incentive stock option, a qualified
stock option, an option granted pursuant to an employee stock purchase plan or a
restricted stock option, but not through the exercise of a nonqualified stock
option) or are statutory option stock with respect to which the applicable
holding period referred to in Section 424(c)(3)(A) of the Code has been
satisfied, the shares received pursuant to the exercise of the option will not
be statutory option stock and the optionee's basis in the number of shares
delivered in payment of the exercise price will be equal to the basis of the
shares delivered in payment. The basis of the remaining shares received upon
such exercise will be equal to the fair market value of such shares. However, if
such already owned shares of Common Stock are statutory option stock with
respect to which the applicable holding period has not been satisfied, it is not
presently clear whether such exercise will be considered a disqualifying
disposition of the statutory option stock, whether the shares received upon such
exercise will be statutory option stock or how the optionee's basis will be
allocated among the shares received.
Incentive Stock Options. No income will be recognized by an optionee for
federal income tax purposes upon the grant or the exercise of an incentive stock
option. The basis of shares transferred to an optionee
-23-
<PAGE>
pursuant to the exercise of an incentive stock option is the price paid for
such shares. If the optionee holds such shares for at least one year after
transfer of the shares to the optionee and two years after the grant of the
option, the optionee will recognize capital gains or loss upon sale of the
shares received upon such exercise equal to the difference between the amount
realized on such sale and the exercise price. Generally, if the shares are not
held for that period, the optionee will recognize ordinary income upon
disposition in an amount equal to the excess of the fair market value of the
shares on the date of exercise over the option price of such shares, or if less
(and if the disposition is a transaction in which loss, if any, will be
recognized), the gain on disposition. Any additional gain realized by the
optionee upon such disposition will be a capital gain.
The excess of the fair market value of shares received upon the exercise
of an incentive stock option over the option price for such shares is an item of
adjustment for the optionee for purposes of the alternative minimum tax.
The Company is not entitled to a deduction upon the exercise of an
incentive stock option by an optionee. If the optionee disposes of the shares of
stock received pursuant to such exercise prior to the expiration of one year
following transfer of the shares to the optionee or two years after grant of the
option, however, the Company may deduct an amount equal to the ordinary income
recognized by the optionee upon disposition of the shares at the time such
income is recognized by the optionee.
If an optionee uses already owned shares of Common Stock to pay the
exercise price for shares under an incentive stock option, the resulting tax
consequences will depend upon whether such already owned shares of Common Stock
are "statutory option stock", and, if so, whether such statutory option stock
has been held by the optionee for the applicable holding period referred to in
Section 424(c)(3)(A) of the Code. In general, "statutory option stock" (as
defined in Section 424(c)(3)(B) of the Code) is any stock acquired through the
exercise of an incentive stock option, a qualified stock option, an option
granted pursuant to an employee stock purchase plan or a restricted stock
option, but not through the exercise of a nonqualified stock option. If such
stock is statutory option stock with respect to which the applicable holding
period has been satisfied, no income will be recognized by the optionee upon the
transfer of such stock in payment of the exercise price of an incentive stock
option. If such stock is not statutory option stock, no income will be
recognized by the optionee upon the transfer of such stock unless such stock is
not substantially vested within the meaning of the regulations under Section 83
of the Code (in which event it appears that the optionee will recognize ordinary
income upon the transfer equal to the amount by which the fair market value of
the transferred shares exceeds their basis). If the stock used to pay the
exercise price of an incentive stock option is statutory option stock with
respect to which the applicable holding period has not been satisfied, the
transfer of such stock with respect to which the applicable holding period has
not been satisfied, the transfer of such stock will be a disqualifying
disposition described in Section 421(b) of the Code which will result in the
recognition of ordinary income by the optionee in an amount equal to the excess
of the fair market value of the statutory option stock at the time the option
covering such stock was exercised over the option price of such stock. Under the
present provisions of the Code, it is not clear whether all shares received upon
the exercise of an incentive stock option with already owned shares will be
statutory option stock or how the optionee's basis will be allocated among such
shares.
