OMNOVA Solutions Inc. DEF 14A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment
No. )
Filed by the Registrant þ
Filed by a Party other than the
Registrant o
Check the appropriate box:
|
|
|
o Preliminary
Proxy Statement |
o Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)) |
þ Definitive Proxy
Statement |
o Definitive
Additional Materials |
o Soliciting
Material Pursuant to Section 240.14a-12 |
OMNOVA Solutions Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
|
|
þ |
No fee required. |
|
o |
Fee computed on table below per Exchange Act
Rules 14a-6(i)(1)
and 0-11.
|
|
|
(1) |
Title of each class of securities to which transaction applies: |
|
|
(2) |
Aggregate number of securities to which transaction applies: |
|
|
(3) |
Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11 (set
forth the amount on which the filing fee is calculated and state
how it was determined): |
|
|
(4) |
Proposed maximum aggregate value of transaction: |
|
|
o |
Fee paid previously with preliminary materials. |
|
o |
Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing. |
|
|
(1) |
Amount Previously Paid: |
|
|
(2) |
Form, Schedule or Registration Statement No.: |
OMNOVA SOLUTIONS INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
|
|
|
To the Shareholders of OMNOVA Solutions Inc.: |
|
February 10, 2006
Fairlawn, Ohio |
The Annual Meeting of Shareholders of OMNOVA Solutions Inc.
(OMNOVA Solutions or the Company) will be held at the Hilton
Akron/Fairlawn, 3180 West Market Street, Fairlawn, Ohio, on
March 23, 2006 at 9:00 a.m. to consider and vote on
the following:
|
|
|
|
1. |
Election of the following individuals to serve as directors for
a term of three years, ending in the year 2009: Kevin M.
McMullen and R. Byron Pipes; |
|
|
2. |
Ratification of the appointment of Ernst & Young LLP as
the Companys independent registered public accounting firm
for the fiscal year ending November 30, 2006; and |
|
|
3. |
Any other business properly brought before the meeting. |
The shareholders of record at the close of business on
January 30, 2006 will be entitled to vote at the meeting.
|
|
|
Kristine C. Syrvalin |
|
Secretary |
Whether you own one share or hundreds of shares, YOUR VOTE IS
IMPORTANT. Regardless of whether you expect to attend the
meeting in person, you are urged to vote your shares by promptly
marking, signing, dating and returning the enclosed proxy in the
envelope provided.
TABLE OF CONTENTS
OMNOVA SOLUTIONS INC.
PROXY STATEMENT
QUESTIONS & ANSWERS
What is the purpose of this Proxy Statement?
This Proxy Statement is being mailed to shareholders beginning
on or about February 10, 2006 in connection with the
Companys solicitation of proxies for the Annual Meeting of
Shareholders to be held on March 23, 2006 at the Hilton
Akron/Fairlawn, 3180 West Market Street, Fairlawn, Ohio.
Who can vote?
Record holders of OMNOVA Solutions Inc. common stock at the
close of business on January 30, 2006 are entitled to vote
at the meeting. Shareholders are entitled to one vote for each
full share held on the January 30, 2006 record date. On
that date, there were 41,320,518 shares outstanding.
How do I vote?
You can vote your shares by marking, signing, dating and
returning the accompanying proxy card to the Companys
transfer agent, The Bank of New York, in the envelope provided.
If you properly complete the accompanying proxy card, and return
it in the envelope provided, it will be voted in accordance with
your instructions.
Any shares held for the account of a shareholder participating
in the OMNOVA Solutions dividend reinvestment program for which
a completed proxy is returned will be voted in accordance with
the shareholders instructions.
Any shares held for the account of a participant in the OMNOVA
Solutions Stock Fund of the Companys retirement savings
plan will be voted by the Trustee for the plan in accordance
with the confidential voting instructions provided by the
participant on a completed proxy returned to The Bank of New
York. If a participant does not return a completed proxy, the
participants shares will be voted by the Trustee in
accordance with instructions provided by the Benefits Management
Committee for the plan.
Registered shareholders and beneficial owners of shares held in
street name may also vote in person at the meeting. If you are a
registered shareholder and attend the meeting, you may deliver
your completed proxy card in person. Additionally, written
ballots will be available for any shareholder that wishes to
vote in person at the meeting. Beneficial owners of shares held
in street name who wish to vote at the meeting will need to
obtain a legal proxy from the institution that holds their
shares.
May I change my vote?
Your proxy may be revoked at any time before it is voted. You
may change your vote after you send in your proxy card by:
|
|
|
|
|
Sending a written notice addressed to the Secretary of the
Company and received prior to the Annual Meeting, stating that
you want to revoke your proxy. |
|
|
|
Submitting another proxy that is received by the Company prior
to the Annual Meeting that has a later date than the previously
submitted proxy and that is properly signed. |
|
|
|
|
|
Attending the Annual Meeting and voting in person. The mere
presence of a shareholder at the meeting will not automatically
revoke any proxy previously given. |
Who is soliciting proxies?
The enclosed proxy is being solicited by the Board of Directors
of the Company, and the Company will pay the cost of the
solicitation.
The Company has retained Georgeson Shareholder Communications
Inc. to assist in the solicitation of proxies for a fee of
$8,500 plus reimbursement of normal expenses. Solicitations may
be made by personal interview, mail, telephone, telegram,
facsimile, electronic mail and other electronic means. It is
anticipated that the solicitations will consist primarily of
requests to brokerage houses, custodians, nominees and
fiduciaries to forward the soliciting material to the beneficial
owners of shares held of record by those persons. The Company
will reimburse brokers and other persons holding shares for
others for their reasonable expenses in sending soliciting
material to the beneficial owners.
In addition, certain officers and other employees of the Company
may, by telephone, letter, personal interview, facsimile,
electronic mail, telegram or other electronic means, request the
return of proxies.
When are shareholder proposals due for the next Annual
Meeting?
Shareholders who want to have their proposals considered for
inclusion in the Companys proxy materials for the 2007
Annual Meeting of Shareholders must submit their proposals to
the Company no later than October 13, 2006. The
Companys Compensation and Corporate Governance Committee
will consider shareholder suggestions for nominees for election
to the Companys Board if such suggestions are in writing,
accompanied by the written consent of each such nominee, mailed
to the Compensation and Corporate Governance Committee, OMNOVA
Solutions, Attention: Secretary, and received by the Secretary
no later than December 12, 2006. Notice of any other
proposal that a shareholder wants to have considered at the 2007
Annual Meeting must be provided to the Company no later than
December 12, 2006 and in accordance with the requirements
set forth in the Companys Code of Regulations.
The Companys Code of Regulations includes additional
requirements for all shareholder proposals. All proposals for
inclusion in the Companys proxy materials, notices of
proposals, suggestions for nominees for election to the
Companys Board of Directors and requests for copies of the
Companys charter documents should be sent to OMNOVA
Solutions Inc., Attn: Secretary, 175 Ghent Road, Fairlawn, Ohio
44333.
2
PROPOSAL 1:
ELECTION OF DIRECTORS
Nominees for election this year are Kevin M. McMullen and R.
Byron Pipes. Each of the nominees currently serves as a director
and has agreed to stand for re-election. Biographical
information on each of the nominees is set forth on the
following page.
If any of the nominees is unable to stand for election, the
Board of Directors may designate a substitute. Shares
represented by proxies may be voted for the substitute but will
not be voted for more than two nominees. The two nominees
receiving the greatest number of votes will be elected.
A quorum, consisting of a majority of the voting power of the
Company, whether in person or by proxy, is required to conduct
the business of the Annual Meeting. Proxies containing
abstentions and non-votes are counted as present for purposes of
determining whether a quorum is present at the meeting.
Directors are elected by a plurality of the votes cast (i.e.,
the nominees receiving the greatest number of votes will be
elected). Each shareholder is entitled to vote his or her shares
for two nominees. He or she may not, however, cumulate his or
her shares in voting for director nominees, as explained on
page 30 of this Proxy Statement under the caption
Other Information Cumulative Voting.
What this means is that a shareholder who owns 100 shares
of OMNOVA common stock may vote 100 shares for each of
two nominees. The shareholder may not, however, vote more than
100 shares for any one nominee, nor vote for more than two
nominees.
Votes cast for a nominee will be counted in favor of election.
Withheld votes and broker non-votes will not count either in
favor of or against election of a nominee. It is the intention
of the persons appointed as proxies in the accompanying proxy
card, unless authorization to do so is withheld, to vote for the
election of the Boards nominees.
Your Board of Directors recommends a vote FOR these
nominees. Shares represented by proxy will be voted FOR the
nominees unless you specify otherwise on your proxy card.
BOARD OF DIRECTORS
The Companys Code of Regulations provides that the number
of directors of the Company will not be less than seven nor more
than seventeen. Currently, there are eight directors.
Set forth on the following pages is biographical information on
the nominees for election and the other continuing directors
with unexpired terms of office. All information is given as of
January 30, 2006, unless otherwise indicated.
3
NOMINEES FOR ELECTION
To Serve a Three-Year Term Expiring in 2009
|
|
|
|
|
Kevin M. McMullen
|
|
|
Term:
|
|
Expires in 2006; Director since March 2000 |
|
Recent Business Experience: |
|
Mr. McMullen has been Chairman of the Board, Chief
Executive Officer and President of the Company since February
2001. Prior to that, Mr. McMullen served as Chief Executive
Officer and President of the Company from December 2000 and as a
Director from March 2000. From January 2000 to December 2000,
Mr. McMullen served as President and Chief Operating
Officer of the Company, and from September 1999 to January 2000,
Mr. McMullen served as Vice President of the Company and
President, Decorative & Building Products. Previously,
Mr. McMullen was Vice President of GenCorp Inc. and
President of GenCorps Decorative & Building
Products business unit from September 1996 until the spin-off of
OMNOVA Solutions in October 1999. Prior to that,
Mr. McMullen was General Manager of General Electric
Corporations Commercial & Industrial Lighting
business from 1993 to 1996 and General Manager of General
Electric Lightings Business Development and Strategic
Planning activities from 1991 to 1993. Mr. McMullen was a
management consultant with McKinsey & Co. from 1985 to
1991. |
|
Other Directorships:
|
|
STERIS Corporation, Mentor, Ohio. |
|
Committees:
|
|
Chairman of the Executive Committee of the OMNOVA Solutions
Board. |
|
Age:
|
|
45 |
|
|
R. Byron Pipes
|
|
|
Term:
|
|
Expires in 2006; Director since October 1999 |
|
Recent Business Experience: |
|
Dr. Pipes has been the John L. Bray Distinguished Professor
of Engineering at Purdue University, West Lafayette, Indiana,
since September 2004. Prior to that, Dr. Pipes was the
Goodyear Professor of Polymer Engineering at the University of
Akron, Akron, Ohio, from December 2001 to August 2004.
