SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K/A
--------------------------
AMENDMENT NO. 1
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO ___________
COMMISSION FILE NUMBER 1-10788
------------------------
INTERNATIONAL SPECIALTY PRODUCTS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 51-0333696
(State of Incorporation) (I.R.S. Employer Identification No.)
818 WASHINGTON STREET
WILMINGTON, DELAWARE 19801
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (302) 429-8554
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
Common Stock, par value $.01 per share New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
---------------
COMMISSION FILE NUMBER 33-44862
ISP CHEMICALS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3416260
(State of Incorporation) (I.R.S. Employer Identification No.)
RT. 95 INDUSTRIAL AREA, P.O. BOX 37
CALVERT CITY, KENTUCKY 42029
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (502) 395-4165
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
----------------
COMMISSION FILE NUMBER 33-44862-01
ISP TECHNOLOGIES INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 51-0333795
(State of Incorporation) (I.R.S. Employer Identification No.)
STATE HIGHWAY 146 & INDUSTRIAL ROAD
TEXAS CITY, TEXAS 77590
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (409) 945-3411
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
SEE TABLE OF ADDITIONAL REGISTRANTS BELOW
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES _X_ NO ___
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST KNOWLEDGE OF INTERNATIONAL SPECIALTY PRODUCTS INC., IN DEFINITIVE PROXY OR
INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K
OR ANY AMENDMENT TO THIS FORM 10-K. __
AS OF MARCH 20, 1998, 96,057,477 SHARES OF COMMON STOCK OF INTERNATIONAL
SPECIALTY PRODUCTS INC. WERE OUTSTANDING. THE AGGREGATE MARKET VALUE OF THE
VOTING STOCK HELD BY NON-AFFILIATES OF INTERNATIONAL SPECIALTY PRODUCTS INC. AS
OF MARCH 20, 1998 WAS $275,958,356.63. THE AGGREGATE MARKET VALUE WAS COMPUTED
BY REFERENCE TO THE CLOSING PRICE ON THE NEW YORK STOCK EXCHANGE OF COMMON STOCK
OF INTERNATIONAL SPECIALTY PRODUCTS INC. ON SUCH DATE ($17 15/16). FOR PURPOSES
OF THE COMPUTATION, VOTING STOCK HELD BY EXECUTIVE OFFICERS AND DIRECTORS OF THE
REGISTRANTS AND ISP HOLDINGS INC., AN AFFILIATE OF INTERNATIONAL SPECIALTY
PRODUCTS INC., HAS BEEN EXCLUDED. SUCH EXCLUSION IS NOT INTENDED, AND SHALL NOT
BE DEEMED, TO BE AN ADMISSION THAT SUCH EXECUTIVE OFFICERS AND DIRECTORS ARE
AFFILIATES OF INTERNATIONAL SPECIALTY PRODUCTS INC.
AS OF MARCH 20, 1998, ISP CHEMICALS INC. AND ISP TECHNOLOGIES INC. EACH HAD
10 SHARES OF COMMON STOCK OUTSTANDING. NO SHARES ARE HELD BY NON-AFFILIATES.
AS OF MARCH 20, 1998, EACH OF THE ADDITIONAL REGISTRANTS HAD THE NUMBER OF
SHARES OUTSTANDING WHICH IS SHOWN ON THE TABLE BELOW. NO SHARES ARE HELD BY
NON-AFFILIATES.
ADDITIONAL REGISTRANTS
ADDRESS, INCLUDING ZIP CODE
STATE OR OTHER AND TELEPHONE
EXACT NAME OF JURISDICTION OF NO. I.R.S. EMPLOYER NUMBER, INCLUDING AREA CODE,
REGISTRANT AS SPECIFIED INCORPORATION OR OF SHARES IDENTIFICATION OF REGISTRANT'S
IN ITS CHARTER ORGANIZATION OUTSTANDING NO. PRINCIPAL EXECUTIVE OFFICE
-------------- ------------ ----------- --------------- --------------------------
ISP (PUERTO RICO) INC ................... Delaware 10 22-2934561 Mirador de Bairoa
Calle 27st-14
Caguas, Puerto Rico 00725-8900
(787) 744-3116
ISP ENVIRONMENTAL
SERVICES INC ........................ Delaware 10 51-0333801 1361 Alps Road
Wayne, NJ 07470
(973) 628-3000
ISP FILTERS INC ......................... Delaware 10 51-0333796 4436 Malone Road
Memphis, TN 38118
(901) 795-2445
ii
ISP GLOBAL TECHNOLOGIES INC.............. Delaware 10 51-0333802 818 Washington Street
Wilmington, DE 19801
(302) 429-7492
ISP INTERNATIONAL CORP .................. Delaware 10 51-0333734 818 Washington Street
Wilmington, DE 19801
(302) 429-7493
ISP INVESTMENTS INC ..................... Delaware 10 51-0333803 818 Washington Street
Wilmington, DE 19801
(302) 429-7496
ISP MANAGEMENT COMPANY, INC ............. Delaware 10 51-0333800 1361 Alps Road
Wayne, NJ 07470
(973) 628-3000
ISP MINERAL PRODUCTS INC ................ Delaware 10 51-0333794 34 Charles Street
Hagerstown, MD 21740
(301) 733-4000
ISP MINERALS INC ........................ Delaware 10 51-0333798 Route 116
Blue Ridge Summit, PA 17214
(717) 794-2184
ISP REAL ESTATE COMPANY, INC ............ Delaware 2 22-2886551 1361 Alps Road
Wayne, NJ 07470
(973) 628-3000
ISP REALTY CORPORATION .................. Delaware 1,000 13-2720081 1361 Alps Road
Wayne, NJ 07470
(973) 628-3000
VERONA INC .............................. Delaware 100 22-3036319 NCNB Plaza, Suite 300
