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FERRO
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[FERRO LOGO]
FERRO CORPORATION
100O LAKESIDE AVENUE
CLEVELAND, OHIO 44114-1147 USA
TELEPHONE: (216) 641-8580
FACSIMILE: (216) 875-7266
March 26, 2003
Dear Shareholder:
I cordially invite you to attend the Annual Meeting of Shareholders of
Ferro Corporation, which will be held on Friday, April 25, 2003. The meeting
will be held at Ferro's headquarters located at 1000 Lakeside Avenue, Cleveland,
Ohio, and will begin at 8:00 a.m. (Cleveland time).
The items proposed for action by the shareholders at the meeting are the
election of three Directors, the ratification of the appointment of our
independent auditors, and the approval of a new Long-Term Incentive Compensation
Plan. The following pages contain a description of these matters and include
information about our Directors, officers and independent auditors.
Regardless of the number of shares you own, your participation is
important. I would urge you to vote as soon as possible by telephone, the
Internet or mail, even if you plan to attend the meeting. You may revoke your
proxy at any time before the meeting regardless of your voting method. If you
choose, you may also vote your shares personally at the meeting. In any case,
your vote is important.
I look forward to seeing you at the Annual Meeting.
Very truly yours,
HECTOR R. ORTINO
Chairman and
Chief Executive Officer
WHO IS SOLICITING MY PROXY WITH THIS PROXY STATEMENT?
The Board of Directors of Ferro is soliciting your proxy in connection with
our Annual Meeting of Shareholders.
WHERE AND WHEN WILL THE MEETING BE HELD?
This year's meeting will be held on Friday, April 25, 2003, at our
headquarters at 1000 Lakeside Avenue in Cleveland, Ohio. The meeting will begin
at 8:00 a.m. (Cleveland Time).
WHAT WILL BE VOTED ON AT THE MEETING?
Three items will be considered at the meeting. They are -
(1) Election of three Directors for terms ending in 2006,
(2) Ratification of the appointment of independent auditors for the
current year, and
(3) Approval of the 2003 Long-Term Incentive Compensation Plan
WHO IS ENTITLED TO VOTE AT THE MEETING?
The record date for this meeting is March 3, 2003. On that date, we had
40,226,975 shares of Common Stock (which have a par value of $1.00 per share)
and 685,229 shares of Series A ESOP Convertible Preferred Stock (which have no
par value) outstanding. Each of these shares will be entitled to one vote at the
meeting. (The Common Stock and Series A ESOP Convertible Preferred Stock will
vote together as a single class.)
HOW DO I VOTE?
You may cast your votes in person at the meeting or by any one of the
following ways:
BY TELEPHONE: You may call the toll-free number (1-800-542-1160) printed on
your proxy card. Follow the simple instructions and use the personalized control
number printed on your proxy card to vote your shares. You will be able to
confirm that your vote has been properly recorded. Telephone voting is available
24 hours a day. If you vote by telephone, you do not need to return your proxy
card.
OVER THE INTERNET: You may visit the web site (www.votefast.com) printed on
your proxy card. Follow the simple instructions and use the personalized control
number printed on your proxy card to vote your shares. You will be able to
confirm that your vote has been properly recorded. Internet voting is available
24 hours a day. If you vote over the Internet, you do not need to return your
proxy card.
BY MAIL: You may mark, sign and date the enclosed proxy card and return it
in the enclosed postage-paid envelope.
WHAT IF I CHANGE MY MIND BEFORE THE MEETING?
If you change your mind, you may revoke your proxy by giving us notice
either in writing before the meeting or at the meeting itself. (If you do revoke
your proxy during the meeting, it will not, of course, affect any vote that has
already been taken.)
PROXY STATEMENT
This document is the Proxy Statement of the Board of Directors of Ferro
Corporation in connection with the Annual Meeting of Shareholders to be held on
Friday, April 25, 2003, at Ferro's headquarters at 1000 Lakeside Avenue,
Cleveland, Ohio, at 8:00 a.m. (Cleveland Time).
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CORPORATE GOVERNANCE
Ferro's Board has long followed, both formally and informally,
corporate governance principles designed to assure that the Board, through
its membership, composition, and committee structure, is able to provide
informed, competent and independent oversight of the company.
In light of the enactment of the Sarbanes-Oxley Act, the development
of new listing standards by the New York Stock Exchange, and the on-going
public discourse over the governance of modern American companies, the
Board is currently reviewing Ferro's corporate governance policies and
committee charters to assure that the Board meets fully its
responsibilities to our shareholders and the investing public.
When new listing standards have been adopted by the NYSE and approved
by the SEC, the Board intends to consider and adopt new corporate
governance principles, new guidelines for determining the independence of
its members, and revised committee charters. As soon as they have been
adopted, Ferro will post the new principles, guidelines and charters, as
well as Ferro's legal and ethical conduct policies, on our website at
www.ferro.com.
As part of this process, the Board will also review the composition of
its committees and qualifications of the members of those committees. At
this time, we expect that all of the current members of both the Audit
Committee and the Compensation & Organization Committee will (as they do
today) fully qualify as "independent" directors under the listing standards
and SEC rules, as well as under the Board's new independence guidelines. We
also expect that each of the Board's committees will be comprised of
individuals who possess the requisite qualifications and expertise to meet
the corporate governance standards established under the Sarbanes-Oxley
Act, the SEC rules and the NYSE listing standards.
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ELECTION OF DIRECTORS
The first item that will be considered at the Annual Meeting is the
election of three Directors for terms ending in 2006.
BACKGROUND
Our Board has ten Directors divided into three classes. The Directors in
each class are elected for terms of three years so that the term of office of
one class of Directors expires at each Annual Meeting. The following pages
contain information about our Directors (both the nominees for re-election and
the Directors whose terms will expire in later years).
NOMINEES FOR ELECTION AT THIS ANNUAL MEETING
The current terms of office of Dr. Jennie S. Hwang, Hector R. Ortino and
Padmasree Warrior will expire on the day of this Annual Meeting (as soon as they
or their successors are elected). The Board has nominated each of these
incumbents for re-election at this Annual Meeting. Following is information
about these three Directors:
JENNIE S. HWANG, Ph.D.
Age: 55
First Became a Ferro Director: 2001
[PHOTO] Current Term Expires: This Annual Meeting
Common Shares Owned: 3,209 Shares
Committee Assignments: Audit Committee
Strategy & Technology
Committee
Biographical Information:
Since 1994, Dr. Hwang has served as President of H-Technologies Group, Inc., an
intellectual property and service company in the microelectronics industry. Dr.
Hwang is also a co-founder of FreeDonation.com, Inc. Before establishing these
companies, Dr. Hwang held various executive positions with Lockheed Martin
Corp., Hanson PLC (SCM Corp.), The Sherwin-Williams Company and International
Electronic Materials Corp., a manufacturing company she founded and later sold.
Dr. Hwang holds advanced degrees in liquid crystals and chemistry and a Ph.D. in
engineering. She is an invited columnist for SMT magazine (a globally-circulated
trade magazine), and has served as National President of the Surface Mount
Technology Association. She also is a member of the National Academy of
Engineering. Dr. Hwang is also a board member of Second Bancorp, Inc., Singapore
Asahi Chemical Industries, Pte. Ltd., Cleveland State University Foundation, and
Case Western Reserve University.
HECTOR R. ORTINO
Age: 60
First Became a Ferro Director: 1993
Current Term Expires: This Annual Meeting
[PHOTO] Common Shares Owned: 598,224 Shares(1)
Series A ESOP Convertible 3,974 Shares
Preferred Shares
Committee Assignment: Executive Committee
(Chair)
Biographical Information:
Mr. Ortino has been Ferro's Chairman and Chief Executive Officer since 1999. Mr.
Ortino began his career with Ferro Argentina in 1971 and held several financial
and operating positions in Argentina and Mexico. In 1983, he moved to Cleveland
and served in several progressively more responsible financial and
administrative positions, including Executive Vice President and Chief
Financial-Administrative Officer. In 1996, he was named Ferro's President and
Chief Operating Officer. Before joining Ferro, Mr. Ortino was with Columbia
Broadcasting Systems Inc., Argentina and Pfizer, Inc., Argentina.
Mr. Ortino is also a director of Parker Hannifin Corporation (a producer of
motion and control components for commercial, industrial and aerospace markets)
and New York Life Insurance Company (a mutual life insurance company).
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(1) The shares reported as owned by Mr. Ortino include shares that he owns
beneficially but not of record. An individual is deemed to be the
beneficial owner of shares over which he exercises or shares voting power
or investment power. The number of shares reported above for Mr. Ortino
includes 109,500 shares issued to him under the Performance Share Plan that
are subject to risk of forfeiture based upon the terms of that plan and
387,299 shares that may be acquired by Mr. Ortino pursuant to exercisable
stock options as of May 2, 2003.
- 2 -
PADMASREE WARRIOR
Age: 42
First Became a Ferro Director: 2002
[PHOTO] Current Term Expires: This Annual Meeting
Common Shares Owned: 2,711 Shares
Committee Assignments: Finance Committee
Strategy & Technology
Committee
Biographical Information:
On January 1, 2003, Ms. Warrior became Senior Vice President & Chief Technology
Officer of Motorola, Inc., an integrated communications and embedded electronic
solutions company. Previously, Ms. Warrior was Corporate Vice President and
General Manager for Motorola's Energy Systems Group, where she was responsible
for all aspects of the business, and General Manager for Thoughtbeam, Inc., a
wholly-owned subsidiary of Motorola, where she led the effort to commercialize
research efforts relating to compound semiconductor materials.
Prior to these assignments, Ms. Warrior was Corporate Vice President and Chief
Technology Officer for Motorola's Semiconductor Products Sector where she led
the sector's global research and development organization and was responsible
for the sector's technology strategy and embedded systems solutions.
All three of the nominees above have agreed to stand for re-election. While
we have no reason to believe that any of these nominees will be unable or
unwilling to serve at the time of the Annual Meeting, in the unlikely event any
of them does not stand for re-election, the Board will reduce the authorized
number of Directors.
- 3 -
DIRECTORS CONTINUING IN OFFICE
The following are the Directors who will continue in office after the
Annual Meeting:
MICHAEL H. BULKIN
Age: 64
First Became a Ferro Director: 1998
[PHOTO] Current Term Expires: 2004
Common Shares Owned: 23,455 Shares
Committee Assignments: Compensation &
Organization Committee
(Chair)
Executive Committee
Biographical Information:
Mr. Bulkin is a private investor. In 1965, he joined McKinsey & Company, Inc.
(an international management consulting firm). He became a principal in 1970 and
was elected a director in 1976. While serving with McKinsey & Company, Mr.
Bulkin held several leadership positions including Managing Director of various
offices, Chairman of the Partner Evaluation and Compensation Committee and
member of the Shareholders Committee, Executive Committee, Strategy Development
Committee, Professional Personnel Committee and Partner Election Committee. Mr.
Bulkin retired from McKinsey & Company in 1993.
In 1994, Mr. Bulkin became a director of Bunge Limited, a global food and
agribusiness company operating in the farm-to-consumer food chain. He is also
currently an advisor to Three Cities Research (a private investment company)
where he has served as a director of portfolio companies. Mr. Bulkin also serves
as a director of American Bridge Company, a privately-held engineering,
manufacturing and construction company, and Specified Technologies Inc., a
privately-held fire stopping products company.
SANDRA AUSTIN CRAYTON
Age: 55
First Became a Ferro Director: 1994
[PHOTO] Current Term Expires: 2005
Common Shares Owned: 26,720 Shares
Committee Assignments: Compensation & Organization
Committee Executive Committee
Strategy & Technology
Committee (Chair)
Biographical Information:
Ms. Crayton is the retired President and CEO, of PhyServ, LLC, a healthcare
billing, collections, receivables and information company.
Between 1981 and 1988, Ms. Crayton served as the Director of Planning, Vice
President and President of the Huron Road Hospital in Cleveland. In 1988, Ms.
Crayton was appointed Senior Vice President and General Manager of the
Medical/Surgical and Psychiatry Management Centers of University Hospitals of
Cleveland. From 1990 to 1994, Ms. Crayton served as the Executive Vice President
and Chief Operating Officer of The University of Chicago Hospitals. In 1994, she
was appointed President of Caremark Clinical Management Services, a division of
Caremark Rx, Inc. In 1995, Ms. Crayton was named President of Caremark Physician
Services, a division of Caremark, Inc., which provides physician practice
management services. Between 1997 and 1999, Ms. Crayton was President and Chief
Executive Officer of Sedona Health Care Group, Inc. In 1999, she became
President and CEO of PhyServ LLC and retired from that position on June 1, 2001,
when the company was sold.
Ms. Crayton also serves as a director of National City Corporation and Cancer
Treatment Centers of America.
- 4 -
WILLIAM B. LAWRENCE
Age: 58
First Became a Ferro Director: 1999
[PHOTO] Current Term Expires: 2005
Common Shares Owned: 11,228 Shares
Committee Assignments: Audit Committee (Chair)
Executive Committee
Biographical Information:
Before the sale of TRW Inc. to Northrop Grumman in December 2002, Mr. Lawrence
served as TRW's Executive Vice President, General Counsel & Secretary. TRW was a
provider of advanced technology products and services for the global automotive,
aerospace and information systems markets.
