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SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /x/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
INTERNATIONAL SPECIALTY PRODUCTS INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
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/ / 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:
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INTERNATIONAL SPECIALTY PRODUCTS
1361 ALPS ROAD
WAYNE, NEW JERSEY 07470
SAMUEL J. HEYMAN
CHAIRMAN OF THE
BOARD
April 19, 2001
FELLOW STOCKHOLDERS:
You are cordially invited to attend the International Specialty Products
Inc. 2001 Annual Meeting of Stockholders to be held at the offices of Weil,
Gotshal & Manges LLP, 767 Fifth Avenue, 25th Floor, New York, New York, on
Tuesday, May 15, 2001, at 10:00 a.m., local time.
The enclosed notice and proxy statement will provide you with complete
information concerning the business to come before the meeting. The Company's
2000 Annual Report to Stockholders is also enclosed.
I look forward to personally greeting you at the meeting as well as
reviewing for you at that time the significant developments at the Company
during the past year.
Sincerely,
[/s/ Samuel J. Heyman]
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[ISP LOGO]
INTERNATIONAL SPECIALTY PRODUCTS INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 15, 2001
------------------------
The Annual Meeting of Stockholders of International Specialty Products Inc.
(the "Company") will be held at 10:00 a.m., local time, on Tuesday, May 15,
2001, at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, 25th
Floor, New York, New York, for the following purposes:
1. To elect seven directors of the Company;
2. To consider and approve the adoption of the International Specialty
Products Inc. 2000 Stock Option Plan for Non-Employee Directors;
3. To consider and approve an amendment to the Company's 2000 Long Term
Incentive Plan to give the Compensation and Pension Committee of the Board of
Directors certain discretion with respect to the initial value and vesting
period of the incentive units granted thereunder and to increase to 700,000 the
limit on the number of incentive units that may be granted to any eligible
person during any calendar year; and
4. To transact such other business as may properly come before the meeting
and all adjournments or postponements thereof.
The Board of Directors has fixed the close of business on March 30, 2001 as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the meeting.
A list of stockholders entitled to vote at the meeting will be open to the
examination of any stockholder, for any purpose germane to the meeting, at the
office of The Bank of New York, 101 Barclay Street, New York, New York, during
ordinary business hours for ten days prior to the meeting.
The accompanying proxy statement forms a part of this notice.
By Order of the Board of Directors,
/s/ Richard A. Weinberg
RICHARD A. WEINBERG
Secretary
Wayne, New Jersey
April 19, 2001
Return of your signed proxy is the only way your shares can be counted
unless you personally cast a ballot at the meeting.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING,
PLEASE COMPLETE THE ENCLOSED PROXY CARD AND SIGN, DATE AND RETURN IT IN THE
ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
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PROXY STATEMENT
INTERNATIONAL SPECIALTY PRODUCTS INC.
300 DELAWARE AVENUE
SUITE 303
WILMINGTON, DELAWARE 19801
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ANNUAL MEETING OF STOCKHOLDERS
------------------------
This Proxy Statement is furnished to stockholders of International
Specialty Products Inc. ("ISP" or the "Company") in connection with the
solicitation of proxies by the Board of Directors of the Company for use at the
Annual Meeting of Stockholders to be held at 10:00 a.m., local time, on Tuesday,
May 15, 2001, at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue,
25th Floor, New York, New York, and at any adjournments or postponements
thereof. This proxy statement and the proxies solicited hereby are being first
sent or delivered to stockholders on or about April 20, 2001.
The Board of Directors has set the close of business on March 30, 2001 (the
"Record Date") as the record date for the determination of stockholders entitled
to notice of, and to vote at, the meeting. As of the close of business on the
Record Date, there were outstanding 66,281,174 shares of the Company's common
stock, $.01 par value ("Common Stock"). Holders of record of shares of Common
Stock are entitled to one vote for each share held by them as of the Record Date
on any matter that may properly come before the meeting.
Shares represented by a valid unrevoked proxy will be voted at the meeting,
or any adjournment or postponement thereof, as specified therein by the person
giving the proxy. If no specification is made, the shares represented by such
proxy will be voted (1) FOR the election of the Board of Directors' nominees as
directors; (2) FOR the adoption of the International Specialty Products Inc.
2000 Stock Option Plan for Non-Employee Directors (the "2000 Directors Plan");
(3) FOR the approval of an amendment to the International Specialty Products
2000 Long Term Incentive Plan (the "2000 LTI Plan"); and (4) in the discretion
of the persons named as proxies on the enclosed proxy card on such other matters
as may properly come before the meeting. Any person giving a proxy may revoke it
at any time before its exercise by executing a later dated proxy, by delivery to
and receipt by the Company's Secretary of written notice of such revocation, or
by attending the meeting and voting in person.
Stockholders of record holding a majority of the issued and outstanding
shares of Common Stock entitled to vote at the meeting, present in person or
represented by proxy, constitute a quorum for the transaction of business at the
meeting. Proxies submitted with votes withheld for the election of directors,
abstentions and broker non-votes are included in determining whether or not a
quorum is present.
The election of directors of the Company requires the affirmative vote of a
plurality of the votes properly cast at the meeting. The vote required for the
adoption of the 2000 Directors Plan and the approval of the amendment to the
2000 LTI Plan is the affirmative vote of the holders of a majority of the shares
of Common Stock present in person or represented by proxy and entitled to vote
at the meeting. Any shares not voted (by abstention, broker non-vote or
otherwise) will not be counted as votes cast. Abstentions are treated as votes
against a proposal. Broker non-votes on proposals are treated as shares as to
which the beneficial holders have withheld voting power and, therefore, are not
considered as shares entitled to vote on any proposal to which they relate.
Samuel J. Heyman, Chairman of the Board of ISP, beneficially owns (as
defined in Rule 13d-3 of the Securities Exchange Act of 1934) and has the power
to vote approximately 79% of the issued and outstanding Common Stock. See
"Security Ownership of Certain Beneficial Owners and Management." Mr. Heyman has
indicated to ISP that he intends to vote, or direct the vote of, such shares FOR
the election of the Board of Directors' nominees as directors, FOR adoption of
the 2000 Directors Plan and FOR approval of the
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amendment to the 2000 LTI Plan. Accordingly, election of the Board of Directors'
nominees as directors, the adoption of the 2000 Directors Plan and the approval
of the amendment to the 2000 LTI Plan are assured.
On July 15, 1998, International Specialty Products Inc. ("Old ISP") merged
with and into the Company (then known as ISP Holdings Inc. ("ISP Holdings")). In
connection with the merger, ISP Holdings changed its name to International
Specialty Products Inc. As used in this proxy statement, "ISP" or the "Company"
refers to both Old ISP prior to the merger and the Company subsequent to the
merger, unless the context otherwise requires.
PROPOSAL 1
ELECTION OF DIRECTORS
Seven (7) directors are to be elected to serve until the next Annual
Meeting of Stockholders and until their successors are elected and have been
qualified. The persons designated in the enclosed proxy card will vote shares
represented by a valid unrevoked proxy FOR the election of each of the nominees
named below, unless instructions to the contrary are indicated in the proxy. If
any such nominees should be unable to serve for any reason, which the Company
does not anticipate, it is intended that proxies will be voted for the election
of such other persons as shall be designated by the Board of Directors.
NOMINEES
The following persons, all of whom are currently directors of ISP, have
been nominated for election as directors. Messrs. Englander and Meckler were
appointed as directors of the Company by the Board of Directors in April 2001 to
fill the vacancies left by the resignations of Harrison J. Goldin and Carl R.
Eckardt as directors. Under ISP's By-laws, each director continues in office
until the next Annual Meeting of Stockholders and until his successor is elected
and qualified. No family relationship exists between any of the directors or
executive officers of the Company. The information presented below with respect
to each nominee has been furnished by the nominee.
CHARLES M. DIKER AGE 66
Mr. Diker has been a director of ISP since February 1992. He has been
Chairman of the Board of Cantel Medical Corp., a manufacturer and marketer of
medical diagnostic and infection control products, since 1986. Mr. Diker is a
director of Chyron Corporation, a designer and manufacturer of digital
equipment, software and systems and AMF Bowling, Inc., an owner and operator of,
and manufacturer of equipment for, commercial bowling centers.
ROBERT ENGLANDER AGE 58
Mr. Englander has been a director of ISP since April 2001. He has been the
Chairman of the Board and Chief Executive Officer of Belvoir Publications, a
publisher of books, magazines and newsletters, since February 1973.
SAMUEL J. HEYMAN AGE 62
Mr. Heyman has been a director and Chairman of the Board of ISP since its
formation and was Chief Executive Officer of ISP and certain of its subsidiaries
from their formation to June 1999. Mr. Heyman also has been a director of G-I
Holdings Inc., an affiliate of the Company, or of its predecessor GAF
Corporation (collectively with G-I Holdings Inc., "G-I Holdings"), for more than
five years and was Chairman, President and Chief Executive Officer of G-I
Holdings and certain of its subsidiaries for more than five years until
September 2000. In January 2001, G-I Holdings filed a voluntary petition for
reorganization under Chapter 11 of the U.S. Bankruptcy Code due to its
asbestos-related claims. Mr. Heyman was a director and Chairman of the Board of
Building Materials Corporation of America ("BMCA"), an indirect wholly-owned
subsidiary of G-I Holdings, from its formation to September 2000 and served as
Chief Executive Officer of BMCA and certain of its subsidiaries from June 1999
to September 2000, which position he also held from June 1996 to
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January 1999. He is also the Chief Executive Officer, Manager and General
Partner of a number of closely held real estate development companies and
partnerships whose investments include commercial real estate and a portfolio of
publicly traded securities.
SANFORD KAPLAN AGE 84
Mr. Kaplan has been a director of ISP since November 1992. He has been a
private investor and consultant since 1977 when he retired from Xerox
Corporation, where he was a Senior Vice President and a director.
SUNIL KUMAR AGE 51
Mr. Kumar has been a director, President and Chief Executive Officer of ISP
and President and Chief Executive Officer of certain of its subsidiaries since
June 1999. Mr. Kumar was a director, President and Chief Executive Officer of
BMCA and certain of its subsidiaries from May 1995, July 1996 and January 1999,
respectively, to June 1999. He also was Chief Operating Officer of BMCA and
certain of its subsidiaries from March 1996 to January 1999. Mr. Kumar was
President, Commercial Roofing Products Division, and Vice President of BMCA from
February 1995 to March 1996. He also was a director and Vice-Chairman of the
Board of G-I Holdings from January 1999 to June 1999. In January 2001, G-I
Holdings filed a voluntary petition for reorganization under Chapter 11 of the
U.S. Bankruptcy Code due to its asbestos-related claims.
BURT MANNING AGE 69
Mr. Manning has been a director of ISP since November 1992. He is President
of Brookbound, Inc., a strategic consulting company. He was Chairman of J.
Walter Thompson Company, a multinational advertising company, from July 1987 to
December 1997 and was Chief Executive Officer of such company from July 1987 to
December 1996. He has served as Chairman Emeritus of such company since January
1998. Mr. Manning is a director of Friendly Ice Cream Corporation.
ALAN M. MECKLER AGE 55
Mr. Meckler has been a director of ISP since April 2001. He has been the
Chairman and Chief Executive Officer of Internet.com Corp., a provider of global
real-time news and information resources for the internet industry, since
December 1998. He was Chairman and Chief Executive Officer of Mecklermedia
Corp., a provider of internet information, from June 1971 to November 1998.
MEETINGS, COMMITTEES AND DIRECTORS' FEES
The Board of Directors met nine times in 2000.
The Board of Directors has delegated certain of its functions and
responsibilities to committees of the Board of Directors.
The Audit Committee reviews the integrity of the Company's financial
statements, internal controls, the internal audit function, the function and
fees of the independent public accountants and other matters relating to
financial and accounting functions. Messrs. Diker, Kaplan and Manning presently
comprise the Audit Committee. The Audit Committee met three times during 2000.
The Compensation and Pension Committee (the "Compensation Committee") is
responsible for the review and administration of the Company's compensation
practices, policies and plans. Messrs. Diker and Manning presently comprise the
Compensation Committee. The Compensation Committee met two times during 2000.
The Board of Directors does not have a nominating committee.
No directors who are employees of ISP or its affiliates receive
compensation for their services as directors. Outside directors receive an
annual fee of $18,000 and a fee of $750 per meeting of the Board of Directors.
Outside directors are compensated $250 per committee meeting held in connection
with a Board of
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Directors meeting and $750 per committee meeting held independently. An
additional fee of $3,000 per year is paid to outside directors who chair a
committee. If an outside director chairs more than one committee, no additional
compensation is paid.