7 North Laurens St.
Greenville, SC 29601
(803) 271-9194
BLUEHALL INCORPORATED ................... Delaware 1 13-3335905 818 Washington Street
Wilmington, DE 19801
(302) 651-0165
iii
This Amendment No. 1 on Form 10-K/A amends and restates in
their entirety the following items of Part III of the Annual Report on Form 10-K
of International Specialty Products Inc. ("ISP") and certain additional
registrants for the fiscal year ended December 31, 1997 ("Form 10-K") to add
information required by Part III Item 10. Directors and Executive Officers of
the Registrant; Item 11. Executive Compensation; Item 12. Security Ownership of
Certain Beneficial Owners and Management; and Item 13. Certain Relationships and
Related Transactions. Except as the context otherwise requires, "ISP" or the
"Company" refers to International Specialty Products Inc. and its subsidiaries
and their predecessors. Capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to them in the Company's Form 10-K.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the name, age and other information with
respect to the directors of ISP. Under ISP's By-laws, each director continues in
office until ISP's next Annual Meeting of Stockholders and until his successor
is elected and qualified. For information relating to the executive officers of
ISP, ISP Chemicals and ISP Technologies, see "Executive Officers of the
Registrant" in Part I of the Form 10-K. No family relationship exists between
any of the directors or executive officers of the Company. The information
presented below with respect to each director has been furnished by such
director.
PRESENT PRINCIPAL OCCUPATION OR
NAME AGE EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY
---- --- -------------------------------------------
Charles M. Diker 63 Mr. Diker has been a director of ISP since
February 1992. He has been a non-managing
principal of Weiss, Peck & Greer, an
investment management firm, since 1975. He
also has been Chairman of the Board of
Cantel Industries Inc., a manufacturer of
medical diagnostics and infection control
products, since 1986. Mr. Diker is a
director of BeautiControl Cosmetics, a
cosmetics company; Data Broadcasting
Corporation, a financial data broadcasting
company; Chyron Corporation, a designer and
manufacturer of digital equipment, software
and systems; and AMF Bowling, Inc., an owner
and operator of, and manufacturer of
equipment for, commercial bowling centers.
Carl R. Eckardt 67 Mr. Eckardt has been a director of ISP since
its formation and Executive Vice President,
Corporate Development, of ISP since November
1996, which position he had held from ISP's
formation to January 1994. From January 1994
to November 1996, Mr. Eckardt was President
and Chief Operating Officer of ISP. He has
been Executive Vice President of ISP
Holdings since its formation. Mr. Eckardt
also has been Vice Chairman of GAF since
November 1996 and a director of GAF since
April 1987. He was Executive Vice President
of GAF from April 1989 to November 1996 and
held the same position with GAF's
predecessor from January 1987 to April 1989.
Mr. Eckardt has been Executive Vice
President of G-I Holdings since March 1993.
Mr. Eckardt joined GAF's predecessor in
1974.
Harrison J. Goldin 62 Mr. Goldin has been a director of ISP since
its formation. Mr. Goldin has been the
senior managing director of Goldin
Associates, L.L.C., a consulting firm, since
January 1990. Mr. Goldin was the Comptroller
of the City of New York from 1974 to 1989
and a New York State Senator from 1966 to
1973.
Peter R. Heinze 55 Dr. Heinze has been a director, President
and Chief Operating Officer of ISP since
November 1996. He was Senior Vice President,
Chemicals of PPG Industries, Inc., a glass
products, coatings and resins, and chemicals
manufacturer, from April 1993 to November
1996 and Group Vice President, Chemicals of
PPG Industries, Inc. from August 1992 to
1
April 1993. From January 1988 to August
1992, Dr. Heinze was President, Chemicals
Division, and an Executive Vice President of
BASF Corporation, a diversified chemical
manufacturing company.
Samuel J. Heyman 59 Mr. Heyman has been a director, Chairman and
Chief Executive Officer of ISP since its
formation and has held the same positions
with ISP Holdings since its formation. Mr.
Heyman also has been a director, Chairman
and Chief Executive Officer of GAF and
certain of its subsidiaries since April
1989, prior to which he held the same
position with GAF's predecessor from
December 1983 to April 1989. Mr. Heyman has
been a director and Chairman of BMCA since
its formation, Chief Executive Officer of
BMCA since June 1996 and a director of USI
since October 1995. He is also the Chief
Executive Officer, Manager and General
Partner of a number of closely held real
estate development companies and
partnerships whose investments include
commercial real estate and a portfolio of
publicly traded securities.
Sanford Kaplan 81 Mr. Kaplan has been a director of ISP since
November 1992. He has been a private
investor and consultant since 1977 when he
retired from Xerox Corporation, where he was
a Senior Vice President and a director. He
is also a director emeritus of Intel Corp.,
a computer hardware and component
manufacturer.
Burt Manning 66 Mr. Manning has been a director of ISP since
November 1992. Mr. Manning was Chairman of
J. Walter Thompson Company, a multinational
advertising company, from July 1987 through
December 1997 and was Chief Executive
Officer of such company from July 1987 to
December 1996. He has served as Chairman
Emeritus of such company since January 1998.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires ISP's directors, executive officers and persons who beneficially own
more than 10 percent of a registered class of ISP's equity securities ("10%
Owners") to file reports of beneficial ownership of ISP's securities and changes
in such beneficial ownership with the Securities and Exchange Commission (the
"Commission"). Directors, executive officers and 10% Owners are also required by
rules promulgated by the Commission to furnish ISP with copies of all forms they
file pursuant to Section 16(a).