Mr. Lawrence first joined TRW in 1976 as counsel specializing in securities and
finance. He became Senior Counsel in 1978 and in 1980 was named Vice President,
Law, for TRW's Industrial and Energy Sector. Mr. Lawrence was named Vice
President and Assistant General Counsel of TRW in 1985. From 1986 to 1987, he
also served as Vice President, Law, for TRW's space and defense businesses. In
1989, Mr. Lawrence was appointed Executive Vice President of Planning,
Development and Government Affairs. He was named to his final position with TRW
in 1997.
MICHAEL F. MEE
Age: 60
First Became a Ferro Director: 2001
[PHOTO] Current Term Expires: 2004
Common Shares Owned: 5,617 Shares
Committee Assignments: Finance Committee (Chair)
Compensation & Organization
Committee
Biographical Information:
At the time of his retirement in March 2001, Mr. Mee served as Executive Vice
President and Chief Financial Officer of Bristol-Myers Squibb Company, a
pharmaceutical and related health care products company. Mr. Mee joined
Bristol-Myers Squibb in 1994 as its Chief Financial Officer. In 1998, he assumed
additional responsibility for Corporate Development. In 1999, he assumed
responsibility for Global Business Services, was made Executive Vice President
and became a member of the Office of the Chairman in 2000. Before joining
Bristol-Myers Squibb, Mr. Mee was involved in the reorganization of Wang
Laboratories as Chairman of the Board and earlier as Executive Vice President
and Chief Financial Officer of the company. Prior to joining Wang Laboratories
in 1990, he was Senior Vice-President and Chief Financial Officer of the Norton
Company and Chairman of its Eastman Christensen Oil Field Services subsidiary.
Before joining Norton Company in 1985, Mr. Mee was Vice President and Controller
of Monsanto Company, and he served in other financial assignments with the
Company prior to this position.
Mr. Mee also serves as a director of Lincoln National Corporation, an insurance
and financial services company.
- 5 -
WILLIAM J. SHARP
Age: 61
First Became a Ferro Director: 1998
[PHOTO] Current Term Expires: 2004
Common Shares Owned: 19,467 Shares
Committee Assignments: Audit Committee
Compensation & Organization
Committee
Biographical Information:
Mr. Sharp serves as a consultant to various private equity groups. In 2001, Mr.
Sharp retired as President of North American Tire for The Goodyear Tire & Rubber
Company, a tire, engineered rubber products and chemicals manufacturer.
Mr. Sharp began his career with Goodyear in 1964. Following various assignments
in the United States and abroad, He was named Director of European Tire
Production in 1984. He was appointed Vice President of Tire Manufacturing in
1987 and later Executive Vice President of Product Supply in 1991. In 1992, he
became President and General Manager of Goodyear's European Regional Operations.
He was elected President of Goodyear Global Support Operations in 1996.
DENNIS W. SULLIVAN
Age: 64
First Became a Ferro Director: 1992
[PHOTO] Current Term Expires: 2005
Common Shares Owned: 33,980 Shares
Committee Assignments: Finance Committee
Executive Committee
Strategy & Technology
Committee
Biographical Information:
Mr. Sullivan began his career with Parker Hannifin Corporation, a producer of
motion and control components for commercial, industrial and aerospace markets,
in 1960. He became Group Vice President in 1972, President of the Fluid
Connectors Group in 1976, Corporate Vice President in 1978, President of the
Fluidpower Group in 1979, and President of the Industrial Sector in 1980.
In 1981, he was named to his current position as Parker Hannifin's Executive
Vice President. In that position, Mr. Sullivan is responsible for Parker
Hannifin's worldwide marketing and is a member of the Office of the CEO.
Mr. Sullivan is a director of Parker Hannifin and KeyCorp (a bank holding
company).
- 6 -
ALBERTO WEISSER
Age: 47
First Became a Ferro Director: 2000
[PHOTO] Current Term Expires: 2004
Common Shares Owned: 5,632 Shares
Committee Assignments: Audit Committee
Finance Committee
Biographical Information:
Mr. Weisser is Chairman and Chief Executive Officer of Bunge Limited, a global
food and agribusiness company operating in the farm-to-consumer food chain.
Mr. Weisser joined Bunge as Chief Financial Officer in July 1993. In 1999, he
was appointed Chief Executive Officer and then Chairman later in the year. He
has served as a member of the Bunge Board of Directors since May 1997. Before
joining Bunge, Mr. Weisser served in various finance-related positions in
Germany, the United States, Mexico, and Brazil for the BASF Group for 15 years.
Mr. Weisser is also a member of the Board of Directors of Rabobank's North
American Agribusiness Advisory Board.
- 7 -
BOARD MEETINGS AND ATTENDANCE
The Board met six times in 2002. Committees of the Board met from time to
time upon call of the Chairman of the Board or individual Committee Chairs.
During 2002, each Director attended at least 75% of the total number of meetings
of the Board and the committees on which he or she served.
BOARD COMMITTEES
The Directors have five committees as follows:
- AUDIT COMMITTEE
The Audit Committee is responsible for appointing Ferro's independent
auditors and for assisting the Board with oversight of Ferro's financial
statement reporting processes, performance of Ferro's internal audit and risk
management functions, and compliance with Ferro's legal and ethical conduct
policies. The Audit Committee is not, however, responsible for conducting
audits, preparing financial statements, or reviewing or assuring accuracy of any
financial statements or filings, all of which remain the responsibility of
management or the independent auditors.
A copy of the Audit Committee's current charter was included in the 2001
Proxy Statement. As noted on page 1 above, the Board intends to review the
charter of the Audit Committee in connection with its overall review of Ferro's
corporate governance principles.
The members of the Audit Committee are Dr. Hwang and Messrs. Lawrence,
Sharp, and Weisser. Mr. Lawrence serves as the Chair. Each member of the Audit
Committee is "independent" under the requirements of section 301 of the
Sarbanes-Oxley Act of 2002, as well as standards contained in the New York Stock
Exchange's corporate governance rule proposals and currently-proposed SEC rules.
Each member of the Audit Committee has experience in financial and accounting
matters. The Audit Committee met three times in 2002, in addition to conference
calls made in advance of the release of Ferro's quarterly results.
The Audit Committee's report is on page 11 below.
- COMPENSATION & ORGANIZATION COMMITTEE
The Compensation & Organization Committee is responsible for recommending
to the Board corporate governance principles for Ferro and for making
recommendations to the Board as to criteria and qualifications for new Board
members, nominees for appointment or election as Directors, composition of
committees, the Chairs of each committee, and compensation of Directors. The
Committee is also responsible for setting the compensation of Ferro's executive
management and recommending to the Board compensation for Ferro's Chief
Executive Officer. (The Chief Executive Officer does not participate in Board
deliberations concerning his or her own compensation.)
In its role as the nominating body for the Board, the Committee reviews the
credentials of potential Director candidates, conducts interviews and makes
formal recommendations to the Board of Directors for the annual and any interim
election of Directors. In making its recommendations, the Committee considers a
variety of factors, including background, experience, diversity, independence
and compatibility with existing Board members. (Any shareholder recommendations
for members of the Board of Directors should be submitted in writing to our
Secretary.)
Ms. Crayton and Messrs. Bulkin, Mee and Sharp are the members of the
Compensation & Organization Committee, with Mr. Bulkin serving as the Chair. The
Compensation & Organization Committee met four times in 2002.
All members of the Compensation & Organization Committee meet the
independence standards contained in the New York Stock Exchange corporate
governance rule proposals.
The Compensation & Organization Committee's report is on pages 17 to 19
below.
- 8 -
- FINANCE COMMITTEE
The Finance Committee reviews our financial plans and recommends actions to
management and/or the Board of Directors, as the Committee deems appropriate.
The Finance Committee reviews our identified worldwide financing requirements
and our plans to meet such requirements. The Finance Committee reviews our
projected worldwide cash flow, our financial objectives and strategies, and
major acquisitions, as well as investment performance of our pension plans. In
addition, the Committee reviews and approves our annual capital appropriation
budget.
The Finance Committee met two times in 2002. Ms. Warrior and Messrs. Mee,
Sullivan and Weisser are the members of the Finance Committee, with Mr. Mee
serving as the Chair.
- STRATEGY & TECHNOLOGY COMMITTEE
The Strategy & Technology Committee, which met two times in 2002, reviews
Ferro's technology initiatives and advises management with respect to strategies
for commercializing promising technologies. Ms. Crayton, Dr. Hwang, Ms. Warrior
and Mr. Sullivan are members of the Strategy & Technology Committee, with Ms.
Crayton serving as the Chair.
- EXECUTIVE COMMITTEE
The Executive Committee meets only in special or emergency circumstances
that arise between Board meetings. Ms. Crayton and Messrs. Bulkin, Lawrence,
Ortino and Sullivan are members of the Executive Committee, with Mr. Ortino
serving as the Chair. The Executive Committee did not meet during 2002.
DIRECTOR COMPENSATION
In 2002 each Director who is not an employee of Ferro was paid an annual
fee of $30,000. In addition, Directors (other than employee Directors) were paid
an attendance fee of $1,500 for meetings of the Board and $1,000 for each
meeting of its committees. The Chairs of Board committees are each paid an
additional annual fee of $4,000. In addition, in 2002 Ferro granted each
Director an option to purchase 2,500 shares of Common Stock under the existing
Stock Option Plan.
Directors may defer their fees into a Ferro Common Stock account. Amounts
so deferred are invested in Ferro Common Stock and dividends on those shares are
reinvested in Ferro Common Stock. Ferro distributes the amounts in a Director's
deferred account after he or she retires or otherwise leaves the Board.
VOTE REQUIRED
Unless cumulative voting is requested, the election of Directors will be by
a plurality of shares present and voting at the Annual Meeting.
If the election of Directors is by cumulative voting (see page 27 below),
then the three nominees who receive the highest number of votes cast on a
cumulative basis will be elected.
- 9 -
BOARD RECOMMENDATION
The Board recommends that you vote FOR the election of Dr. Hwang, Mr.
Ortino and Ms. Warrior. Unless you instruct otherwise on your proxy card or
telephone or Internet voting instructions, your proxy will be voted in
accordance with the Board's recommendation.
If the election of Directors is by cumulative voting (see page 27 below),
however, the persons appointed by your proxy intend to cumulate the votes
represented by the proxies they receive and distribute such votes in accordance
with their best judgment.
- 10 -
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The second item that will be considered at the Annual Meeting is the
ratification of the appointment of KPMG LLP to serve as Ferro's independent
auditors for the fiscal year ending December 31, 2003.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee has reviewed and discussed with Ferro's management and
KPMG LLP, Ferro's independent auditors, the audited financial statements of the
Company for the fiscal year ended December 31, 2002. The Audit Committee has
also discussed with KPMG all matters required by generally accepted auditing
standards to be discussed. The Audit Committee has received the written
disclosures and the letter from KPMG required by Independence Standards Board
Standard No. 1, has discussed with KPMG its independence, and has concluded that
KPMG is independent.
Based on the review and discussions noted above, the Audit Committee
recommended to the Board that the audited financial statements be included in
Ferro's Annual Report on Form 10-K for the fiscal year ended December 31, 2002,
for filing with the Securities and Exchange Commission.
Respectfully submitted,
William B. Lawrence, Chair
William J. Sharp
Dr. Jennie S. Hwang
Alberto Weisser
AUDIT COMMITTEE APPOINTMENT AND RATIFICATION
The Audit Committee has sole responsibility for the appointment and
compensation of Ferro's independent auditors. KPMG served as our auditors for
the fiscal year ended December 31, 2002. The Audit Committee has appointed KPMG
to continue as Ferro's auditors for the current year. The Board is asking the
shareholders to ratify this appointment.
Representatives of KPMG will be at the Annual Meeting. They will have an
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions.
AUDITOR FEES FOR 2002
KPMG billed the Company aggregate fees of $3,376,869 for the year ended
December 31, 2002. These fees were for the following services:
--------------------------------------------------------------------------------
AUDIT FEES AUDIT-RELATED FEES TAX FEES ALL OTHER SERVICES
--------------------------------------------------------------------------------
$ 2,081,083 $ 231,786 $ 1,064,000 $ 0
--------------------------------------------------------------------------------
The Audit Committee has reviewed all non-audit services and has concluded
that the provision of these non-audit services is compatible with maintaining
KPMG's independence.
The "Audit-Related Fees" above related principally to work performed by
KPMG with respect to Ferro's benefit plans and assistance KPMG provided in
connection with physical inventories performed as part of the sale of Ferro's
powder coatings businesses. The "Tax Fees" above related principally to tax
compliance and transactional tax analyses.
During 2002, we did not engage KPMG to perform any "financial systems
design" or "implementation" services.
- 11 -
VOTE REQUIRED
The affirmative vote of a majority of the shares present and voting at the
meeting is necessary for ratification of the Audit Committee's appointment of
KPMG as Ferro's independent auditors for the year ending December 31, 2003.
BOARD RECOMMENDATION
The Board recommends you vote FOR ratification of the appointment of KPMG
as Ferro's independent auditors. Unless you instruct otherwise on your proxy
card, telephone or Internet voting instructions, your proxy will be voted in
accordance with the Board's recommendation.
- 12 -
APPROVAL OF A NEW
LONG-TERM INCENTIVE COMPENSATION PLAN
The third item that will be considered at the Annual Meeting is the
proposed approval of the 2003 Long-Term Incentive Compensation Plan (the
"Plan"). (See Exhibit A at pages A-1 to A-7 below for the entire text of the
proposed Plan.)