Previously, Dr. Pipes served as a Distinguished Visiting
Scientist at the College of William and Mary, Williamsburg,
Virginia from 1998 to 2001; Seventeenth President of Rensselaer
Polytechnic Institute, Troy, New York from 1993 to 1998; and
Provost of the University of Delaware from 1991 to 1993 and Dean
of the College of Engineering from 1985 to 1993. |
|
Committees:
|
|
Member of the Compensation and Corporate Governance and the
Executive Committees of the OMNOVA Solutions Board. |
|
Age:
|
|
64 |
|
4
|
|
|
|
CONTINUING DIRECTORS |
|
|
Edward P. Campbell
|
|
|
|
Term:
|
|
Expires in 2008; Director since October 1999 |
|
Recent Business Experience: |
|
Mr. Campbell has been Chairman of the Board of Directors of
Nordson Corporation, Westlake, Ohio (an international
manufacturer of industrial application equipment) since March
2004 and Chief Executive Officer and a Director of Nordson
Corporation since 1997. |
|
Other Directorships:
|
|
Nordson Corporation, Westlake, Ohio and KeyCorp, Cleveland, Ohio. |
|
Committees:
|
|
Member of the Compensation and Corporate Governance Committee of
the OMNOVA Solutions Board. |
|
Age:
|
|
56 |
|
|
David A. Daberko
|
|
|
|
Term:
|
|
Expires in 2008; Director since November 1999 |
|
Recent Business Experience: |
|
Mr. Daberko has been Chairman and Chief Executive Officer
of National City Corporation, Cleveland, Ohio (a diversified
financial services company) since 1995. Previously,
Mr. Daberko served as President and Chief Operating Officer
of National City Corporation from 1993 to 1995 and Deputy
Chairman of National City Corporation and President, National
City Bank, Cleveland, from 1987 to 1993. |
|
Other Directorships:
|
|
National City Corporation, Cleveland, Ohio and The Marathon Oil
Company, Houston, Texas. |
|
Committees: |
|
Chairman of the Compensation and Corporate Governance Committee
and member of the Executive Committee of the OMNOVA Solutions
Board. |
|
Age: |
|
60 |
|
|
David J. DAntoni
|
|
|
|
Term:
|
|
Expires in 2007; Director since November 2003 |
|
Recent Business Experience: |
|
In September 2004, Mr. DAntoni retired from his
positions as Senior Vice President and Group Operating Officer
of Ashland Inc. (a chemical, energy and transportation
construction company), positions which he had held since 1988
and 1999, respectively. Mr. DAntoni also previously
served as President of APAC, Inc. and as President of Ashland
Chemical Company. |
|
Other Directorships:
|
|
State Auto Financial Corporation, Columbus, Ohio and Compass
Minerals International, Inc., Overland Park, Kansas. |
|
Committees:
|
|
Member of the Audit Committee of the OMNOVA Solutions Board. |
|
Age:
|
|
61 |
|
5
|
|
|
|
|
Diane E. McGarry
|
|
|
|
Term:
|
|
Expires in 2007; Director since October 1999 |
|
Recent Business Experience: |
|
In January 2005, Ms. McGarry retired from her position as
Chief Marketing Officer, Xerox Corporation, Stamford,
Connecticut (a manufacturer of copiers and electronic office
equipment), a position she held since October 2001. Previously,
she was President, North American General Markets Operations of
Xerox since January 2000; Senior Vice President, Eastern
Operations, North American Solutions Group of Xerox Corporation,
Rochester, New York from January 1999 to January 2000; Vice
President/ General Manager, Color Solutions Business Unit of
Xerox from March 1998 to January 1999; and Chairman, President
and Chief Executive Officer of Xerox Canada Inc., North York,
Ontario, Canada, from 1993 to March 1998. |
|
Other Directorships:
|
|
Maple Leaf Foods, Toronto, Ontario, Canada. |
|
Committees:
|
|
Member of the Audit Committee of the OMNOVA Solutions Board. |
|
Age:
|
|
56 |
|
|
Steven W. Percy
|
|
|
|
Term:
|
|
Expires in 2007; Director since October 1999 |
|
Recent Business Experience: |
|
Mr. Percy was Senior Vice President Refining,
Marketing & Transportation of Phillips Petroleum,
Bartlesville, Oklahoma (a petroleum extraction, refining and
distribution company) from June 2000 to March 2001. Previously,
Mr. Percy served as Chairman and Chief Executive Officer of
BP America, Inc., from 1996 to March 1999, and as Executive Vice
President of BP America and President of BP Oil in the United
States from 1992 to 1996. |
|
Other Directorships:
|
|
Non-Executive Chairman of Wavefront Energy and Environmental
Services, Inc., Edmonton, Alberta, Canada. |
|
Committees:
|
|
Chairman of the Audit Committee of the OMNOVA Solutions Board. |
|
Age:
|
|
59 |
|
6
|
|
|
|
|
William R. Seelbach
|
|
|
|
Term:
|
|
Expires in 2008; Director since April 2002 |
|
Recent Business Experience: |
|
Mr. Seelbach has been the President and CEO of the Ohio
Aerospace Institute (an organization that brings together
collaborators from industry, universities, and federal
laboratories to work together to build Ohios aerospace
economy) since April 2003. Previously, he was President of Brush
Engineered Materials, Inc., Cleveland, Ohio (a manufacturer of
high performance engineered materials) from 2001 to May 2002.
Prior to that, he served as President, Brush Wellman Inc. from
2000 to 2001 and as President, Alloy Products division of Brush
Wellman from 1998 to 2000. From 1987 to 1998, Mr. Seelbach
was Chairman and Chief Executive Officer of Inverness Partners,
a limited liability company engaged in acquiring and operating
Midwestern manufacturing companies. |
|
Other Directorships:
|
|
Corrpro Companies, Inc., Medina, Ohio. |
|
Committees:
|
|
Member of the Compensation and Corporate Governance Committee of
the OMNOVA Solutions Board. |
|
Age:
|
|
57 |
|
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
Meetings of the Board
The Companys Board of Directors held six meetings during
the 2005 fiscal year. Each director attended 75 percent or
more of the total number of Board meetings and meetings of
committees on which he or she served during the 2005 fiscal
year. Each director is expected to attend the Annual Meeting of
Shareholders. In 2005, all of the Companys directors
attended the Annual Meeting of Shareholders.
The Board of Directors currently has three standing committees:
the Audit Committee, the Compensation and Corporate Governance
Committee and the Executive Committee.
Audit Committee
Members of the Audit Committee are: Steven W. Percy, Chairman,
David J. DAntoni and Diane E. McGarry. Each member of the
Audit Committee has been determined by the Board of Directors to
be financially literate and independent as defined by the New
York Stock Exchanges listing standards. The Board of
Directors has determined that Mr. Percy meets the
requirements of an audit committee financial expert
as defined by the Securities and Exchange Commission and,
accordingly, has designated him as such.
The Committee is responsible for overseeing the Companys
financial reporting process on behalf of the Board of Directors.
The Committee is directly responsible for the appointment,
termination, compensation, retention, evaluation and oversight
of the work of the Companys independent registered public
accounting firm (including resolution of disagreements between
management and the Companys independent registered public
accounting firm regarding financial reporting) for the purpose
of preparing or issuing an audit report or performing other
audit, review or attest services for the Company and other
non-audit engagements.
7
In performing its responsibilities the Committee will, among
other things:
|
|
|
|
|
review and discuss the independent registered public accounting
firms quality control; |
|
|
|
review and discuss the independence of the independent
registered public accounting firm; |
|
|
|
review and discuss the audit plan and the conduct of the audit; |
|
|
|
review and discuss the financial statements and disclosures; |
|
|
|
review and discuss earnings press releases; |
|
|
|
review and discuss internal audit plans and reports; |
|
|
|
review and discuss the systems of internal controls; |
|
|
|
review and discuss audit results; |
|
|
|
discuss risk management policies; |
|
|
|
obtain reports regarding conformity with legal requirements and
the Companys code of business conduct and ethics; and |
|
|
|
review and discuss material contingent liabilities. |
The Audit Committee has adopted a written charter, which is
reviewed and reassessed annually. The Audit Committee charter is
available on the Companys website at
www.omnova.com and in print to any shareholder who
requests a copy. All requests must be made in writing, addressed
to OMNOVA Solutions Inc., Attn: Secretary, 175 Ghent Road,
Fairlawn, Ohio 44333-3300.
The Audit Committee met eight times during fiscal year 2005. The
Audit Committee Report is set forth beginning on page 27 of
this Proxy Statement.
Compensation and Corporate Governance Committee
Members of the Compensation and Corporate Governance Committee
are: David A. Daberko, Chairman, Edward P. Campbell, R. Byron
Pipes and William R. Seelbach, each of whom has been determined
to be independent as defined by the New York Stock
Exchanges listing standards. The Committee has adopted a
written charter, which is available on the Companys
website at www.omnova.com and in print to any
shareholder who requests a copy. All requests must be made in
writing, addressed to OMNOVA Solutions Inc., Attn: Secretary,
175 Ghent Road, Fairlawn, Ohio
44333-3300.
The Compensation and Corporate Governance Committees
responsibilities include:
|
|
|
|
|
establishing executive compensation policies and programs; |
|
|
|
reviewing and approving executive officer compensation; |
|
|
|
making recommendations to the Board with respect to all
executive incentive compensation plans and equity-based
compensation plans; |
|
|
|
administering compensation plans; |
|
|
|
making recommendations to the Board concerning the appointment
and removal of officers of the Company; |
|
|
|
reviewing and approving employment agreements and severance or
retention plans or agreements applicable to any executive
officer; |
|
|
|
overseeing the Companys employee benefit, savings and
retirement plans; |
|
|
|
periodically reviewing director compensation in relation to
other comparable companies; |
8
|
|
|
|
|
developing and recommending to the Board, Corporate Governance
Guidelines and, annually thereafter, reviewing the guidelines to
determine whether they are being effectively adhered to and
implemented; |
|
|
|
assisting in succession planning; |
|
|
|
reviewing possible conflicts of interest of Board members and
executive officers; and |
|
|
|
overseeing the Boards annual evaluation process. |
The Compensation and Corporate Governance Committee also serves
as the nominating committee for the Board of Directors. In its
capacity as the nominating committee, members of the
Compensation and Corporate Governance Committee, among other
things, establish and periodically review the criteria for Board
membership, identify new director candidates, evaluate incumbent
directors and make recommendations to the Board regarding the
appropriate size of the Board and the appointment of members to
the Boards committees. The Committee may occasionally
retain a third-party search firm to assist it in identifying
potential new director candidates.