Based solely upon a review of the copies of the forms filed pursuant to
Section 16(a) furnished to ISP, or written representations that no year-end Form
5 filings were required for transactions occurring during the 1997 fiscal year,
ISP believes that its directors, executive officers and 10% Owners complied with
Section 16(a) filing requirements applicable to them during the 1997 fiscal
year, except that Andrew G. Mueller, Executive Vice President-Operations,
inadvertently filed on an untimely basis an initial report of ownership on
Form 3.
2
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and non-cash compensation for
each of the last three fiscal years awarded to or earned by the Chief Executive
Officer of ISP and the four other most highly compensated executive officers of
ISP who were employed by ISP as of December 31, 1997.
Long-Term
Annual Compensation Compensation
------------------- ------------
Securities
Name and Principal Fiscal Bonus Other Annual Underlying All Other
Position Year Salary($) ($)(1) Compensation($) Options/SARs(#)(2) Compensation($)
- ---------------------- ------ ----------- ---------- --------------- ------------------ ---------------
Samuel J. Heyman........... 1997 $ 579,125 $ 0 $ 0 0 $20,579(3)
Chairman of the Board of 1996 572,000 200,000 0 89,200 (ISP-O) 14,739(3)
Directors and Chief 1995 553,666 200,000 0 150,000 (ISP-O) 9,848(3)
Executive Officer
Peter R. Heinze............ 1997 $ 379,725 349,271 $ 31,774(4) 18,750 (ISP-O) $24,291(4)
President and Chief 1996 46,875(4) 40,000(4) 0 156,250 (ISP-O) 0(4)
Operating Officer 1995 (4) (4) (4) (4) (4)
Carl R. Eckardt............ 1997 $ 340,704 $ 156,277 $ 0 0 $ 8,500(5)
Executive Vice 1996 339,612 164,901 0 49,600 (ISP-O) 17,756(5)
President-Corporate 1995 325,500 300,000 0 41,600 (ISP-O) 10,095(5)
Development
James P. Rogers............ 1997 $ 275,125 $ 250,000 $ 0 7,500 (ISP-O) $18,459(6)
Executive Vice 1996 263,467 225,000 0 39,210 (ISP-O)/ 14,258(6)
President-Finance 24,095(ISPH-O)(6)(8)
1995 248,333 225,000 0 38,300 (ISP-O) 13,154(6)
Richard A. Weinberg........ 1997 $ 252,475 $ 250,000 $ 0 0 $15,118(7)
Senior Vice President, 1996 130,833(7) 125,014(7) 0 37,410(ISP-O)/ 2,960(7)
General Counsel and 31,970(ISPH-O)(7)(8)
Secretary 1995 (7) (7) (7) (7) (7)
(1) Bonus amounts are payable pursuant to ISP's Executive Incentive
Compensation Program, except that in respect of the bonus amounts paid to
certain executive officers in 1997, ISP was reimbursed under a management
agreement for a portion of the bonus amounts earned by such executive
officers. See Item 13, "Certain Relationships and Related Transactions
Management Agreement."
(2) The ISP options (ISP-O) are for shares of ISP common stock, $.01 par value
("ISP Common Stock"), and ISP Holdings options (ISPH-O) are for shares of
redeemable convertible preferred stock of ISP Holdings. See "Options and
Stock Appreciation Rights."
(3) Included in "All Other Compensation" for Mr. Heyman are: $18,116, $12,989
and $8,598 for the premiums paid by the Company for a life insurance
policy in 1997, 1996 and 1995, respectively; and $1,963, $1,250 and $1,250
for the premiums paid by the Company for a long-term disability policy in
1997, 1996 and 1995, respectively.
(4) Included in "Other Annual Compensation" for Dr. Heinze are $25,043 in
payment of moving related expenses and a "tax gross-up" of $6,731 in 1997.
Included in "All Other Compensation" for Dr. Heinze are $10,792,
representing the Company's contribution under the GAF Capital Accumulation
Plan in 1997; $11,536 for the premium paid by the Company for a life
insurance policy in 1997; and $1,963 for the premium paid by the Company
for a long-term disability policy in 1997. Dr. Heinze commenced employment
with ISP in November 1996.
(5) Included in "All Other Compensation" for Mr. Eckardt are: $6,537, $16,506
and $8,845 for the premiums paid by the Company for a life insurance
policy in 1997, 1996 and 1995, respectively; and $1,963, $1,250 and $1,250
for the premiums paid by the Company for a long-term disability policy in
1997, 1996 and 1995, respectively.
(6) Included in "All Other Compensation" for Mr. Rogers are: $11,450, $11,198
and $10,963, representing the Company's contribution under the GAF Capital
Accumulation Plan in 1997, 1996 and 1995, respectively; $5,046, $1,810 and
$978 for the premiums paid by the Company for a life insurance policy in
1997, 1996 and 1995, respectively; and $1,963, $1,250 and $1,213 for the
premiums paid by the Company for a long-term disability policy in 1997,
1996 and 1995, respectively. Excluded are the stock appreciation rights
relating to shares of ISP Holdings common stock referred to in Note (2)
under the second table under "Options and Stock Appreciation Rights."