SUMMARY OF THE LONG-TERM INCENTIVE COMPENSATION PLAN
Purpose. The purpose of the Plan is to promote Ferro's long-term financial
interests and growth by attracting, retaining and motivating high quality
executive personnel and Directors and aligning their interests with those of our
shareholders.
Plan Administration. The Plan will be administered by the Compensation &
Organization Committee or such other committee as the Board may from time to
time designate. The Committee will have such additional authority as the Board
determines from time to time is necessary or desirable in order to further the
purposes of the Plan.
Awards to Executive Personnel. The Committee (and in some cases the Chief
Executive Officer) will be responsible for selecting the executive personnel who
will participate in the Plan, determine the type(s) and number of award(s) to be
made to each participant, and the terms, conditions and limitations applicable
to each award.
Types of Awards. The Plan will authorize several different types of
long-term incentives, including the following:
- Stock Options. Stock options entitle a participant to purchase shares
of our Common Stock at a fixed price over a pre-established period of
time. The Plan will authorize the award of both incentive stock
options and nonstatutory stock options as the Committee determines.
Incentive stock options may be granted only to employees of Ferro and
subsidiary corporations that are at least 50%-owned, directly or
indirectly, by Ferro. The exercise price of stock options will not be
less than the per share fair market value of our Common Stock on the
date the option is granted and thereafter the option price may not be
changed. No stock option will be exercisable more than ten years after
it is granted.
- Stock Appreciation Rights. A stock appreciation right entitles a
participant to receive a payment, in cash or Common Stock, equal to
the appreciation in market value of a stated number of shares of
Common Stock from the price established at the time of grant to the
fair market value on the date of exercise or surrender. Once granted,
the initial value of a stock appreciation right may not be changed so
as to increase its value.
- Restricted Shares. Restricted shares are shares of Common Stock that
are forfeitable if certain conditions are not satisfied. No
restriction period applicable to restricted shares may be less than 12
months.
- Performance Shares. Performance shares are represented either by
forfeitable shares of Common Stock issued at the time of grant or by
phantom performance shares. Performance shares will be earned upon
satisfaction of pre-established performance targets over a performance
period (usually three years) established by the Committee. At the end
of the applicable performance period, the performance shares will be
converted into Common Stock, cash, or a combination of Common Stock
and cash, or forfeited, based on whether and to what extent the
pre-established performance targets have been achieved. Performance
targets may be established based upon various financial and stock
performance measures established by the Committee.
- Common Stock Awards. The Committee is authorized to make awards in the
form of Common Stock or on a basis valued in whole or in part by
reference to, or otherwise based upon, Common Stock.
- 13 -
Stock Options for Directors. Each year under the Plan, Ferro may grant
Directors who are not employees of Ferro or any of its subsidiaries or
affiliates options to purchase such number of shares of Common Stock as is
recommended by the Committee and approved by the Board. The option exercise
price of Director Stock Options will be the per share fair market value of the
Common Stock on the date of the grant, as determined by the Committee. The terms
and conditions of each Director Stock Option will be contained in a written
option agreement.
Shares Subject to the Plan. The shares of Common Stock to be issued under
the Plan may be either authorized but unissued shares or previously issued
shares reacquired by Ferro and held as treasury shares. Subject to allowed
adjustments upon changes in capitalization, the number of shares of Common Stock
reserved for awards under the Plan will be 3,250,000 shares of Common Stock.
Each performance share will be considered as a share of Common Stock counted
against the maximum number of shares of Common Stock reserved for awards under
the Plan, whether represented by forfeitable Common Stock or by phantom
performance shares.
Limitations. The Plan contains certain limitations on awards under the
Plan, including the following:
- No more than 200,000 shares of Common Stock will be available for
issuance with respect to incentive stock options,
- No more than 500,000 shares of Common Stock will be available for
issuance with respect to restricted shares, performance shares, or
Common Stock awards,
- No more than 300,000 shares of Common Stock may be awarded to any
single participant during any 12-month period in the form of stock
options or stock appreciation rights,
- The payout to any single participant under a performance share award
granted during any 12-month period may not exceed 100,000 shares of
Common Stock, and
- Awards (other than the grant of stock options or performance shares)
to any single participant during any 12-month period may not exceed
100,000 shares of Common Stock.
Change of Control. The Plan has special provisions concerning a "Change in
Control" of Ferro. Those special provisions include the following:
- All stock options and stock appreciation rights will become fully
exercisable,
- All restrictions and conditions with respect to all awards of
restricted shares will be deemed fully released or satisfied, except
as set forth below,
- All previously established performance targets for performance shares
will be deemed to have been met at 100% of the award level, and
- During a restriction period or during a performance period,
participants will be entitled to receive a prorata portion of the
award that would have been distributed to them at the end of the
applicable restriction period or performance period.
In connection with a Change of Control, Ferro may make payments to participants
in cash based upon the higher of (i) the closing price on the date of the Change
of Control or (ii) the highest price actually paid in connection with the Change
of Control.
- 14 -
Amendment or Termination. The Board of Directors will have the power
to amend, modify or terminate the Plan under certain circumstances. The Board
will not have the power to change an option price nor the initial value of a
stock appreciation right.
Federal Income Tax Consequences. Ferro believes generally that awards under
the Plan will have the following consequences under current U.S. Federal income
tax laws:
- Incentive Stock Options. A participant will not recognize any taxable
income on grant or exercise of an incentive stock option. The exercise
of an incentive stock option may, however, result in the imposition of
the alternative minimum tax. Ferro is not entitled to a deduction on
grant or exercise of an incentive stock option unless the participant
disposes of the shares within 12 months after exercise.
- Other Awards. A participant will not recognize any taxable income on
grant of non-statutory stock options, stock appreciation rights,
restricted shares or performance shares. On exercise of non-statutory
stock options or stock appreciation rights, on expiration of a
restriction period for restricted shares, or on expiration of a
performance period for performance shares, the participant will
recognize compensation income and Ferro will be entitled to a
deduction equal to the value of the Common Stock or cash the
participant receives (minus, in the case of a non-statutory stock
option, the option exercise price paid by the participant).
Effective Date and Term of Plan. The Plan was adopted by the Board as of
January 1, 2003, subject to approval by the shareholders at this Annual Meeting.
No new awards may be made under the Plan after December 31, 2012.
Status of Grants Under Prior Plans. If the Plan is approved, no further
grants may be made under Ferro's Employee Stock Option Plan or under Ferro's
1997 Performance Share Plan. Outstanding options and performance shares shall
not be affected by shareholder approval of this Plan.
2003 ALLOCATIONS
In February 2003, the Board approved the following allocation of stock
options and performance shares to Ferro officers and employees:
2003 OPTION AND PERFORMANCE SHARE AWARDS
---------------------------------------------------------------------------------
OPTIONS PERFORMANCE SHARES
---------------------------------------------------------------------------------
Hector R. Ortino 175,000 40,000
---------------------------------------------------------------------------------
James C. Bays 35,000 6,000
---------------------------------------------------------------------------------
Dale G. Kramer 55,000 8,500
---------------------------------------------------------------------------------
Millicent W. Pitts 55,000 8,500
---------------------------------------------------------------------------------
Robert A. Rieger 50,000 8,500
---------------------------------------------------------------------------------
EXECUTIVES AS A GROUP 395,000 75,500
---------------------------------------------------------------------------------
NON-EXECUTIVE DIRECTORS 63,000 --
AS A GROUP
---------------------------------------------------------------------------------
NON-EXECUTIVE OFFICERS AND EMPLOYEES AS 332,300 54,000
A GROUP
---------------------------------------------------------------------------------
There are not enough remaining shares available under the existing Stock
Option Plan and Performance Share Plan to make these awards. Consequently, the
awards above will be made from the Long-Term Incentive Compensation Plan if it
is approved at the Annual Meeting. If the Long-Term Incentive Compensation Plan
is not approved at the Annual Meeting, the Compensation & Organization Committee
will retain its current authority to grant options and performance shares to the
extent available under the existing plans.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information as of December 31, 2002
regarding the number of shares issued and available for issuance under Ferro's
equity compensation plans.
- 15 -
--------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES REMAINING
NUMBER OF SHARES TO BE WEIGHTED-AVERAGE AVAILABLE FOR FUTURE ISSUANCE
ISSUED ON EXERCISE OF EXERCISE PRICE OF UNDER EQUITY COMPENSATION
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, PLANS (EXCLUDING SECURITIES
EQUITY COMPENSATION PLANS WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN FIRST COLUMN)
--------------------------------------------------------------------------------------------------------------------
APPROVED BY FERRO
Shareholders(1) 3,737,182 Shares $21.80 524,559 Shares(3)
--------------------------------------------------------------------------------------------------------------------
NOT APPROVED BY FERRO
SHAREHOLDERS(2) 107,244 Shares $24.96(4) --
--------------------------------------------------------------------------------------------------------------------
TOTAL 3,844,426 Shares $21.86 524,559 Shares(3)
--------------------------------------------------------------------------------------------------------------------
(1) Includes options issued under the Company's Stock Option Plan.
(2) Includes options granted in excess of 100,000 shares to the Chief Executive
Officer and phantom units issued under the Company's Executive Employee
Deferred Compensation Plan and Supplemental Executive Deferred Contribution
Plan.
(3) As indicated in the summary of the 2003 Long-Term Incentive Compensation
Plan, no further grants of these shares will be offered if the Plan is
approved.
(4) Weighted-average exercise price of outstanding options; excludes phantom
units.
Set forth below is a description of the material features of each plan that
were not approved by Ferro shareholders:
- Stock Options. On February 11, 2002 and February 9, 2001,
respectively, the Board granted Mr. Ortino 155,000 and 122,000 options
to purchase shares. Of this amount, options for 100,000 shares each
year were granted under the Company's Stock Option Plan approved by
shareholders and the remaining options were approved and granted by
the Board from available treasury shares. The options granted in 2002
have an exercise price of $25.50 and the options granted in 2001 have
an exercise price of $23.60. Both grants have a maximum term of ten
years and vest evenly over four years on the anniversary of the grant
date.
- Executive Employee Deferred Compensation Plan. The Executive Employee
Deferred Compensation Plan allows participants to defer up to 75
percent of annual base salary and up to 100 percent of incentive cash
bonus awards and cash performance share payouts. Participants may
elect to have all or a portion of their deferred compensation accounts
deemed to be invested in shares of Ferro Common Stock, and credited
with hypothetical appreciation, depreciation, and dividends. When
distributions are made from this plan in respect of such shares, the
distributions are made in actual shares of Ferro Common Stock.
- Supplemental Executive Deferred Contribution Plan. The Supplemental
Executive Defined Contribution Plan allows participants to be credited
annually with matching contributions that they would have received
under the Company's 401(k) plan except for the applicable IRS
limitations on compensation and contributions. Contributions vest at
20% for each year of service, are deemed invested in Ferro Common
Stock and earn dividends. Distributions are made in Ferro Common Stock
or in cash.
VOTE REQUIRED
The affirmative vote of a majority of the shares present and voting at the
meeting on this issue is necessary for approval of the 2003 Long-Term Incentive
Compensation Plan.
BOARD RECOMMENDATION
The Board recommends you vote FOR approval of the 2003 Long-Term Incentive
Compensation Plan. Unless you instruct otherwise on your proxy card or telephone
or Internet voting instructions, your proxy will be voted in accordance with the
Board's recommendation.
- 16 -
INFORMATION CONCERNING EXECUTIVE OFFICERS
REPORT OF THE COMPENSATION & ORGANIZATION COMMITTEE
The Compensation Program
Ferro's management compensation program is designed to balance current
performance with achievement of long-term objectives and to align the interests
of senior management with those of the shareholders. The three key elements of
this program are (1) an annual base salary, (2) an annual incentive bonus, and
(3) long-term incentives. The Chairman and Chief Executive Officer's
compensation includes all three of these elements. The Compensation &
Organization Committee has general responsibility for administering the
compensation program.
Annual Base Salary. The Committee sets the annual base salary of all
executive officers, except for Ferro's Chief Executive Officer. The Committee
recommends to the Board an annual base salary for the Chief Executive Officer.
(The Chief Executive Officer does not participate in deliberations concerning
his own compensation.) The Chief Executive Officer makes recommendations to the
Committee as to the base salaries of officers other than himself or herself.
Annual Incentive Bonus. Annual cash bonuses are paid to management
employees under an annual incentive compensation plan. Under this plan, the
Chairman and Chief Executive Officer's achievement is measured exclusively by
attainment of mathematical targets. Awards for other senior managers are based
on achievements measured primarily by attainment of mathematical targets, but
they are also measured to a lesser extent by nonmathematical determinations.
Each year the Committee determines which senior managers will participate
in the annual incentive compensation plan, determines the applicable percentage
of salary to be used for bonus measurement, and sets the mathematical targets by
which the level of bonus achievement will be measured. The Committee also
approves the actual nonmathematical bonus awards to senior executive officers.
Long-Term Incentives. Historically, Ferro has used two forms of long-term
incentives: stock options and performance shares.
- Stock Options. Stock options are awarded under Ferro's Employee Stock
Option Plan (which was last amended and restated at the Annual Meeting
in 2000). The Stock Option Plan provides for the issuance of stock
options at no less than the current market price at the date of grant.