The Committee will consider shareholders suggestions for
nominees for election to the Companys Board of Directors
in 2007 if any such suggestion is made in writing, includes
biographical data and a description of such nominees
qualifications and is accompanied by the written consent of such
nominee. Any such suggestion for nominees must be mailed to the
Compensation and Corporate Governance Committee, OMNOVA
Solutions, Attention: Secretary, and received by the Secretary
no later than December 12, 2006. Nominees for election to
the Board of Directors should at a minimum satisfy the following
criteria:
|
|
|
|
|
possess the integrity and mature judgment essential to effective
decision making; |
|
|
|
have the ability and willingness to commit necessary time and
energy to prepare for, attend and participate in meetings of the
Board and one or more of its standing Committees and not have
other directorships, trusteeships or outside involvements which
would materially interfere with responsibilities as a director
of the Company; |
|
|
|
have the willingness and availability to serve at least one term; |
|
|
|
have the willingness and ability to represent the interests of
all shareholders of the Company rather than any special interest
or constituency while keeping in perspective the interests of
the Companys employees, customers, local communities and
the public in general; |
|
|
|
have background and experience that complement the background
and experience of other Board members; |
|
|
|
be a shareholder or willing to become a shareholder of the
Company; |
|
|
|
be free from interests that are or would present the appearance
of being adverse to, or in conflict with, the interests of the
Company; and |
|
|
|
have a proven record of competence and accomplishment through
demonstrated leadership in business, education, government
service, finance or the sciences, including director, CEO or
senior management experience; academic experience; scientific
experience; financial and accounting experience; or other
relevant experiences which will provide the Board with
perspectives that will enhance Board effectiveness, including
perspectives that may result from diversity in ethnicity, race,
gender, national origin or nationality. |
These criteria have been established by the Compensation and
Corporate Governance Committee as criteria that any director
nominee, whether suggested by a shareholder or otherwise, should
satisfy. A nominee for election to the Board of Directors that
is suggested by a shareholder (in compliance with the procedures
described above) will be evaluated by the Compensation and
Corporate Governance Committee in the same manner that any other
nominee for election to the Board (other than directors standing
for re-election) is evaluated. The evaluation process will
9
include a comprehensive background and reference check, a series
of personal interviews by, at a minimum, the Chairman of the
Board and the Chairman of the Compensation and Corporate
Governance Committee, and a thorough review by the full
Committee of the nominees qualifications and other
relevant characteristics, taking into consideration the criteria
that are set forth in the Corporate Governance Guidelines.
Finally, if the Committee determines that a candidate should be
nominated for election to the Board of Directors, the Committee
presents its findings and recommendation to the full Board of
Directors for approval.
The Compensation and Corporate Governance Committee met five
times during fiscal year 2005. The report of the Compensation
and Corporate Governance Committee is set forth beginning on
page 21 of this Proxy Statement.
Executive Committee
During the intervals between meetings of the Board of Directors,
the Executive Committee, unless restricted by resolution of the
Board, may exercise, under the control and direction of the
Board, all of the powers of the Board of Directors in the
management and control of the business of the Company. The
Executive Committee did not meet during fiscal year 2005.
Members of the Executive Committee are: Kevin M. McMullen,
Chairman, David A. Daberko and R. Byron Pipes.
CORPORATE GOVERNANCE
Corporate Governance Guidelines
The Board of Directors has adopted the OMNOVA Solutions Inc.
Corporate Governance Guidelines. These guidelines outline the
responsibilities of the Board of Directors, director selection
criteria and procedures, board composition criteria and various
policies and procedures designed to ensure effective and
responsive governance. These guidelines will be reviewed
annually by the Compensation and Corporate Governance Committee
to determine whether the guidelines are being effectively
adhered to and implemented. The guidelines may be revised from
time to time in response to regulatory requirements or best
practices that develop. The OMNOVA Solutions Corporate
Governance Guidelines are available on our website at
www.omnova.com and in print to any shareholder who
requests a copy. All requests must be made in writing, addressed
to OMNOVA Solutions Inc., Attn: Secretary, 175 Ghent Road,
Fairlawn, Ohio 44333-3300.
Code of Ethics
Each of our officers, employees and directors are required to
comply with the OMNOVA Solutions Business Conduct Policies, a
code of business conduct and ethics adopted by the Company. It
is the objective of the Company that our business is conducted
in accordance with the highest standards of personal and
professional ethics. The OMNOVA Solutions Business Conduct
Policies set forth policies covering a broad range of subjects,
including sales practices, conflicts of interest, insider
trading, financial reporting, harassment and confidential
information, and require strict adherence to laws and
regulations applicable to OMNOVAs business. The OMNOVA
Solutions Business Conduct Policies are available on our website
at www.omnova.com and in print to any shareholder
who requests a copy. All requests must be made in writing,
addressed to OMNOVA Solutions Inc., Attn: Secretary,
175 Ghent Road, Fairlawn, Ohio
44333-3300.
Executive Sessions
The non-management directors meet in executive session without
members of management present at least two times each year. The
Chairman of the Compensation and Corporate Governance Committee
presides at these executive sessions.
10
Communicating with the Board of Directors
Shareholders who wish to communicate with the Board of Directors
or a particular director may do so by sending a letter to the
Secretary of the Company at 175 Ghent Road, Fairlawn, Ohio
44333. The mailing envelope must contain a clear notation
indicating that the enclosed letter is a Shareholder-Board
Communication or Shareholder-Director
Communication. All such letters must identify the author
as a shareholder and clearly state whether the intended
recipients are all members of the Board or certain specified
individual directors. The Secretary will make copies of all such
letters and circulate them to the appropriate director or
directors.
Director Independence
OMNOVAs Corporate Governance Guidelines require that a
majority of directors meet the criteria for independence set
forth in the listing standards of the New York Stock Exchange.
The listing standards provide that, in order to be considered
independent, the Board must determine that a director has no
material relationship with OMNOVA other than as a director. As
permitted by the listing standards, the Board of Directors has
adopted categorical standards to assist it in determining
whether its members have such a material relationship with the
Company. These standards provide that the following
relationships are deemed to be immaterial and would not, in and
of themselves, impair a directors independence:
|
|
|
|
|
a director is an executive officer or employee, or an immediate
family member of a director is an executive officer, of a
company that makes payments to, or receives payments from OMNOVA
or any of its subsidiaries, for property or services in an
amount which in any single fiscal year of the Company does not
exceed the greater of $1 million or 2% of such other
companys consolidated gross revenues; or |
|
|
|
a director serves as an executive officer of a charitable
organization and OMNOVAs charitable contributions to that
organization (excluding the amount of any matching contributions
under the Companys matching gifts program) in any fiscal
year of the Company are not more than the greater of
$1 million or 2% of the charitable organizations
consolidated gross revenues. |
The Board has reviewed the independence of its members
considering these standards and any other commercial, banking,
consulting, legal, accounting and familial relationships between
the directors and OMNOVA and has determined that none of the
seven nonemployee directors has a material relationship with the
Company and that each such director is independent in accordance
with the listing standards of the New York Stock Exchange.
COMPENSATION OF DIRECTORS
Directors who are also employees of the Company are not
compensated separately for serving on the Board and are not paid
a retainer or additional compensation for attendance at Board or
committee meetings.
Effective January 1, 2006, each nonemployee director
receives a retainer of $47,000 per year, $35,000 of which
is payable in cash and the remaining $12,000 of which is paid in
restricted shares of OMNOVA common stock. A nonemployee director
who serves as chairman of a committee of the Board receives an
additional fee of $5,000 per year in consideration of such
service.
The number of restricted shares of OMNOVA common stock awarded
to each director is determined by dividing $12,000 by the
closing price per share of OMNOVA common stock on the New York
Stock Exchange on the date of the Companys Annual Meeting
of Shareholders. These restricted shares will vest on the third
anniversary of the grant date and are awarded under the OMNOVA
Solutions Amended and Restated 1999 Equity and Performance
Incentive Plan. Dividends, if any, on restricted shares are
automatically reinvested through the Companys dividend
11
reinvestment program unless a director chooses otherwise. All
shares may be voted, but ownership may not be transferred until
service on the OMNOVA Solutions Board terminates. Unvested
shares will be forfeited in the event of a voluntary resignation
or refusal to stand for reelection, but vesting will be
accelerated in the event of death, disability or retirement or
upon the occurrence of a change in control of the Company.
Nonemployee directors may elect to defer all or a percentage of
their cash retainer and any committee chairmans fees. The
deferred compensation plan is unfunded. Amounts deferred at the
election of the director are credited with phantom shares in the
OMNOVA Solutions Stock Fund, an S&P 500 index fund or a cash
deposit program, as selected by the director. Deferred amounts
and earnings are payable in cash in either a lump sum or
installments as elected by the director commencing, at the
directors election, (i) 30 days after
termination of his service as a director, (ii) on a fixed
future date specified by the director at the time of his
deferral election or (iii) upon the directors
attainment of a certain age specified by him at the time of his
deferral election.
In February 2000, the Board of Directors discontinued
availability of the Retirement Plan for Nonemployee Directors to
any subsequently elected directors. Pursuant to this plan, each
nonemployee director who terminated his or her service on the
Board after at least sixty months of service (including service
on the Board of Directors of GenCorp Inc., prior to the spin-off
of OMNOVA Solutions in October 1999) would receive an annual
retirement benefit equal to the retainer in effect on the date
the directors service terminated until the number of
monthly payments made equaled the lesser of (a) the
individuals months of applicable service as a director or
(b) 120 monthly payments. In the event of death prior
to payment of the applicable number of installments, the
aggregate amount of unpaid monthly installments would be paid,
in a lump sum, to the retired directors surviving spouse
or other designated beneficiary, if any, or to the retired
directors estate. In February 2000, nonemployee directors
were given a one-time choice of (i) continuing with the
then-current compensation package consisting of participation in
the retirement plan and an annual restricted stock grant or
(ii) freezing their participation in the retirement plan
but discontinuing participation going forward and receiving a
discretionary annual option grant. Of the seven current
nonemployee directors, two elected to continue their
participation in the Retirement Plan for Nonemployee Directors
and three elected to freeze their participation in the plan. Two
nonemployee directors joined the Board after February 2000 and,
therefore, never participated in the Retirement Plan for
Nonemployee Directors. For those nonemployee directors who
elected to freeze their participation in the retirement plan,
their benefits were fully vested as of February 2, 2000, at
which time they ceased to accrue additional benefits. Because
the compensation arrangements that take effect January 1,
2006 provide for a significant stock-based compensation
component for all directors, the Board of Directors determined
that effective December 31, 2005, participation for the
remaining two nonemployee directors will freeze and there will
be no further accruals of benefits for any director under the
Retirement Plan for Nonemployee Directors.
Under the Boards retirement policy, a director will not be
nominated for reelection to the Board following his or her
seventieth birthday.