Under the 2000 Directors Plan, if approved by stockholders at the meeting,
each outside director is granted a non-qualified stock option to purchase 5,000
shares of Common Stock (the "Initial Option") on the date such person becomes an
Eligible Director (as defined) and an additional non-qualified option to
purchase 3,000 shares of Common Stock (an "Additional Option") on each
anniversary of the date of grant of the Initial Option. The term of each option
granted is nine years. Initial Options are subject to a three-year vesting
period, commencing on the first anniversary of the date of grant, and Additional
Options are subject to a one-year vesting period, becoming exercisable in full
on the first anniversary of the date of grant. The exercise price of the options
is equal to the fair market value of the underlying shares on the date of grant.
The Company currently has five non-employee directors, Messrs. Diker, Englander,
Kaplan, Manning and Meckler. Messrs. Diker, Kaplan and Manning were each granted
an Additional Option to purchase 3,000 shares of Common Stock during 2000, and
Messrs. Englander and Meckler were each granted an Initial Option to purchase
5,000 shares of Common Stock in April 2001, all of which are subject to
stockholder approval of the adoption of the 2000 Directors Plan. See "Proposal
2 -- Adoption of the International Specialty Products Inc. 2000 Stock Option
Plan for Non-Employee Directors."
REPORT OF THE AUDIT COMMITTEE
The following is the report of the Audit Committee with respect to the
Company's audited consolidated financial statements for the year ended December
31, 2000.
The Audit Committee's responsibilities are set forth in the Audit Committee
Charter adopted by the Company's Board of Directors, a copy of which is attached
as Annex A to this proxy statement. Each of the members of the Audit Committee
qualifies as an "independent" director under the applicable listing standards of
the New York Stock Exchange.
Management has the primary responsibility for the Company's system of
internal controls, the preparation of the Company's consolidated financial
statements and the Company's financial reporting process. The Company's
independent accountants are responsible for performing an independent audit of
the Company's consolidated financial statements in accordance with generally
accepted accounting standards and for expressing an opinion thereon. The Audit
Committee has the responsibility to monitor and oversee these processes.
In this context, the Audit Committee has reviewed and discussed the
Company's audited consolidated financial statements with management. The Audit
Committee has also discussed with Arthur Andersen LLP, the Company's independent
accountants, the matters required to be discussed by the Statement of Auditing
Standards No. 61, Communications with Audit Committees, that includes, among
other items, matters related to the conduct of the annual audit of the Company's
consolidated financial statements. The Audit Committee has also received written
disclosures and the letter from Arthur Andersen LLP required by Independence
Standards Board Standard No. 1, which relates to the accountant's independence
from the Company, and has discussed with Arthur Andersen LLP its independence.
Based upon the review and discussions referred to above, the Audit
Committee has recommended to the Company's Board of Directors that the Company's
audited consolidated financial statements be included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2000.
Members of the Audit Committee:
CHARLES M. DIKER
SANFORD KAPLAN
BURT MANNING
The foregoing report does not constitute and shall not be deemed soliciting
material or incorporated by reference in prior or future filings of the Company
under the Securities Act of 1933 or the Securities Exchange
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Act of 1934, directly or by reference to the incorporation of proxy statements
of the Company, except to the extent the Company specifically incorporates this
report by reference therein, and the report shall not otherwise be deemed filed
under such Acts.
Audit Fees. The aggregate fees billed by Arthur Andersen LLP for
professional services rendered for the audit and review of the Company's
consolidated financial statements for the year ended December 31, 2000 were
$554,000.
Financial Information Systems Design and Implementation Fees. There were
no fees incurred or billed by Arthur Andersen LLP for financial information
systems design and implementation services for the year ended December 31, 2000.
All Other Fees. All other fees paid to Arthur Andersen LLP for the year
ended December 31, 2000 aggregated $1,240,000.
The Audit Committee has considered whether the provision of non-audit
services is compatible with maintaining the independence of Arthur Andersen LLP.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 30, 2001, the Common Stock of the Company was beneficially
owned by the Company's directors, the executive officers named in the Summary
Compensation Table below, directors and executive officers of the Company as a
group, and each person or group known by the Company to be the beneficial owner
of more than 5% of the Common Stock as follows:
NUMBER OF SHARES
NAME BENEFICIALLY OWNED %
---- ------------------ ----
Samuel J. Heyman................................... 52,567,240(1)(2) 79.0%
Charles M. Diker................................... 49,000(2)(3) *
Robert Englander................................... 0
Sanford Kaplan..................................... 28,000(2) *
Sunil Kumar........................................ 366,371(4) *
Burt Manning....................................... 30,000(2) *
Alan M. Meckler.................................... 0
Andrew G. Mueller.................................. 64,126(2) *
Richard A. Weinberg................................ 339,444(2) *
Susan B. Yoss...................................... 189,834(2) *
All directors and executive officers of ISP as a
group (13 persons)............................... 53,796,268(1)(2) 80.3%
---------------
* Less than 1%.
(1) The business address of Mr. Heyman is 1361 Alps Road, Wayne, New Jersey
07470. Mr. Heyman may be deemed to beneficially own (as defined in Rule
13d-3 of the Securities Exchange Act of 1934), and has sole voting and
investment power in respect of, 52,328,040 of these shares through a general
partnership, a limited partnership and a limited liability company. Mr.
Heyman disclaims a pecuniary interest in these shares in excess of his
partnership interests in such entities.
(2) Includes with respect to Mr. Heyman, 239,200 shares; Mr. Diker, 23,000
shares; Mr. Kaplan, 23,000 shares; Mr. Manning, 23,000 shares; Mr. Weinberg,
260,389 shares; Mr. Mueller 50,000 shares; Ms. Yoss 29,834 shares; and all
directors and executive officers as a group 750,918 shares subject to
options granted under the 1991 Incentive Plan for Key Employees and
Directors, as amended (the "1991 Incentive Plan") which are currently
exercisable or will become exercisable within the next 60 days. The 1991
Incentive Plan expired in accordance with its terms in June 2000. Includes
with respect to Mr. Manning 7,000 shares held jointly with his spouse, and
to Mr. Mueller 2,200 shares held jointly with his spouse and 9,926 shares
held in the Company's 401(k) plan as of December 31, 2000.
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(3) Includes 4,050 shares held by trusts for the benefit of Mr. Diker's children
of which Mr. Diker is trustee; 5,950 shares held by Mr. Diker's spouse, as
to which Mr. Diker disclaims beneficial ownership; and 4,000 shares over
which Mr. Diker shares investment power, as to which Mr. Diker disclaims
beneficial ownership.
(4) Includes with respect to Mr. Kumar 16,772 shares held in the Company's
401(k) plan as of December 31, 2000; 11,000 shares held by Mr. Kumar's
spouse; and 5,000 shares held by Mr. Kumar's daughter, as to which Mr. Kumar
disclaims beneficial ownership.
COMPENSATION OF EXECUTIVE OFFICERS OF THE COMPANY
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors establishes the
compensation policies of the Company, evaluates and determines the specific
compensation levels for the Company's executive officers and other employees and
administers the Company's compensation plans. The Compensation Committee is
composed of two independent, non-employee directors who have no interlocking
relationships as defined by the rules promulgated by the Securities and Exchange
Commission.
Philosophy
The objectives of the Company's executive compensation program are to
support the Company's strategic goals, to provide compensation that will
attract, retain and motivate highly-qualified executives and to align
executives' long-term interests with those of the Company's stockholders. The
Compensation Committee's philosophy is to compensate the Company's executive
officers based primarily on their performance and level of responsibility.
Generally, the Company seeks to maintain a competitive position in the executive
marketplace with companies identified by the Company, using external surveys, as
being of similar size and engaged in similar businesses, by establishing total
compensation levels for executive officers competitive with the median total
compensation earned by executives with comparable responsibilities in such
comparison group. These companies are not necessarily the same as those
comprising the peer group index in the performance graph included elsewhere in
this proxy statement.
Executive Compensation
The principal components of the Company's executive compensation program
are base salary, annual incentive compensation and long-term incentive
compensation.
Executive salary levels generally are adjusted annually based on an
evaluation of each executive's performance (such as individual managerial
accomplishments and current responsibilities of such executive officer) and the
Company's budgetary considerations.
Annual incentive compensation for executive officers generally is awarded
under the Company's Executive Incentive Compensation Program ("EIC") and is
based on both corporate and individual performance. In any year, the aggregate
EIC pool, if any, for all awards is based principally on the Company's operating
income as a percentage of the Company's budgeted operating income established at
the beginning of such year. The EIC pool for any year may vary in size depending
upon unusual factors affecting the Company's operating results. Individual award
targets for each participant in the EIC (including executive officers) are
computed as a percentage of base salary based on such participant's grade level.
Individual EIC awards may vary from the applicable percentage based on corporate
performance as described above or an executive officer's individual performance
as described below.
Specific performance-related targets and objectives for an executive
officer are established at the beginning of each year. These individual goals
relate to specific business, departmental or managerial objectives that support
the Company's overall business plan and other specific corporate goals and
strategic objectives established for the year. After considering the evaluations
and recommendations of the executive officer's supervisor and a senior
management committee comprised of the Company's Chairman, President
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and Chief Executive Officer and Senior Vice President, Human Resources, the
Compensation Committee determines an executive officer's individual EIC award
based on the Company's financial performance, such officer's achievement of
these pre-established targets and goals and such officer's contribution to the
Company's overall performance. It also exercises discretion in view of the
Company's compensation objectives and policies described above to determine
total annual compensation. Based upon the foregoing criteria, the Compensation
Committee determined that an aggregate of $1,442,000 in EIC cash awards should
be paid to the Company's executive officers for the year ended December 31,
2000.
In addition to the EIC awards, from time to time, the Compensation
Committee may award Company employees (including executive officers) annual
incentive cash compensation for extraordinary individual performance and
contribution to the Company. The Compensation Committee made no special awards
to executive officers for the year ended December 31, 2000.
The Compensation Committee believes that long-term incentive compensation
promotes superior future performance by executives by giving executives a
significant long-term interest in the Company's success, aligning executives'
interests with those of the Company's stockholders and aiding the Company's
retention efforts. In light of the anticipated expiration of the Company's
former incentive plan in June 2000 in accordance with that plan's terms, the
Compensation Committee in early 2000 reviewed the Company's executive
compensation policy and determined to adopt, subject to stockholder approval,
the International Specialty Products 2000 Long Term Incentive Plan (the "2000
LTI Plan"), a long-term incentive plan based on the Company's book value rather
than market value. The Compensation Committee believes that an incentive plan
based on book value better reflects and measures the value of the Company and
the contributions of the Company's employees. The 2000 LTI Plan also provides a
meaningful incentive to employees and greater flexibility to the Company in
attracting and retaining highly qualified executives. The 2000 LTI Plan was
approved by the Company's stockholders at the Company's 2000 Annual Meeting of
Stockholders.
The 2000 LTI Plan is an important component of the Company's
performance-based compensation philosophy and provides a vehicle by which
executive officers can be motivated to increase the Company's profitability. The
Compensation Committee generally grants units to executive officers under the
2000 LTI Plan on a regular, periodic basis based upon the executive's individual
performance, respective grade level and the Company's book value at the time of
grant. The Compensation Committee also has granted from time to time units to
executives based on individual merit, taking into account, among other things,
an evaluation of the executive's past or potential contribution to the Company
or its subsidiaries and recommendations by the Company's management, including
the Chairman. In October and December 2000, the Compensation Committee adopted
amendments to the 2000 LTI Plan, subject to stockholder approval of the latter
amendment, to allow the Compensation Committee to grant units with an Initial
Value (as defined in the 2000 LTI Plan) that is less than the value that such
units would otherwise have as normally determined under the 2000 LTI Plan and to
give to the Compensation Committee discretion to determine the vesting schedule
of any unit grant. See "Proposal 3 -- Amendment to the International Specialty
Products 2000 Long Term Incentive Plan." During 2000, 1,022,674 units were
granted to the Company's executive officers, including 187,450 units granted,
subject to stockholder approval, with Initial Values that were less than the
Initial Values such units would otherwise have as normally determined under the
2000 LTI Plan.
The Compensation Committee also believes that equity ownership by
management encourages management to enhance stockholder value. In addition to
the awards of long-term incentive units under the 2000 LTI Plan, certain
officers, including a named executive officer, were granted shares of restricted
common stock in recognition of their past or potential contributions to the
Company. In order to enhance retention and to strengthen the link between the
officers' long-term interests with those of the Company's stockholders, the
restricted shares granted to these officers were made subject to vesting
restrictions that generally lapse over a period of up to five years so long as
the recipient is an employee at the time. Stock bonus awards also were made in
February 2000 to two executive officers for retention purposes.