Stock options have a maximum term of ten years and vest evenly over
four years on the anniversary of the grant date. The Committee
determines which employees receive stock options and the number of
option shares granted to such employees in accordance with the terms
of the Employee Stock Option Plan.
- Performance Shares. Performance shares are awarded under Ferro's 1997
Performance Share Plan (which was last amended and restated at the
Annual Meeting in 2000). Under this plan, employees are awarded a
nominal or target number of shares. At the end of a pre-determined
performance period (usually three years), a determination is made
whether and to what extent the pre-established performance targets
have been achieved. Unless target levels of performance are achieved,
employees' actual payouts under the plan can be significantly below
the nominal values of the awards. Payments under this plan are made
one-half in shares and one-half in cash.
At this Annual Meeting, shareholders will consider adopting a single plan under
which stock options, performance shares and other forms of long-term incentives
may be awarded.
- 17 -
2002 Executive Compensation
Compensation of the Chief Executive Officer. The Committee was responsible
for recommending to the Board the compensation package for Mr. Ortino, Ferro's
Chairman and Chief Executive Officer. To assist in its evaluations, the
Committee retained Watson Wyatt & Company ("Watson Wyatt") as independent
executive consultants. Watson Wyatt's advice was based on a variety of
competitive data maintained by, or available to, Watson Wyatt.
From these data, Watson Wyatt made recommendations to the Committee as to
competitive levels of each element of Mr. Ortino's compensation (base salary,
annual incentive and long-term incentive). The Committee took these
recommendations into consideration in making its recommendations concerning
executive compensation. The Committee's policy is to attain competitive levels
of executive compensation for each of these elements.
For 2002, the Committee recommended, and the Board approved, the following
compensation for Mr. Ortino:
------------------------------------------------------------------------------------------
BASE SALARY ANNUAL INCENTIVE BONUS STOCK OPTIONS PERFORMANCE SHARES
------------------------------------------------------------------------------------------
$ 700,000 $ 787,500 155,000 Shares 36,500 Shares
------------------------------------------------------------------------------------------
The recommendations of the Committee represented satisfaction with the
manner in which Mr. Ortino performed his responsibilities as Chairman and Chief
Executive Officer and his results orientation, sound business judgment and
foresight during an extremely challenging year. The recommendations and actions
of the Committee included consideration of Watson Wyatt's data as to competitive
standards of compensation in the marketplace. Watson Wyatt advised the Company
as to competitive levels of salary, annual incentive compensation and long-term
incentive compensation.
The Committee recommended and approved salary increases for 2002, including
for Mr. Ortino, but management elected not to implement any salary increases
during 2002 due to general business conditions. Mr. Ortino's base salary was in
the second quartile of competitive market salary data as reported by Watson
Wyatt. Mr. Ortino's annual incentive bonus target amount equaled 75% of his base
salary, a percentage that, if achieved, would have placed Mr. Ortino's bonus in
the third quartile of other companies in the marketplace for 2002 as reported by
Watson Wyatt. Based on the mathematical application of performance factors for
earnings per share growth, sales growth and debt reduction, Mr. Ortino's actual
bonus for 2002 equaled 112.5% of his base salary.
With respect to long-term incentives, Mr. Ortino's 2002 stock option award
was in the third quartile and his 2002 performance share award was in the fourth
quartile of long-term incentive programs of comparable companies in the
marketplace as reported by Watson Wyatt. The actual future value of stock option
awards will, of course, be a function of the market value for Ferro stock in the
future. The actual future value of performance share awards will be a function
both of the future market value of Ferro stock and of the degree of achievement
of performance targets.
Senior Management Compensation. Mr. Ortino strongly advocates, and the
Committee concurs, that a substantial portion of executive compensation should
be variable, based upon performance of the Company and results achieved by each
member of management.
In making its determinations with respect to Ms. Pitts and Messrs. Bays,
Kramer and Rieger, the Committee considered and discussed the same materials and
information that were considered with respect to Mr. Ortino. With respect to
these executives, the Committee also considered its and Mr. Ortino's evaluation
of their individual performances. In the case of Ms. Pitts and Messrs. Kramer
and Rieger, who have direct responsibilities with respect to Ferro business
operations, their levels of achievement under the Annual Incentive Compensation
Plan and Performance Share Plan were also materially affected by the performance
of the specific operations for which they are responsible.
Based on the foregoing, the target bonuses for the four named senior
executives as a group were in the third quartile of the peer companies reported
in Watson Wyatt's competitive market data.
- 18 -
Interlocks and Insider Participation
During 2002, no officer or employee of Ferro served as a member of the
Compensation & Organization Committee. Also, during 2002, there were no
interlocking relationships (as described in Item 402(j) of SEC Regulation S-K)
between members of the Compensation & Organization Committee and Ferro.
Section 162(m) Limitation
In 1993, the Internal Revenue Code was amended to add Section 162(m), which
generally provides that certain compensation in excess of $1 million per year
paid to a company's chief executive officer and any of its four highest paid
executive officers is no longer deductible by a company unless the compensation
qualifies for an exception. Section 162(m) provides an exception for
performance-based compensation if certain procedural requirements, including
shareholder approval of the material terms of the performance goals, are
satisfied. In 1995, the Committee recommended, and the shareholders approved,
certain changes to Ferro's Performance Share Plan and Stock Option Plan that
would qualify such plans under the Section 162(m) exception and preserve the tax
deductibility to the Company of compensation paid to executives under these
plans in the future. Mr. Ortino received compensation in excess of $1 million in
2002.
Respectfully submitted,
Michael H. Bulkin, Chairman
Sandra Austin Crayton
Michael F. Mee
William J. Sharp
- 19 -
EXECUTIVE COMPENSATION
The following table shows on an accrual basis the elements of compensation
paid or awarded during each of the last three fiscal years to the Chief
Executive Officer and each of our other four highest paid executive officers.
SUMMARY COMPENSATION TABLE
---------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------- --------------------------------
PERFORMANCE AND
REWARD SHARES
---------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER (1) OPTIONS(2) AWARDS(3) PAYOUTS(4) COMPEN-
SATION(5)
---------------------------------------------------------------------------------------------------------------------
HECTOR R. ORTINO 2002 $700,000 $787,500 $94,534 155,000 $994,990 $1,112,819 $66,286
Chairman and 2001 700,000 525,000 104,070 122,000 778,800 501,435 71,690
Chief Executive Officer 2000 600,000 629,064 70,231 70,000 591,938 487,490 66,400
---------------------------------------------------------------------------------------------------------------------
JAMES C. BAYS(6) 2002 240,000 133,200 14,155 30,000 163,560 -- 0
Vice President & 2001 170,000 128,700 3,119 15,000 88,500 -- 49,098
General Counsel 2000 -- -- -- -- -- -- --
---------------------------------------------------------------------------------------------------------------------
DALE G. KRAMER(6) 2002 240,000 159,235 24,093 45,000 204,450 0 5,660
Vice President, 2001 216,667 52,608 14,812 15,000 118,000 -- 2,563
Performance Chemicals 2000 185,000 43,013 17,256 5,500 53,813 -- 17,567
---------------------------------------------------------------------------------------------------------------------
MILLICENT W. PITTS(6) 2002 240,000 135,566 19,726 40,000 257,870 177,039 18,010
Vice President, 2001 225,333 150,024 16,800 21,000 118,000 75,975 9,999
Tile Coating Systems 2000 210,000 109,069 20,466 20,000 89,688 72,715 7,760
---------------------------------------------------------------------------------------------------------------------
ROBERT A. RIEGER(6) 2002 261,684 97,468 28,913 50,000 388,160 233,002 18,658
Vice President, 2001 241,668 195,975 27,758 29,000 179,360 75,975 9,426
Color and Electronic 2000 215,000 132,493 18,158 18,000 118,388 -- 3,225
Material Systems
---------------------------------------------------------------------------------------------------------------------
(1) For the year ended December 31, 2002, "Other" Annual Compensation included
Company matching payments under the Ferro Savings and Stock Ownership Plan,
as follows: Mr. Ortino, $7,500; Mr. Bays, $7,000; Mr. Kramer, $7,348; Ms.
Pitts, $7,265; and Mr. Rieger, $7,500.
(2) With the exception of Mr. Bays' 2001 grant on May 16, 2001, these stock
options were granted on February 11, 2000, February 9, 2001, and February
11, 2002.
(3) The values reported in this column are based on awards made under two
long-term incentive plans. The first plan is the Performance Share Plan
(which is described on page 13 above). The values reported represent the
number of Performance Shares awarded times the market price of Ferro Common
Stock on the date of the award. Under this plan, the actual number of
shares that will be paid out for any given three-year performance period
will depend upon the level of achievement during such period and can equal
up to twice the number of shares awarded. Dividends are paid to recipients
of the Performance Shares during the three-year performance period.
At December 31, 2002, the persons listed above held the following number of
Performance Shares applicable to performance periods not yet completed,
valued at the value of the underlying shares at December 31, 2002: Mr.
Ortino, 69,500 shares, valued at $1,697,885; Mr. Bays, 9,750 shares, valued
at $238,193; Mr. Kramer, 12,500 shares, valued at $305,375; Ms. Pitts,
12,000 shares, valued at $293,160; and Mr. Rieger, 16,100 shares, valued at
$393,323.
The second plan is the Acquisition Performance Reward Plan. Under this
plan, awards of Reward Shares are made to selected employees on completion
of acquisitions. The values reported above are based upon the number of
Reward Shares awarded under this plan times the market price of Ferro
Common Stock on the date of completion of the acquisition. If targeted
results are achieved during a four-year performance period, the award
recipient will receive a cash payment based upon the greater of (a) the
initial award price or (b) the average closing price of Ferro Common Stock
for the 10-market-day period at the end of the performance period. The
maximum achievement under this plan is two times the number of Reward
Shares awarded. No dividends are paid on Reward Shares during the
performance period. In connection with the dmc2 acquisition, on December 5,
2002, Ms. Pitts was awarded 3,000 Reward Shares, valued at $67,050, and Mr.
Rieger was awarded 7,000 Reward Shares, valued at $156,450, under the
Acquisition Performance Reward Plan.
(4) As provided in the Performance Share Plan, these payouts will be made in
equal amounts of cash and shares of Ferro Common Stock.
(5) The 2002 amounts represent contributions by the Company on behalf of the
executives to the Supplemental Executive Defined Contribution Plan.
(6) In 2002, management elected not to implement approved salary increases due
to general business conditions. The year-to-year increases in base salaries
for Ms. Pitts and Messrs. Bays, Kramer and Rieger were not due to salary
increases in 2002. Mr. Bays had been employed by Ferro for only a portion
of calendar year 2001; his base salary did not change from 2001 to 2002.
Mr. Kramer and Ms. Pitts each received a salary increase in September 2001
on promotion to their current positions and those salary levels were
maintained throughout 2002. Finally, in December 2001, Mr. Rieger received
a salary increase as a result of his increased level of responsibility
following the acquisition of the dmc2 businesses and that salary rate
continued throughout 2002.
- 20 -
STOCK OPTION GRANTS, EXERCISES AND YEAR-END VALUES
The following tables set forth information with respect to each of the five
highest paid executive officers of Ferro regarding grants and exercises of stock
options to under Ferro's Stock Option Plan during the fiscal year ended December
31, 2002.
OPTION GRANTS IN 2002
-----------------------------------------------------------------------------------------------------------
% OF TOTAL
OPTIONS PRESENT VALUE
OPTIONS GRANTED TO EXERCISE AT DATE OF
NAME GRANTED(1) EMPLOYEES PRICE EXPIRATION DATE GRANT(2)
-----------------------------------------------------------------------------------------------------------
Hector R. Ortino 155,000 18.1% $25.50 February 11, 2012 $1,178,000
-----------------------------------------------------------------------------------------------------------
James C. Bays 30,000 3.5% 25.50 February 11, 2012 228,000
-----------------------------------------------------------------------------------------------------------
Dale G. Kramer 45,000 5.2% 25.50 February 11, 2012 342,000
-----------------------------------------------------------------------------------------------------------
Millicent W. Pitts 40,000 4.7% 25.50 February 11, 2012 304,000
-----------------------------------------------------------------------------------------------------------
Robert A. Rieger 50,000 5.8% 25.50 February 11, 2012 380,000
-----------------------------------------------------------------------------------------------------------
(1) Stock options have a maximum term of ten years and vest evenly over four
years on the anniversary of the grant date. In the case of death,
retirement, disability or change in control, the options become 100%
exercisable.
(2) The grant date present value has been calculated using the Black-Scholes
method of option valuation. The model assumes the following: (a) an option
term of ten years; (b) an interest rate that represents the interest rate
on a U.S. Treasury bond with a 30-year maturity; (c) volatility calculated
using month-end stock prices for the past six years prior to grant date;
and (d) the stock's most recent annual dividend yield.