SARs. A recipient of SARs will not recognize income for federal income tax
purposes upon the grant of SARs. Except as described below in the case of an
"insider" subject to Section 16(b) of the Exchange Act who exercises his or her
SARs less than six months from the date of grant, when SARs are exercised, the
recipient will recognize ordinary income on the date of exercise in an amount
equal to the cash (if any) and the fair market value of the shares transferred
to him or her, without limitation, pursuant to SARs. In the absence of an
election pursuant to Section 83(b) of the Code, an "insider" subject to Section
16(b) of the Exchange Act who exercises SARs less than six months from the date
of the grant will recognize ordinary income with respect to shares transferred
to him or her on the date six months after the date of grant of the SARs in an
amount equal to the fair market value of the shares on such date. A recipient
subject to Section 16(b) of the Exchange Act can avoid such deferral by making
an election pursuant to Section 83(b) of the Code no later than 30 days after
the date of exercise.
The Company will be allowed a deduction equal to the amount of ordinary
income recognized by the recipient due to the exercise of SARs at the time of
such recognition by the recipient.
-24-
<PAGE>
The basis of any shares of Common Stock transferred to a recipient
pursuant to the exercise of an SAR is equal to the amount the recipient is
required to include in income as discussed above. If a recipient sells shares
acquired upon exercise of SARs, any amount realized in excess of the basis of
such shares will constitute capital gain to such recipient for federal income
tax purposes.
Restricted Stock and RSRs. If the restrictions placed upon an award of
Restricted Stock under the Plan are of a nature that such shares are both
subject to a substantial risk of forfeiture and are not freely transferable
within the meaning of Section 83 of the Code, the recipient of such award will
not recognize income for federal income tax purposes at the time of the award
unless such recipient affirmatively elects to include the fair market value of
the shares of Restricted Stock on the date of the award in gross income for the
year of the award pursuant to Section 83(b) of the Code. In the absence of such
an election, the recipient will be required to include in income for federal
income tax purposes in the year in which occurs the date the shares either
become freely transferable or are no longer subject to a substantial risk of
forfeiture within the meaning of Section 83 of the Code, the fair market value
of the shares of Restricted Stock on such date. The Company will be entitled to
a deduction at such time in an amount equal to the amount the recipient is
required to include in income with respect to the shares.
If the restrictions imposed upon an award of Restricted Stock under the
Plan are not of a nature that such shares are both subject to a substantial risk
of forfeiture and not freely transferable, within the meaning of Section 83 of
the Code, the recipient of such an award will recognize ordinary income for
federal income tax purposes at the time of the award (except as described below
in the case of an "insider" subject to Section 16(b) of the Exchange Act) in an
amount equal to the fair market value of the shares of Restricted Stock on the
date of the award. The Company will be entitled to a deduction at such time in
an amount equal to the amount the recipient is required to include in income
with respect to the shares. In the absence of an election pursuant to Section
83(b) of the Code, an "insider" subject to Section 16(b) of the Exchange Act
will recognize income on the date six months after the date of the award in an
amount equal to the fair market value of the shares of Restricted Stock on such
date. A recipient subject to Section 16(b) of the Exchange Act can avoid such
deferral by making an election, pursuant to Section 83(b) of the Code no later
than 30 days after the date of the award.
A recipient of RSRs will not recognize income for federal income tax
purposes upon the grant of RSRs. Except as described below in the case of an
"insider" subject to Section 16(b) of the Exchange Act with respect to which the
restriction period terminates less than six months from the date of grant, the
recipient will recognize ordinary income on the date the restriction period
terminates in an amount equal to the fair market value of the shares transferred
to him or her, without limitation, pursuant to RSRs. In the absence of an
election pursuant to Section 83(b) of the Code, an "insider" subject to Section
16(b) of the Exchange Act with respect to which the restriction period
terminates less than six months from the date of the grant will recognize
ordinary income with respect to shares transferred to him or her on the date six
months after the date of grant of the RSRs in an amount equal to the fair market
value of the shares on such date. A recipient of RSRs subject to Section 16(b)
of the Exchange Act can avoid such deferral by making an election pursuant to
Section 83(b) of the Code no later than 30 days after the date on which the
restriction period terminates. The Company will be allowed a deduction equal to
the amount of ordinary income recognized by the recipient with respect to RSRs
at the time of such recognition by the recipient.