3
(7) Mr. Weinberg commenced service as Senior Vice President, General Counsel
and Secretary of the Company on May 15, 1996. Prior to that time, he
served as Vice President and General Counsel of BMCA. Excluded are amounts
paid to Mr. Weinberg by BMCA prior to May 15, 1996. Included in "All Other
Compensation" for Mr. Weinberg are: $11,300 and $2,158, representing the
Company's contribution under the GAF Capital Accumulation Plan in 1997 and
1996, respectively; $1,914 and $277 for the premiums paid by the Company
for a life insurance policy in 1997 and 1996, respectively; and $1,904 and
$525 for the premiums paid by the Company for a long-term disability
policy in 1997 and 1996, respectively.
(8) Excluded are the stock appreciation rights relating to shares of GAF
common stock referred to in Note (4) under the second table under "Options
and Stock Appreciation Rights".
OPTIONS AND STOCK APPRECIATION RIGHTS
The following tables summarize options to acquire ISP Common Stock
("ISP Options") granted during 1997 to the executive officers named in the
Summary Compensation Table, the potential realizable value of such options and
the value of the unexercised ISP Options, options to acquire ISP Holdings
redeemable convertible preferred stock ("ISP Holdings Options") and stock
appreciation rights ("SARs") held by such persons on December 31, 1997. No
options or SARs were exercised by such persons, and no ISP Holdings Options or
SARs relating to common stock of ISP Holdings were granted, during 1997.
ISP COMMON STOCK OPTION GRANTS IN 1997
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO EXERCISE/ MARKET POTENTIAL REALIZABLE VALUE
UNDERLYING EMPLOYEES BASE PRICE ON AT ASSUMED ANNUAL RATES
OPTIONS IN FISCAL PRICE DATE OF EXPIRATION OF STOCK PRICE APPRECIATION
NAME GRANTED 1997 ($/SH) GRANT DATE FOR OPTION TERM
---- ------- ---- ------ ----- ---- --------------------------------
0% 5% 10%
---- ---- -----
Samuel J.
Heyman...... -- -- -- -- -- -- -- --
Peter R.
Heinze...... 18,750(ISP-O)(1) 3.6% $9.9375 $14.9375 12/31/03 $93,750 $189,003 $309,847
Carl R.
Eckardt..... -- -- -- -- -- -- -- --
James P.
Rogers...... 7,500(ISP-O)(1) 1.5% $9.9375 $14.9375 12/31/03 $37,500 $75,601 $123,939
Richard A.
Weinberg.... -- -- -- -- -- -- -- --
- -----------------
(1) The ISP Options were granted under the ISP 1991 Incentive Plan for Key
Employees and Directors, as amended (the "ISP Incentive Plan"). The ISP
Options set forth in the foregoing table will become fully vested 2-1/2
years after the date of grant, and, to the extent vested, are exercisable
for six years from the date of grant. The Compensation and Pension
Committee (the "Compensation Committee") of the Board of Directors of ISP
(the "ISP Board") may, on a case by case basis, accelerate the vesting of
unvested options in the event of a "Change of Control" (as defined).
4
VALUE OF ISP COMMON STOCK OPTIONS/ISP HOLDINGS
OPTIONS/ISP HOLDINGS STOCK APPRECIATION RIGHTS AT DECEMBER 31, 1997(4)
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED ISP OPTIONS (ISP-O)/ IN-THE-MONEY ISP OPTIONS/ISP HOLDINGS
ISP HOLDINGS OPTIONS (ISPH-O)/ISP HOLDINGS OPTIONS/ISP HOLDINGS SARS
SARS(S) AT 12/31/97 AT 12/31/97(1)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------------------- -------------------------
Samuel J. Heyman...... 60,000/179,200(ISP-O) $ 476,250/$987,550
Peter R. Heinze....... 0/175,000(ISP-O) $ 0/$826,172
Carl R. Eckardt....... 93,784/ 92,656(ISP-O) $ 492,907/$457,621
James P. Rogers(4).... 61,320/ 83,690(ISP-O) $ 310,208/$471,329
7,455/1,864(S)(2) $ 834,967/$208,742(2)
0/24,095(ISPH-O)(3) $ 0/$240,727(3)
Richard A. Weinberg(4) 2,800/34,610(ISP-O) $ 8,925/$107,393
0/31,970(ISPH-O)(3) $ 0/$560,168(3)
- -----------------
(1) All ISP Options, ISP Holdings Options and ISP Holdings SARs were
in-the-money at December 31, 1997.
(2) The ISP Holdings SARs represent the right to receive a cash payment based
upon the appreciation in value of the specified number of shares of ISP
Holdings common stock over the sum of the determined initial Book Value
(as defined) per share of common stock of ISP Holdings, plus interest on
such Book Value at a specified rate. The ISP Holdings SARs vest over a
five-year period, subject to earlier vesting under certain circumstances
including in connection with a change of control, and have no expiration
date. The ISP Holdings SARs were issued on January 1, 1997 to holders of
stock appreciation rights relating to shares of GAF common stock ("GAF
SARs"). The grant date of each ISP Holdings SAR is deemed to be the grant
date of such GAF SARs.