12
MANAGEMENT OWNERSHIP OF SHARES
The following table lists share ownership of the Companys
common stock by directors and executive officers of the Company
as of January 27, 2006. Unless otherwise indicated, share
ownership is direct.
|
|
|
|
|
|
|
|
|
|
|
Number of Shares of | |
|
Percent of Outstanding | |
|
|
Common Stock | |
|
Shares of Common | |
Name |
|
Beneficially Owned(1) | |
|
Stock(2) | |
|
|
| |
|
| |
Edward P. Campbell
|
|
|
7,767 |
|
|
|
* |
|
David A. Daberko
|
|
|
14,263 |
(3) |
|
|
* |
|
David J. DAntoni
|
|
|
6,125 |
(3) |
|
|
* |
|
Diane E. McGarry
|
|
|
14,343 |
(3) |
|
|
* |
|
Steven W. Percy
|
|
|
13,595 |
(3) |
|
|
* |
|
R. Byron Pipes
|
|
|
3,567 |
|
|
|
* |
|
William R. Seelbach
|
|
|
7,500 |
(3) |
|
|
* |
|
Kevin M. McMullen
|
|
|
1,214,394 |
(3), (4) |
|
|
2.9 |
% |
Michael E. Hicks
|
|
|
277,387 |
(3), (4) |
|
|
* |
|
James J. Hohman
|
|
|
241,071 |
(3), (4) |
|
|
* |
|
James C. LeMay
|
|
|
218,699 |
(3), (4) |
|
|
* |
|
Douglas E. Wenger
|
|
|
86,533 |
(3), (4) |
|
|
* |
|
Directors and Officers as a group
|
|
|
2,359,987 |
(3), (4) |
|
|
5.7 |
% |
|
|
* |
Less than 1%. |
|
(1) |
Except as otherwise indicated below, beneficial ownership means
the sole power to vote and dispose of shares. |
|
(2) |
Calculated using 41,320,518 shares as the number of
outstanding shares. |
|
(3) |
Includes shares subject to stock options which may be exercised
within 60 days of January 27, 2006 as follows:
Mr. Daberko, 9,375 shares; Mr. DAntoni,
3,125 shares; Ms. McGarry, 12,500 shares;
Mr. Percy, 12,500 shares; Mr. Seelbach,
7,500 shares; Mr. McMullen, 1,134,117 shares;
Mr. Hicks, 216,191 shares; Mr. Hohman,
185,926 shares; Mr. LeMay, 167,924 shares;
Mr. Wenger, 62,000 shares; and all directors and
executive officers as a group, 1,994,166 shares. |
|
(4) |
Includes the approximate number of shares credited to the
individuals account as of January 27, 2006 under the
OMNOVA Solutions Retirement Savings Plan. |
13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
To the knowledge of the Company, except as set forth below, no
person beneficially owned more than five percent of the
41,320,518 shares of the Companys common stock
outstanding as of January 30, 2006. The information set
forth in the following table was derived from reports filed with
the Securities and Exchange Commission by the beneficial owners
on the dates indicated in the footnotes below.
|
|
|
|
|
|
|
|
|
|
|
Number of Shares of | |
|
Percent of | |
|
|
Common Stock | |
|
Outstanding Shares | |
Name |
|
Beneficially Owned | |
|
of Common Stock | |
|
|
| |
|
| |
The Baupost Group, L.L.C.
|
|
|
8,100,000 |
(1) |
|
|
19.6 |
% |
10 St. James Avenue
Suite 2000
Boston, MA 02116 |
|
|
|
|
|
|
|
|
|
Gabelli Asset Management Inc., et al
|
|
|
4,634,340 |
(2) |
|
|
11.2 |
% |
One Corporate Center
Rye, NY 10580 |
|
|
|
|
|
|
|
|
|
Putnam Investment Management, LLC
|
|
|
4,001,960 |
(3) |
|
|
9.7 |
% |
One Post Office Square
Boston, MA 02109 |
|
|
|
|
|
|
|
|
|
FMR Corp.
|
|
|
2,753,580 |
(4) |
|
|
6.7 |
% |
82 Devonshire Street
Boston, MA 02109 |
|
|
|
|
|
|
|
|
|
OMNOVA Solutions Retirement Savings Plan
|
|
|
2,140,126 |
(5) |
|
|
5.2 |
% |
175 Ghent Road
Fairlawn, Ohio 44333 |
|
|
|
|
|
|
|
|
|
|
(1) |
Pursuant to a Schedule 13F-HR filed with the Securities and
Exchange Commission on November 14, 2005, The Baupost
Group, L.L.C. reported that, as of September 30, 2005, it
had sole voting and dispositive power over 8,100,000 shares. |
|
(2) |
Pursuant to a Schedule 13F-HR filed with the Securities and
Exchange Commission on November 14, 2005, Gabelli Asset
Management Inc., et al, reported that, as of
September 30, 2005, Gabelli Funds, LLC had sole investment
discretion and voting power over 1,232,000 shares, and
GAMCO Investors Inc. shared with certain affiliated entities
investment discretion over 3,402,340 shares, with respect
to which GAMCO Investors Inc. held sole voting power over
3,276,340 shares, shared voting power over
6,000 shares and held no voting power over
120,000 shares. |
|
(3) |
Pursuant to a Schedule 13F-HR filed with the Securities and
Exchange Commission on November 15, 2005, Putnam, LLC
reported that, as of September 30, 2005, it shared
investment discretion with its affiliate, The Putnam Advisory
Company, LLC, over 1,210,860 shares, of which Putnam, LLC
had sole voting power over 687,140 shares and no voting
power over 523,720 shares; and that it shared investment
discretion with its affiliate, Putnam Investment Management,
LLC, over 2,791,100 shares, over which Putnam, LLC had no
voting power. |
|
(4) |
Pursuant to a Schedule 13F-HR filed with the Securities and
Exchange Commission on November 15, 2005, FMR Corp.
reported that, as of September 30, 2005, it shared
investment discretion with its affiliated entities, Fidelity
Management & Research Company and FMR Co., Inc., over
2,533,580 shares, over which it holds no voting power; and
that it shared investment discretion with its affiliated entity,
Fidelity Management Trust Company, over 220,000 shares,
with respect to which it holds sole voting power. |
|
(5) |
National City Bank, 1900 East Ninth Street, Cleveland, OH 44101
serves as Trustee of the OMNOVA Solutions Retirement Savings
Plan. National City reports that, as of December 31, 2005,
the Plan held 2,140,126 shares. National City disclaims
beneficial ownership of these shares as it does not retain
discretionary authority to buy, sell or vote the shares. |
14
SUMMARY COMPENSATION TABLE
The following table sets forth compensation information for
fiscal year 2005 for the Chief Executive Officer of the Company
and each of the Companys four most highly compensated
executive officers who were serving in such capacities at the
end of fiscal 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual | |
|
|
|
|
|
|
|
|
Compensation | |
|
Long Term Compensation | |
|
|
|
|
|
|
| |
|
| |
|
|
|
|
|
|
|
|
Awards | |
|
Payouts | |
|
|
|
|
|
|
|
|
| |
|
| |
|
|
|
|
|
|
|
|
Restricted | |
|
Securities | |
|
|
|
|
|
|
|
|
|
|
Stock | |
|
Underlying | |
|
LTIP | |
|
All Other | |
|
|
|
|
Salary(1) | |
|
Bonus | |
|
Awards(2) | |
|
Options/SARs | |
|
Payouts | |
|
Compensation(3) | |
Name |
|
Year | |
|
($) | |
|
($) | |
|
($) | |
|
(#) | |
|
($) | |
|
($) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Kevin M. McMullen
|
|
|
2005 |
|
|
|
610,000 |
|
|
|
953,125 |
|
|
|
143,040 |
|
|
|
|
|
|
|
159,834 |
|
|
|
116,342 |
|
Chairman, Chief Executive
|
|
|
2004 |
|
|
|
568,000 |
|
|
|
|
|
|
|
120,549 |
|
|
|
50,000 |
|
|
|
|
|
|
|
26,452 |
|
Officer and President
|
|
|
2003 |
|
|
|
568,000 |
|
|
|
|
|
|
|
|
|
|
|
240,000 |
|
|
|
|
|
|
|
12,862 |
|
|
Michael E. Hicks
|
|
|
2005 |
|
|
|
280,100 |
|
|
|
350,125 |
|
|
|
64,908 |
|
|
|
|
|
|
|
44,851 |
|
|
|
47,656 |
|
Senior Vice President and
|
|
|
2004 |
|
|
|
266,800 |
|
|
|
|
|
|
|
53,419 |
|
|
|
|
|
|
|
|
|
|
|
5,660 |
|
Chief Financial Officer; Treasurer
|
|
|
2003 |
|
|
|
251,700 |
|
|
|
|
|
|
|
|
|
|
|
45,000 |
|
|
|
|
|
|
|
1,043 |
|
|
James J. Hohman
|
|
|
2005 |
|
|
|
273,000 |
|
|
|
341,250 |
|
|
|
63,255 |
|
|
|
|
|
|
|
42,677 |
|
|
|
43,889 |
|
Vice President; President,
|
|
|
2004 |
|
|
|
239,295 |
|
|
|
|
|
|
|
47,914 |
|
|
|
|
|
|
|
|
|
|
|
6,635 |
|
Performance Chemicals
|
|
|
2003 |
|
|
|
225,750 |
|
|
|
|
|
|
|
|
|
|
|
45,000 |
|
|
|
|
|
|
|
1,174 |
|
|
James C. LeMay
|
|
|
2005 |
|
|
|
241,700 |
|
|
|
302,125 |
|
|
|
57,084 |
|
|
|
|
|
|
|
38,923 |
|
|
|
42,291 |
|
Senior Vice President,
|
|
|
2004 |
|
|
|
234,635 |
|
|
|
|
|
|
|
48,115 |
|
|
|
|
|
|
|
|
|
|
|
6,240 |
|
Business Development;
|
|
|
2003 |
|
|
|
226,700 |
|
|
|
|
|
|
|
|
|
|
|
45,000 |
|
|
|
|
|
|
|
943 |
|
General Counsel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas E. Wenger
|
|
|
2005 |
|
|
|
216,400 |
|
|
|
270,500 |
|
|
|
51,122 |
|
|
|
|
|
|
|
34,851 |
|
|
|
38,442 |
|
Senior Vice President and
|
|
|
2004 |
|
|
|
210,120 |
|
|
|
|
|
|
|
43,294 |
|
|
|
|
|
|
|
|
|
|
|
6,281 |
|
Chief Information Officer
|
|
|
2003 |
|
|
|
204,000 |
|
|
|
|
|
|
|
|
|
|
|
25,000 |
|
|
|
|
|
|
|
93 |
|
|
|
(1) |
Salary reported for each year reflects the salary in effect for
each of the named executive officers on November 30th, the
last day of the Companys fiscal year. Actual salary earned
during the years reported may be less due to the timing of
salary increases, if any, in a particular year and the
Companys pay cycles. |
|
(2) |
The values reported in the Summary Compensation Table for
restricted stock awards in 2005 were calculated by multiplying
the number of shares awarded by $5.51, the closing price per
share of OMNOVA Common Stock on the New York Stock Exchange on
July 12, 2005, the date of grant. On that date, the named
executive officers were granted restricted shares of OMNOVA
Common Stock in the following amounts:
Mr. McMullen 25,960 shares;
Mr. Hicks 11,780 shares;
Mr. Hohman 11,480 shares;
Mr. LeMay 10,360 shares; and
Mr. Wenger 9,278 shares. These restricted
shares vest in two installments, with restrictions on one-half
of the shares lapsing on July 12, 2006 and restrictions on
the remainder of the shares lapsing on July 12, 2007. |
|
|
|
The values reported in the Summary Compensation Table for
restricted stock awards in 2004 were calculated by multiplying
the number of shares awarded by $5.90, the closing price per
share of OMNOVA Common Stock on the New York Stock Exchange on
July 9, 2004, the date of grant. On that date, the named
executive officers were granted restricted shares of OMNOVA
Common Stock in the following amounts:
Mr. McMullen 20,432 shares;
Mr. Hicks 9,054 shares;
Mr. Hohman 8,121 shares;
Mr. LeMay 8,155 shares; and
Mr. Wenger 7,338 shares. These restricted
shares vest in two installments, with restrictions on one-half
of the shares lapsing on July 9, 2005 and restrictions on
the remainder of the shares lapsing on July 9, 2006. |
|
|
The agreements pursuant to which these restricted shares were
awarded provide that, during the restriction period, the
executive shall have the right to vote the shares and to receive
all dividends and other distributions, if any, paid with respect
to the shares. |
|
|
The total number of restricted shares of OMNOVA Common Stock
held by each of the named executive officers and their
respective values at November 30, 2005, based on the
closing price per share of OMNOVA Common Stock on the New York
Stock Exchange on that date of $4.70 were:
Mr. McMullen 36,176 shares with an
aggregate value of $170,027; Mr. Hicks
16,307 shares with an aggregate value of $76,643;
Mr. Hohman 15,541 shares with an aggregate
value of $73,043; Mr. LeMay 14,438 shares
with an aggregate value of $67,859; and
Mr. Wenger 12,947 shares with an aggregate
value of $60,851. |
|
|
(3) |
Includes amounts paid pursuant to Retention Agreements entered
into with each of the Companys executive officers on
April 1, 2005. The Retention Agreements provided for a
retention payment to each |
15
|
|
|
executive of an amount equal to 15%
of his base salary. The Retention Agreements further provide
that if the executive should voluntarily retire or resign his
employment with the Company, or if such executives
employment should be terminated by the Company for cause, in
either case on or before April 1, 2006, then the executive
would be required to repay to the Company the full amount of the
retention payment (net of taxes withheld). Amounts paid pursuant
to the Retention Agreements were: Mr. McMullen, $85,200;
Mr. Hicks, $38,888; Mr. Hohman, $34,878;
Mr. LeMay, $34,600; and Mr. Wenger, $31,059.