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Section 162(m) of the Internal Revenue Code limits the deductibility of
compensation paid by public companies to certain executive officers. Under
Section 162(m), a company generally may deduct compensation paid to such an
officer only to the extent it does not exceed $1 million during any calendar
year or is "performance-based" as defined in Section 162(m) and approved by
stockholders. While the Compensation Committee generally intends to qualify
certain compensation paid to executive officers for deductibility under the
Internal Revenue Code, including Section 162(m), it may from time to time
authorize the payment of compensation to the Company's executive officers that
is not fully deductible if it determines, after weighing many factors, including
the deductibility of such compensation, that such compensation is appropriate
and in the best interests of the Company. The Company expects that the
deductibility limit of Section 162(m) currently will have an insignificant
effect on the Company.
Compensation of the Chief Executive Officer
The Compensation Committee reviews and evaluates the Chief Executive
Officer's total compensation package annually. Although the Compensation
Committee's basis for determining the Chief Executive Officer's compensation is
substantially the same as discussed above with respect to the Company's other
executive officers, the Compensation Committee relies more heavily on the
Company's financial performance, overall financial condition and achievement of
annual and strategic corporate objectives in determining the total annual and
long-term compensation for the Chief Executive Officer. Among the criteria used
in determining the compensation of the Chief Executive Officer are (i) the
Company's financial performance compared to its performance in the prior year,
including the Company's operating income, revenues, net income per share and
overall financial condition, and (ii) the Company's actual financial performance
compared to its annual business plan. Based on the foregoing criteria during
2000, the Compensation Committee increased Mr. Kumar's annual base salary of
$325,000 to $341,300, an increase of five percent. Effective June 30, 2000 and
December 31, 2000, Mr. Kumar also received two awards of 67,080 and 75,000
incentive units, respectively, under the 2000 LTI Plan with an Initial Value of
$8.99 and $0.00, respectively, per unit. These awards are subject to the
approval of the amendment to the 2000 LTI Plan by the stockholders at the
meeting. See "Proposal 3 -- Amendment to the International Specialty Products
2000 Long Term Incentive Plan." Mr. Kumar exchanged 500,000 previously granted
stock options held by him for 488,818 units under the 2000 LTI Plan, which was
approved by stockholders at the Company's 2000 annual meeting.
Mr. Kumar is also eligible to participate in the EIC to the same extent as
other executive officers of the Company. Based on the Compensation Committee's
evaluation of both corporate and individual achievement of performance-related
goals as described above, Mr. Kumar received an EIC award of $250,000 for 2000.
The Compensation Committee considers Mr. Kumar's total compensation package
relative to that of other chief executive officers in the comparison group of
companies of similar size and in similar businesses to the Company described
above. The Company believes that Mr. Kumar's compensation is below the average
of that paid to chief executive officers of such comparable companies.
Members of the Compensation Committee:
CHARLES M. DIKER
BURT MANNING
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SUMMARY COMPENSATION TABLE
The following table sets forth the cash and non-cash compensation for each
of the last three fiscal years awarded to or earned by ISP's Chief Executive
Officer in 2000 and the four other most highly compensated executive officers
who were employed by the Company or its subsidiaries as of December 31, 2000.
LONG-TERM COMPENSATION
ANNUAL COMPENSATION --------------------------------
-------------------------------------- SECURITIES
NAME AND OTHER ANNUAL RESTRICTED UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION STOCK AWARD(S) OPTIONS/SARS(2) COMPENSATION
------------------ ---- -------- ---------- ------------ -------------- --------------- ------------
Samuel J. Heyman.......... 2000 $100,000 $ 500,000 $0 $ 0 0 $ 5,288(7)
Chairman of the Board 1999 340,750 0 0 0 0 13,601(7)
1998 581,500 0 0 0 0 21,352(7)
Sunil Kumar............... 2000 $337,225 $ 250,000 $0 $ 0 0 $ 19,690(3)
President and Chief 1999 174,500(3) 300,000(3) 0(3) 0(3) 600,000(3) 6,975(3)
Executive Officer 1998 --(3) --(3) --(3) --(3) --(3) --(3)
Richard A. Weinberg....... 2000 $309,000 $ 300,000(4) $0 $ 0 0 $933,431(4)
Executive Vice 1999 281,700 250,000 0 0 95,140(8) 850,694(4)
President, General 1998 260,875 235,000 0 0 378,056(4) 360,705(4)
Counsel and Secretary
Susan B. Yoss............. 2000 $249,517 $ 200,000(5) $0 $862,500(5) 0 $ 76,816(5)
Executive Vice 1999 217,500 160,000 0 0 32,575(8) 14,806(5)
President -- Finance 1998 174,231(5) 57,172(5) 0(5) 0(5) 36,775(5) 6,496(5)
and Treasurer
Andrew G. Mueller......... 2000 $270,375 $ 65,000(6) $0 $ 0 0 $ 21,400(6)
Executive Vice 1999 256,250 125,000 0 0 35,000 21,221(6)
President -- Operations 1998 250,000 90,956 0 0 25,000 25,199(6)
---------------
(1) Bonus amounts are payable pursuant to ISP's Executive Incentive Compensation
Program. See Notes (4) and (5) below for information relating to certain
stock bonuses awarded to Mr. Weinberg and Ms. Yoss in lieu of a portion of
such executive officers' annual compensation.
(2) The options are for shares of Common Stock. See Notes (4) and (8) below and
"-- Options and Stock Appreciation Rights."
(3) Included in "All Other Compensation" for Mr. Kumar are: $12,400 and $2,869,
representing the Company's contribution under the Company's 401(k) plan in
2000 and 1999, respectively; $5,130 and $2,736 for the premiums paid by the
Company for a life insurance policy in 2000 and 1999, respectively; and
$2,160 and $1,370 for the premiums paid by the Company for a long-term
disability policy in 2000 and 1999, respectively. Mr. Kumar commenced
employment with ISP in June 1999.
(4) Included in "All Other Compensation" for Mr. Weinberg are: $12,150, $11,300
and $11,300, representing the Company's contribution under the Company's
401(k) plan in 2000, 1999 and 1998, respectively; $1,938, $1,938 and $1,264
for the premiums paid by the Company for a life insurance policy in 2000,
1999 and 1998, respectively; $2,160, $1,963 and $1,963 for the premiums paid
by the Company for a long-term disability policy in 2000, 1999 and 1998,
respectively; and $394,063, representing the market value of a stock bonus
awarded to Mr. Weinberg in 2000. In connection with the merger of Old ISP
into ISP Holdings, the options to purchase shares of redeemable convertible
preferred stock of ISP Holdings ("ISP Holdings Options"), including ISP
Holdings Options held by Mr. Weinberg, were terminated. In consideration of
the termination of the ISP Holdings Options held by Mr. Weinberg, Mr.
Weinberg received, subject to his continued employment through each vesting
date (the last of which will occur in December 2003), options to purchase
378,056 shares of Common Stock under the 1991 Incentive Plan (which options
are included in "Securities Underlying Options/SARs" for 1998) and the right
to receive cash payments of $3,238,358 in the aggregate. Mr. Weinberg
received $523,120, $835,493 and $346,178 of these cash payments in 2000,
1999 and 1998, respectively, which amounts are included in "All Other
Compensation" for Mr. Weinberg for such years. For information regarding
other payments made to Mr. Weinberg, see "Certain Transactions -- Management
Agreement."
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(5) Included in "All Other Compensation" for Ms. Yoss are: $12,150, $11,450 and
$4,735, representing the Company's contribution under the Company's 401(k)
plan in 2000, 1999 and 1998, respectively; $1,881, $1,649 and $393 for the
premiums paid by the Company for a life insurance policy in 2000, 1999 and
1998, respectively; $2,160, $1,707 and $1,368 for the premiums paid by the
Company for a long-term disability policy in 2000, 1999 and 1998,
respectively; and $60,625, representing the market value of a stock bonus
awarded to Ms. Yoss in 2000. Ms. Yoss was granted 150,000 shares of
restricted Common Stock effective as of September 26, 2000. The value of
these shares as set forth in the table was based on the market value of such
shares on the date of grant. As of December 31, 2000, the aggregate value of
such shares was $1,003,125. Such restricted shares vest in 12.5% increments
every six months, commencing on January 1, 2001 and ending on July 1, 2004.
Ms. Yoss has the right to receive dividends on such restricted shares if and
when dividends are declared and paid on the Common Stock. Ms. Yoss commenced
employment with the Company in February 1998. For information regarding
other payments made to Ms. Yoss, see "Certain Transactions -- Management
Agreement."
(6) Included in "All Other Compensation" for Mr. Mueller are: $12,400, $11,700
and $11,700, representing the Company's contribution under the Company's
401(k) plan in 2000, 1999 and 1998, respectively; $6,840, $7,558 and $11,536
for the premiums paid by the Company for a life insurance policy in 2000,
1999 and 1998, respectively; and $2,160, $1,963 and $1,963 for the premiums
paid by the Company for a long-term disability policy in 2000, 1999 and
1998, respectively.
(7) Included in "All Other Compensation" for Mr. Heyman are: $3,602, $11,138 and
$18,889 for the premiums paid by the Company for a life insurance policy in
2000, 1999 and 1998, respectively; and $936, $1,963 and $1,963 for the
premiums paid by the Company for a long-term disability policy in 2000, 1999
and 1998, respectively. Mr. Heyman also was Chief Executive Officer of the
Company until June 1999.
(8) Excluded are stock appreciation rights ("SARs") relating to shares of common
stock of an affiliate of the Company referred to in Note (3) under the table
under "-- Options and Stock Appreciation Rights."
OPTIONS AND STOCK APPRECIATION RIGHTS
The following table summarizes the value of unexercised options to acquire
Common Stock held by the executive officers named in the Summary Compensation
Table above at December 31, 2000. No stock options were granted to or exercised
by such persons during 2000.
VALUE OF ISP COMMON STOCK OPTIONS AT DECEMBER 31, 2000(1)
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED ISP OPTIONS IN-THE-MONEY ISP OPTIONS
AT 12/31/00 AT 12/31/00(2)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------------------------- -------------------------
Samuel J. Heyman............................ 239,200/0 $0/$0
Sunil Kumar(3).............................. 0/100,000 $0/$190,900
Richard A. Weinberg(3)...................... 217,960/292,646 $0/$90,750
Andrew G. Mueller........................... 50,000/0 $0/$0
Susan B. Yoss(3)............................ 9,834/59,516 $0/$6,445
---------------
(1) All stock options represent options to purchase shares of Common Stock and
were granted under the 1991 Incentive Plan. The 1991 Incentive Plan provides
that the vesting of options will be accelerated automatically if at any time
following a "Change of Control" (as defined), the Company terminates without
cause the optionee's employment, the optionee's employment is terminated as
a result of his death or permanent disability or the optionee terminates his
employment for "good reason" (as defined). The 1991 Incentive Plan expired
in June 2000 in accordance with its terms.
(2) Options for 100,000, 50,000 and 3,075 shares of Common Stock were
in-the-money for Messrs. Kumar, Weinberg and Ms. Yoss, respectively, at
December 31, 2000, and none of the options held by Messrs. Heyman and
Mueller were in-the-money at December 31, 2000.
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(3) Excluded are SARs relating to shares of common stock of an affiliate of the
Company held by Messrs. Kumar, Weinberg, and Ms. Yoss. These SARs represent
the right to receive a cash payment based upon the appreciation in value of
the specified number of shares of such affiliate's common stock over the
determined initial Book Value (as defined) per share of such affiliate's
common stock. The SARs vest over a five-year period, subject to earlier
vesting under certain circumstances, including in connection with a change
of control, and have no expiration date. Of the 17,810 SARs held by Mr.
Kumar, 16,088 were exercisable at December 31, 2000 and 1,722 were
unexercisable. Of the 25,409 SARs held by Mr. Weinberg, 14,219 were
exercisable at December 31, 2000 and 11,190 were unexercisable. Of the 4,363
SARs held by Ms. Yoss, 1,454 were exercisable and 2,909 were unexercisable.
None of these SARs were in-the-money at December 31, 2000.
LONG-TERM INCENTIVE PLAN
The following table sets forth information on awards granted to the
executive officers named in the Summary Compensation Table above during 2000
under the Company's 2000 LTI Plan.