(3) The ISP Holdings Options represent options to purchase shares of
redeemable convertible preferred stock of ISP Holdings (the "Holdings
Preferred Stock"). Each share of Holdings Preferred Stock is convertible,
at the holder's option, into shares of common stock of ISP Holdings at a
formula price based on the sum of the determined initial Book Value (as
defined in the option agreements) plus interest on such Book Value at a
specified rate. The ISP Holdings Options are exercisable at a price of
$111.44 per share and vest over seven years, subject to earlier vesting
under certain circumstances including in connection with a change of
control. Dividends will accrue on the Holdings Preferred Stock from the
date of issuance at the rate of 6% per annum. Holdings Preferred Stock is
redeemable, at ISP Holdings' option, for a redemption price equal to the
exercise price per share plus accrued and unpaid dividends. The common
stock of ISP Holdings issuable upon conversion of the Holdings Preferred
Stock is subject to repurchase by ISP Holdings under certain circumstances
at a price equal to current Book Value (as defined). The exercise price of
the ISP Holdings Options is equal to the fair value per share of the
Holdings Preferred Stock at the date of grant. The ISP Holdings Options
have no expiration date. The ISP Holdings Options were issued on January
1, 1997 to holders of similar options to purchase redeemable convertible
preferred stock of GAF granted during 1996, which GAF options were
exchanged for GAF SARs. See Note (4) below. The grant date of each ISP
Holdings Option is deemed to be the grant date of such GAF options.
(4) Excluded are GAF SARs as follows: Mr. Rogers--7,455 exercisable and 10,473
unexercisable GAF SARs, all of which were in-the-money and had a value of
$72,640 in respect of the exercisable and $187,437 in respect of the
unexercisable GAF SARs at December 31, 1997; and Mr. Weinberg--12,320
unexercisable GAF SARs, all of which were in-the-money and had a value of
$225,286 at December 31, 1997.
PENSION PLANS
Non-Qualified Retirement Plan. The Company has a non-qualified
retirement plan for the benefit of certain key employees (the "Retirement
Plan"). The benefit payable under the Retirement Plan, which vests in accordance
with a 10-year schedule, consists of an annual payment commencing at age 65
equal to 25% of a covered employee's last full year's base salary. The benefit
continues for the longer of 15 years or the joint lifetimes of the employee or
his or her spouse. If a covered employee dies while employed by the Company or a
subsidiary, a death benefit of 36% of the employee's base salary at the date of
death is payable for a term of 15 years to the employee's beneficiary.
5
No new participants have been admitted to the Retirement Plan since
January 1989 and it is not anticipated that any new participants will be
admitted hereafter. Of the executive officers named in the Summary Compensation
Table, only Messrs. Heyman and Eckardt participate in the Retirement Plan.
The following table shows, for the salary levels and years of service
indicated, the annual pension benefit, payable commencing at age 65 to
participants in the Retirement Plan.
Non-Qualified Retirement Plan
Annual Payments at Age 65
Years of Service
----------------------------------------------------------------------------------------------------------
Salary 5 10 15 20 25 30 35
-------- ------- -------- -------- -------- -------- -------- --------
$250,000 $31,250 $ 62,500 $ 62,500 $ 62,500 $ 62,500 $ 62,500 $ 62,500
300,000 37,500 75,000 75,000 75,000 75,000 75,000 75,000
350,000 43,750 87,500 87,500 87,500 87,500 87,500 87,500
400,000 50,000 100,000 100,000 100,000 100,000 100,000 100,000
450,000 56,250 112,500 112,500 112,500 112,500 112,500 112,500
500,000 62,500 125,000 125,000 125,000 125,000 125,000 125,000
550,000 68,750 137,500 137,500 137,500 137,500 137,500 137,500
600,000 75,000 150,000 150,000 150,000 150,000 150,000 150,000
650,000 81,250 162,500 162,500 162,500 162,500 162,500 162,500
700,000 87,500 175,000 175,000 175,000 175,000 175,000 175,000
The years of service covered by the Retirement Plan are twelve years
for each of Mr. Heyman and Mr. Eckardt. Current salaries covered by the
Retirement Plan are the amounts set forth under the "salary" column of the
Summary Compensation Table for the above-named executive officers. The annual
pension benefit is not subject to reduction for Social Security and other
benefits and is computed on a straight-life annuity basis.
Additional Arrangements. ISP has agreed to provide Mr. Eckardt, at age
67, a $200,000 annuity comprising two pieces: (1) the benefits payable under the
Retirement Plan described above, and (2) a supplemental retirement benefit
representing the difference between $200,000 per year and the benefit payable
under the Retirement Plan. The supplemental retirement benefit vests at 20% per
year over a five-year period beginning March 1994. In the event Mr. Eckardt
should die without a surviving spouse, no supplemental retirement benefit will
be payable. In the event Mr. Eckardt should die prior to the termination of his
employment, leaving a surviving spouse, his spouse will be entitled to receive
for her life an annual payment of the portion of the supplemental retirement
benefit in which he was vested on the date of his death. If Mr. Eckardt's
employment is terminated involuntarily other than for cause (as defined), or in
the event Mr. Eckardt becomes totally and permanently disabled, he will be
entitled to receive payment of the portion of the supplemental retirement
benefit in which he is vested on the date of termination or the onset of such
disability. If Mr. Eckardt's employment is terminated for cause, the Company in
its sole discretion may declare all or any portion (whether vested or unvested)
of the supplemental retirement benefits forfeited.