OPTION EXERCISES IN 2002
----------------------------------------------------------------------------------------------------------------------
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS "IN-THE-MONEY" OPTIONS
AT DECEMBER 31, 2002 AT DECEMBER 31, 2002(1)
SHARES VALUE --------------------------- -----------------------------
ACQUIRED REALIZED NOT NOT
NAME ON EXERCISE ON EXERCISE EXERCISABLE EXERCISABLE EXERCISABLE EXERCISABLE
----------------------------------------------------------------------------------------------------------------------
Hector R. Ortino 41,000 $423,660 283,738 302,762 $1,135,265 $359,329
----------------------------------------------------------------------------------------------------------------------
James C. Bays 3,750 14,325 2,812 38,438 11,951 35,862
----------------------------------------------------------------------------------------------------------------------
Dale G. Kramer 0 -- 6,500 59,000 19,420 25,645
----------------------------------------------------------------------------------------------------------------------
Millicent W. Pitts 0 -- 28,905 74,595 77,005 109,538
----------------------------------------------------------------------------------------------------------------------
Robert A. Rieger 0 -- 19,493 83,007 72,546 76,785
----------------------------------------------------------------------------------------------------------------------
(1) Value of unexercised in-the-money options is based on Ferro's NYSE closing
Common Stock price on December 31, 2002, of $24.43.
PERFORMANCE SHARE AWARDS AND PAYOUTS
The following table sets forth information relating to Performance Share
Plan awards during 2002 to each of the five highest paid executive officers of
Ferro.
PERFORMANCE SHARE AWARDS IN 2002
----------------------------------------------------------------------------------------------------------------------
ESTIMATED FUTURE PAYOUTS IN SHARES(1)
--------------------------------------------------------------------------
NUMBER OF THRESHOLD PERFORMANCE TARGET PERFORMANCE MAXIMUM PERFORMANCE
NAME SHARES (50%) (100%) (200%)
----------------------------------------------------------------------------------------------------------------------
Hector R. Ortino 36,500 18,250 36,500 73,000
----------------------------------------------------------------------------------------------------------------------
James C. Bays 6,000 3,000 6,000 12,000
----------------------------------------------------------------------------------------------------------------------
Dale G. Kramer 7,500 3,750 7,500 15,000
----------------------------------------------------------------------------------------------------------------------
Millicent W. Pitts 7,000 3,500 7,000 14,000
----------------------------------------------------------------------------------------------------------------------
Robert A. Rieger 8,500 4,250 8,500 17,000
----------------------------------------------------------------------------------------------------------------------
(1) Mr. Ortino and Mr. Bays have performance measurements based on corporate
earnings per share growth and sales growth. In addition to the corporate
performance measurements, Ms. Pitts and Messrs. Kramer and Rieger have
measurements based on their respective operating group sales growth, growth
in operating profit, and achievement of personal performance objectives.
All of the above performance measurements are further adjusted for
completed acquisitions.
- 21 -
Each of the awards listed above has a three-year performance cycle ending on
December 31, 2004. A condition to vesting includes the continued employment of
the Performance Share Plan participant to the end of the performance period.
However, if the participant dies, is disabled, or retires, there is a pro rata
payment at the end of the Performance Period based upon the portion of the
Performance Period during which he or she was employed. Also, in the case of a
change in control, a cash payment equal to (1) the aggregate value of
Performance Share Plan awards based on the remaining term in the executive's
employment agreement and the portion of the Performance Period that expired
prior to the change in control, minus (2) the value of payments made under the
Performance Share Plan, is paid at the time of the change in control.
The following table sets forth information relating to the performance
matrix and actual payouts under the Performance Share Plan for the 2000-2002
performance period to each of our five highest paid executive officers. Each
award under the Performance Share Plan was based on a three-year performance
cycle ending on December 31, 2002.
PERFORMANCE SHARE PAYOUTS FOR 2000-2002
--------------------------------------------------------------------------------------------------------
PERFORMANCE MATRIX 2002 PAYOUTS(1)
----------------------------------------- --------------------------------------
THRESHOLD TARGET MAXIMUM TOTAL CASH
NAME (50%) (100%) (200%) CASH SHARES VALUE
--------------------------------------------------------------------------------------------------------
Hector R. Ortino $397,437 $794,874 $1,589,749 $556,410 23,100 $1,112,819
--------------------------------------------------------------------------------------------------------
James C. Bays -- -- -- -- -- --
--------------------------------------------------------------------------------------------------------
Dale G. Kramer 36,131 72,261 144,523 0 0 0
--------------------------------------------------------------------------------------------------------
Millicent W. Pitts 60,218 120,436 240,871 88,520 3,675 177,039
--------------------------------------------------------------------------------------------------------
Robert A. Rieger 79,487 158,975 317,950 116,501 4,837 233,002
--------------------------------------------------------------------------------------------------------
(1) Mr. Ortino had performance measurements based on corporate earnings per
share growth and sales growth. In addition to the corporate performance
measurements, Ms. Pitts and Messrs. Kramer and Rieger had measurements
based on their respective operating group sales growth and growth in
operating profit. All of the above performance measurements were further
adjusted for completed acquisitions. Mr. Bays, who joined Ferro in 2001,
was not eligible for an award for the 2000-2002 performance period.
PENSION BENEFITS
The following table indicates the amount of annual pension benefits that
would be payable at age 65 under the Ferro Corporation Retirement Plan (the
"Qualified Plan") and the Ferro Corporation Nonqualified Retirement Plan (the
"Nonqualified Plan") (collectively, the "Retirement Program") to officers.
-----------------------------------------------------------------------------------------------
YEARS OF SERVICE AT AGE 65
WITH RETIREMENT IN 2002
ASSUMED ----------------------------------------------------------------------------
REGULAR
COMPENSATION 15 20 25 30 35
-----------------------------------------------------------------------------------------------
$200,000 $45,020 $60,027 $75,033 $90,040 $90,040
-----------------------------------------------------------------------------------------------
400,000 95,020 126,693 158,367 190,040 190,040
-----------------------------------------------------------------------------------------------
600,000 145,020 193,360 241,700 290,040 290,040
-----------------------------------------------------------------------------------------------
800,000 195,020 260,027 325,033 390,040 390,040
-----------------------------------------------------------------------------------------------
1,000,000 245,020 326,693 408,367 490,040 490,040
-----------------------------------------------------------------------------------------------
1,200,000 295,020 393,360 491,700 590,040 590,040
-----------------------------------------------------------------------------------------------
1,400,000 345,020 460,027 575,033 690,040 690,040
-----------------------------------------------------------------------------------------------
1,600,000 395,020 526,693 658,367 790,040 790,040
-----------------------------------------------------------------------------------------------
1,800,000 445,020 593,360 741,700 890,040 890,040
-----------------------------------------------------------------------------------------------
2,000,000 495,020 660,027 825,033 990,040 990,040
-----------------------------------------------------------------------------------------------
2,200,000 545,020 726,693 908,367 1,090,040 1,090,040
-----------------------------------------------------------------------------------------------
Under the Retirement Program, an eligible participant who retires at age 65 with
at least 30 years of service will receive a monthly benefit equal to 50% of the
average of the participant's highest five consecutive calendar years of
compensation (includes base salary, bonuses, and incentive compensation
substantially equivalent to salary, bonus and performance shares as reflected in
the Summary Compensation Table), reduced for 50% of primary social security
benefits. Service in excess of 30 years will not be taken into account for
accrual of retirement benefits. Benefits are payable in a life annuity form
- 22 -
with 120 monthly payments guaranteed unless the benefits under the Nonqualified
Plan are commuted and paid in a single sum. Benefits are subject to reduction
for service of less than 30 years and for early commencement. Furthermore, the
benefits payable under the Nonqualified Plan to an eligible participant are
conditioned upon the execution of, and compliance with, a noncompetition,
nonsolicitation, nondisparagement, and confidentiality agreement.
The five-year average covered compensation for the individuals listed in
the Summary Compensation Table was: Mr. Ortino, $1,795,976; Mr. Bays, $285,840;
Mr. Kramer, $253,304; Ms. Pitts, $381,471; and Mr. Rieger, $371,791. As of
December 31, 2002, Mr. Ortino, Mr. Bays, Mr. Kramer, Ms. Pitts and Mr. Rieger
had 31, 1, 3, 4 and 4 whole years of service, respectively.
EXECUTIVE EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL AGREEMENTS
Ferro is a party to an executive employment agreement (the "Executive
Employment Agreement") with Mr. Ortino and a party to change in control
agreements (the "Change in Control Agreements") with Ms. Pitts and Messrs. Bays,
Kramer and Rieger. The purpose of these agreements is to reinforce and encourage
the officer's continued attention and dedication to his/her assigned duties
without distraction in the face of solicitations by other employers and the
potentially disturbing circumstances arising from the possibility of a change in
control of Ferro. The two agreements limit the respective officer's right to
compete against Ferro after the termination of employment. The Change in Control
Agreements are not employment agreements.
Severance benefits are payable under the Executive Employment Agreement if
Mr. Ortino's employment is terminated for reasons other than for cause,
disability, death or normal retirement or if Mr. Ortino terminates his
employment for "Good Reason." Good Reason will exist if (1) Ferro fails to honor
certain obligations, (2) following a change in control, Mr. Ortino receives a
notice of termination which prevents the extension of the term of his employment
agreement or (3) Mr. Ortino voluntarily resigns during the three-month period
following the first anniversary of a change in control. Severance benefits are
also payable if a successor to all or substantially all of the business and/or
assets of Ferro fails to expressly assume the Executive Employment Agreement.
The principal severance benefits to be paid to Mr. Ortino under the
Executive Employment Agreement are (1) a lump sum severance payment equal to a
full year's compensation (base salary and incentive compensation) multiplied by
three, (2) a lump sum calculated to approximate the present value of the
additional retirement benefits to which Mr. Ortino would have become entitled
had he remained in the employment of Ferro for the same number of years used in
computing the lump sum severance payment, (3) continued participation in Ferro's
employee benefit programs for the same number of years used in computing the
lump sum severance payment and (4) a cash payment in an amount to reimburse, on
an after-tax basis, that portion of any excise tax attributable to payments or
benefits required to be made to Mr. Ortino. The Change in Control Agreements
provide similar severance benefits (with a salary multiplier of two rather than
three) if an officer's employment is terminated following a change in control.
In accordance with its obligation under the agreements, Ferro has deposited
into an escrow account at National City Bank a percentage of the amount that
would be payable to each of the officers under the agreements. No officer has a
right to receive any amount in the escrow account until Ferro has defaulted in
its obligations to that officer under the agreement to which he or she is a
party. Interest earned on the escrow account is paid to the Company.
- 23 -
COMPARATIVE PERFORMANCE OF SHAREHOLDER RETURNS
The chart below compares Ferro's cumulative total shareholder return for
the five years ended December 31, 2002 to that of the Standard & Poor's 500
Index and the Standard & Poor's MidCap Specialty Chemicals Index. In all cases,
the information is presented on a dividend reinvested basis and assumes
investment of $100.00 on December 31, 1997 in each of the items.
COMPARISON OF FIVE-YEAR
CUMULATIVE TOTAL RETURNS
[GRAPH]
1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ----
Ferro $100 $109 $ 94 $102 $117 $113
S&P 500 Index 100 129 156 142 125 97
S&P MidCap Specialty
Chemicals Index 100 82 70 77 95 96
- 24 -
SHAREHOLDINGS
STOCK OWNERSHIP BY DIRECTORS, EXECUTIVE OFFICERS AND EMPLOYEES
Ferro encourages share ownership by its Directors and executive officers
and has ownership guidelines based on base compensation or fees and position
within the Company. The information below shows beneficial ownership of Ferro
Common Stock by (i) each person who is a Director or a nominee for Director;
(ii) each executive officer named in the Summary Compensation Table on page 20
above; and (iii) all Directors and executive officers as a group. Except as
otherwise noted, each person has sole voting and investment power as to his or
her shares. (Except as noted, the information set forth below is as of March 3,
2003.)
-------------------------------------------------------------------------------------------------------------
SHARES OF SHARES UNDERLYING
COMMON STOCK OPTIONS EXERCISABLE SERIES A ESOP
OWNED DIRECTLY WITHIN 60 DAYS OF TOTAL COMMON CONVERTIBLE
OR INDIRECTLY(1) RECORD DATE STOCK PREFERRED
-------------------------------------------------------------------------------------------------------------
Michael H. Bulkin 14,705 8,750 23,455 0
-------------------------------------------------------------------------------------------------------------
Sandra Austin Crayton 11,407 15,313 26,720 0
-------------------------------------------------------------------------------------------------------------
Jennie S. Hwang 2,584 625 3,209 0
-------------------------------------------------------------------------------------------------------------
William B. Lawrence 7,478 3,750 11,228 0
-------------------------------------------------------------------------------------------------------------
Michael F. Mee 3,742 1,875 5,617 0
-------------------------------------------------------------------------------------------------------------
Hector R. Ortino 210,925 387,299 598,224 3,974
-------------------------------------------------------------------------------------------------------------
William J. Sharp 10,717 8,750 19,467 0
-------------------------------------------------------------------------------------------------------------
Dennis W. Sullivan 17,730 16,250 33,980 0
-------------------------------------------------------------------------------------------------------------
Padmasree Warrior 2,086 625 2,711 0
-------------------------------------------------------------------------------------------------------------
Alberto Weisser 3,757 1,875 5,632 0
-------------------------------------------------------------------------------------------------------------
FOUR OTHER OFFICERS NAMED IN
SUMMARY COMPENSATION TABLE
-------------------------------------------------------------------------------------------------------------
James C. Bays 21,768 10,312 32,080 0
-------------------------------------------------------------------------------------------------------------
Dale G. Kramer 23,144 22,007 45,151 0
-------------------------------------------------------------------------------------------------------------
Millicent W. Pitts 42,325 51,786 94,111 238
-------------------------------------------------------------------------------------------------------------
Robert A. Rieger 39,417 43,255 82,672 16
-------------------------------------------------------------------------------------------------------------
15 DIRECTORS AND EXECUTIVE 416,109 572,472 988,581 4,228
OFFICERS AS A GROUP
-------------------------------------------------------------------------------------------------------------
(1) With respect to officers named in the Summary Compensation Table on page 20
above, the shares reported above include:
(a) 23,100, 3,675, and 4,837 shares that will be paid out to Mr. Ortino,
Ms. Pitts and Mr. Rieger, respectively, under the Performance Share
Plan in April 2003 with regard to the 2000-2002 performance period
(see page 22 above), which are no longer subject to forfeiture,
(b) 109,500, 15,750, 21,000, 20,500 and 24,600 shares awarded to Mr.