The basis of any shares of Common Stock transferred to a recipient of an
RSR is equal to the amount the recipient is required to include in income as
discussed above. If a recipient sells shares acquired pursuant to RSRs, any
amount realized in excess of the basis of such shares will constitute capital
gain to such recipient for federal income tax purposes.
Required Affirmative Vote
The affirmative vote of the holders of a least a majority of the shares of
Common Stock present at the meeting in person or by proxy and entitled to vote
is required to approve the proposal to amend the Plan. If not approved, the
amendment will not become effective.
-25-
<PAGE>
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND THE
PLAN. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED IN FAVOR OF THE
PROPOSAL UNLESS STOCKHOLDERS SPECIFY OTHERWISE.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires directors and officers of the
Company and persons who own more than 10 percent of the Common Stock to file
with the SEC initial reports of ownership and reports of changes in ownership of
the Common Stock. Directors, officers and more than 10 percent shareholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required during the year ended December 31, 1995, all filings
applicable to its directors, officers and more than 10 percent beneficial owners
were in compliance with Section 16(a) filing requirements.
NOTICE PROVISIONS FOR STOCKHOLDER PROPOSALS AND
SHAREHOLDER NOMINATIONS OF DIRECTORS
The Company's by-laws establish an advance notice procedure with regard to
the nomination, other than by or at the direction of the Board of Directors of
the Company, of candidates for election as directors and with regard to certain
matters to be brought before an annual meeting of shareholders of the Company.
The by-laws provide that only persons who are nominated by or at the
direction of the Board of Directors or by a shareholder who has given timely
written notice to the Secretary of the Company prior to the meeting at which
directors are to be elected will be eligible for election as directors of the
Company. The by-laws provide further that at an annual meeting, and subject to
any other applicable requirements, only such business may be conducted as has
been brought before the meeting by or at the direction of the Board of Directors
or by a shareholder who has given timely prior written notice to the Secretary
of the Company of such shareholder's intention to bring such business before the
meeting. To be timely, any notice regarding director nominations or other items
of business to be considered at the meeting must be received by the Company not
less than 30 days prior to the meeting (or if fewer than 40 days' notice or
prior public disclosure of the meeting date is given or made to shareholders,
not later than the tenth day following the day on which such notice was mailed
or such public disclosure was made).
Notice to the Company from a shareholder who proposes to nominate a person
at an annual meeting for election as a director must contain certain information
about that person, including age, business and residence addresses, principal
occupation, the class and number of shares of Company stock beneficially owned
and such other information as would be required to be included in a proxy
statement soliciting proxies for the election of the proposed nominee.
Furthermore, certain information must be provided about the shareholder making
the nomination. The Company may require any person nominated by the Board of
Directors to furnish the information that would be required to be set forth in a
shareholder's notice of nomination with respect to such nominee.
Under the by-laws, notice relating to the conduct of business other than
the nomination of directors at an annual meeting must contain certain
information about such business and about the shareholder who proposes to bring
the business before the meeting, including a brief description of the business
the shareholder proposes to bring before the meeting, the reasons for conducting
such business at the meeting, the class and number of shares of Company stock
beneficially owned by such shareholder and any material interest of such
shareholder in the business so proposed.
If the Chairman of the Board of Directors or other officer presiding at a
meeting of shareholders of the Company determines that a person was not
nominated in accordance with the by-laws, such person will not
-26-
<PAGE>
be eligible for election as a director, or if the Chairman or other
presiding officer determines that the business was not properly brought before
such meeting in accordance with the by-laws, such business will not be conducted
at meeting. Nothing in the by-laws will preclude discussion by any shareholder
of any nomination or business properly made or brought before the annual meeting
in accordance with the above-mentioned procedures.