OTHER AGREEMENTS
In connection with his becoming President and Chief Operating Officer
of ISP in November 1996, Dr. Heinze and ISP entered into a letter agreement that
provides, among other things, that Dr. Heinze will receive an initial base
salary of $375,000 per year, certain stock options and other benefits. In
accordance with the letter agreement, on December 9, 1996, Dr. Heinze was
granted under the ISP Incentive Plan 125,000 ISP Options at an exercise price of
$11.25 per share, which options vest in full on December 9, 1999 and expire nine
years from the date of grant, and 31,250 ISP Options at an exercise price of
$6.25 per share, which options vest in full on June 9, 1999 and expire six years
from the date of grant, in each case subject to earlier vesting in the event of
a "Change of Control" (as defined in the ISP Incentive Plan). He is also
eligible to participate in ISP's Executive Incentive Compensation Program and
the ISP Incentive Plan. The letter agreement also provides that if Dr. Heinze's
employment is terminated by ISP other than for cause, ISP will continue to pay
Dr. Heinze his then base salary for a severance period of up to 18 months
6
depending upon when such termination occurs. In addition, in the event of a
Change of Control of ISP and either (i) the termination of Dr. Heinze's
employment by ISP (or its successor) or other than for cause within twelve
months after such Change in Control or (ii) the termination of employment by Dr.
Heinze under certain circumstances, Dr. Heinze will continue to receive his base
salary in lieu of any other severance for 24 months following such termination.
DIRECTOR'S COMPENSATION
No directors who are employees of ISP or its affiliates receive
compensation for their services as directors. Outside directors receive an
annual fee of $18,000 and a fee of $750 per meeting of the ISP Board. Outside
directors are compensated $250 per committee meeting held in connection with an
ISP Board meeting and $750 per committee meeting held independently. An
additional fee of $3,000 per year is paid to outside directors who chair a
committee. If an outside director chairs more than one committee, no additional
compensation is paid. Additionally, in connection with their service on a
special committee of independent directors ("Special Committee") of the ISP
Board which was formed in 1997 to consider, among other things, a possible
business combination transaction between ISP and ISP Holdings, ISP agreed to pay
each of Messrs. Diker and Manning a $50,000 fee and a fee of $2,000 per Special
Committee meeting, plus reimbursement of out-of-pocket expenses. See Item 13,
"Certain Relationships and Related Party Transactions". Under the ISP Incentive
Plan, each outside director is granted a non-qualified stock option to purchase
5,000 shares of ISP Common Stock (the "Initial Option") on the date such person
becomes a director and an additional non-qualified option to purchase 2,500
shares of ISP Common Stock (an "Additional Option") on each anniversary of the
date of grant of the Initial Option. The term of each option granted is nine
years. Initial Options are subject to a three-year vesting period, commencing on
the first anniversary of the date of grant, and Additional Options are subject
to a one-year vesting period, becoming exercisable in full on the first
anniversary of the date of grant. The exercise price of the options is equal to
the fair market value of the underlying shares on the date of grant. ISP
currently has four non-employee directors, Messrs. Diker, Goldin, Kaplan and
Manning, each of whom was granted an Additional Option to purchase 2,500 shares
of ISP Common Stock during 1997.
The directors who serve on the Compensation Committee of the ISP Board
are not employees of the Company and have no interlocking relationships as
defined by the rules promulgated by the Commission.
7
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 20, 1998, the ISP Common Stock was beneficially owned by
the Company's directors, the executive officers named in the Summary
Compensation Table, directors and executive officers of the Company as a group
and each person or group known by the Company to be the beneficial owner of more
than 5% of the ISP Common Stock as follows:
NAME(1) NUMBER OF NUMBER OF SHARES
- ------- SHARES OWNED % BENEFICIALLY OWNED %
------------ - ------------------ -
Samuel J. Heyman.......................... 125,000 * 80,715,000(2)(3) 83.9%(2)(3)(5)
Carl R. Eckardt........................... 1,000 * 103,832(3)(5) *
Peter R. Heinze........................... 0 -- 0 --
Charles M. Diker.......................... 12,000 * 41,000(3)(4) *
Harrison J. Goldin........................ 0 -- 15,000 (3) *
Sanford Kaplan............................ 5,000 * 20,000 (3) *
Burt Manning.............................. 7,000(3) * 22,000 (3) *
James P. Rogers........................... 20,848(3) * 88,168 (3) *
Richard A. Weinberg....................... 0 -- 5,600 (3) *
ISP Holdings.............................. 80,500,000 83.8% 80,500,000 83.8%
All directors and executive officers
of ISP as a group (11 persons)............ 173,039(3) * 81,013,191(2)(3)(5) 84.1%
- ----------------------------
* Less than 1%.
(1) The business address of each of the directors and executive officers
listed above is 1361 Alps Road, Wayne, New Jersey 07470.
(2) Includes 80,500,000 shares owned by ISP Holdings, a corporation controlled
by Mr. Heyman. The business address of ISP Holdings is 818 Washington
Street, Wilmington, Delaware 19801.
(3) Includes, with respect to Mr. Heyman, 90,000 shares; Mr. Eckardt, 102,832
shares; Mr. Diker, 15,000 shares; Mr. Goldin, 15,000 shares; Mr. Kaplan,
15,000 shares; Mr. Manning, 15,000 shares; Mr. Rogers, 67,320 shares; Mr.
Weinberg, 5,600 shares; and all directors and executive officers as a
group, 326,152 shares, subject to options granted under the ISP Incentive
Plan which are currently exercisable or will become exercisable within the
next 60 days. Also includes with respect to Mr. Rogers 7,848 shares and
for all directors and executive officers as a group 9,309 shares, which
were held in the GAF Capital Accumulation Plan as of December 31, 1997.
Includes with respect to Mr. Rogers 10,000 shares held jointly with his
spouse and with respect to Mr. Manning 7,000 shares held jointly with his
spouse.