Ortino, Mr. Bays, Mr. Kramer, Ms. Pitts and Mr. Rieger, respectively,
with regard to the 2001-2003, 2002-2004, and 2003-2005 performance
periods (which shares are subject to forfeiture under the Performance
Share Plan and/or the new Long-Term Incentive Compensation Plan to be
considered at this Annual Meeting), and
(c) 8,078, 203, and 1,273 "phantom" shares held for the accounts of Mr.
Ortino, Mr. Kramer and Ms. Pitts in the voluntary Ferro Corporation
Executive Employee Deferred Compensation Plan (which was previously
known as the "Ferro Corporation Executive Employee Deferred Bonus
Plan").
As a group, our Directors and officers have beneficial ownership of 2.4% of
our outstanding Common Stock. (This percentage includes shares that would be
issued if the Directors and officers exercised all stock options vested within
60 days after the record date for the Annual Meeting.) Mr. Ortino, who owns 1.5%
of the outstanding Common Stock, is the only Director or executive officer that
owns more than 1.0% of the outstanding shares. With regard to Series A ESOP
Convertible Preferred Stock, Directors and executive officers as a group own
0.6% of the outstanding shares of that series.
In addition, based on information available to us, our Directors, executive
officers and employees as a group own approximately 14.2% of the outstanding
shares of Common Stock. That number assumes all stock options that are
exercisable within 60 days of the record date and all of the Series A ESOP
Convertible Preferred Stock are converted into Common Stock.
- 25 -
STOCK OWNERSHIP BY OTHER MAJOR SHAREHOLDERS
The following table sets forth information about each person known by us to
be the beneficial owner of more than 5% of Ferro's outstanding Common Stock or
stock convertible into Common Stock.
---------------------------------------------------------------------------------------------------------------------
PERCENTAGE OF
NATURE AND AMOUNT OF OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP COMMON STOCK
---------------------------------------------------------------------------------------------------------------------
Mario J. Gabelli and related entities (1) 5,179,447 12.8%
One Corporate Center Shares of Common Stock
Rye, New York 10017
---------------------------------------------------------------------------------------------------------------------
FMR Corp. and related entities (2) 5,027,173 12.4%
82 Devonshire Street Shares of Common Stock
Boston, Massachusetts 02109
---------------------------------------------------------------------------------------------------------------------
Capital Group International, Inc. and related entities (3) 4,631,640 11.5%
11100 Santa Monica Boulevard - 15th Floor Shares of Common Stock
Los Angeles, California 90025
---------------------------------------------------------------------------------------------------------------------
(1) We obtained the information regarding share ownership from Schedule 13D/A
filed October 23, 2002, by Mario J. Gabelli and related entities. Such
reporting persons reported sole voting power as to 5,085,447 shares and
sole dispositive power as to 5,179,447 shares.
(2) We obtained the information regarding share ownership from Schedule 13G/A
filed February 13, 2003, by FMR Corp, which reported sole voting power as
to 1,126,433 shares and sole dispositive power as to 5,027,173 shares.
(3) We obtained the information regarding share ownership from Schedule 13G/A
filed February 11, 2003, by Capital Group International, Inc., which
reported sole voting power as to 3,348,080 shares and sole dispositive
power as to 4,631,640 shares.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our officers
and Directors, and persons who own more than ten percent of a registered class
of our equity securities, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission. Officers, Directors and greater
than ten percent shareholders are required by SEC regulation to furnish Ferro
with copies of all Section 16(a) forms they file.
Based solely upon a review of Forms 3 and 4 (including amendments to such
forms) furnished to us during 2002 and Forms 5 (including, again, amendments to
such forms) we received with respect to 2002, no Director, officer, beneficial
owner of more than ten percent of its outstanding Common Stock, or stock
convertible into Common Stock, or any other person subject to Section 16 of the
Exchange Act failed to file on a timely basis during 2002 or prior fiscal years
any reports required by Section 16(a) of the Exchange Act.
- 26 -
SHAREHOLDER PROPOSALS FOR THE
2004 ANNUAL MEETING
Any shareholder who intends to present a proposal at the 2004 Annual
Meeting and who wishes to have the proposal included in Ferro's proxy statement
and form of proxy for that meeting must deliver the proposal to Ferro at our
headquarters, 1000 Lakeside Avenue, Cleveland, Ohio 44114, not later than
November 28, 2003.
Any shareholder who intends to present a proposal at the 2004 Annual
Meeting other than for inclusion in Ferro's proxy statement and form of proxy
must deliver the proposal to Ferro at our headquarters, 1000 Lakeside Avenue,
Cleveland, Ohio 44114, not later than February 10, 2004 or such proposal will be
untimely. Ferro reserves the right to exercise discretionary voting authority on
the proposal if a shareholder has failed to submit the proposal by February 10,
2004.
MISCELLANEOUS
Ferro will bear the cost of preparing and mailing this statement, with the
accompanying proxy and other instruments. Ferro will also pay the standard
charges and expenses of brokerage houses, or other nominees or fiduciaries, for
forwarding such instruments to and obtaining proxies from security holders and
beneficiaries for whose account they hold registered title to Ferro shares. In
addition to using the mail, Directors, officers and other employees of Ferro,
acting on its behalf, may also solicit proxies, and Morrow & Co., New York, New
York, has been retained, at an estimated cost of $10,000 plus expenses, to aid
in the solicitation of proxies from brokers, institutional holders and
individuals who own a large number of shares. Proxies may be solicited
personally, by telephone, or by telegram. This proxy statement and the
accompanying proxy will be sent to shareholders by mail on or about March 26,
2003.
Under the Ohio General Corporation Law, if a shareholder desires cumulative
voting for election of the Directors, then the shareholder must provide written
notice to the President, a Vice President or the Secretary of Ferro at least
forty-eight hours before the meeting. Upon announcement of this notice at the
meeting, each shareholder will have cumulative voting rights. Cumulative voting
means that each shareholder is entitled to that number of votes equal to the
number of shares that he or she owns multiplied by the number of Directors to be
elected. Each shareholder may cast all of his or her votes for a single nominee
or may distribute his or her votes among as many nominees as he or she sees fit.
As indicated on page 10 above, if the election of Directors is by cumulative
voting, the persons appointed by the accompanying proxy intend to cumulate the
votes represented by the proxies they receive and distribute such votes in
accordance with their best judgment. Those nominees receiving the largest number
of votes for the Director positions to be filled will be elected to those
positions. Abstentions and broker non-votes will be deemed to be present for the
purpose of determining a quorum for the meeting, but will be deemed not voting
on the issues or matters as to which the abstention and non-votes are
applicable.
Only the business set forth above in this notice of meeting will be acted
upon at the Annual Meeting of Shareholders.
FERRO CORPORATION
BY: MARY ANN JORGENSON, Secretary
March 26, 2003
- 27 -
Exhibit A
2003 LONG-TERM INCENTIVE COMPENSATION PLAN
1. Purpose. The purpose of this 2003 Long-Term Incentive Compensation Plan
(this "Plan") is to promote the long-term financial interests and growth of
Ferro Corporation ("Ferro") and its subsidiary and affiliated companies by:
(a) Attracting and retaining high-quality executive personnel and
Directors;
(b) Further motivating such executive personnel and Directors to
achieve Ferro's long-range performance goals and objectives and thus act in
the best interests of Ferro and its shareholders generally; and
(c) Aligning the interests of Ferro's executive personnel and
Directors with those of Ferro's shareholders by encouraging increased
ownership of Ferro Common Stock, par value $1.00 per share ("Common
Stock"), by such executive personnel and Directors.
2. Plan Administration. The Compensation & Organization Committee (the
"Committee") of the Board of Directors (the "Board") (or such other committee as
the Board may from time to time designate) will administer this Plan. Subject to
any limitations established by the Board, in administering this Plan the
Committee will have conclusive authority:
(a) To administer this Plan in accordance with its provisions in such
a way as to give effect to economic and competitive conditions, individual
situations, and the evaluation of individual performance and the economic
potential and business plans of various units of Ferro;
(b) To determine the terms and conditions, not inconsistent with the
provisions of this Plan, of any Award granted under this Plan and prescribe
the form of any agreement or document applicable to any such Award;
(c) To construe and interpret the provisions of this Plan and all
Awards granted under this Plan; and
(d) To establish, amend, and rescind rules and regulations for the
administration of this Plan.
The Committee will also have such additional authority as the Board may from
time to time determine to be necessary or desirable in order to further the
purposes of this Plan.
3. Awards to Executive Personnel. The Committee will select the executive
personnel ("Participants") who will participate in this Plan and determine the
type(s) and number of award(s) ("Awards") to be made to each such Participant.
The Committee will determine the terms, conditions and limitations applicable to
each Award. The Committee may, if it so chooses, delegate to Ferro's Chief
Executive Officer authority to select certain of the Participants (other than
officers of Ferro) and to determine Awards to be granted to such Participants on
such terms as the Committee may specify. Awards may be made singly, in
combination, or in exchange for a previously granted Award and also may be made
in combination or in replacement of, or as alternatives to, grants or rights
under any other employee plan of the Company, including the plan of any acquired
entity.
4. Types of Awards to Executive Personnel. Under this Plan, the Committee
will have the authority to grant the following types of Awards to executive
personnel of Ferro and its subsidiaries and affiliates:
(a) Stock Options. The Committee may grant Awards in the form of Stock
Options. Such Stock Options may be either incentive stock options (within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code")) or nonstatutory stock options (not intended to qualify under
Section 422 of the Code). However, incentive stock options may
A-1
be granted only to employees of Ferro and subsidiary corporations that are
at least 50% owned, directly or indirectly, by Ferro. The option price of a
Stock Option may be not less than the per share fair market value of the
Common Stock on the date of the grant, as determined by the Committee. Once
a Stock Option has been granted, the option price may not be adjusted or
amended, whether directly or indirectly, by amendment, cancellation,
replacement grants or any other means. Such Stock Options will be
exercisable in whole or in such installments and at such times and upon
such terms as the Committee may specify. No stock option, however, may be
exercisable more than ten years after its date of grant. A Participant will
be permitted to pay the exercise price of a Stock Option in cash, with
shares of Common Stock (including by attestation of Common Stock owned) or
by a combination of cash and Common Stock. The aggregate fair market value
(determined at the time the option is granted) of shares of Common Stock as
to which incentive stock options are exercisable for the first time by a
Participant during any calendar year (under this Plan and any other plan of
Ferro) may not exceed $100,000 (or such other limit as may be fixed by the
Code from time to time).
(b) Stock Appreciation Rights. The Committee may grant Awards in the
form of Stock Appreciation Rights. Stock Appreciation Rights will entitle a
Participant to receive a payment, in cash or Common Stock, equal to the
appreciation in market value of a stated number of shares of Common Stock
from the price stated in the Award Agreement to the fair market value on
the date of exercise or surrender, on such terms, conditions and
restrictions as the Committee deems appropriate. Once a stock appreciation
right has been granted, the initial share value may not be adjusted or
amended, whether directly or indirectly, by amendment, cancellation,
replacement grants or any other means, so as to increase the value of such
Stock Appreciation Right. Stock Appreciation Rights may be granted either
separately or in conjunction with other Awards granted under this Plan. Any
Stock Appreciation Right related to a Stock Option, however, will be
exercisable only to the extent the related Stock Option is exercisable.
Similarly, upon exercise of a Stock Appreciation Right as to some or all of
the shares of Common Stock covered by a related Stock Option, the related
Stock Option will be canceled automatically to the extent of the Stock
Appreciation Right exercised, and such shares of Common Stock shall not be
eligible for subsequent grant. Any Stock Appreciation Right related to a
nonstatutory stock option may be granted at the same time such stock option
is granted or at any subsequent time before exercise or expiration of such
stock option. Any Stock Appreciation Right related to an incentive stock
option must be granted at the same time such incentive stock option is
granted.
(c) Restricted Shares. The Committee may grant Awards in the form of
Restricted Shares. Such Awards may be in such numbers of shares of Common
Stock and at such times as the Committee determines. Such Awards will have
such periods of vesting and forfeiture restrictions as the Committee may
determine at the time of grant, except that no restriction period
applicable to Restricted Shares may be less than 12 months.
(d) Performance Shares. The Committee may grant Awards in the form of
Performance Shares. Performance Shares will be (i) represented by
forfeitable shares of Common Stock issued at the time of grant of a
Performance Share Award or (ii) phantom Performance Shares. Such
Performance Shares will be earned upon satisfaction of Performance Targets
relating to Performance Periods established by the Committee at the time of
a grant. At the end of the applicable Performance Period, based upon the
level of achievement of the Performance Targets, Performance Shares will be
converted into Common Stock, cash, or a combination of Common Stock and
cash, or forfeited. If Performance Shares initially were represented by
forfeitable Common Stock, such Common Stock will become nonforfeitable or
be repurchased by Ferro at the end of the applicable Performance Period.