|
|
|
|
Also includes Company contributions to the executives
account in the OMNOVA Solutions Retirement Savings Plan (which
provides that the Company will match 50% of up to 6% of
contributions to the plan by eligible employees) and, where
applicable, the amount credited to the executives account
in the OMNOVA Solutions Benefits Restoration Plan, a nonfunded
plan which restores to the individuals account amounts
otherwise excluded due to limitations imposed by the Internal
Revenue Code on contributions and includable compensation under
qualified plans. Amounts contributed or credited during fiscal
2005 were: Mr. McMullen, $20,194; Mr. Hicks, $8,678;
Mr. Hohman, $8,753; Mr. LeMay, $7,601; and
Mr. Wenger, $7,293. |
|
|
Also includes income imputed to the executives for company paid
life insurance as follows: Mr. McMullen, $11,038;
Mr. Hicks, $90; Mr. Hohman, $258; Mr. LeMay, $90;
and Mr. Wenger, $90. |
16
AGGREGATED OPTION/ SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/ SAR VALUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities | |
|
|
|
|
Underlying Unexercised | |
|
Value of Unexercised | |
|
|
Options/SARs at | |
|
In-the-Money Options/SARs at | |
|
|
Fiscal Year End (#)(1) | |
|
Fiscal Year End ($) | |
|
|
| |
|
| |
Name |
|
Exercisable | |
|
Unexercisable | |
|
Exercisable | |
|
Unexercisable | |
|
|
| |
|
| |
|
| |
|
| |
Kevin M. McMullen
|
|
|
1,074,117 |
|
|
|
85,000 |
|
|
|
99,000 |
|
|
|
33,000 |
|
|
Michael E. Hicks
|
|
|
204,941 |
|
|
|
11,250 |
|
|
|
18,563 |
|
|
|
6,188 |
|
|
James J. Hohman
|
|
|
174,676 |
|
|
|
11,250 |
|
|
|
18,563 |
|
|
|
6,188 |
|
|
James C. LeMay
|
|
|
156,674 |
|
|
|
11,250 |
|
|
|
18,563 |
|
|
|
6,188 |
|
|
Douglas E. Wenger
|
|
|
55,750 |
|
|
|
11,250 |
|
|
|
10,313 |
|
|
|
3,438 |
|
|
|
(1) |
No SARs have been issued under the OMNOVA Solutions Amended and
Restated 1999 Equity and Performance Incentive Plan. No stock
options were exercised by the executive officers listed in the
table during fiscal 2005. |
LONG-TERM INCENTIVE PLANS AWARDS IN LAST FISCAL
YEAR
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts | |
|
|
|
|
|
|
Under Non-Stock Price-Based Plans(2), (3) | |
|
|
Number of Shares, | |
|
Performance or Other | |
|
| |
|
|
Units or Other | |
|
Period Until | |
|
Threshold | |
|
Target | |
|
Maximum | |
Name |
|
Rights | |
|
Maturation or Payout | |
|
($) | |
|
($) | |
|
($) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Kevin M. McMullen
|
|
|
(1 |
) |
|
|
2 years |
|
|
|
234,469 |
|
|
|
468,938 |
|
|
|
937,875 |
|
Michael E. Hicks
|
|
|
(1 |
) |
|
|
2 years |
|
|
|
63,023 |
|
|
|
126,045 |
|
|
|
252,090 |
|
James J. Hohman
|
|
|
(1 |
) |
|
|
2 years |
|
|
|
61,425 |
|
|
|
122,850 |
|
|
|
245,700 |
|
James C. LeMay
|
|
|
(1 |
) |
|
|
2 years |
|
|
|
54,383 |
|
|
|
108,765 |
|
|
|
217,530 |
|
Douglas E. Wenger
|
|
|
(1 |
) |
|
|
2 years |
|
|
|
48,690 |
|
|
|
97,380 |
|
|
|
194,760 |
|
|
|
(1) |
Indicates awards under the OMNOVA Solutions Long-Term Incentive
Program which provides participants the opportunity for a payout
at the end of the performance period if specified performance
goals are achieved. In January 2005, the Compensation and
Corporate Governance Committee of the Board of Directors
approved a long-term incentive program for the 2005-2006
performance period, pursuant to which key employees designated
by the Committee would be eligible to receive incentive payments
equal to certain specified percentages of average annual
compensation (salary and bonus paid under the Companys
Executive Incentive Compensation Program) upon attainment of
specified threshold, target or maximum levels of cumulative
earnings per share targets (performance goals) over the two-year
2005-2006 performance period. |
|
(2) |
Percentages of average annual compensation payable to
participants upon attainment of performance goals for the
2005-2006 performance period are as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Threshold | |
|
Target | |
|
Maximum | |
|
|
| |
|
| |
|
| |
Chairman and Chief Executive Officer
|
|
|
15 |
% |
|
|
30 |
% |
|
|
60 |
% |
All other Participants
|
|
|
10 |
% |
|
|
20 |
% |
|
|
40 |
% |
|
|
(3) |
For purposes of the table above, estimated future payouts for
the 2005-2006 performance period were calculated on the basis of
the participants 2005 fiscal year salary and bonus shown
in the Summary Compensation Table on page 15. |
17
PENSION BENEFITS
The OMNOVA Solutions Consolidated Pension Plan includes several
formulas for the determination of benefits and requires that the
formula providing the highest benefit be utilized to determine
an individual employees actual benefit. Benefits for
Messrs. McMullen, Hicks, Hohman, LeMay and Wenger have been
determined pursuant to a formula which utilizes average
compensation for the highest 60 consecutive months of service
(average compensation) prior to December 1, 2004 and a
career average formula for service from December 1, 2004 to
normal retirement. The Companys pension plan provides
credit for years of service with GenCorp. Estimated benefits are
shown below because the required calculations do not lend
themselves to a typical pension plan table where benefits can be
determined by the reader solely upon the basis of years of
service and final compensation.
|
|
|
|
|
|
|
|
|
|
|
Approximate |
|
|
|
|
Years of Credited |
|
Estimated Annual |
|
|
Service at Normal |
|
Benefits Payable at |
Name |
|
Retirement |
|
Normal Retirement(1) |
|
|
|
|
|
Kevin M. McMullen
|
|
|
29 |
|
|
$ |
354,155 |
|
Michael E. Hicks
|
|
|
45 |
|
|
$ |
237,440 |
|
James J. Hohman
|
|
|
17 |
|
|
$ |
86,817 |
|
James C. LeMay
|
|
|
31 |
|
|
$ |
141,668 |
|
Douglas E. Wenger
|
|
|
20 |
|
|
$ |
100,475 |
|
|
|
(1) |
Retirement benefits shown in the table for
Messrs. McMullen, Hicks, Hohman, LeMay and Wenger were
calculated pursuant to the terms of the OMNOVA Solutions
Consolidated Pension Plan. There is no offset for Social
Security payments. |
|
|
The benefits shown for Messrs. McMullen, Hicks, Hohman,
LeMay and Wenger are estimated and have not been adjusted for
any survivor option. Each estimated benefit is based upon the
assumption that the executive will remain an employee until
age 65 at a rate of compensation equivalent to that in
effect on December 1, 2005 and that the pension plan under
which the estimated benefit is calculated will remain unchanged. |
|
|
Benefits for Messrs. McMullen, Hicks, Hohman, LeMay and
Wenger have been determined by a formula which provides for a
benefit (A) for years of service prior to December 1,
2005 of (i) 1.125% of average compensation up to the
average Social Security wage base (ASSWB) plus 1.5% of
average compensation in excess of the ASSWB multiplied by the
total of such years of service up to 35 years and
(ii) 1.5% of average compensation multiplied by the total
years of service in excess of 35 years, and (B) for
each year of service after December 1, 2005 (i) prior
to attainment of 35 years of service, 1.625% of annual
compensation up to the ASSWB plus 2.0% of annual compensation in
excess of the ASSWB, and (ii) after attainment of
35 years of service, 2.0% of annual compensation. |
|
|
The benefits shown in the table have not been reduced to reflect
the limitation on includable compensation or the overall benefit
limitation imposed on pension plans qualified under
Section 401(a) of the Internal Revenue Code since the
amount of any of those reductions will be restored to the
individual pursuant to the terms of the OMNOVA Solutions
Benefits Restoration Plan, a nonfunded plan with benefits
payable out of the general assets of OMNOVA Solutions. |
18
OTHER COMPENSATION ARRANGEMENTS
In December 2000, the Board of Directors approved the terms of
an employment agreement with Kevin M. McMullen regarding his
service as Chief Executive Officer and Chairman, providing for
(i) 2001 base annual salary in the amount of $550,000;
(ii) maximum annual incentive opportunity equal to 125% of
base salary; (iii) maximum long-term incentive opportunity
equal to 60% of average annual compensation during each
performance period; (iv) options for 200,000 shares of
OMNOVA stock upon his election as Chief Executive Officer and
options for 150,000 shares as an annual grant for the 2001
fiscal year; (v) country club membership;
(vi) financial planning; (vii) participation in the
Companys executive physical program; and
(viii) company-paid supplemental life insurance in the
amount of $4,000,000. The employment agreement also provides
that, in the event the Company terminates
Mr. McMullens employment other than for cause prior
to age 65 or if Mr. McMullen elects to terminate his
employment due to the Boards decision to remove him as
Chairman or Chief Executive Officer, he will be entitled to
(a) termination pay in an amount equal to two times the sum
of (1) base annual salary and (2) the higher of his
base annual salary or the highest year-end bonus which he
received in the previous three fiscal years; and
(b) accelerated vesting of all unvested stock options and
continued exercisability of all options for the remainder of
their respective
10-year terms.