LONG-TERM INCENTIVE PLAN -- AWARDS IN 2000
NUMBER OF PERFORMANCE OR ESTIMATED FUTURE PAYOUTS UNDER
SHARES, UNITS OTHER PERIOD NON-STOCK PRICE-BASED PLANS
OR OTHER UNTIL MATURATION ----------------------------------------------
NAME RIGHTS(1) OR PAYOUT(2) THRESHOLD($)(3) TARGET($)(4) MAXIMUM($)(4)
---- ------------- ---------------- --------------- ------------ -------------
Samuel J. Heyman....... -- -- -- -- --
Sunil Kumar............ 488,818(5) -- $8.63 -- --
67,080(6) -- 8.99 -- --
75,000(6)(7) -- 0.00 -- --
Richard A. Weinberg.... 41,510 -- $8.99 -- --
50,000(6)(7) -- 0.00 -- --
Andrew G. Mueller...... 41,642(5) -- $8.63 -- --
37,720 -- 8.99 -- --
15,000(6) -- 0.00 -- --
Susan B. Yoss.......... 26,960 -- $8.99 -- --
3,075(6) -- 5.23 -- --
---------------
(1) The Company's 2000 LTI Plan provides long-term compensation to employees and
key management personnel based on the Company's book value. The number of
incentive units ("Incentive Units") granted is determined by the
Compensation Committee in its sole discretion, subject to a maximum number
of Incentive Units that may be received by any employee in any calendar
year. For more information regarding the terms of the 2000 LTI Plan and the
proposed amendment thereto, see "Proposal 3 -- Amendment to the
International Specialty Products 2000 Long Term Incentive Plan."
(2) Generally, Incentive Units vest cumulatively, in twenty percent (20%)
increments, on each anniversary of the date such Incentive Units were
granted or received in exchange for stock options. If the proposed amendment
to the 2000 LTI Plan is approved, the Compensation Committee, in its sole
discretion, may grant Incentive Units with any vesting schedule other than
that normally provided in the 2000 LTI Plan. Subject to such stockholder
approval, Messrs. Kumar, Weinberg, Mueller and Ms. Yoss each received
Incentive Units with accelerated vesting schedules. See "Proposal
3 -- Amendment to the International Specialty Products 2000 Long Term
Incentive Plan." Vesting will end upon the termination of an employee's
employment with the Company or any subsidiary for any reason. Incentive
Units generally are exercisable for a period of six years from the date of
grant. In the event of a "Change of Control" of the Company (as defined),
all Incentive Units will become fully and immediately vested and payable in
cash.
(3) Set forth under the "Threshold" column is the "Initial Value" (as defined)
per unit at which the respective Incentive Units were granted. The value of
an Incentive Unit as of any "Valuation Date" (as defined) generally is equal
to the Company's total stockholders' equity (adjusted to exclude accumulated
comprehensive income and losses), divided by the total number of outstanding
shares of Common Stock
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as determined on such Valuation Date. A "Valuation Date" is the last
business day of each fiscal quarter of the Company. If the proposed
amendment to the 2000 LTI Plan is approved, the Compensation Committee, in
its sole discretion, may grant Incentive Units with an Initial Value (i.e.,
the value of an Incentive Unit on the date of grant) that is less than the
Initial Value of such Incentive Units as normally determined under the 2000
LTI Plan. See "Proposal 3 -- Amendment to the International Specialty
Products 2000 Long Term Incentive Plan."
(4) Upon exercise of an Incentive Unit, a participant will receive in cash the
excess, if any, of the value of such Incentive Unit as of the Valuation Date
on or, in the event of an exercise between Valuation Dates, immediately
preceding the exercise date (the "Final Value"), over the Initial Value of
such Incentive Unit (subject to all appropriate withholdings). Accordingly,
the dollar value of future payouts is not readily ascertainable.
(5) These Incentive Units were granted in exchange for stock options to
purchase, with respect to Mr. Kumar, 500,000 shares and, with respect to Mr.
Mueller, 60,000 shares of Common Stock previously granted under the 1991
Incentive Plan.
(6) These Incentive Units were granted subject to stockholder approval of the
amendment to the 2000 LTI Plan. See "Proposal 3 -- Amendment to the
International Specialty Products 2000 Long Term Incentive Plan."
(7) In addition to these grants, subject to stockholder approval of the
amendment to the 2000 LTI Plan, Messrs. Kumar and Weinberg will receive two
additional grants of 75,000 and 50,000 Incentive Units, respectively, each
with Initial Values of $0.00 on December 31, 2001 and December 31, 2002. The
Incentive Units will vest in 10% increments every six months following the
date of grant.
PENSION PLANS
Non-Qualified Retirement Plan. The Company has a non-qualified retirement
plan for the benefit of certain key employees (the "Retirement Plan"). The
benefit payable under the Retirement Plan, which vests in accordance with a
10-year schedule, consists of an annual payment commencing at age 65 equal to
25% of a covered employee's last full year's base salary. The benefit continues
for the longer of 15 years or the joint lifetimes of the employee or his or her
spouse. If a covered employee dies while employed by the Company or a
subsidiary, a death benefit of 36% of the employee's base salary at the date of
death is payable for a term of 15 years to the employee's beneficiary.
No new participants have been admitted to the Retirement Plan since January
1989 and it is not anticipated that any new participants will be admitted
hereafter. Of the executive officers named in the Summary Compensation Table,
only Mr. Heyman participates in the Retirement Plan.
The following table shows, for the salary levels and years of service
indicated, the annual pension benefit, payable commencing at age 65 to
participants in the Retirement Plan.
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NON-QUALIFIED RETIREMENT PLAN
ANNUAL PAYMENTS AT AGE 65
YEARS OF SERVICE
-------------------------------------------------------------------------
SALARY 5 10 15 20 25 30 35
-------- ------- -------- -------- -------- -------- -------- --------
$125,000 $12,188 $ 31,250 $ 31,250 $ 31,250 $ 31,250 $ 31,250 $ 31,250
150,000 14,625 37,500 37,500 37,500 37,500 37,500 37,500
200,000 19,500 50,000 50,000 50,000 50,000 50,000 50,000
250,000 24,375 62,500 62,500 62,500 62,500 62,500 62,500
300,000 29,250 75,000 75,000 75,000 75,000 75,000 75,000
350,000 34,125 87,500 87,500 87,500 87,500 87,500 87,500
400,000 39,000 100,000 100,000 100,000 100,000 100,000 100,000
450,000 43,875 112,500 112,500 112,500 112,500 112,500 112,500
500,000 48,750 125,000 125,000 125,000 125,000 125,000 125,000
550,000 53,625 137,500 137,500 137,500 137,500 137,500 137,500
600,000 58,500 150,000 150,000 150,000 150,000 150,000 150,000
The years of service covered by the Retirement Plan are fifteen years for
Mr. Heyman. Current salaries covered by the Retirement Plan are the amounts set
forth under the "salary" column of the Summary Compensation Table for the
above-named executive officer. The annual pension benefit is not subject to
reduction for Social Security and other benefits and is computed on a
straight-life annuity basis.
OTHER AGREEMENTS
In connection with his becoming President and Chief Executive Officer of
ISP, on September 29, 1999, the Company granted to Mr. Kumar the right to
purchase, and on such date Mr. Kumar purchased, 318,599 shares of Common Stock
for a purchase price of $9.563 per share, or an aggregate of $3,046,762. Under
the purchase agreement, as amended, the Company loaned to Mr. Kumar the funds to
purchase the shares, which loan is evidenced by a recourse promissory note
("Note") of Mr. Kumar in the foregoing principal amount. The Note bears interest
at a rate of six percent (6%) per annum, three percent (3%) of which is payable
annually during the term of the loan with the balance payable at stated maturity
or the date on which the outstanding principal amount of the Note is declared
due and payable. The principal amount of the Note is payable in four
installments on each June 11 of the years 2001, 2002 and 2003 and on January 11,
2004, the first three of which are in the amount of $761,691 each and the last
of which is for the balance of the then outstanding principal amount. If Mr.
Kumar remains continuously employed by the Company or any of its subsidiaries
through each installment payment date, the principal amount due on such
installment payment date will be forgiven, so that if Mr. Kumar remains
continuously employed by the Company or any of the subsidiaries through January
11, 2004, the loan and the Note will be discharged and cancelled in full,
provided that all interest due on the Note has been paid. In addition, if a
"Change of Control" (as defined) occurs, and at any time following such Change
of Control, the Company (or its successor) terminates without "cause" (as
defined) Mr. Kumar's employment, or Mr. Kumar's employment is terminated as a
result of his death or "disability" (as defined), or Mr. Kumar terminates his
employment for "good reason" (as defined), the principal amount of the loan then
outstanding shall be immediately forgiven. If Mr. Kumar's employment with the
Company is otherwise terminated for any reason whatsoever, the entire principal
balance outstanding, together with all interest accrued thereon, will be
immediately due and payable at the Company's election.
For information with respect to certain other arrangements relating to Mr.
Weinberg, see also Note (4) under "-- Summary Compensation Table."
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who beneficially own more than 10%
of the Common Stock, to file initial statements of beneficial ownership (Form
3), and statements of changes in beneficial ownership (Form 4 or 5), of
securities of the Company with the Securities and Exchange Commission and the
New York Stock Exchange.
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Executive officers, directors and greater than 10% stockholders also are
required to furnish the Company with copies of all forms that they file pursuant
to Section 16(a).
To the Company's knowledge, based solely on its review of the copies of
such forms received by it, or written representations from certain reporting
persons that no additional forms were required for those persons, the Company
believes that its executive officers, directors and greater than 10% beneficial
owners complied with the Section 16(a) filing requirements applicable to them
during 2000, except that Sunil Kumar, President and Chief Executive Officer and
a director of the Company, inadvertently filed one Form 4 on an untimely basis
on which one open market purchase by a family member of shares of Common Stock,
as to which Mr. Kumar disclaims beneficial ownership, was reported.
PERFORMANCE GRAPH
The following graph compares the performance of the Common Stock with the
performance of the Standard & Poor's 500 Index and the Standard & Poor's
Specialty Chemicals Index for the period January 1, 1996 through the end of
2000. The graph assumes that the value of the investment in Common Stock and in
each index was $100 on December 31, 1995 and that all dividends were reinvested.
[STOCK PRICE PERFORMANCE LINE GRAPH]
INTERNATIONAL
SPECIALTY PRODUCTS S&P SPECIALTY
INC. S&P 500 INDEX CHEMICALS INDEX
------------------ ------------- ---------------
Dec 95 100 100 100
Dec 96 113 123 103
Dec 97 137 164 127
Dec 98 125 211 108
Dec 99 84 255 120
Dec 00 61 232 107
The foregoing graph is not incorporated in any prior or future filings of
the Company under the Securities Act of 1933 or the Securities Exchange Act of
1934, directly or by reference to the incorporation of proxy statements of the
Company, unless the Company specifically incorporates the graph by reference,
and the graph shall not otherwise be deemed filed under such Acts.
CERTAIN TRANSACTIONS
MANAGEMENT AGREEMENT
Pursuant to a management agreement (the "Management Agreement"), the
Company provides certain general management, administrative, legal,
telecommunications, information and facilities services to certain of its
affiliates, including BMCA and G-I Holdings. Charges by the Company for
providing such services aggregated $6.1 million in 2000. Such charges consist of
management fees and other reimbursable expenses attributable to, or incurred by
the Company for the benefit of, the respective parties, which are based on an
estimate of the costs the Company incurs to provide such services. The
Management Agreement also obligates
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the Company to pay to a subsidiary of G-I Holdings annual lease payments in the
amount of $57,300 for the use of one of the Company's sales offices. Total
amounts due in connection with this lease for the year 2000 were approximately
$473,000, which amount included the annual rent and arrearages in the amount of
$419,381. Effective January 1, 2001, the Management Agreement was amended to
extend the term of the agreement through March 31, 2001, to provide for the
automatic extension of the agreement for successive quarterly periods unless the
agreement is terminated by a party, and to adjust the management fees payable
thereunder. In addition, the Management Agreement was amended to provide that
BMCA rather than the Company be responsible for providing management services to
G-I Holdings and certain of its subsidiaries and that G-I Holdings pay to BMCA a
management fee for such services. The Company and BMCA also allocate a portion
of the management fees payable by BMCA under the Management Agreement to
separate lease payments for the use of BMCA's headquarters. Based on the
services provided by the Company in 2000 under the Management Agreement, the
aggregate amount payable to the Company under the Management Agreement for 2001,
net of the lease payments to a subsidiary of G-I Holdings, is expected to be
approximately $6.6 million.
As of December 31, 2000, G-I Holdings owed the Company an aggregate of $4.3
million, including $0.6 million of unpaid management fees under the Management
Agreement and $2.1 million of other payments that the Company made on behalf of
G-I Holdings. In January 2001, G-I Holdings filed a voluntary petition for
reorganization under Chapter 11 of the U.S. Bankruptcy Code due to its
asbestos-related claims. As a result, the Company, as of December 31, 2000,
established a reserve for doubtful receivables from G-I Holdings of $2.7
million.
Certain of the executive officers of the Company perform services for
affiliates of the Company pursuant to the Management Agreement, and the Company
is indirectly reimbursed therefor by virtue of the management fees and other
reimbursable expenses payable under the Management Agreement. In this regard,
Mr. Weinberg and Ms. Yoss received $400,000 and $230,000, respectively, of
additional compensation in connection with services performed by them for BMCA
in 2000. BMCA reimbursed ISP for these payments pursuant to the Management
Agreement. See "Compensation of Executive Officers of the Company -- Summary
Compensation Table."