During the period any Performance Shares are subject to forfeiture
restrictions, the Committee may, in its discretion, grant to the
Participant to whom phantom Performance Shares have been awarded the right
to receive dividend equivalents with respect to such Performance Shares.
The Committee may establish Performance Targets in terms of any or all
of the following: sales; sales growth; gross margins; operating income; net
earnings; earnings growth; cash flows; market share; total shareholder
returns; returns on equity, net assets,
A-2
assets employed, or capital employed; accomplishment of acquisitions,
divestitures, or joint ventures (or the success of an acquisition or joint
venture, measured in terms of any of the preceding), or the attainment of
levels of performance of Ferro under one or more of the measures described
above relative to the performance of other businesses, or various
combinations of the foregoing, or changes in any of the foregoing.
Performance Targets applicable to Performance Shares may vary from Award to
Award and from Participant to Participant.
When determining whether Performance Targets have been attained, the
Committee will have the discretion to make adjustments to take into account
extraordinary or nonrecurring items or events, or unusual nonrecurring
gains or losses identified in Ferro's financial statements, provided such
adjustments are made in a manner consistent with Section 162(m) of the Code
(to the extent applicable). Awards of Performance Shares made to
Participants subject to Section 162(m) of the Code are intended to qualify
under Section 162(m) and the Committee will interpret the terms of such
Awards in a manner consistent with that intent to the extent appropriate.
(The foregoing provisions of this Section 4(d) will also apply to Awards of
Restricted Shares made under Section 4(c) to the extent such Awards of
Restricted Shares are subject to the financial performance of Ferro.)
(e) Common Stock Awards. The Committee may grant Awards in the form of
Common Stock or on a basis valued in whole or in part by reference to, or
otherwise based upon, Common Stock. Common Stock Awards will be subject to
conditions established by the Committee and set forth in the applicable
Award Agreement.
5. Award Agreements. All Awards to executive personnel under this Plan will
be evidenced by a written agreement (an "Award Agreement") between Ferro and the
Participant containing such terms not inconsistent with this Plan as the
Committee may determine, including such restrictions, conditions, and
requirements as to transferability, continued employment, individual performance
or financial performance of Ferro or a subsidiary or affiliate as the Committee
deems appropriate. Each such Award Agreement will, however, provide that the
Award will be forfeitable if, in the opinion of the Committee, the Participant,
without the written consent of Ferro:
(a) Directly or indirectly, engages in, or assists or has a material
ownership interest in, or acts as agent, advisor or consultant of, for, or
to any person, firm, partnership, corporation or other entity that is
engaged in the manufacture or sale of any products manufactured or sold by
Ferro, or any subsidiary or affiliate, or any products that are logical
extensions, on a manufacturing or technological basis, of such products;
(b) Discloses to any person any proprietary or confidential business
information concerning Ferro, its subsidiaries, or affiliates or any of the
officers, Directors, employees, agents, or representatives of Ferro, its
subsidiaries or affiliates, which the Participant obtained or which came to
his or her attention during the course of his or her employment with Ferro;
(c) Takes any action likely to disparage or have an adverse effect on
Ferro, its subsidiaries, or affiliates or any of the officers, Directors,
employees, agents, or representatives of Ferro, its subsidiaries, or
affiliates;
(d) Induces or attempts to induce any employee of Ferro or any of its
subsidiaries or affiliates to leave the employ of Ferro or such subsidiary
or affiliate or otherwise interferes with the relationship between Ferro or
any of its subsidiaries or affiliates and any of their respective
employees, or hires or assists in the hiring of any person who was an
employee of Ferro or any of its subsidiaries or affiliates, or solicits,
diverts or otherwise attempts to take away any customers, suppliers, or
co-venturers of Ferro, any subsidiary or any affiliate, either on the
Participant's own behalf or on behalf of any other person or entity; or
(e) Otherwise performs any act or engages in any activity which in the
opinion of the Committee is inimical to the best interests of Ferro.
A-3
6. Stock Options for Directors. Each year under this Plan, Ferro may grant
Directors who are not employees of Ferro or any of its subsidiaries and
affiliates options to purchase such number of shares of Common Stock as is
recommended by the Committee and approved by the Board. Such Director Stock
Options will be granted on such date as the Committee or the Board determines.
If an individual is elected or appointed Director at least six months before the
expected annual grant date, then his or her first Director Stock Option will
granted as of the date he or she is elected or appointed. No Director Stock
Option will be granted to a Director if his or her normal retirement under a
plan or policy of Ferro will occur within six months after the date a Director
Stock Option otherwise would have been granted. The option exercise price of
Director Stock Options will be the per share fair market value of the Common
Stock on the date of the grant, as determined by the Committee. The terms and
conditions of each Director Stock Option will be contained in a written option
agreement, signed on behalf of Ferro by the Chief Executive Officer, setting
forth the number of shares of Common Stock subject to the option, the option
price to be paid upon exercise, the manner in which the option may be exercised
and the option price may be paid, the term of the option and such other
provisions not inconsistent with this Plan as the Committee may specify.
7. Shares Subject to this Plan. The shares of Common Stock to be issued
under this Plan may be either authorized but unissued shares or previously
issued shares reacquired by Ferro and held as treasury shares, as the Committee
may from time to time determine. Subject to adjustment as provided in Section 8
below, the number of shares of Common Stock reserved for Awards under this Plan
will equal 3,250,000 shares of Common Stock.
Any shares of Common Stock issued by Ferro through the assumption or
substitution of outstanding grants previously made by an acquired corporation or
entity shall not reduce the number of shares available for Awards under this
Plan. If any shares of Common Stock subject to any Award granted under this Plan
are forfeited or if such Award otherwise terminates without the issuance of such
shares or payment of other consideration in lieu of such shares, the shares
subject to such Award, to the extent of any such forfeiture or nonissuance,
shall again be available for grant under this Plan as if such shares had not
been subject to an Award. As regards Performance Share Awards, each Performance
Share will be considered as a share of Common Stock counted against the maximum
number of shares of Common Stock reserved for Awards under this Plan, whether
represented by forfeitable Common Stock or by phantom Performance Shares, and no
shares of Common Stock shall again be available for grant under this Plan as a
result of any repurchase by Ferro of forfeitable Common Stock or any cash
payment in settlement of Performance Shares.
Subject to adjustment as provided in Section 8 below:
(a) A cumulative maximum of 200,000 shares of Common Stock will be
available for issuance with respect to incentive stock options granted
under this Plan;
(b) A cumulative maximum of 500,000 shares of Common Stock will be
available for issuance with respect to Restricted Shares, Performance
Shares, and Common Stock Awards granted under this Plan;
(c) A maximum of 300,000 shares of Common Stock will be the subject of
Stock Options (including related Stock Appreciation Rights) granted under
this Plan to any single Participant during any 12-month period;
(d) The maximum payout to any single Participant under a Performance
Share Award granted during any 12-month period under this Plan will be
100,000 shares of Common Stock; and
(e)Awards, other than the grant of Stock Options or Performance
Shares, made under this Plan to any single Participant during any 12-month
period may not exceed a maximum of 100,000 shares of Common Stock.
8. Adjustments Upon Changes in Capitalization. If the outstanding shares of
Common Stock are changed by reason of any reorganization, recapitalization,
stock split, stock dividend, combination or exchange of shares, merger,
consolidation or any change in the corporate structure or
A-4
Common Stock of Ferro, then the maximum aggregate number and class of shares of
Common Stock as to which Awards may be granted under this Plan, the maximums
described in Section 7 above, the shares of Common Stock issuable pursuant to
then outstanding Awards, and the option price of outstanding stock options and
any related Stock Appreciation Rights shall be appropriately adjusted by the
Committee. If Ferro makes an extraordinary distribution in respect of Common
Stock or effects a pro rata repurchase of Common Stock, the Committee will
consider the economic impact of the extraordinary distribution or pro rata
repurchase on Participants and make such adjustments as it deems equitable under
the circumstances. For purposes of this Section 8,
(a) The term "extraordinary distribution" means a dividend or other
distribution of (i) cash, where the aggregate amount of such cash dividend
or distribution together with the amount of all cash dividends and
distributions made during the preceding twelve months, when combined with
the aggregate amount of all pro rata repurchases (for this purpose,
including only that portion of the aggregate purchase price of such pro
rata repurchases that is in excess of the fair market value of the Common
Stock repurchased during such 12-month period), exceeds ten percent of the
aggregate fair market value of all shares of Common Stock outstanding on
the record date for determining the shareholders entitled to receive such
extraordinary distribution, or (ii) any shares of capital stock of Ferro
(other than shares of Common Stock), other securities of Ferro, evidences
of indebtedness of Ferro or any other person, or any other property
(including shares of any subsidiary of Ferro), or any combination thereof;
and
(b) The term "pro rata repurchase" means a purchase of shares of
Common Stock by Ferro or any of its subsidiaries or affiliates, pursuant to
any tender offer or exchange offer subject to section 13(e) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or any
successor provision of law, or pursuant to any other offer available to
substantially all holders of Common Stock other than a purchase of shares
of Ferro made in an open market transaction.
The determinations of the Committee under this Section 8 shall be final and
binding upon all Participants, in the absence of revision by the Board.
9. Assignment and Transfer. No Award of a Stock Option or a related Stock
Appreciation Right shall be transferable by a Participant or Director except by
will or the laws of descent and distribution, and Stock Options and Stock
Appreciation Rights may be exercised during a Participant's or Director's
lifetime only by the Participant or Director or the Participant's or Director's
guardian or legal representative. Notwithstanding the foregoing, the Committee
may, in its discretion, authorize the transfer of all or a portion of a Stock
Option and related Stock Appreciation Right (other than an incentive stock
option) to:
(a) A Participant's or Director's spouse, children, grandchildren,
parents, siblings and other family members approved by the Committee
(collectively, "Family Members");
(b) Trust(s) for the exclusive benefit of such Participant, Director,
or Family Members; or
(c) Partnerships or limited liability companies in which such
Participant, Director, or Family Members are at all times the only partners
or members.
Any transfer to or for the benefit of Family Members permitted under this Plan
may be made subject to such conditions or limitations as the Committee may
establish to ensure compliance under the Federal securities laws, or for other
purposes. Subject to the terms of the Award, a transferee-Family Member may
exercise a Stock Option and/or related Stock Appreciation Right during or after
the Participant's or Director's lifetime.
The rights and interests of a Participant or Director with respect to any
Award made under this Plan other than Stock Options and related Stock
Appreciation Rights may not be assigned, encumbered or transferred except, in
the event of the death of a Participant or Director, by will or the laws of
descent and distribution; PROVIDED, HOWEVER, that the Board is specifically
authorized to permit
A-5
assignment, encumbrance, and transfer of any such other Award if and to the
extent it, in its sole discretion, determines that such assignment, encumbrance
or transfer would not produce adverse consequences under tax or securities laws.
10. Change of Control. Except as the Board may expressly provide otherwise,
in the event of a Change of Control:
(a) All Stock Options (including Director Stock Options) and Stock
Appreciation Rights then outstanding shall become fully exercisable as of
the date of the Change of Control;
(b) All restrictions and conditions with respect to all Awards of
Restricted Shares then outstanding shall be deemed fully released or
satisfied as of the date of the Change of Control, except as set forth in
paragraph (d) below;
(c) All previously established Performance Targets necessary to
achieve 100% of a Participant's specified award level for Performance
Shares shall be deemed to have been met as of the date of the Change of
Control; and
(d) If the Change of Control occurs during a restriction period
applicable to an Award of Restricted Shares or during a Performance Period
applicable to a Performance Share Award, then Participants will be entitled
to receive a prorata proportion of the Award that would have been
distributed to them at the end of the applicable restriction period or
Performance Period, based upon the portion of the applicable restriction
period or Performance Period during which the Participant's employment
continued.
In lieu of distributing shares of Common Stock in settlement of an Award of
Restricted Shares or Performance Shares in connection with a Change of Control,
Ferro may make payment to Participants in cash based on the fair market value of
the Common Stock that would have been issued under the applicable Award, which
fair market value for this purpose shall be the higher of (i) the closing price
on the New York Stock Exchange for the Common Stock on the date of such Change
of Control or (ii) the highest price per share of Common Stock actually paid in
connection with such Change of Control.
For purposes of this Section 10, the term "Change of Control" means a
change of control of Ferro of a nature that would be required to be reported
(assuming such event has not been previously reported) in response to Item 6 (e)
of Schedule 14A of Regulation 14A (or any successor provision) promulgated under
the Exchange Act; provided that, without limitation, a Change of Control shall
be deemed to have occurred at such time as (i) any "person" (within the meaning
of section 14(d) of the Exchange Act) is or becomes the beneficial owner,
directly or indirectly, of securities of Ferro representing 50% or more of the
combined voting power of Ferro's then outstanding securities, (ii) during any
period of two consecutive years, individuals who at the beginning of such period
constituted the Board cease for any reason to constitute at least a majority of
the Board unless the election, or the nomination for election, by Ferro's
shareholders of each new Director was approved by a vote of at least two-thirds
of the Directors then still in office who were Directors at the beginning of the
period (iii) a merger or consolidation of Ferro occurs, other than a merger or
consolidation that would result in Ferro's shareholders holding securities that
represent immediately after the merger or consolidation more than fifty percent
(50%) of the voting securities of either Ferro or the other entity that survives
such merger or consolidation (or the parent of such entity) or (iv) Ferro sells
or otherwise disposes of all or substantially all of Ferro's assets to an entity
that is not controlled by Ferro or its shareholders; provided, however, that no
Change of Control shall be deemed to occur solely as a result of the acquisition
of any securities of Ferro by a trust exempt from tax under Section 501(a) of
the Code that is formed for the purpose of providing retirement or other
benefits to employees of Ferro, any subsidiary or any affiliate.