RATIFICATION OF THE APPOINTMENT OF AUDITORS
Based upon the recommendation of the Audit Committee, the Company's Board
of Directors has voted to appoint, subject to ratification by the Company's
shareholders, Arthur Andersen LLP as the firm of independent certified public
accountants to audit the financial statements of the Company and its
subsidiaries for 1996. Although it is not required to do so, the Board is
submitting the selection of auditors for ratification in order to obtain
shareholders' approval of this appointment. The affirmative vote of the holders
of at least a majority of the outstanding shares of Common Stock present in
person or by proxy at the meeting and entitled to vote is required to ratify the
selection of auditors. If the selection is not ratified, the Board of Directors
will reconsider the appointment. A representative of Arthur Andersen LLP will be
present at the annual meeting with the opportunity to make a statement to
shareholders if he or she so desires and to respond to appropriate questions
from shareholders.
-27-
<PAGE>
OTHER BUSINESS
The management of the Company knows of no business other than that stated
in this Proxy Statement which will be presented for action at the 1996 Annual
Meeting. If however, other business should properly come before the meeting, the
persons designated in the enclosed proxy will vote or refrain from voting in
respect thereof in accordance with their best judgment.
THE COMPANY WILL PROVIDE WITHOUT COST TO ANY OF ITS SHAREHOLDERS A COPY OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR ITS MOST RECENT FISCAL YEAR WHICH
THE COMPANY IS REQUIRED TO FILE WITH THE SECURITIES AND EXCHANGE COMMISSION.
WRITTEN REQUESTS FOR THE REPORT SHOULD BE DIRECTED TO ELJER INDUSTRIES, INC.,
17120 DALLAS PARKWAY, DALLAS, TEXAS 75248, ATTENTION: GEORGE W. HANTHORN, VICE
PRESIDENT - GENERAL COUNSEL AND SECRETARY.
1997 ANNUAL MEETING OF SHAREHOLDERS
Proposals from shareholders to be presented at the 1997 Annual Meeting of
Shareholders of the Company must be received by the Company on or before
November 25, 1996 in order to be eligible for inclusion in the Company's proxy
statement and form of proxy for that meeting.
ELJER INDUSTRIES, INC.
Scott G. Arbuckle
President and
Chief Executive Officer
Dallas, Texas
March 15, 1995
-28-
<PAGE>
[COMPANY LOGO]
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
17120 Dallas Parkway
Dallas, Texas 75248
The undersigned hereby appoints Scott G. Arbuckle, Paul E. Price and
C.A. Rundell, Jr., and each or any of them, as Proxies, with power of
substitution to each, and hereby authorizes them to represent and to vote, as
designated below, all the shares of common stock of Eljer Industries, Inc. held
of record by the undersigned on February 20, 1996, at the Annual Meeting of
Stockholders to be held on April 16, 1996, or any postponement or adjournment
thereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
-29-
<PAGE>
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
[DARK SLASH MARK]
1. ELECTION OF DIRECTORS --
FOR WITHHOLD FOR WITHHOLD
[ ] [ ] Frank J. Morgan [ ] [ ] John H. Deininger
2. AMENDMENT TO LONG-TERM EXECUTIVE For Against Abstain
INCENTIVE COMPENSATION PLAN [ ] [ ] [ ]
3. RATIFICATION OF THE APPOINTMENT OF
ARTHUR ANDERSEN LLP as the independent For Against Abstain
auditors of the Company for the fiscal year [ ] [ ] [ ]
ending December 29, 1996.
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This proxy will be voted as you direct above. In the absence of such direction,
it will be voted FOR the Nominees listed above, FOR the amendment to the
Long-Term Executive Incentive Compensation Plan and FOR ratification of the
appointment of Arthur Andersen LLP.
Dated:____________________________________, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please sign above exactly as your name appears on this card. Joint owners should
each sign personally. Corporation proxies should be signed by an authorized
officer. Executors, administrators, trustees, etc., should so indicate when
signing.
-30-