In July 2000, the Compensation and Corporate Governance
Committee (formerly the Organization & Compensation
Committee) of the Board of Directors adopted the Executive
Separation Policy which provides for (i) salary
continuation for 12 months after the date of termination;
(ii) payment of a lump sum bonus equal to the prior
years bonus paid, reduced to reflect the percentage of the
fiscal year not completed at the time of termination;
(iii) medical, dental and life insurance benefit
continuation for 12 months at the same levels elected prior
to termination; and (iv) outplacement assistance for a
period not to exceed 12 months, to eligible officers of
OMNOVA (other than Mr. McMullen whose employment agreement
is described above) in the case of involuntary termination of
the officers employment, other than in the event of a
change in control or termination for cause. There are currently
five elected executive officers eligible for the benefits set
forth in the Executive Separation Policy. The Companys
other executive officers are eligible for similar severance
benefits pursuant to the terms of their offers of employment.
The Company has also entered into change of control agreements
with the Companys six elected executive officers. The
change of control agreements provide for a severance payment in
an amount equal to the officers base salary plus bonus (as
defined in the agreements) multiplied by a factor of three if
within three years after a
change-in-control (as
such term is defined in the agreements), the officers
employment is terminated (i) by the Company for any reason
other than death, disability or cause, or (ii) by the
officer following the occurrence of one or more adverse events
enumerated in the agreement. The agreements provide for payment
of performance awards under the Long-Term Incentive Program,
continuation of health and life benefits for 36 months,
vesting of accrued retirement benefits, payment of the amount
required to cover excise taxes, if any, financial counseling,
outplacement and accounting fees and costs of legal
representation if required to enforce the agreement.
Mr. McMullens agreement includes a requirement that
any amount which may become payable under the severance
agreement be offset by any amount which may be paid under the
individual executives employment agreement as a result of
termination of employment due to a
change-in-control.
Mr. McMullens agreement also provides that
(i) for purposes of calculating the severance payment,
bonus is defined as no less than 100% of base salary in effect
at the time a
change-in-control
occurs, and (ii) he may terminate his employment for any
reason, or without reason, during the
30-day period
immediately following the date six months after the occurrence
of a change-in-control,
with the right to severance compensation under his agreement.
The change of control agreements renew annually unless
terminated pursuant to their provisions.
On April 1, 2005, the Company entered into a Retention
Agreement with each of its executive officers, including the
named executive officers. The Retention Agreements provided for
an immediate payment equal to 15% of the executive
officers then current base salary, provided that if
19
the executive should voluntarily retire or resign his employment
with the Company, or if such executives employment should
be terminated by the Company for cause, in either case on or
before April 1, 2006, then the executive would be required
to repay to the Company the full amount of the retention payment
(net of taxes withheld).
COMPENSATION OF EXECUTIVE OFFICERS
Compensation and Corporate Governance Committee Function
The Compensation and Corporate Governance Committee reviews and
approves the total compensation of the Chairman of the Board and
Chief Executive Officer. In addition, the Committee, with the
counsel of the Chief Executive Officer, considers and
establishes base pay and incentive bonuses for the other
executive officers of the Company elected by the Board. The
Committee also administers the Companys long-term
incentive program.
Compensation Committee Interlocks and Insider
Participation
The Committee is composed entirely of independent directors, as
defined by the New York Stock Exchanges listing standards.
Current members of the Committee include David A. Daberko,
Chairman, Edward P. Campbell, R. Byron Pipes and William R.
Seelbach.
20
Report of the Compensation and Corporate Governance
Committee
on Executive Compensation
|
|
|
Executive Compensation Philosophy |
The Committee desires to provide an executive compensation
program that allows for the effective recruitment, retention and
motivation of highly qualified individuals who are key to the
Companys current and future success. The Companys
executive compensation program is designed to:
|
|
|
|
|
create and reinforce alignment among the Companys vision,
strategies, goals and priorities; |
|
|
|
promote the interests of OMNOVA Solutions shareholders; |
|
|
|
differentiate compensation based on individual responsibilities
and performance as well as an individuals effectiveness in
achieving results in a team environment; |
|
|
|
properly balance the focus on both short and long-term Company
performance; |
|
|
|
allow the Company to respond to changes in compensation for
similar positions in the competitive marketplace; and |
|
|
|
administer the fiscal resources of the organization in a manner
designed to achieve the Committees executive compensation
philosophy and objectives. |
In the application of this philosophy, the Committee recognizes
the need to attract and retain individuals who, by their
actions, will add to shareholder value and will become
personally accountable for the overall success of the Company.
The Committee regularly reviews the Companys executive
compensation program to ensure that each component and the
overall package are competitive. The Committee looks beyond
competitive data, however, in its deliberations on compensation
for executive officers and places great weight on individual job
performance. Each year, Mr. McMullen evaluates the
performance of each executive officer, including the named
executive officers, and presents to the Committee his evaluation
of each officer, including contribution and performance over the
past year, strengths, weaknesses, development plans and
succession potential. Following Mr. McMullens
presentation and discussion of the competitive market, the
Committee considers total compensation for each executive
officer.
|
|
|
Executive Compensation Structure |
Executive compensation at OMNOVA Solutions consists of four
components base pay, an annual incentive bonus,
stock options or restricted stock, and an opportunity to
participate in the Long-Term Incentive Program. Each of these
components is intended to meet a different objective. They are
combined to focus the individual executive on high levels of
sustained performance directed at key organizational objectives.
A degree of risk/reward potential has been built into the
compensation program to motivate executives to achieve superior
results.
Compensation levels for executives vary depending on the scope
of their individual responsibilities, as well as on the degree
of individual performance and achievement.
Annual compensation consists of two components: base pay and
incentive bonus. Each year the Committee reviews historical
information and analyses of current executive compensation
trends and practices. Information for these analyses is derived
from several national and regional executive compensation
surveys.
21
The data selected from these surveys is representative of
organizations which are similar to the Company in sales volume.
The 50th percentile of compensation survey data is used as
a reference point in combination with actual performance in
establishing competitive compensation levels within the Company.
Base Pay. The Committee reviews executives base
salaries annually. The level of base pay for each executive is
established relative to the 50th percentile of competitive
pay levels for comparable positions at similar organizations,
with consideration given to Mr. McMullens performance
evaluations and recommendations. These factors are incorporated
into a determination regarding the level at which to set, and
the amount by which to change, an executives base pay. No
specific weighting is applied to these factors. Rather, the
collective judgment of the Committee members is utilized in
establishing the appropriate level of base pay for the following
year. Base pay for each of the named executive officers is set
forth in the Summary Compensation Table on page 15 of this
Proxy Statement.
Annual Incentive Bonuses. The primary purpose of the
Companys Executive Incentive Compensation Program has been
to reward employees for achievement of specific Company and
individual performance objectives. Incentive bonus amounts are
intended to vary in a consistent and predictable manner with the
financial and operational performance of the Company and its
various business units, as well as with the performance of the
individual employee. Participating in the incentive compensation
program are those employees in positions which have significant
scope, authority and impact on the Companys performance.
Financial performance objectives for the Company and each
business unit are derived from the annual operating plan (AOP).
The Committee approves these objectives at the beginning of each
fiscal year.
Each participating employee has a maximum incentive opportunity
expressed as a percentage of annual base pay. The level of this
incentive opportunity has been set after a review of prevailing
incentive opportunities for similar positions at similar
organizations. These opportunities vary depending on the
anticipated potential contribution for a particular position.
Performance objectives are established for each participant
based on their position and responsibilities. In fiscal 2005,
primary corporate measures under the Executive Incentive
Compensation Program included earnings per share and cash flow,
while segment and division measures included segment or division
operating profit and segment or division cash flow. Other
measures applicable to certain participants included, as
appropriate, product line operating profit, inventory turns,
productivity, safety, quality and customer metrics. Each of
these measures was weighted and totaled 100% of the incentive
opportunity. In any given year, the primary measures and
weightings may be adjusted to allow management flexibility in
focusing the employee on critical achievement areas.
Actual incentive bonus awards are calculated and approved by the
Committee at the end of the fiscal year based on an evaluation
of financial and other performance against the established
objectives. Using this calculation as a starting point, the
Companys executive officers will then evaluate each
participating employee for performance and award a bonus
commensurate with the Companys and individuals
performance. With respect to the Companys executive
officers, Mr. McMullen recommends to the Committee a bonus
for each executive commensurate with the Companys
performance and his evaluation of the individual
executives performance. The Committee approves the
incentive bonus awarded to each of the Companys executive
officers, including the named executive officers.
For 2005, in addition to threshold, target and maximum goals,
the Committee also approved a special upside
opportunity allowing for a maximum bonus opportunity of 125% of
the participants ordinary maximum opportunity if certain
stretch goals were achieved. This special
upside opportunity was approved as an incentive for
dramatic improvement in financial performance
22
considering the Companys performance in recent years. In
2005, the stretch goals approved for the
upside opportunity were achieved and exceeded for
Corporate participants and Performance Chemicals participants,
which includes all of the named executive officers. Accordingly,
these participants were eligible for bonus awards equal to 125%
of their maximum annual bonus opportunity.
|
|
|
Long-Term Incentive Program |
The Long-Term Incentive Program has limited executive
participation that includes the named executive officers listed
in the Summary Compensation Table on page 15 of this Proxy
Statement. The purpose of the program is to retain and to
motivate executives to achieve sustained improvement in
specified performance measures over a multi-year period. The
Committee sets specific threshold, target and maximum
achievement levels for each multi-year performance period after
reviewing the strategic business plans of the Company.
A payout was earned under the 2004-2005 Long Term Incentive
Program pursuant to a retention feature approved at the time the
program was approved in March 2004. This retention feature was
built into the program in response to the Committees
concerns regarding retention of the Companys executive
team and in recognition of the fact that none of the
Companys long-term incentive programs had yet yielded a
payout. The retention feature provided for a minimum payout at
the threshold level if the participant continued employment with
the Company through the performance period and at the date of
payout. Accordingly, the Committee has approved a cash payout
under the 2004-2005 Long Term Incentive Program in an amount
equal to the threshold levels for the program of 15% of average
annual compensation (base and bonus) over the two year
performance period for Mr. McMullen and 10% of average
annual compensation over the two year performance period for all
other participating executive officers. With respect to the
named executive officers, this payout is reflected in the LTIP
Payout column of the Summary Compensation Table on page 15
of this Proxy Statement.