(4) Includes 4,050 shares held by trusts for the benefit of Mr. Diker's
children of which Mr. Diker is trustee; 5,950 shares held by Mr. Diker's
spouse, as to which Mr. Diker disclaims beneficial ownership; and 4,000
shares over which Mr. Diker shares investment power, as to which Mr. Diker
disclaims beneficial ownership.
(5) The number of shares shown as being beneficially owned by all directors
and officers of the Company as a group attributes ownership of ISP
Holdings' 80,500,000 shares to Mr. Heyman. As of March 20, 1998, Messrs.
Heyman and Eckardt beneficially owned 97% and 1.7%, respectively, of the
outstanding capital stock of ISP Holdings.
8
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
ISP Holdings was a wholly-owned subsidiary of GAF until January 1,
1997, when all of its capital stock was distributed to the stockholders of GAF
in a series of transactions involving GAF's subsidiaries (the "Separation
Transactions"). As a result, ISP Holdings and ISP are no longer direct or
indirect subsidiaries of GAF or its subsidiary, G-I Holdings.
MANAGEMENT AGREEMENT
Pursuant to a Management Agreement (the "Management Agreement") which
expires at the end of 1998, the Company provides certain general management,
administrative, legal, telecommunications, information and facilities services
to ISP Holdings and certain of its affiliates, including GAF, BMCA, G-I Holdings
and GAF Fiberglass Corporation. Charges by the Company for providing such
services aggregated $5.6 million in 1997. Such charges consist of management
fees and other reimbursement expenses attributable to, or incurred by the
Company for the benefit of, the respective parties, which are based on an
estimate of the costs the Company incurs to provide such services. Effective
January 1, 1998, the term of the Management Agreement was extended through the
end of 1998, and the management fees payable under the agreement were adjusted,
including an adjustment to reflect the direct payment by BMCA of the costs of
certain services rendered by third parties that were previously included in the
management fees payable to the Company. The Company and BMCA further modified
the agreement to allocate a portion of the management fees payable by BMCA under
the Management Agreement to separate lease payments for the use of BMCA's
headquarters. Based on the services provided by the Company in 1997, after
taking into account the modifications to the agreement described above, the
aggregate amount payable to the Company under the Management Agreement for 1998
is expected to be approximately $5.6 million. BMCA also is expected to pay
directly certain third party costs which aggregated approximately $0.4 million
in 1997, that were previously included in the management fees. In addition, the
Company currently anticipates that in 1998 BMCA will require additional space
for its headquarters and will pay additional rent based on the square footage to
be occupied. Although, due to the unique nature of the services provided under
the Management Agreement, comparisons with third party arrangements are
difficult, the Company believes that the terms of the Management Agreement,
taken as a whole, are no less favorable to the Company than could be obtained
from an unaffiliated third party. Certain of the executive officers of the
Company perform services for affiliates of the Company pursuant to the
Management Agreement, and ISP is indirectly reimbursed therefor by virtue of the
management fees and other reimbursable expenses payable under the Management
Agreement. BMCA reimbursed ISP for a portion of the bonus amounts paid to
Messrs. Rogers and Weinberg in connection with services performed by them for
BMCA during 1997. See Item 11, "Executive Compensation - Summary Compensation
Table."
TAX SHARING AGREEMENT
Effective January 1, 1997, the Company and each of its domestic
subsidiaries entered into an agreement (the "Tax Sharing Agreement") with ISP
Holdings with respect to the payment of Federal income taxes and certain related
matters. During the term of the Tax Sharing Agreement, which extends as long as
the Company or any of its domestic subsidiaries, as the case may be, are
included in a consolidated Federal income tax return filed by ISP Holdings or a
successor entity, the Company is obligated to pay to ISP Holdings an amount
equal to those Federal income taxes the Company would have incurred if, subject
to certain exceptions, the Company (on behalf of itself and its domestic
subsidiaries) filed its own consolidated Federal income tax return. These
exceptions include, among others, that the Company may utilize certain favorable
tax attributes, i.e., losses, deductions and credits (except for a certain
amount of foreign tax credits and, in general, net operating losses), only at
the time such attributes reduce the Federal income tax liability of ISP Holdings
and its consolidated subsidiaries (the "ISP Holdings Group"); and that the
Company may carry back or carry forward its favorable tax attributes only after
taking into account current tax attributes of the ISP Holdings Group. In
general, subject to the foregoing limitations, unused tax attributes carry
forward for use in reducing amounts payable by the Company to ISP Holdings in
future years. Subject to certain exceptions, actual payment for such attributes
will be made by ISP Holdings to the Company only when ISP Holdings receives an
actual refund of taxes from the Internal Revenue Service or, under certain
circumstances, the earlier of (i) the dates of the filing of Federal income tax
returns of the Company for taxable years of the Company following the last
taxable year in which it was a member of the ISP Holdings Group, or (ii) when
ISP Holdings no longer owns more than 50% of the Company. Foreign tax credits
not utilized by the Company in computing its tax sharing payments will be
refunded by ISP Holdings to the Company, if such credits expire unutilized, upon
9
the termination of the statute of limitations for the year of expiration. The
Tax Sharing Agreement provides for analogous principles to be applied to any
consolidated, combined or unitary state or local income tax filings. Under the
Tax Sharing Agreement, ISP Holdings makes all decisions with respect to all
matters relating to taxes of the ISP Holdings Group. The provisions of the Tax
Sharing Agreement take into account both the Federal income taxes ISP would have
incurred if it filed its own separate Federal income tax return and the fact
that ISP is a member of the ISP Holdings Group for Federal income tax purposes.