Although, due to the unique nature of the services provided under the
Management Agreement, comparisons with third party arrangements are difficult,
the Company believes that the terms of the Management Agreement, taken as a
whole, are no less favorable to the Company than could be obtained from an
unaffiliated third party.
TAX SHARING AGREEMENT
The Company was a party to tax sharing agreements with members of the
consolidated tax group that included GAF Corporation ("GAF") and G-I Holdings
(the "G-I Holdings Group"). As a result of a series of transactions (the
"Separation Transactions") involving GAF and its subsidiaries on January 1, 1997
that resulted in, among other things, the capital stock of ISP Holdings being
distributed to the stockholders of GAF, the Company is no longer included in the
consolidated Federal income tax returns of the G-I Holdings Group, and
therefore, such tax sharing agreements are no longer applicable with respect to
the tax liabilities of the Company for periods subsequent to the Separation
Transactions. The Company remains obligated, however, with respect to tax
liabilities imposed or that may be imposed for periods prior to the Separation
Transactions. Among other things, those tax sharing agreements provide for the
sharing of the G-I Holdings Group's consolidated tax liability based on each
member's share of the tax as if such member filed on a separate basis.
Accordingly, a payment of tax would be made to G-I Holdings equal to the
Company's allocable share of the G-I Holdings Group's consolidated tax
liability. Furthermore, those tax-sharing agreements provide for an
indemnification to the Company for any tax liability attributable to another
member of the G-I Holdings Group. In light of G-I Holdings' recent bankruptcy
filing, G-I Holdings may not have sufficient assets to satisfy its
indemnification obligations to the Company.
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SALES TO AFFILIATES
BMCA, an indirect subsidiary of G-I Holdings and an affiliate of the
Company, and its subsidiaries purchase from the Company all of their colored
roofing granules requirements under a requirements contract, except for the
requirements of certain of their roofing plants which are supplied by third
parties. Effective January 1, 2001, this contract was amended and restated to
provide, among other things, that the contract will expire on December 31, 2001,
unless extended by the parties. In 2000, BMCA and its subsidiaries purchased a
total of $59.3 million of mineral products from the Company, representing 7.6%
of the Company's total net sales and 82.5% of the Company's net sales of mineral
products. The Company's supply arrangements with BMCA and its subsidiaries are
at prices and on terms which the Company believes are no less favorable to it
than could be obtained from an unaffiliated third party.
CERTAIN OTHER TRANSACTIONS
For a discussion of certain arrangements with executive officers of the
Company, see "Compensation of Executive Officers of the Company -- Other
Agreements."
In April 2000, the Company made a loan to Mr. Weinberg in the principal
amount of $143,635 to enable him to satisfy certain withholding tax obligations
in connection with the award by the Company to him of 65,000 shares of
unrestricted Common Stock. The loan bore interest at an annual rate of 6.45% and
was paid in full at its maturity in April 2001. In February 2001, the Company
made a second loan to Mr. Weinberg in the principal amount of $36,450 to enable
him to satisfy certain withholding tax obligations in connection with the award
by the Company to him of 13,055 shares of unrestricted Common Stock. The loan
bears interest at an annual rate of 6.45% and is due and payable in full,
together with accrued interest thereon, on April 15, 2002.
In April 2000, the Company made a loan to Ms. Yoss in the principal amount
of $22,098 to enable her to satisfy certain withholding tax obligations in
connection with the award by the Company to her of 10,000 shares of unrestricted
Common Stock. The loan bore interest at an annual rate of 6.45% and was paid in
full at maturity in April 2001. In January 2001, the Company made a second loan
to Ms. Yoss in the principal amount of $44,282 to enable her to satisfy certain
withholding tax obligations in connection with the award by the Company to her
of 150,000 shares of restricted Common Stock, 18,750 shares of which vested on
January 1, 2001. The remainder of such shares vest in 12.5% increments every six
months thereafter until full vesting on January 1, 2004, subject to certain
terms and conditions. The loan bears interest at an annual rate of 6.45% and is
due and payable in full, together with accrued interest thereon, on April 15,
2002.
The Company invests primarily in international and domestic arbitrage and
securities of companies involved in acquisition or reorganization transactions,
including, at times, common stock short positions which are offsets against long
positions in securities which are expected, under certain circumstances, to be
exchanged or converted into the short positions. The latter category of
investments is administered, at no cost or charge to the Company, by certain
investment partnerships controlled by Mr. Heyman and his family, and, when
purchased or sold on the same day as investments purchased or sold by members of
the ISP group of companies, and certain Heyman family enterprises, are effected
at the same price as the investments of such other entities.
PROPOSAL 2
ADOPTION OF THE INTERNATIONAL SPECIALTY PRODUCTS INC.
2000 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
BACKGROUND
The Board of Directors is proposing for stockholder approval adoption of
the International Specialty Products Inc. 2000 Stock Option Plan for
Non-Employee Directors (the "2000 Directors Plan"). The 2000 Directors Plan
replaces the 1991 Incentive Plan to the extent that the 1991 Incentive Plan
provided for grants of stock options to non-employee directors. The 1991
Incentive Plan expired in June 2000 in accordance with
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its terms. The 2000 Directors Plan is intended to encourage ownership of the
Company's Common Stock by outside directors of the Company, whose services are
considered essential to the Company's future growth and continued financial
success and to thereby provide them with a further incentive to continue as
directors of the Company. The Compensation Committee adopted, subject to
stockholder approval, the 2000 Directors Plan effective as of July 1, 2000 (the
"Effective Date"). The closing price of the Common Stock on the New York Stock
Exchange on April 12, 2001 was $8.24.
The following description of the 2000 Directors Plan is qualified in its
entirety by reference to the full text of the 2000 Directors Plan, which is
attached to this proxy statement as Annex B. In the event this description and
the 2000 Directors Plan are in conflict, the text of the 2000 Directors Plan
will control in all cases.
PLAN SUMMARY
The 2000 Directors Plan provides for the granting of options to purchase
shares of Common Stock to non-employee directors of ISP. Under the 2000
Directors Plan, options may be granted from time to time until July 1, 2010, the
expiration date of the 2000 Directors Plan. Currently, five persons are eligible
to participate in the 2000 Directors Plan.
Directors Who May Participate
All directors of the Company who are not officers or employees of the
Company or any subsidiary of the Company ("Eligible Directors") are eligible to
receive options under and participate in the 2000 Directors Plan.
Grant of Options and Awards
The 2000 Directors Plan provides for an automatic grant to each person who
first becomes an Eligible Director after the Effective Date of a non-qualified
stock option to purchase 5,000 shares of Common Stock (an "Initial Option"),
subject to adjustment as provided in the 2000 Directors Plan, upon the
commencement of service as a non-employee director. The 2000 Directors Plan also
provides for an automatic annual grant to each person who was or becomes an
Eligible Director on or after the Effective Date of a non-qualified stock option
to purchase 3,000 shares of Common Stock (an "Additional Option"), subject to
adjustment as provided in the 2000 Directors Plan, on each anniversary of such
Eligible Director's initial election or appointment, provided that the person
serve as director through such anniversary date.
The maximum number of shares for which options may be granted under the
2000 Directors Plan is 200,000, which may be authorized but unissued shares of
Common Stock or shares of Common Stock held in the Company's treasury.
Exercise of Options, Exercise Price and Duration
The exercise price of non-qualified options granted under the 2000
Directors Plan is equal to the fair market value of a share of Common Stock on
the date of grant of such option.
The term of each option granted to Eligible Directors is nine years.
Initial Options vest as to one-third of the shares subject thereto on each of
the first through third anniversaries of the date of grant. Additional Options
become exercisable in full on the first anniversary of the date of grant.
Termination of Service, Transferability
If an Eligible Director who has been granted options under the 2000
Directors Plan ceases to be a director of the Company for any reason, each
option held on the date of such cessation, to the extent then exercisable, may
be exercised at any time prior to the earlier to occur of the expiration date of
the option or the expiration of 60 days following the date service as a director
ceases. Options are not transferable by the optionee, except by will or the laws
of descent and distribution.
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The 2000 Directors Plan permits option agreements to contain limited stock
appreciation rights ("Limited Rights"). Under the Limited Rights, should a
tender or exchange offer for the Common Stock be made by a bidder other than the
Company, the optionee would be entitled to surrender any option or portion
thereof (regardless of the extent to which the option was then exercisable) and
to receive cash or Common Stock (or a combination thereof), as determined by the
Board of Directors, equal to the difference between the aggregate fair market
value of the shares subject to options on the date of surrender (as determined
in accordance with the Limited Rights) and the aggregate exercise price.
Amendment
The Board of Directors of the Company may terminate, modify, suspend or
amend the 2000 Directors Plan at any time and from time to time. No option shall
be modified or amended without the consent of the optionee or the optionee's
executor, administrator, guardian or legal representative to the extent that
such action would adversely alter or impair any rights or obligations under any
such option.
FEDERAL INCOME TAX EFFECTS OF PLAN PARTICIPATION
The discussion below is based on federal income tax law and authorities as
of the date of this proxy statement, which are subject to change at any time
(possibly with retroactive effect). The law is technical and complex and the
discussion represents only a general summary of some of the applicable
provisions of Federal income tax law.
Non-qualified stock options ("NSOs") granted under the 2000 Directors Plan
are options that do not qualify as incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). An
Eligible Director who receives an NSO does not recognize any taxable income upon
the grant of such NSO. However, the Eligible Director generally will recognize
ordinary income upon exercise of an NSO in an amount equal to the excess of (i)
the fair market value of the shares of Common Stock at the time of exercise over
(ii) the exercise price.
A federal income tax deduction generally will be allowed to the Company in
an amount equal to the ordinary income included by the director with respect to
his NSO, provided that such amount constitutes an ordinary and necessary
business expense to the Company and is reasonable and the limitations of Section
280G of the Code do not apply.
If an individual exercises an NSO by delivering shares of Common Stock to
the Company, other than shares previously acquired pursuant to the exercise of
an incentive stock option which is treated as a "disqualifying disposition", the
individual will not recognize gain or loss with respect to the exchange of such
shares, even if their then fair market value is different from the individual's
tax basis. The individual, however, will recognize ordinary income as described
above with respect to the exercise of the NSO as if he paid the exercise price
in cash, and the Company likewise generally will be entitled to an equivalent
tax deduction.
ERISA. The 2000 Directors Plan is not subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended.
No employees and, therefore, no executive officers are eligible to receive
options under the 2000 Directors Plan. Options to purchase an aggregate of
19,000 shares of Common Stock were granted under the 2000 Directors Plan to
current non-employee directors as a group, subject to stockholder approval of
the plan. If the proposed 2000 Directors Plan is approved by stockholders, these
options will become effective, and Eligible Directors will automatically receive
future grants of options as provided in the 2000 Directors Plan described above.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ADOPTION OF THE INTERNATIONAL
SPECIALTY PRODUCTS INC. 2000 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS.
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PROPOSAL 3
AMENDMENT TO THE INTERNATIONAL SPECIALTY PRODUCTS
2000 LONG TERM INCENTIVE PLAN
BACKGROUND
The Board of Directors is proposing for stockholder approval an amendment
to the International Specialty Products 2000 Long Term Incentive Plan (the "2000
LTI Plan"). The 2000 LTI Plan is intended to provide benefits that will attract
and retain highly qualified persons as officers and employees of the Company and
its subsidiaries, by providing a long-term incentive system that supports the
Company's business strategy and emphasizes pay for performance by tying reward
opportunities to corporate goals.
In December 2000, the Compensation Committee of the Board of Directors
unanimously approved amending the 2000 LTI Plan, subject to stockholder
approval, to allow the Compensation Committee to grant Incentive Units (as
hereinafter defined), in its sole discretion, with an Initial Value (as
hereinafter defined) that is less than the value of such Incentive Units as
normally determined under the 2000 LTI Plan and with any vesting schedule other
than the vesting schedule normally provided by the 2000 LTI Plan, provided that
the Incentive Units granted under such vesting schedule vest on a Valuation
Date. The Compensation Committee also unanimously approved amending the 2000 LTI
Plan, subject to stockholder approval, to increase the limit on the number of
Incentive Units that may be granted to any eligible person during any calendar
year from 500,000 to 700,000 Incentive Units. The amendment has permitted the
Company greater flexibility in attracting and retaining highly qualified
employees.
The following is a summary of the principal provisions of the 2000 LTI Plan
as it exists without giving effect to the proposed amendment. The full text of
the proposed amendment to the 2000 LTI Plan is attached to this proxy statement
as Annex C.
PLAN SUMMARY
The 2000 LTI Plan permits the grant of Incentive Units based on the
Company's book value to eligible employees of the Company and its subsidiaries.