In January 2005, the Committee approved a new two-year long-term
incentive program for the 2005-2006 performance period. The
performance measure for this program was defined as cumulative
earnings per share over the two-year cycle. Potential earnings
for the 2005-2006 performance period for the executives listed
in the Summary Compensation Table on page 15 range from 10%
to 60% of average annual cash compensation. The net value (after
tax withholding) of any performance awards earned by
participants may be paid in cash or in shares of OMNOVA common
stock. Additional data concerning the Long-Term Incentive
Program and the percentages of compensation payable upon
attainment of performance goals can be found in the footnotes to
the Long-Term Incentive Plans Awards in Last Fiscal
Year table on page 17 of this Proxy Statement.
|
|
|
Stock Options and Restricted Stock Grants |
The Companys philosophy is to consider the interests of
shareholders in the payment of executive compensation, and
specifically, to link the interests of executives to the
interests of shareholders. Equity based plans such as stock
options and restricted stock help accomplish this goal and are
an important component of overall compensation. In fiscal 2005,
the Company granted restricted stock to executive officers,
including the named executive officers, and certain other
employees in positions that have the ability to significantly
impact the Companys performance, in an effort to retain
talent critical to the Companys success while at the same
time providing compensation that would align the
executives interests with the interests of the
Companys shareholders.
In January 2005, the Committee awarded restricted stock to
approximately 82 employees considered key to the
Companys future success, but not including the
Companys executive officers. The size of the restricted
stock grants awarded to these employees was determined by,
first, deciding on a standard ratio of restricted shares to
stock options. This ratio was then applied to the stock option
award granted to these employees in a typical year to arrive at
a normal restricted
23
stock award for each eligible employee. Finally, individual
awards were evaluated and, where deemed appropriate, adjusted
upwards or downwards based on factors such as the nature of the
employees position, individual retention concerns and
individual performance.
In connection with the Committees review of the total
compensation of each executive officer in July 2005, the
Committee awarded restricted stock to the Companys
executive officers, including the named executive officers. The
size of these awards was determined by calculating 20% of the
2005 salary approved for each executive officer and converting
that to an equivalent number of shares of OMNOVA common stock.
|
|
|
Other Compensation and Benefits |
Executive officers are eligible to participate in medical,
dental, life and benefit programs generally available to
salaried employees, including the OMNOVA Solutions Retirement
Savings Plan and the OMNOVA Solutions Consolidated Pension Plan.
Executive officers also have the opportunity to participate in
the OMNOVA Solutions Benefits Restoration Plan, which restores
the pension and retirement savings plan benefits which would
otherwise be lost as a result of Internal Revenue Code
limitations on contributions to, and payment of benefits from,
tax qualified pension and retirement savings plans, and the
executive physical program and to receive reimbursement for
certain financial counseling expenses. Certain executive
officers also receive reimbursement of country club dues.
On April 1, 2005, the Company entered into a Retention
Agreement with each of its executive officers, including the
named executive officers. The Committee approved these
agreements in recognition of the unprecedented challenges in
markets and economic conditions that the Company had faced over
the past several years and the corresponding need for the
continuing commitment and undivided attention of each executive
officer to management of the Company. The Retention Agreements
provided for an immediate payment equal to 15% of the executive
officers then current base salary, provided that if the
executive should voluntarily retire or resign his employment
with the Company, or if such executives employment should
be terminated by the Company for cause, in either case on or
before April 1, 2006, then the executive would be required
to repay to the Company the full amount of the retention payment
(net of taxes withheld). Payments pursuant to these Retention
Agreements are reflected in the Summary Compensation Table on
page 15 of this Proxy Statement.
Compensation of the Chief Executive Officer
In March 2005, the Committee reviewed Mr. McMullens
base salary as compared to competitive market data for
CEOs of similarly sized companies and in light of the fact
that he had not received a salary increase since May 2002. The
Committee considered the Companys performance, as well as
its evaluation of Mr. McMullens individual
performance since May 1, 2002, including recent performance
trends and expectations. Based on this review and evaluation,
the Committee determined that Mr. McMullens salary
should be increased from $568,000 to $588,000 per year.
In July 2005, in connection with the Committees annual
compensation review process, the Committee evaluated
Mr. McMullens total compensation package, including
salary, bonus opportunity, long-term incentive opportunity,
accumulated realized and unrealized stock option gains, and the
value to Mr. McMullen and the cost to the Company of all
perquisites. In considering Mr. McMullens total
compensation, the Committee considered the aggregate amount and
mix of all components of his compensation. In reviewing
Mr. McMullens base salary, the Committee considered
Mr. McMullens base salary as compared to competitive
market data for CEOs of similarly sized companies and the
targeted merit increases for all employees of 3%. Based on this
review and evaluation, the Committee determined that
Mr. McMullens salary should be increased to $610,000,
an increase of approximately 3.7%, effective August 8,
2005. The Committee also determined to grant Mr. McMullen a
restricted stock award of 25,960 restricted shares of OMNOVA
Common
24
Stock. Additional information regarding the restricted stock
awarded to Mr. McMullen is set forth on page 15 of
this Proxy Statement.
Mr. McMullen was also a participant in the 2005 OMNOVA
Executive Incentive Compensation Program. As CEO,
Mr. McMullens maximum bonus opportunity is 125% of
base salary. As discussed above, the Committee approved a
special upside opportunity for 2005 of 125% of each
participants maximum bonus opportunity. For
Mr. McMullen, this amounted to a maximum bonus opportunity
of approximately 156% of base salary for 2005. Because the goals
established for Corporate participants for the special
upside opportunity were achieved, the starting point
for calculating Mr. McMullens bonus under the 2005
Executive Incentive Compensation Program was approximately 156%
of base salary. The Committee then further considered its
evaluation of Mr. McMullens individual performance
and his contribution to the dramatic improvement in the
Companys performance in 2005, in particular considering
the Companys improvement with respect to operating profit,
debt reduction, cost containment and leverage ratio, as well as
the fact that no bonus had been awarded under the Executive
Incentive Compensation Program since 2001. Based on this
evaluation, the Committee awarded Mr. McMullen an annual
bonus under the 2005 Executive Incentive Compensation Program of
$953,125.
Mr. McMullen is also a participant in the Companys
Long-Term Incentive Program. As described above, a cash payout
was earned pursuant to a retention feature of the 2004-2005
Long-Term Incentive Program. This retention feature provided for
a minimum payout to Mr. McMullen of 15% of average annual
compensation (base plus bonus) over the two year performance
period if he continued to be employed by the Company through the
performance period and at the date of payout. Accordingly, the
Committee approved a cash payout to Mr. McMullen of
$159,834 under the 2004-2005 Long Term Incentive Program.
If the performance targets for the 2005-2006 Long Term Incentive
Program are met, Mr. McMullen will be eligible to receive a
payout of 15% if threshold performance is achieved, 30% if
target performance is achieved, and 60% if maximum performance
is achieved. There is no retention feature included in the
2005-2006 Long Term Incentive Program.
Finally, as described above, on April 1, 2005, in
recognition of the unprecedented challenges faced by the Company
in recent years and the need for the continuing commitment and
undivided attention of the Companys executive team to
management of the Companys recovery, the Committee
approved Retention Agreements with each of its executive
officers, including Mr. McMullen. Pursuant to
Mr. McMullens agreement, he was issued a payment of
$85,200 in April 2005. The agreement further provides that if
Mr. McMullen should voluntarily retire or resign his
employment with the Company, or if his employment should be
terminated by the Company for cause, in either case on or before
April 1, 2006, then Mr. McMullen would be required to
repay to the Company the full amount of the retention payment
(net of taxes withheld).
The Committee believes that Mr. McMullens total
compensation, in the aggregate, is market competitive and
reasonable.
|
|
By: |
The Compensation and Corporate Governance Committee of the Board
of Directors
David A. Daberko, Chairman
Edward P. Campbell
R. Byron Pipes
William R. Seelbach |
25
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder
return, assuming reinvestment of dividends, of the
Companys common stock over the past five fiscal years with
the cumulative total return, assuming reinvestment of dividends,
of Standard & Poors 500 Composite Stock Price
Index and the Standard & Poors Industrial Index
over that same period of time.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
AMONG OMNOVA SOLUTIONS INC., THE S&P 500 INDEX
AND THE S&P INDUSTRIALS INDEX
|
|
* |
$100 invested on 11/30/00 in stock or index, including
reinvestment of dividends. Fiscal year ending November 30. |
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 and
the rules promulgated under it require that certain officers,
directors and beneficial owners of the Companys equity
securities file various reports of transactions effected in
OMNOVA Solutions common stock with the Securities and Exchange
Commission. The Company has procedures in place to assist these
persons in preparing and filing these reports on a timely basis.
To the best of the Companys knowledge, all required
reports were filed timely, other than one transaction which was
reported late on behalf of Kristine C. Syrvalin.
26
AUDIT COMMITTEE REPORT
No portion of this Audit Committee Report shall be deemed to
be incorporated by reference into any filing under the
Securities Act of 1933, as amended (the Securities
Act), or the Exchange Act of 1934, as amended (the
Exchange Act), through any general statement
incorporating by reference in its entirety the Proxy Statement
in which this report appears, except to the extent that the
Company specifically incorporates this report or a portion of it
by reference. In addition, this report shall not be deemed to be
soliciting material or to be filed under
either the Securities Act or the Exchange Act.
The Audit Committee oversees the Companys financial
reporting process on behalf of the Board of Directors.
Management has the primary responsibility for the preparation,
presentation and integrity of the Companys financial
statements, for establishing and maintaining internal control
over financial reporting and for assessing the effectiveness of
the Companys internal control over financial reporting as
of the end of each fiscal year. The Companys independent
registered public accounting firm is responsible for planning
and carrying out a proper audit of the Companys annual
financial statements and the Companys internal control
over financial reporting, expressing an opinion as to the
conformity of the financial statements with generally accepted
accounting principles, and expressing an opinion on
managements assessment of the effectiveness of internal
controls over financial reporting, and the effectiveness of
internal control over financial reporting, based on its audits.
The Committee discussed with the Companys internal
auditors and its independent registered public accounting firm
the overall scope and plans for their respective audits. The
Committee meets with the internal auditors and representatives
of the Companys independent registered public accounting
firm, with and without management present, to discuss the
results of their examinations, their evaluations of the
Companys internal controls, and the overall quality of the
Companys financial reporting.
In fulfilling its oversight responsibilities, the Committee
reviewed and discussed the audited financial statements in the
Annual Report with management, including a discussion of the
quality, not just the acceptability, of the accounting
principles, the reasonableness of significant judgments and the
clarity of disclosures in the financial statements. The
Committee also reviewed and discussed with representatives of
the Companys independent registered public accounting firm
their judgments as to the quality, not just the acceptability,
of the Companys accounting principles and underlying
estimates in its financial statements, and the matters required
to be discussed by Statement on Auditing Standards
(SAS) No. 61, Communications with Audit
Committees, as amended by SAS No. 90, Audit
Committee Communications, and as currently in effect. The
Committee has received from the independent registered public
accounting firm the written disclosures regarding their
independence required by Independence Standards Board Standard
No. 1, Independence Discussions with Audit
Committees, as currently in effect, and has discussed with
representatives of the Companys independent registered
public accounting firm the firms independence from
management and the Company. Finally, the Committee has received
written confirmations with respect to non-audit services
performed by the independent registered public accounting firm
and has considered whether such non-audit services are
compatible with maintaining the firms independence.