ISP was a party to tax sharing agreements with members of the GAF
consolidated tax group (the "GAF Group"). As a result of the Separation
Transactions, ISP is no longer included in the consolidated Federal income tax
returns of GAF, and therefore, such tax sharing agreements are no longer
applicable with respect to the tax liabilities of ISP for periods subsequent to
the Separation Transactions. ISP remains obligated, however, with respect to tax
liabilities imposed or that may be imposed for periods prior to the Separation
Transactions. Among other things, those tax sharing agreements provide for the
sharing of the GAF Group's consolidated tax liability based on each member's
proportionate share of the tax as if such member filed on a separate basis.
Accordingly, ISP would be required to pay an amount equal to its allocable share
of any consolidated tax deficiency of the GAF Group and would be entitled to a
refund if losses or other attributes reduce the GAF Group's consolidated tax
liability. Moreover, foreign tax credits generated by ISP not utilized by GAF
will be refunded by GAF or its subsidiary to ISP, if such credits expire
unutilized upon termination of the statute of limitations for the year of
expiration. Furthermore, those tax sharing agreements provide for an
indemnification to ISP for any tax liability attributable to another member of
the GAF Group.
SALES TO AFFILIATES
BMCA purchases from the Company all of its colored roofing granules
requirements (except for the requirements of BMCA's California roofing plant)
under a requirements contract. In addition, in December 1995, USI commenced
purchasing from the Company substantially all of its requirements for colored
roofing granules (except for the requirements of USI's Stockton, California and
Corvallis, Oregon plants) pursuant to a requirements contract. Each such
requirements contract was renewed for 1998 and is subject to annual renewal
unless terminated by either party to the agreement. In 1997, BMCA and USI
purchased a total of $51.1 million of mineral products from the Company,
representing approximately 7% of the Company's total net sales and approximately
62% of the Company's net sales of mineral products. The Company's supply
arrangements with BMCA and USI are at prices and on terms which the Company
believes are no less favorable to it than could be obtained from an unaffiliated
third party.
AFFILIATE BORROWINGS
Under the terms of its revolving credit facility, the Company and its
subsidiaries are permitted to make loans to affiliates, and provide letters of
credit issued for the benefit of such affiliates, up to an aggregate amount not
to exceed $75 million outstanding at any time. The largest amount of such loans
and letters of credit outstanding at any time during 1997 was $19.0 million.
Such loans and letters of credit were on terms which the Company believes were
no less favorable to the Company than could have been obtained from unaffiliated
third parties. As of March 20, 1998, $3.7 million of loans to, and no letters of
credit for the benefit of, affiliates were outstanding.
During 1997, the Company and its subsidiaries also borrowed from ISP
Holdings from time to time at the same rates available to the Company under its
revolving credit facility, which the Company believes were on terms no less
favorable to the Company than could be obtained from unaffiliated third parties.
The largest amount of such loans from ISP Holdings outstanding at any time
during 1997 was $68.6 million, and as of March 20, 1998 such borrowings
outstanding were $50.0 million.
CERTAIN OTHER TRANSACTIONS
For a discussion of certain arrangements with executive officers of the
Company, see Item 11, "Executive Compensation - Other Agreements" and "- Pension
Plans - Additional Arrangements."
10
The Company invests primarily in international and domestic arbitrage
and securities of companies involved in acquisition or reorganization
transactions, including, at times, common stock short positions which are
offsets against long positions in securities which are expected, under certain
circumstances, to be exchanged or converted into the short positions. The latter
category of investments is administered, at no cost or charge to the Company, by
certain investment partnerships controlled by Mr. Heyman and his family, and,
when purchased or sold on the same day as investments purchased or sold by
members of the GAF group of companies, other members of the ISP Holdings group
and certain Heyman family enterprises, are effected at the same price as the
investments of such other entities.
On March 30, 1998, ISP announced that the ISP Board has approved the
merger of ISP with and into ISP Holdings (and ISP Holdings will be the surviving
corporation of the merger). In the merger, each issued and outstanding share of
ISP Common Stock (other than those held by Holdings) will be converted into one
share of common stock of the surviving corporation, whose name will be changed
to "International Specialty Products Inc." The merger is subject to, among other
things, the approval of the holders of a majority of each of the respective
companies' shares of common stock. ISP will be filing with the Commission and
delivering to its stockholders a definitive proxy statement for use in
connection with the solicitation of proxies by the ISP Board for its Annual
Meeting of Stockholders, at which meeting the stockholders of ISP will consider
approval of the merger. The proxy statement will contain information with
respect to the merger, including the effect of the merger, if consummated, on
executive compensation and the interests of certain of the executive officers
named in the Summary Compensation Table.
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
each registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: April 30, 1998
INTERNATIONAL SPECIALTY PRODUCTS INC.
ISP CHEMICALS INC.
ISP TECHNOLOGIES INC.
ISP FILTERS INC.
ISP GLOBAL TECHNOLOGIES INC.
ISP INTERNATIONAL CORP.
ISP INVESTMENTS INC.
ISP MINERAL PRODUCTS INC.
ISP MINERALS INC.
ISP REAL ESTATE COMPANY, INC.
VERONA INC.
BLUEHALL INCORPORATED
ISP REALTY CORPORATION
ISP (PUERTO RICO) INC.
ISP ENVIRONMENTAL SERVICES INC.
ISP MANAGEMENT COMPANY, INC.
By: /s/ Richard A. Weinberg
------------------------------
Richard A. Weinberg
Senior Vice President,
General Counsel and Secretary