Employees Who May Participate
Every employee of the Company or any of its subsidiaries is eligible to
participate in the 2000 LTI Plan. However, the employees entitled to receive
grants of Incentive Units or exchange stock options for Incentive Units will be
determined by the Compensation Committee in its sole discretion. As of March 30,
2001, the Company had approximately 2,600 employees.
Description of Incentive Units
The number of incentive units ("Incentive Units") granted to each employee
is determined by the Compensation Committee in its sole discretion. The number
of Incentive Units to be received by each employee in exchange for stock
options, and the number of stock options that can be exchanged for Incentive
Units, is also determined by the Compensation Committee in its sole discretion.
Currently, the maximum number of Incentive Units that may be received by any
eligible employee under the 2000 LTI Plan in any calendar year is 500,000,
subject to adjustment in the case of reorganization, recapitalization, stock
split, stock dividend, combination of shares or otherwise. If the proposed
amendment to the 2000 LTI Plan is approved, the maximum number of Incentive
Units that may be received by any eligible employee during any calendar year
will be limited to 700,000. No Incentive Units will be granted under the 2000
LTI Plan more than five years after the Effective Date.
The initial value (the "Initial Value") of Incentive Units granted under
the 2000 LTI Plan normally is equal to the value of such Incentive Units
determined as of the Valuation Date (as hereinafter defined) on which the grant
occurred, except that the Initial Value of Incentive Units exchanged for stock
options is equal to the value of such Incentive Units determined as of a
Valuation Date selected by the Compensation
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Committee in its sole discretion. The value of an Incentive Unit generally is
the sum of the Company's total stockholders' equity (adjusted to exclude
accumulated comprehensive income and losses), divided by the total number of
outstanding shares of Common Stock. A "Valuation Date" is the last business day
of each fiscal quarter of the Company. If the proposed amendment to the 2000 LTI
Plan is approved, the Compensation Committee, in its sole discretion, may grant
Incentive Units with an Initial Value that is less than the value of such
Incentive Units as normally determined under the 2000 LTI Plan.
In the event of a change in the Company's outstanding Common Stock by
reason of any reorganization, recapitalization, stock split, stock dividend,
combination of shares or otherwise, there will be substituted for, added to or
subtracted from each Incentive Unit then outstanding under the 2000 LTI Plan the
number of additional or partial Incentive Units that, in the sole discretion of
the Compensation Committee, accurately reflects the effect of such
reorganization, recapitalization, stock split, stock dividend, share combination
or other such event, and the Initial Value of each Incentive Unit will also be
adjusted by the Compensation Committee if it determines in its sole discretion
that such adjustment is appropriate.
Incentive Units Available; Exchange of Options
The Compensation Committee has authorized 5,000,000 Incentive Units for
issuance to participants. The Compensation Committee may, in its sole
discretion, permit one or more participants to exchange stock options they hold
under the 1991 Incentive Plan for Incentive Units under the 2000 LTI Plan.
Vesting and Duration
Incentive Units normally vest cumulatively, in twenty percent (20%)
increments, on each anniversary of the date such Incentive Units were granted to
the employee or received in exchange for stock options. If the proposed
amendment to the 2000 LTI Plan is approved, the Compensation Committee, in its
sole discretion, may grant Incentive Units with any vesting schedule other than
the vesting schedule normally provided in the 2000 LTI Plan. Vesting will end
upon the termination of an employee's employment with the Company or any
subsidiary for any reason. Incentive Units may be exercised for six years from
the date of grant, subject to the provisions regarding "Termination of
Employment" described below.
In the event of a "Change in Control" of the Company (as defined in the
2000 LTI Plan), all Incentive Units granted by the Compensation Committee under
the 2000 LTI Plan will become fully and immediately vested and payable in cash.
Exercise of Incentive Units, Exercise Price
Upon exercise of an Incentive Unit, the employee will receive from a
subsidiary of the Company in cash the excess, if any, of the value of such
Incentive Unit as of the Valuation Date on or, in the event of an exercise
between Valuation Dates, immediately preceding the exercise date (the "Final
Value"), over the Initial Value of such Incentive Unit (subject to all
appropriate withholdings). The value of a partial Incentive Unit will be
determined by the same method, but pro rated to reflect the percentage of a
whole Incentive Unit reflected by such partial Incentive Unit.
If an employee received any Incentive Units in exchange for stock options,
a special provision of the 2000 LTI Plan governs the cash amount to be received
by such employee in the event of a Change in Control of the Company within one
year of such exchange of stock options. In such event, the amount to be received
(subject to all appropriate withholdings) will be equal to the greater of (i)
the amount determined by subtracting the Initial Value from the Final Value of
each Incentive Unit pursuant to the procedures described in the immediately
preceding paragraph, or (ii) the difference between the market price of the
Common Stock at the time of the Change in Control and the exercise price of the
stock options exchanged by the employee for Incentive Units, multiplied by the
number of shares of Common Stock underlying such stock options.
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Termination of Employment, Transferability
Upon termination of an employee's employment with the Company or any
subsidiary for Good Cause (as defined in the 2000 LTI Plan), the Incentive Units
granted to such employee will be immediately forfeited and unexercisable. If an
employee's employment is terminated due to his or her death, long-term
disability or retirement, the vested Incentive Units granted to such employee
will be exercisable for one year, unless, prior to the end of such one year
period, the sixth anniversary of the grant of such Incentive Units occurs. If an
employee's employment is terminated for any other reason, the employee will have
90 days to exercise his or her vested Incentive Units, unless, prior to the end
of such 90 day period, the sixth anniversary of the grant of such Incentive
Units occurs.
An employee may not sell, assign, redeem, pledge, transfer or otherwise
encumber an accrued but unpaid Incentive Unit, except by will or the laws of
descent and distribution.
Amendment
The Compensation Committee may amend the 2000 LTI Plan from time to time or
suspend or terminate the 2000 LTI Plan at any time. No amendment of the 2000 LTI
Plan may be made without approval of the stockholders of the Company if the
amendment will (i) increase the maximum number of Incentive Units that may be
granted to an individual participant under the 2000 LTI Plan during any
particular calendar year, (ii) modify the requirements as to eligibility for
participation in the 2000 LTI Plan or (iii) change the vesting provisions of the
2000 LTI Plan.
COSTS
The costs and expenses of administering the 2000 LTI Plan are borne by the
Company and are not charged against any award or to any employee receiving an
Incentive Unit.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The statements in the following paragraphs of the principal U.S. federal
income tax consequences of Incentive Units under the 2000 LTI Plan are based on
federal income tax law and authorities as of the date of this proxy statement,
which are subject to change at any time (possibly with retroactive effect). The
law is technical and complex, and the discussion below represents only a general
summary of some of the applicable provisions of federal income tax law.
Incentive Units. An employee who receives an Incentive Unit will not
recognize any taxable income upon the grant of such Incentive Unit. However, the
employee generally will recognize ordinary income upon the receipt of cash
pursuant to the exercise of an Incentive Unit. The ordinary income recognized
with respect to the receipt of cash upon exercise of an Incentive Unit will be
subject to both wage withholding and other employment taxes.
Dividend Equivalents. Holders of Incentive Units who are credited with
additional Incentive Units under the 2000 LTI Plan to account for dividends paid
on the Common Stock will be taxed with respect to such additional Incentive
Units in the manner described in the preceding paragraph (i.e., no income
recognition on date of receipt of additional Incentive Units, but rather
ordinary income recognition on the date of exercise).
Company Tax Treatment. A federal income tax deduction generally will be
allowed to the Company in an amount equal to the ordinary income included by the
individual with respect to his or her Incentive Units, provided that such amount
constitutes an ordinary and necessary business expense to the Company, is
reasonable, and the limitations of Sections 280G and 162(m) of the Code
(discussed below) do not apply.
Change in Control. In general, if the total amount of payments to an
individual that are contingent upon a "change in control" of the Company (as
defined in Section 280G of the Code), including payments under the 2000 LTI Plan
that vest upon a "change in control," equals or exceeds three times the
individual's "base amount" (generally such individual's average annual
compensation for the five calendar years preceding the
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change in control), then, subject to certain exceptions, the payments may be
treated as "parachute payments" under the Code, in which case a portion of such
payments would be non-deductible to the Company and the individual would be
subject to a 20% excise tax on such portion of the payments.
Certain Limitations on Deductibility of Executive Compensation. With
certain exceptions, Section 162(m) of the Code denies a deduction to publicly
held corporations for compensation paid to certain executive officers in excess
of $1 million per executive per taxable year (including any deduction with
respect to the exercise of an Incentive Unit). One such exception applies to
certain performance-based compensation, provided that such compensation has been
approved by stockholders in a separate vote and certain other requirements are
met. The Company believes that Incentive Units granted under the 2000 LTI Plan
(other than Incentive Units granted to participants in exchange for options)
should qualify for the performance-based compensation exception to Section
162(m) of the Code with respect to those Incentive Units granted with an Initial
Value at or above the value at the date of grant of such Incentive Units.
Certain Incentive Units granted in 2000 under the 2000 LTI Plan are subject
to stockholder approval of the proposed amendment. The following table sets
forth the Incentive Units that have been granted to the persons and groups
referred to below under the 2000 LTI Plan, subject to stockholder approval of
the proposed amendment to the 2000 LTI Plan:
NUMBER OF
NAME AND POSITION UNITS(1)
----------------- ---------
Samuel J. Heyman............................................ 0
Chairman of the Board
Sunil Kumar................................................. 142,080(2)
President and Chief Executive Officer
Richard A. Weinberg......................................... 50,000
Executive Vice President, General Counsel and Secretary
Susan B. Yoss............................................... 3,075
Executive Vice President -- Finance and Treasurer
Andrew G. Mueller........................................... 15,000
Executive Vice President -- Operations
Executive Group............................................. 254,530(3)
Non-Employee Directors...................................... --(4)
Non-Executive Employee Group................................ 835,224
---------------
(1) For information relating to the potential value of these units, see
"Compensation of Executive Officers of the Company -- Long-Term Incentive
Plan -- Awards in 2000."
(2) These 142,080 Incentive Units were granted to Mr. Kumar, subject to
stockholder approval of the proposed amendment in two grants. The first
grant was for 67,080 Incentive Units at an Initial Value determined as
normally determined under the 2000 LTI Plan. The second grant was for 75,000
Incentive Units at an Initial Value that was less than that normally
determined under the 2000 LTI Plan.
(3) Of these 254,530 Incentive Units, 187,450 Incentive Units were granted to
the Company's executive officers at Initial Values that were less than the
Initial Values that such Incentive Units would otherwise have been granted
as normally determined under the 2000 LTI Plan.
(4) Non-Employee Directors of the Company are not eligible to participate in the
2000 LTI Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO
THE INTERNATIONAL SPECIALTY PRODUCTS 2000 LONG TERM INCENTIVE PLAN.
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INDEPENDENT PUBLIC ACCOUNTANTS
No accounting firm has been selected to date to audit the accounts of the
Company for 2001. No such selection shall be made without the recommendation and
approval of ISP's Audit Committee.
Arthur Andersen LLP performed the audit of the Company's accounts in 2000.
A representative of Arthur Andersen is expected to be present at the meeting to
answer appropriate questions that may be asked by stockholders and will have an
opportunity to make a statement.
STOCKHOLDERS PROPOSALS FOR 2002 ANNUAL MEETING
Proposals of security holders intended for possible action at the 2002
Annual Meeting of Stockholders must be received by the Company at its principal
executive offices prior to December 21, 2001. All proposals received will be
subject to the applicable rules of the Securities and Exchange Commission. A
duly executed proxy given in connection with the 2002 Annual Meeting of
Stockholders will confer discretionary authority on the persons named as proxies
in such proxy, or any of them, to vote at such meeting on any matter of which
the Company does not have written notice on or before March 7, 2002, without
advice in the Company's proxy statement as to the nature of such matter.
OTHER MATTERS
The cost of the solicitation will be borne by the Company. In addition to
use of the mails, proxies may be solicited by telephone, telegraph or personal
interview by employees of ISP without additional compensation.
The Company will reimburse brokerage firms, banks, trustees, nominees and
other persons authorized by the Company for their out-of-pocket expenses in
forwarding proxy material to the beneficial owners of Common Stock.
Management does not know of any other matters that will be presented at the
meeting other than matters incident to the conduct thereof. However, if any
matters properly come before the meeting or any adjournment or postponement
thereof, it is intended that the persons named in the accompanying proxy will
vote thereon in their discretion.
For a copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 2000 as filed with the Securities and Exchange Commission, please
contact: Stockholder Relations Department, International Specialty Products
Inc., 1361 Alps Road, Wayne, New Jersey 07470 or visit the Securities and
Exchange Commission website at http://www.sec.gov.
By Order of the Board of Directors
/s/ Richard A. Weinberg
RICHARD A. WEINBERG
Secretary
Wayne, New Jersey
April 19, 2001
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ANNEX A
INTERNATIONAL SPECIALTY PRODUCTS
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
I. PURPOSE
The primary purpose of the Audit Committee of the Board of Directors of
International Specialty Products is to provide independent and objective
oversight of the accounting functions and internal controls of International
Specialty Products ("ISP"), its subsidiaries and affiliates and to ensure the
objectivity of ISP's financial statements. The Committee and the Board shall
have the ultimate authority and responsibility to select, evaluate and, where
appropriate, replace the independent accountants. The Committee shall also
review and advise the Board with respect to ISP's risk management policies, and
tax policies.
II. FUNCTIONS
The Audit Committee shall perform the following functions:
1. INDEPENDENT ACCOUNTANTS. Recommend to the Board the firm to be employed
by ISP as its independent accountants, which firm shall be ultimately
accountable to the Board and the Committee as representatives of shareholders.
2. PLAN OF AUDIT. Consult with the independent accountants regarding the
plan of audit. The Committee also shall review with the independent accountants
their report on the audit and review with management the independent accountants
suggested changes or improvements in ISP's accounting practices or controls.
3. ACCOUNTING PRINCIPLES AND DISCLOSURE. Review significant developments
in accounting rules. The Committee shall review with management recommended
changes in ISP's methods of accounting or financial statements. The Committee
also shall review with the independent accountants any significant proposed
changes in accounting principles and financial statements.
4. INTERNAL ACCOUNTING CONTROLS. Consult with the independent accountants
regarding the adequacy of internal accounting controls. Where appropriate,
consultation with the independent accountants regarding internal controls shall
be conducted out of management's presence. In connection with this function,
have the General Counsel circulate a Code of Conduct concerning ISP's compliance
with financial disclosure and accounting laws.
5. FINANCIAL DISCLOSURE DOCUMENTS. Review with management and the
independent accountants ISP's financial disclosure documents, including all
financial statements and reports filed with the Securities and Exchange
Commission or sent to stockholders and following the satisfactory completion of
each year-end review recommend to the Board the inclusion of the audited
financial statements in ISP's filing on Form 10-K. The review shall include any
significant problems and material disputes between management and the
independent accountants and a discussion with the independent accountants out of
management's presence of the quality of ISP's accounting principles as applied
in its financial reporting, the clarity of ISP's financial disclosures and
degree of aggressiveness or conservatism of ISP's accounting principles and
underlying estimates, and a frank and open discussion of other significant
decisions made by management in preparing the financial disclosure and reviewed
by the independent accountants.
6. INTERNAL CONTROL SYSTEMS. Review with management and internal auditors
ISP's internal control systems intended to ensure the reliability of financial
reporting and compliance with applicable codes of conduct, laws, and
regulations. The review shall include any significant problems and regulatory
concerns. The Committee also shall review internal audit plans in significant
compliance areas.
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7. ETHICAL ENVIRONMENT. Consult with management on the establishment and
maintenance of an environment that promotes ethical behavior, including the
establishment, communication, and enforcement of codes of conduct to guard
against dishonest, unethical, or illegal activities.
8. OVERSIGHT OF EXECUTIVE OFFICERS AND DIRECTORS AND CONFLICTS OF
INTEREST. Review any significant conflicts of interest involving directors or
executive officers. The Committee shall review compliance with Company policies
and procedures with respect to officers' expense accounts and perquisites,
including their use of corporate assets, and consider the results of any review
of these areas by the internal auditor or the independent accountant. The
Committee also shall review any significant questionable or illegal payments.
9. OVERSIGHT OF INDEPENDENT ACCOUNTANTS. Evaluate the independent
accountants on an annual basis, and where appropriate, recommend a replacement
for the independent accountants. In such evaluation, the Committee shall ensure
that the independent accountants deliver to the Committee a formal written
statement delineating all relationships between the accountants and ISP. The
Committee also shall engage in a dialogue with the accountants with respect to
any disclosed relationships or services that may impact the objectivity and
independence of the independent accountants and in response to the independent
accountant's report take, or recommend that the Board take, appropriate action
to satisfy itself of the independent accountant's independence.
10. ADEQUACY OF PERSONNEL. Review periodically the adequacy of ISP's
accounting, financial, and auditing personnel resources.
11. RISK MANAGEMENT. Review periodically risk management policies in light
of ISP's business strategy, capital strength, and overall risk tolerance. The
Committee also shall evaluate on a periodic basis ISP's investment and
derivatives risk management policies, including the internal system to review
operational risks, procedures for derivatives investment and trading, and
safeguards to ensure compliance with procedures.
12. TAX POLICIES. Review periodically ISP's tax policies and any pending
audits or assessments.
13. OFFERINGS OF SECURITIES. Perform appropriate due diligence on behalf
of the Board of Directors with respect to ISP's offerings of securities.
14. CHARTER AMENDMENTS. Review this Charter periodically, assess its
adequacy and propose appropriate amendments to the Board.
The Committee's function is one of oversight and review, and it is not
expected to audit ISP, to define the scope of the audit, to control ISP's
accounting practices, or to define the standards to be used in preparation of
ISP's financial statements.
III. COMPOSITION & INDEPENDENCE
The Committee shall consist of not less than three independent members, who
shall be appointed by the Board of Directors. Members of the Committee shall be
financially literate or become financially literate within a reasonable period
of time after appointment to the Committee and at least one member of the
Committee shall have accounting, related financial management expertise, or any
other comparable experience or background that results in the individual's
financial sophistication. No member of the Committee shall be employed or
otherwise affiliated with ISP's independent accountants.
In the event that a Committee member faces a potential or actual conflict
of interest with respect to a matter before the Committee, that Committee member
shall be responsible for alerting the Committee Chairman, and in the case where
the Committee Chairman faces a potential or actual conflict of interest, the
Committee Chairman shall advise the Chairman of the Board of Directors. In the
event that the Committee Chairman, or the Chairman of the Board of Directors,
concurs that a potential or actual conflict of interest exists, an independent
substitute Director shall be appointed as a Committee member until the matter,
posing the potential or actual conflict of interest, is resolved.
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IV. QUORUM AND MEETINGS
A quorum of the Committee shall be declared when a majority of the
appointed members of the Committee are in attendance. The Committee shall meet
on a regular basis. Meetings shall be scheduled at the discretion of the
Chairman. Notice of the meetings shall be provided at least ten days in advance,
unless such notice is waived in accordance with the Charter or By-laws of the
company. The Committee may ask members of management or others to attend the
meeting and provide pertinent information as necessary.
V. REPORTS
The Committee will report to the Board from time to time with respect to
its activities and its recommendations. When presenting any recommendation or
advice to the Board, the Committee will provide such background and supporting
information as may be necessary for the Board to make an informed decision. The
Committee will keep minutes of its meetings and will make such minutes available
to the full Board for its review.
The Committee shall report to shareholders in Company's proxy statement for
its annual meeting whether the Committee has satisfied its responsibilities
under this Charter.
VI. OTHER AUTHORITY
The Committee is authorized to confer with Company management and other
employees to the extent it may deem necessary or appropriate to fulfill its
duties. The Committee is authorized to conduct or authorize investigations into
any matters within the Committee's scope of responsibilities. The Committee also
is authorized to seek outside legal or other advice to the extent it deems
necessary or appropriate, provided it shall keep the Board advised as to the
nature and extent of such outside advice.
The Committee will perform such other functions as are authorized for this
Committee by the Board of Directors Statement of Purpose and Responsibilities or
the Board of Directors.
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ANNEX B
INTERNATIONAL SPECIALTY PRODUCTS INC.
2000 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE
The purpose of this 2000 Stock Option Plan for Non-Employee Directors (the
"Plan") of International Specialty Products Inc. (the "Company") is to encourage
ownership of the Company's common stock, $.01 par value ("Common Stock"), by
outside directors of the Company, whose services are considered essential to the
Company's future growth and continued financial success and to thereby provide
them with a further incentive to continue as directors of the Company. The stock
options (the "Option" or "Options") granted pursuant to the Plan are a matter of
separate inducement and are not in lieu of any salary or other compensation for
the services of any Eligible Director (as hereinafter defined) participating in
the Plan.
2. PARTICIPATION IN THE PLAN
All directors of the Company who are not officers or employees of the
Company or any subsidiary of the Company ("Eligible Director(s)") shall
participate in the Plan, except for any Eligible Director who shall elect in a
written notice to the Secretary of the Company not to participate in the Plan.
3. COMMON STOCK SUBJECT TO THE PLAN
The maximum number of shares of Common Stock available for the exercise of
Options granted under the Plan shall be two hundred thousand (200,000) shares.
Such number of shares of Common Stock shall be subject to adjustment as provided
in Section 7 of the Plan. Such shares may be authorized but unissued shares of
Common Stock or shares of Common Stock issued and reacquired by the Company and
held in its treasury. If any outstanding Option expires or is terminated for any
reason without having been exercised in full, the shares of Common Stock covered
by the unexercised portion of such Option shall again become available for the
grant of Options.
4. NONSTATUTORY STOCK OPTIONS
All Options shall be nonqualified Options and shall not be entitled to tax
treatment under Section 422 of the Internal Revenue Code of 1986, as amended to
date, and as may be amended from time to time (the "Code").
5. TERMS, CONDITIONS AND FORM OF OPTIONS
(a) OPTION AGREEMENTS. Each Option granted under the Plan shall be
evidenced by a written agreement setting forth the terms and conditions of such
grant (the "Stock Option Agreement"), which shall be executed by the Company and
by the person to whom the Option is granted.
(b) GRANT OF OPTIONS. Each person who first becomes an Eligible Director
after the Effective Date (as hereinafter defined) of the Plan shall be granted
automatically, as of the date such person becomes an Eligible Director, an
Option to purchase 5,000 shares of Common Stock of the Company (the "Initial
Option"), subject to adjustment as provided in Section 7 of the Plan. Each
person who is an Eligible Director on the Effective Date and each person who
first becomes an Eligible Director thereafter shall be granted automatically, on
each anniversary date of such Eligible Director's initial election or
appointment to the Board of Directors, commencing in the year 2000, an
additional Option to purchase 3,000 shares of Common Stock of the Company (an
"Additional Option"), subject to adjustment as provided in Section 7 of the
Plan, provided that such Eligible Director has continued to serve in such
capacity through such anniversary date. If the date of grant of any Option is
not a business day, such Option shall be granted on the next succeeding business
day.
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(c) OPTIONS NOT TRANSFERABLE. The rights and benefits under the Plan may
not be assigned, except as provided in this Section 5(c). Each Option shall not
be transferable by the optionee, except by will or, if the optionee dies
intestate, by the laws of descent and distribution of the state of the
optionee's domicile at the time of his death, and shall be exercised during the
lifetime of the optionee only by the optionee or the optionee's guardian or
legal representative. No Option or interest therein may be transferred,
assigned, pledged or hypothecated by the optionee, whether by operation of law
or otherwise, or be made subject to execution, attachment or similar process.
(d) EXERCISE OF OPTIONS. Subject to Section 5(e) hereof, an Option granted
under the Plan shall, to the extent not exercised, expire on the ninth
anniversary of the date of grant. To the extent that an Option is not exercised
within the period of time prescribed by the Plan and the Stock Option Agreement
confirming the Option, the Option shall lapse and all rights of the optionee
with respect to it shall terminate. An Initial Option granted to an Eligible
Director shall vest and become exercisable in equal annual installments on each
of the first through third anniversaries of the date of grant. An Additional
Option granted to an Eligible Director shall fully vest and become exercisable
with respect to one hundred percent (100%) of the aggregate number of shares of
Common Stock subject to such Additional Option on the first anniversary of the
date of grant. Options may be exercised only by written notice to the Company
addressed to the office of the Secretary of the Company and accompanied by
payment of the full exercise price for the shares as to which they are
exercised.
(e) TERMINATION OF SERVICE; EXERCISE BY REPRESENTATIVE FOLLOWING DEATH OR
DISABILITY OF DIRECTOR. If an Eligible Director who has been granted Options
under the Plan shall cease to be a director of the Company for any reason then
each Option held by such Eligible Director on the date of such cessation, to the
extent then exercisable, may be exercised at any time prior to the earlier of
(i) its expiration date or (ii) the expiration of a sixty (60) day period
following the date of such cessation.
6. OPTION EXERCISE PRICE; PAYMENT FOR SHARES
(a) The exercise price for each share of Common Stock subject to an Option
shall be equal to the Fair Market Value (as hereinafter defined) of a share of
Common Stock on the date of grant of such Option and shall be payable in cash
(including check, bank draft, money order or wire transfer), or, if approved by
the Board of Directors in its sole discretion, by delivering shares of Common
Stock already owned by the optionee and having an aggregate value (based on the
Fair Market Value of the Common Stock so delivered as of the day preceding the
date of delivery) equal to the exercise price of the Option shares purchased, or
by delivering to the Company a combination of such shares and cash having an
aggregate value (based on the Fair Market Value of the Common Stock so delivered
as of the date preceding the date of delivery) equal to the exercise price of
the Option shares purchased.
(b) For purposes of Section 6 hereof, "Fair Market Value", as of any date,
shall mean (i) in the event the Common Stock is listed on a national securities
exchange, the closing price as reported for composite transactions on the date,
or, if no sales occurred on that date, then the closing price on the next
preceding date on which such sales of Common Stock occurred; (ii) in the event
the Common Stock is not listed on a national securities exchange, the mean
between the high bid and the low asked prices reported for shares of Common
Stock traded over-the-counter on that date, or, if no bid and asked prices were
reported on that date, then the mean between the high bid and low asked prices
on the next preceding date on which such prices were reported; or (iii) in the
event there are no over-the-counter prices for the Common Stock and it is not
listed on a national securities exchange, the fair market value determined by
the Board of Directors either on the basis of the available price of the Common
Stock or in such other manner as the Board of Directors may deem reasonable.
7. GENERAL PROVISIONS
(a) NO RIGHTS AS STOCKHOLDERS. An Eligible Director to whom an Option is
granted shall not be deemed the holder of any shares subject to the Option or
have any rights of a stockholder with respect thereto
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until the date of issuance to such Eligible Director of a stock certificate
therefor, and no adjustment will be made for dividends or other rights for which
the record date precedes the date such certificate is issued.
(b) TERM OF THE PLAN. The Plan shall terminate on the tenth anniversary of
the Effective Date of the Plan. No Options shall be granted more than ten (10)
years after the Effective Date.
(c) LIMITATION OF RIGHTS. Neither the Plan, nor the granting of an Option,
nor any other action taken pursuant to the Plan, shall constitute or be evidence
of any agreement or understanding, express or implied, that the Company will
retain an Eligible Director, nor confer upon any Eligible Director the right to
remain a member of the Board of Directors, for any period of time or at any
particular rate of compensation.
(d) ADJUSTMENTS. The aggregate number of shares of Common Stock subject to
the Plan, the number of shares subject to outstanding Options, the exercise
price of such outstanding Options and the number of shares covered by future
Option grants shall be appropriately adjusted, in any reasonable manner
determined by the Board of Directors, to reflect any future stock dividends,
stock splits, split-ups, reorganizations, recapitalizations or other
substitutions of securities of the Company for the present Common Stock. Such
adjustment shall be effective and binding for all purposes of the Plan and each
Stock Option Agreement entered into under the Plan. Upon the effective date of
any merger or consolidation of the Company with or into another corporation
(other than a merger or consolidation in which the Company is the surviving
corporation and which does not result in any reclassification or reorganization
of the then outstanding shares of Common Stock) and upon the effective date of
any sale of all or substantially all of the assets of the Company to any other
entity (a "Terminating Event"), the Plan and any unexercised Options granted
under the Plan shall terminate unless a provision shall be made in writing in
connection with such Terminating Event for the continuance of the Plan and, if
the Company is not the surviving corporation, for the assumption of such
unexercised Options by a successor parent or subsidiary thereof or for the
substitution for such unexercised Options of new Options covering shares of such
successor with appropriate adjustments as to number, price and kind of
securities or property subject to such new Options. In such event, the Plan and
the unexercised Options theretofore granted or the new Options substituted
therefor shall continue in the manner and under the terms provided in the Plan.
No adjustment or substitution provided for in this Section 7 shall require the
Corporation to issue a fractional share.
(e) SURRENDER AND REPURCHASE OF OPTIONS. A Stock Option Agreement may
provide that in the event of any tender or exchange offer (other than an offer
by the Company) for shares of Common Stock, the optionee will have the
unconditional right (a "Limited Right") to surrender all or any portion of such
Option (regardless of the extent to which such Option is then exercisable)
during the 30-day period following the date shares are first purchased or
exchanged pursuant to such offer (but without regard to the number of shares so
purchased) and to receive in consideration of such surrender an amount equal to
the excess of the "Fair Market Value on the date of surrender" (as hereinafter
defined) of the shares covered by the surrendered portion of the Option over the
exercise price of the shares covered by such portion of the Option. Such amount
shall be paid in (i) cash, (ii) Common Stock, or (iii) any combination of cash
and Common Stock, with the form of payment to be at the election of the Board of
Directors, provided, however, that in every instance the Board of Directors
shall determine that such payment is consistent with the purposes set forth in
Section 1 of the Plan. For the purposes of Limited Rights, the term "Fair Market
Value on the date of surrender" shall mean the average of the Fair Market Value
of the shares of Common Stock during the period commencing on the date the
bidder publicly announced its intention to pay the price which was initially
paid for, or the exchange ratio which was initially used for, such shares first
purchased or exchanged and ending on the date on which such shares were first
purchased or exchange, inclusive.
(f) EFFECTIVE DATE. This Plan shall take effect on and as of July 1, 2000
(the "Effective Date"), subject to approval of the Plan by the stockholders of
the Company by no later than the next Annual Meeting of Stockholders of the
Company to occur after the Effective Date. If such stockholder approval is not
obtained on or prior to the date of such Annual Meeting, all prior Option grants
shall be void ab initio and of no further force and effect. In no event shall
any Option be exercisable unless the Common Stock subject thereto (i) has been
registered under the Securities Act of 1933, as amended, and qualified under
applicable state "blue sky" laws in connection with the offer and sale thereof,
or the Company has determined that an exemption from
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registration under the Securities Act and from qualification under such state
"blue sky" laws is available and (ii) has been admitted to listing on any stock
exchange on which the Common Stock may then be listed free of any conditions not
acceptable to the Company.
(g) AMENDMENT. The Board of Directors of the Company may terminate,
modify, suspend or amend the Plan at any time and from time to time. No Option
shall be modified or amended without the consent of the optionee or the
optionee's executor, administrator, guardian or legal representative to the
extent that such action would adversely alter or impair any rights or
obligations under any Option granted under the Plan.
(h) NOTICE. Any written notice to the Company required by any of the
provisions of the Plan or a Stock Option Agreement under the Plan shall be
addressed to the Secretary of the Company and shall become effective when it is
received.
8. GOVERNING LAW
The Plan, together with all Options and Stock Option Agreements under the
Plan, and all determinations made and actions taken pursuant hereto, shall be
governed by the laws of the State of New Jersey, to the extent not superseded by
the laws of the United States.
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ANNEX C
AMENDMENT NO. 2 TO THE
INTERNATIONAL SPECIALTY PRODUCTS
2000 LONG TERM INCENTIVE PLAN
This Amendment No. 2 (the "Amendment") to the International Specialty
Products 2000 Long Term Incentive Plan, as amended (the "Plan"), is effective as
of December 31, 2000 (the "Effective Date").
1. Section IV(a) of the Plan is hereby amended to read in its entirety as
follows:
"(a) Grant of Incentive Units. The Committee may, in its sole
discretion, grant Incentive Units to any one or more Employees. The number
of Incentive Units granted to each Employee shall be determined by the
Committee in its sole discretion. Subject to adjustment as provided in
Section IV(d) below, the maximum number of Incentive Units which may be
granted to any individual participant under the Plan (including Incentive
Units granted to a participant in exchange for Options) during any
particular calendar year shall not exceed 700,000. Incentive Units may only
be granted on a Valuation Date. Subject to adjustment as provided in
Section IV(d) below, the "Initial Value" of any Incentive Unit granted
under this Plan shall normally be equal to the value of such Incentive Unit
determined (under Section I(k) hereof) as of the Valuation Date on which
such Incentive Unit is granted. The Committee, however, may in its sole
discretion grant Incentive Units with an "Initial Value" that is lower than
the value of such Incentive Units as normally determined on any given
Valuation Date."
2. Section IV(e) of the Plan is hereby amended to read in its entirety as
follows:
"(e) Vesting in Incentive Units. The Incentive Units granted to an
Employee or received by an Employee in exchange for Options (including any
additional whole or partial Incentive Units credited to the Employee as a
result of the payment of a dividend on the Corporation's common stock or a
recapitalization) shall normally vest cumulatively, in twenty percent (20%)
increments, on each anniversary of the date such Incentive Units were
granted to the Employee or received in exchange for Options and such
vesting shall end upon the termination of an Employee's employment with the
Corporation or any subsidiary for any reason whatsoever; provided, however,
that the Committee may in its sole discretion grant Incentive Units with
any other vesting schedule, provided that Incentive Units granted under
such vesting schedule vest on a Valuation Date. However, (i) such Incentive
Units will become fully and immediately vested and payable in cash
(pursuant to the terms of Section IV(g) hereof) in the event of a Change in
Control of the Corporation and (ii) such Incentive Units, to the extent not
then exercised, shall become immediately forfeited and totally
unexercisable upon the termination of an Employee's employment with the
Corporation or any Subsidiary for Good Cause."
3. Except as amended hereby, the Plan remains unmodified.
4. The above amendments to the Plan are effective as of the Effective Date,
provided that such amendments are approved by the stockholders of International
Specialty Products Inc. (the "Corporation") at an annual meeting, any special
meeting or by written consent of the stockholders of the Corporation within
twelve months of the Effective Date, and such approval of the stockholders shall
be a condition to the right of each participant to receive any Incentive Units
(as defined in the Plan) under the Plan, as amended hereby. Any Incentive Units
granted under the Plan, as amended hereby, prior to such approval of the
stockholders shall be effective as of the date of grant, but no such Incentive
Unit may be exercised and no restrictions relating to any Incentive Unit may
lapse prior to such stockholder approval, and if the stockholders fail to
approve the Plan as specified hereunder, any such Incentive Unit shall be
cancelled.
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FORM OF PROXY CARD
INTERNATIONAL SPECIALTY PRODUCTS INC.
PROXY FOR THE ANNUAL MEETING TO BE HELD AT 10:00 A.M.,
LOCAL TIME, ON TUESDAY, MAY 15, 2001, AT
WEIL, GOTSHAL & MANGES LLP, 767 FIFTH AVENUE, 25TH FLOOR,
NEW YORK, NEW YORK
The undersigned hereby appoints Richard A. Weinberg and Randall R. Lay,
and each of them, proxies, with full power of substitution, to represent and to
vote and act with respect to all of the undersigned's shares of common stock of
International Specialty Products Inc. at the Annual Meeting of Stockholders of
International Specialty Products Inc. to be held on Tuesday, May 15, 2001, and
at any adjournments or postponements thereof, as designated herein upon the
proposals set forth herein and, in their discretion, upon such other matters as
may properly be brought before the meeting.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY. WHEN
PROPERLY EXECUTED IT WILL BE VOTED AS DIRECTED BY THE STOCKHOLDER BUT, UNLESS
OTHERWISE SPECIFIED, IT WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND FOR
ITEMS 2 AND 3.
Change of Address
___________________________ INTERNATIONAL SPECIALTY PRODUCTS INC.
___________________________ P.O. BOX 11028
___________________________ NEW YORK, N.Y. 10203-0028
(continued on reverse side)
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3.
1. ELECTION OF DIRECTORS
FOR all nominees WITHHOLD AUTHORITY to vote *EXCEPTIONS
listed below [___] for all nominees listed below [___] [___]
Nominees: Charles M. Diker, Robert Englander, Samuel J. Heyman, Sanford Kaplan,
Sunil Kumar, Burt Manning and Alan M. Meckler
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
*Exceptions ________________________________________________________
2. ADOPTION OF THE INTERNATIONAL SPECIALTY PRODUCTS INC. 2000 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
FOR [____] AGAINST [____] ABSTAIN [___]
3. APPROVAL OF AMENDMENT TO THE INTERNATIONAL SPECIALTY PRODUCTS 2000 LONG TERM
INCENTIVE PLAN
FOR [____] AGAINST [____] ABSTAIN [___]
4. Such other business as may properly come before the meeting and any
adjournment or postponement thereof.
Change of Address
On Reverse Side ____
Please vote, sign and date this proxy and
return it promptly in the enclosed envelope.
No postage is required if mailed in the
United States. Your signature(s) should
correspond with the name(s) appearing in the
space at the left. Where signing in a
fiduciary or representative capacity, please
give your full title as such. If shares are
held in more than one capacity, this proxy
will be deemed to vote all shares held in
all capacities.
Dated ________________________________, 2001
______________________________________
Signature
______________________________________
Signature, if held jointly
PLEASE SIGN, DATE AND RETURN THE PROXY Votes must be indicated
Card Promptly Using the Enclosed Envelope. (x) in black or blue ink. X
ii