In addition, the Committee discussed with management their
assessment of the effectiveness of the Companys internal
controls over financial reporting, and discussed with
representatives of the Companys independent registered
public accounting firm their opinion as to managements
assessment of the effectiveness of the Companys internal
controls over financial reporting and their opinion as to the
effectiveness of the Companys internal controls over
financial reporting. Finally, the Committee discussed with
representatives of the Companys independent registered
public accounting firm any significant deficiencies in the
Companys internal controls over financial reporting
identified as a result of the firms audit of the
Companys internal controls.
27
Based on the reviews and discussions referred to above, the
Committee recommended to the Board of Directors (and the Board
has approved) that the audited financial statements be included
in the Annual Report on
Form 10-K for the
year ended November 30, 2005 for filing with the Securities
and Exchange Commission. The Committee has also appointed the
Companys independent registered public accounting firm for
the 2006 fiscal year, subject to shareholder approval.
|
|
By: |
The Audit Committee of the Board of Directors |
Steven W. Percy, Chairman
David J. DAntoni
Diane E. McGarry
PROPOSAL 2:
RATIFICATION OF ERNST & YOUNG LLP AS THE
COMPANYS
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Services of Independent Registered Public Accounting Firm for
2005
Ernst & Young LLP served as OMNOVAs independent
registered public accounting firm for fiscal year 2005.
Aggregate fees for professional services rendered to OMNOVA by
Ernst & Young for the fiscal years ended
November 30, 2004 and 2005 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
Fiscal Year Ended |
|
|
November 30, 2004 |
|
November 30, 2005 |
|
|
|
|
|
Audit Fees
|
|
$ |
1,482,000 |
|
|
$ |
1,473,209 |
|
Audit Related Fees
|
|
$ |
48,750 |
|
|
$ |
45,617 |
|
Tax Fees
|
|
$ |
108,269 |
|
|
$ |
58,458 |
|
All Other Fees
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
1,639,019 |
|
|
$ |
1,577,284 |
|
Audit Fees include the aggregate fees billed for professional
services rendered by Ernst & Young for the audit of the
Companys annual consolidated financial statements and
review of financial statements included in the Companys
quarterly reports on
Form 10-Q, and for
the audit of the Companys internal control over financial
reporting. This category may also include services that
generally only the independent registered public accounting firm
can reasonably provide, such as comfort letters, attest
services, consents and assistance with and review of documents
filed with the Commission.
Audit Related Fees include the aggregate fees billed for
services by Ernst & Young that are reasonably related
to the performance of the audit or review of the Companys
financial statements, including pension audits and accounting
consultations.
Tax Fees include $102,269 and $58,458 in fees billed for
professional services rendered by Ernst & Young for tax
compliance in 2004 and 2005, respectively; and $6,000 and $0 in
fees billed for professional services rendered by
Ernst & Young for tax advice and tax planning services
provided for the Company and its subsidiaries in 2004 and 2005,
respectively.
Audit Committee Pre-Approval Policies and Procedures
The Audit Committee annually approves the scope and fees payable
for the year end audit, statutory audits and employee benefit
plan audits to be performed by the independent registered public
accounting firm for the next fiscal year. Management also
defines and presents to the Audit Committee specific projects
and categories of service, together with the corresponding fee
estimates, for which the advance approval of the Audit Committee
is requested. The Audit Committee reviews these requests and, if
acceptable, pre-approves the engagement of the independent
registered public accounting firm for these specific projects
and categories of service on a fiscal
28
year basis. On a periodic basis, management reports to the Audit
Committee regarding the actual spending for such projects and
services compared to the approved amounts. The Audit Committee
has delegated to its Chairman the authority to pre-approve the
engagement of the independent registered public accounting firm
for audit and permitted non-audit services in an aggregate
amount of $50,000, provided that the Chairman reports to the
Committee at each regularly scheduled meeting the nature and
amount of any audit and non-audit services that he has approved
pursuant to the delegation of authority. All other services for
which the Company desires to engage the independent registered
public accounting firm are approved by the Committee in advance
of such engagement.
All services provided by Ernst & Young have been
approved in accordance with the foregoing policies and
procedures.
Appointment of Independent Registered Public Accounting Firm
for 2006
Subject to ratification by the shareholders at the
March 23, 2006 Annual Meeting, the Audit Committee of the
Board of Directors has appointed Ernst & Young LLP as
the Companys independent registered public accounting firm
to examine the consolidated financial statements of the Company
for the fiscal year ending November 30, 2006.
Ratification of the appointment of Ernst & Young LLP as
the Companys independent registered public accounting firm
requires that a majority of the votes cast, whether in person or
by proxy, be cast in favor of the proposal. Abstentions and
broker non-votes are counted in determining the votes present at
a meeting for purposes of establishing a quorum; however,
abstentions and broker non-votes are not considered votes cast
and will not count either in favor of or against the proposal.
If the Committees appointment is not ratified, or if
Ernst & Young LLP declines to act or becomes incapable
of action, or if their appointment is discontinued, the
Committee will appoint another independent registered public
accounting firm whose continued appointment after the next
annual meeting of shareholders will be subject to ratification
by the shareholders.
Representatives of Ernst & Young LLP are expected to be
present at the Annual Meeting to respond to any shareholder
questions. They will have an opportunity to make a statement at
the meeting if they desire to do so.
Your Board of Directors recommends a vote FOR
ratification of the appointment of Ernst & Young LLP as
the Companys independent registered public accounting
firm. Shares represented by proxy will be voted FOR this
proposal, unless you specify a different choice on the
accompanying proxy card.
29
OTHER INFORMATION
Cumulative Voting
The Company has no provision for cumulative voting in the
election of directors. Holders of OMNOVA Solutions common stock
are therefore entitled to cast one vote for each share held on
the January 30, 2006 record date for each nominee for
director.
Other Business
The Company did not receive notice by December 17, 2005 of
any shareholder proposals that are to be presented for a vote at
the meeting. Therefore, no shareholder proposals will be voted
upon at the meeting and if any other matter requiring a vote
properly comes before the meeting, the persons named on the
accompanying proxy card will vote your shares on that matter in
their discretion.
YOUR VOTE IS IMPORTANT. Regardless of whether you expect to
attend the meeting in person, you are urged to vote your shares
by promptly marking, signing, dating and returning the enclosed
proxy in the envelope provided.
|
|
|
Kristine C. Syrvalin
|
|
Secretary |
30
|
|
|
|
|
|
|
|
|
|
o
|
|
6 DETACH PROXY CARD HERE 6
|
|
|
|
|
|
|
|
|
|
Please specify choices, sign,
date and return in the enclosed postage paid envelope.
|
|
x
Votes must be indicated
(x) in Black or Blue ink. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1. |
|
ELECTION OF DIRECTORS TO A THREE-YEAR TERM EXPIRING AT THE 2009 ANNUAL MEETING. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR
ALL
|
|
o
|
|
WITHHOLD
FOR ALL
|
|
o
|
|
*EXCEPTIONS
|
|
o
|
|
|
Nominees: Kevin M. McMullen and R. Byron Pipes.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the Exceptions box and write that
nominees name in the space provided below).
*Exceptions
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR
|
|
AGAINST
|
|
ABSTAIN |
|
|
|
|
|
|
|
|
|
2.
|
|
TO RATIFY THE APPOINTMENT OF ERNST &
YOUNG LLP AS THE COMPANYS INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR
THE FISCAL YEAR ENDED NOVEMBER 30, 2006.
|
|
o
|
|
o
|
|
o |
|
|
|
|
|
|
|
|
|
3.
|
|
Upon matters incident to the conduct of the meeting
and such other business as may properly come before
the meeting or any adjournments thereof. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To change your address, please mark this box.
|
|
|
|
o |
|
|
|
|
|
|
|
|
|
|
|
|
|
To include any comments, please mark this box.
|
|
|
|
o |
|
|
|
|
|
|
|
|
|
|
Please sign exactly as name appears at left. When
shares are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee or
guardian, give full title as such. If a corporation, sign
in full corporate name by President or other authorized
officer. If a partnership, sign in partnership name by
authorized person. |
|
|
|
|
|
|
|
|
|
|
|
|
Date Share Owner sign here
|
|
Co-Owner sign here |
February 10, 2006
Dear Shareholder:
Enclosed
are OMNOVA Solutions 2005 Annual Report and 2006 Proxy Statement.
OMNOVA Solutions posted strong improvement in nearly every financial metric in 2005. We built on the
previous years solid sales growth, improved profitability and reduced debt significantly. This
shows that our actions to streamline costs and processes, introduce value-added products and
services, and focus on more attractive markets and geographies have begun to bear fruit. This is
especially satisfying given the continued record inflation in the costs of our oil-based raw
materials and a slow recovery in certain market segments.
While the significantly improved operating performance did not generate the return to shareholders
to which we are committed, we recognize that we must earn shareholder confidence over time with
sustained continuous improvement. With our improved balance sheet which offers greater flexibility,
the strong progress of our Performance Chemicals segment, and solid profit improvement in
Decorative Products, we believe we are positioned to do just that. Our associates are
enthusiastically engaged and equipped with a number of exciting new tools that will help us deliver
greater shareholder value.
The theme
of this years Annual Report is Rethink OMNOVA. I
hope you will take the opportunity to read the highlights presented in this Report, which
describe how we are achieving positive change for our shareholders, customers, employees and
communities.
The 2006 Annual Meeting will be held on March 23, 2006 at the Hilton Akron/Fairlawn, Ohio. Details
are provided in the enclosed Proxy Statement.
Your vote is important to us. Whether or not you plan to attend the Annual Meeting, please take
time to complete and return the attached proxy card.
Thank you for your continued support.
Best Regards,
![-s- Kevin M. McMullen](l17831al1783190.gif)
Kevin McMullen
OMNOVA SOLUTIONS INC.
175 GHENT ROAD FAIRLAWN, OHIO 44333
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The
undersigned hereby appoints JAMES C.LEMAY, KRISTINE C. SYRVALIN and
MICHAEL E. HICKS, and
each of them, his proxy, with power of substitution, to vote all shares of Common Stock of OMNOVA
Solutions Inc. which the undersigned is entitled to vote at the
Annual Meeting of Shareholders to be
held at 9:00 a.m. on March 23, 2006 at the Hilton Akron/Fairlawn, 3180 West Market Street, Fairlawn,
Ohio 44333, and at any adjournments thereof, and appoints the proxyholders to vote as directed
below and in accordance with their judgment on matters incident to the conduct of the meeting and
any matters of other business referred to in item 3.
The shares represented by this proxy will be voted as directed by the shareholder. If no
direction is given when the duly executed proxy is returned, such shares will be voted FOR all
nominees in item 1, FOR item 2, and in accordance with the
proxyholders judgment on matters incident
to the conduct of the meeting and any matters of other business
referred to in item 3. The Board of
Directors recommends a vote FOR items 1 and 2.
This card also constitutes your voting instructions for any and all shares held of record by the
Bank of New York for your account in the Companys Dividend Reinvestment Plan and will be considered to be
CONFIDENTIAL VOTING INSTRUCTIONS to the Plan Trustee with respect to Shares held for your account under the OMNOVA
Solutions Retirement Savings Plan.
OMNOVA SOLUTIONS INC.
P.O. BOX 11104
NEW YORK, N.Y. 10203-0104
(Continued, and to be signed and dated on the other side.)