11. Employee Rights Under this Plan. No employee or other person shall have
any claim or right to be granted any Award under this Plan. Neither this Plan
nor any action taken under this Plan shall be construed as giving any employee
any right to be retained in the employ of Ferro or any subsidiary or affiliate.
A-6
12. Settlement by Subsidiaries and Affiliates. Settlement of Awards held by
employees of subsidiaries or affiliates shall be made by and at the expense of
such subsidiary or affiliate. Ferro either will sell or contribute, in its sole
discretion, to the subsidiary or affiliate, the number of shares needed to
settle any Award that is granted under this Plan. In addition, with respect to
Participants who are foreign nationals or employed outside the United States, or
both, the Committee may cause Ferro or a subsidiary or affiliate to adopt such
rules and regulations, policies, sub-plans or the like as may, in the judgment
of the Committee, be necessary or advisable in order to effectuate the purposes
of this Plan.
13. Amendment or Termination. Ferro, by action of its Board, reserves the
right to amend, modify or terminate this Plan at any time and, by action of the
Committee with the consent of the Participant or Director, to amend, modify or
terminate any outstanding Award Agreement, except to the extent, if any, that
further shareholder approval is required pursuant to any applicable law,
regulation or rule, including any rule relating to the listing on a national
securities exchange of Ferro Common Stock, and except with respect to any
adjustment or amendment affecting the value of a Stock Option or Stock
Appreciation Right not permitted under paragraph 4(a) or 4(b) above.
14. Effective Date and Term of Plan. This Plan is adopted by the Board as
of January 1, 2003, subject to approval by Ferro shareholders at the 2003 annual
meeting of shareholders. No Awards shall be made under this Plan after December
31, 2012, provided that any Awards outstanding on such date shall not be
affected and shall continue in accordance with their terms.
15. Status of Grants Under Prior Plans. Following approval of this Plan by
the shareholders of Ferro, no further grants of stock options or stock
appreciation rights shall be made under Ferro's Employee Stock Option Plan and
no further grants of performance shares shall be made under Ferro's 1997
Performance Share Plan, provided that any outstanding stock options, stock
appreciation rights, and performance shares under such prior plans shall not be
affected by shareholder approval of this Plan and shall continue in accordance
with their terms.
A-7
------------------------------------------------------------------------------------------------------------------------
VOTE BY TELEPHONE
------------------------------------------------------------------------------------------------------------------------
Have your voting instruction
card available when you call
the TOLL-FREE NUMBER
1-800-542-1160 using a
touch-tone telephone. You will
be prompted to enter your
Control Number. Please follow
the simple prompts that will
be presented to you to record
your vote.
------------------------------
VOTE BY INTERNET
------------------------------
Have your voting instruction
card available when you access
the website
http://www.votefast.com. You
will be prompted to enter your
Control Number. Please follow
the simple prompts that will
be presented to you to record
your vote.
------------------------------
VOTE BY MAIL
------------------------------
Please mark, sign and date
your voting instruction card
and return it in the
POSTAGE-PAID ENVELOPE provided
or return it to: Stock
Transfer Dept (NC) National
City Bank, P.O. Box 92301
Cleveland OH 44193-0900.
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
VOTE BY TELEPHONE VOTE BY INTERNET VOTE BY MAIL
Call TOLL-FREE using a Access the WEBSITE set forth Return your voting instruction
touch-tone phone: below and cast your vote: card in the POSTAGE-PAID
1-800-542-1160 http://www.votefast.com envelope provided
----------------------------------------------------------------------------------------------------------------
YOUR TELEPHONE OR INTERNET VOTE WITH RESPECT TO YOUR
PLAN ACCOUNT MUST BE RECEIVED BY 11:59 P.M. EDT ON APRIL 21, 2003 IN
ORDER TO BE COUNTED IN THE FINAL TABULATION.
SEE REVERSE SIDE FOR VOTING INSTRUCTIONS.
To Vote Shares of Company Stock To Vote Uninstructed Shares of
Allocated to Your Plan Account Company Stock in the Plan
CONTROL NUMBER:__________________ CONTROL NUMBER:__________________
IF YOU VOTE BY MAIL, THE VOTING INSTRUCTION CARD BELOW MUST BE SIGNED AND DATED.
PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING.
-------------------------------------------------------------------------------------------------------------------
FERRO CORPORATION CONFIDENTIAL VOTING INSTRUCTIONS
-------------------------------------------------------------------------------------------------------------------
The undersigned, a participant in the Ferro Corporation Savings and Stock
Ownership Plan and/or the Ferro Corporation Bargaining Unit 401(k) Plan (the
"Plan"), hereby instructs the Trustee under the Plan, to vote the shares of
Company stock allocated to his or her Plan account at the 2003 Annual Meeting
of Ferro Corporation, and at any adjournment thereof, in accordance with the
instructions on this card, as follows:
1. ELECTION OF DIRECTORS
Nominees for terms expiring in 2006:
(01) Jennie S. Hwang, Ph.D. (02) Hector R. Ortino (03) Padmasree Warrior
|_| FOR all nominees listed above |_| WITHHOLD AUTHORITY
(except as listed to the contrary below) to vote for all nominees listed above.
To withhold authority to vote for any individual nominee, write that nominee's name below:
-------------------------------------------------------------------------
2. RATIFICATION OF THE DESIGNATION OF KPMG LLP AS INDEPENDENT AUDITORS.
|_| FOR |_| AGAINST |_| ABSTAIN
3. APPROVAL OF THE 2003 LONG-TERM INCENTIVE COMPENSATION PLAN.
|_| FOR |_| AGAINST |_| ABSTAIN
Your voting instructions will be kept confidential. Under no circumstances will
the Trustee or any of its agents disclose to Ferro Corporation or any other
party how you voted.
------------------------------------------------------------
Signature -- Please sign exactly as your name appears above.
Date: _____________________________ , 2003
As a participant in the Ferro Corporation Savings and Stock Ownership Plan
and/or the Ferro Corporation Bargaining Unit 401(k) Plan (the "Plan"), you
have the right to instruct Mellon Bank, as Trustee, to vote the shares
allocated to your Plan account. You also have the ability, acting as a
Named Fiduciary under the Plan, to instruct Mellon Bank to vote a pro rata
portion of the shares of Company stock (based on the ratio of the amount of
Company stock in your Plan account to the total amount of Company stock in
the Plan) allocated to other participants' Plan accounts for which the
Trustee does not receive voting instructions.
To direct the Trustee to vote the shares of Company stock allocated to your
Plan account by mail, please sign this voting instruction card on the
reverse side. To direct the Trustee to vote the shares of Company stock
allocated to your Plan account by telephone or the Internet, please follow
the instructions on the reverse side and use the CONTROL NUMBER PRINTED IN
GREEN.
To direct the Trustee to vote the uninstructed shares of Company stock by
mail, please sign this voting instruction card below. To direct the Trustee
to vote the uninstructed shares of Company stock allocated to the Plan
accounts of other participants by telephone or the Internet, please follow
the instructions on the reverse side and use the CONTROL NUMBER PRINTED IN
BLUE.
If you vote by telephone or the Internet, please do not send your voting
instruction card by mail.
PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING.
--------------------------------------------------------------------------------
FERRO CORPORATION CONFIDENTIAL VOTING INSTRUCTIONS
--------------------------------------------------------------------------------
The undersigned participant, acting as a Named Fiduciary under the Ferro
Corporation Savings and Stock Ownership Plan and/or the Ferro Corporation
Bargaining Unit 401(k) Plan (the "Plan"), hereby instructs the Trustee under the
Plan to vote the shares subject to this instruction at the 2003 Annual Meeting
of Ferro Corporation, and at any adjournment thereof, in accordance with the
instructions on this card, as follows:
1. ELECTION OF DIRECTORS
Nominees for terms expiring in 2006:
01) Jennie S. Hwang, Ph.D. (02) Hector R. Ortino (03) Padmasree Warrior
|_| FOR all nominees listed above |_| WITHHOLD AUTHORITY
(except as listed to the contrary below) to vote for all nominees
listed above.
To withhold authority to vote for any individual nominee, write that
nominee's name below:
---------------------------------------------------------
2. RATIFICATION OF THE DESIGNATION OF KPMG LLP AS INDEPENDENT AUDITORS.
|_| FOR |_| AGAINST |_| ABSTAIN
3. APPROVAL OF THE 2003 LONG-TERM INCENTIVE COMPENSATION PLAN.
|_| FOR |_| AGAINST |_| ABSTAIN
Your voting instructions will be kept confidential. Under no circumstances
will the Trustee or any of its agents disclose to Ferro Corporation or any
other party how you voted.
------------------------------------------------------------
Signature -- Please sign exactly as your name appears above.
Date: _____________________________ , 2003
----------------------------------------------------------------------------------------------------------------------------
VOTE BY TELEPHONE
----------------------------------------------------------------------------------------------------------------------------
Have your proxy card
available when you call
the TOLL-FREE NUMBER
1-800-542-1160 using a
touch-tone telephone. You
will be prompted to enter
your Control Number.
Please follow the simple
prompts that will be
presented to you to record
your vote.
----------------------------------------------------------------------------------------------------------------------------
VOTE BY INTERNET
----------------------------------------------------------------------------------------------------------------------------
Have your proxy card
available when you access
the website
http://www.votefast.com.
You will be prompted to
enter your Control Number.
Please follow the simple
prompts that will be
presented to you to record
your vote.
----------------------------------------------------------------------------------------------------------------------------
VOTE BY MAIL
----------------------------------------------------------------------------------------------------------------------------
Please mark, sign and date
your proxy card and return
it in the POSTAGE-PAID
ENVELOPE provided or
return it to: Stock
Transfer Dept (NC)
National City Bank, P.O.
Box 92301 Cleveland OH
44193-0900.
----------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
VOTE BY TELEPHONE VOTE BY INTERNET VOTE BY MAIL
Call TOLL-FREE using a Access the WEBSITE and Return your proxy
touch-tone phone: cast your vote: in the POSTAGE-PAID
1-800-542-1160 http://www.votefast.com envelope provided
--------------------------------------------------------------------------------
VOTE 24 HOURS A DAY, 7 DAYS A WEEK!
YOUR TELEPHONE OR INTERNET VOTE MUST BE RECEIVED BY 11:59 P.M. EASTERN DAYLIGHT
TIME ON THURSDAY, APRIL 24, 2003 IN ORDER TO BE COUNTED IN THE FINAL TABULATION.
IF YOU VOTE BY TELEPHONE OR INTERNET, PLEASE DO NOT SEND YOUR PROXY BY MAIL.
YOUR CONTROL NUMBER IS:
------------------------
PROXY MUST BE SIGNED AND DATED BELOW.
PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING.
--------------------------------------------------------------------------------
FERRO CORPORATION PROXY
--------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF SHAREHOLDERS ON APRIL 25, 2003.
The undersigned shareholder of Ferro Corporation hereby appoints James C. Bays
and M. A. Jorgenson, the proxies of the undersigned, to vote the shares of the
undersigned at the 2003 Annual Meeting of Shareholders of the Corporation and
any adjournment thereof upon the proposals on the reverse side.
--------------------------------
Signature
--------------------------------
Signature if held jointly
Date: , 2003
--------------------
NOTICE: When signing as attorney,
executor, administrator, trustee
or guardian, please give your full
title as such. A proxy given by a
corporation should be signed in
the corporate name by the chairman
of its board of directors, its
president, vice president,
secretary, or treasurer.
PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING.
--------------------------------------------------------------------------------
FERRO CORPORATION PROXY
--------------------------------------------------------------------------------
PLEASE INDICATE HOW YOU WISH YOUR SHARES TO BE VOTED. UNLESS OTHERWISE
INDICATED, THE PROXIES WILL VOTE FOR PROPOSALS 1, 2 AND 3.
THE BOARD OF DIRECTORS RECOMMENDS VOTES BE CAST FOR PROPOSALS 1, 2 AND 3.
1. ELECTION OF DIRECTORS
Nominees for terms expiring in 2006:
(01) Jennie S. Hwang, Ph.D. (02) Hector R. Ortino (03) Padmasree Warrior
|_| FOR all nominees listed above |_| WITHHOLD AUTHORITY
(except as listed to the contrary below) to vote for all nominees
listed above.
To withhold authority to vote for any individual nominee, write that nominee's
name or number below:
---------------------------------------------------------
2. RATIFICATION OF THE DESIGNATION OF KPMG LLP AS INDEPENDENT AUDITORS.
|_| FOR |_| AGAINST |_| ABSTAIN
3. APPROVAL OF THE 2003 LONG-TERM INCENTIVE COMPENSATION PLAN.
|_| FOR |_| AGAINST |_| ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.
IMPORTANT--THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE