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Amendment Without Stockholder Approval As presently in effect, the Profit-Sharing Plan may be amended by the Board of Directors, without stockholder approval, unless the effect of such amendment is to increase the Company's contribution to an amount in excess of 3% of unconsolidated earnings be- fore Federal income taxes and before deduction of the sum to be contributed to the Profit-Sharing Plan and the amount allocated to the Incentive Compensation Plan Reserve. For 1977, this amount was $11,938,701, the amount actually contributed by the Company. It is now proposed to amend this provision to provide that the Board of Directors may amend the Profit-Sharing Plan without stockholder approval, unless the effect of such amendment is to increase the aggregate annual contribution of the Company and its sub- sidiaries to an amount in excess of 3% of earnings of the Company and its consolidated subsidiaries, before deduction of contributions under the Profit-Sharing Plan and of alloca- tions to or contributions under all incentive compensation plans and before all income taxes. For 1977, this amount would have been $19,292,000. The amendment does not otherwise affect the existing authority of the Board of Directors to amend the Profit-Sharing Plan without stockholder approval. Deductibility for Federal income tax purposes of the amounts contributed by the Company and its subsidiaries to the Profit-Sharing Plan Trust depends, among other things, upon the exemption of the trust under the Internal Revenue Code. The resolution of the Board of Directors authorizing the amendments is subject to the receipt of a determination from the Internal Revenue Service to the effect that the exemption of the trust will continue. In the event that changes in the amended Profit-Sharing Plan are necessary to obtain this determination, such changes may be made without resubmission to stockholders. It is not anticipated that any such changes would be material. When such determination is received, it is believed that all contributions will be deductible. AMENDMENT TO INCENTIVE COMPENSATION PLAN In 1967, the Company, with stockholder approval, adopted an Incentive Compensation Plan (the "Incentive Plan"). Under the Incentive Plan, awards are made out of a Reserve, to which amounts are credited annually by the Board of Directors. Awards from the Reserve are made by the Incentive Compensation Committee (the "Committee"), consisting of directors and former directors, none of whom is eligible for an award. Any person who served as an employee of the Company or any of its subsidiaries in an important position at any time during the calendar year prior to the year in which an award is made is eligible for consideration for an award, but the Committee has absolute discretion with respect to his or her selection for an award, the amount of the award and the method of its payment, except that no employee may be granted an award in excess of 100% of his or her highest annual salary rate during the calendar year prior to the year 11

t 1 4 in which the award is made. (As originally adopted, the Incentive Plan limited individual awards to 50% of the highest annual salary rate; however, pursuant to authority granted to it by the terms of the Incentive Plan, the Board of Directors in 1976 increased the limitation to 100%.) Awards are deductible by the Company for Federal income tax pur- poses. As originally adopted in 1967, the maximum annual amount which could be credited to the Reserve was the smallest of: Formula A: 7% of the amount by which the Company's consolidated pre-tax earnings for the year less $65,000,000 were greater than 15% of the amount by which stockholders' equity on a consolidated basis as of December 31 of that year exceeded $250,000,000; Formula B: The amount which added to the Company's contribution to its Profit-Sharing Plan Trust with respect to the year was equal to 7% of the amount by which consolidated pre-tax earnings for the year exceeded 15% of stockholders' equity on a consolidated basis as of December 31 of such year; or Formula C: 6% of the amount of cash dividends declared by the Company on its Common Stock during the year. In 1975, the Board of Directors amended Formula A to increase the deductible from $65,000,000 (the approximate amount of the Company's 1966 consolidated pre-tax earn- ings) to $225,000,000 and the stockholders' equity base from $250,000,000 (the approx- imate amount thereof on December 31, 1966) to $700,000,000. The Board of Directors believes that the Incentive Plan has been of great benefit to the Company in attracting and retaining key employees who have contributed to the growth of the Company since 1967. However, because of this growth, the increase in the number of participants in the Incentive Plan and the amendments proposed to the Profit-Sharing Plan (see "Amendments to Deferred Profit-Sharing Plan"), the Board of Directors has determined that the maximum amount that can be allocated to the Reserve will soon become too small. Accordingly, subject to stockholder approval, the Board of Directors amended, effective as of January 1, 1978, the Incentive Plan to provide that the maximum amount which can be credited to the Reserve is the smaller of: Method l: 7% of the amount by which the Company's consolidated pre-tax earn- ings for the year less $475,000,000 are greater than 15% of the amount by which stockholders' equity on a consolidated basis as of December 31 of that year exceeds $1,425,000,000; or Method /l: 8% of the amount of cash dividends declared by the Company on its Common Stock during that year. 12 ,

For 1976, consolidated pre-tax earnings were $472,000,000 and stockholders' equity at December 31, 1976 was $1,430,000,000. As is evident from a comparison of the amendment with the existing limitation, the major changes are a ten-year updating of Formula A, the elimination of Formula B and the increase to 8% from 6% of the dividend limitation of Formula C. Under the existing limita- tion, the maximum amount that could have been credited to the Reserve for 1977 was $5,611,761, which equals 6% of the cash dividends declared on the Company's Common Stock in 1977; had the proposed amendment been in effect, this amount would have been increased to $7,482,320. With respect to 1977, the Formula A limitation was $17,640,427, whereas under the amendment (Method I), it would have been $7,752,927. Under Formula B, the limitation with respect to 1977 was $14,101,726; had the employees of the Miller Group been participants in the Profit-Sharing Plan in 1977 (see "Amendments to Deferred Profit-Sharing Plan"), the Formula B limitation would have been $13,401,726. In each of the last five years, Formula C has determined the maximum amount creditable to the Reserve. Under Formula C, such maximum amount in each of the last five years was as follows: 1977, $5,611,761; 1976, $4,101,960; 1975, $3,265,140; 1974, $2,610,240; 1973, $2,227,680. The amount actually credited to the Reserve by the Board of Directors in each of the last five years was: 1977, $5,611,761; 1976, $3,940,000; 1975, $3,100,000; 1974, $2,400,000; 1973, $2,200,000. The aggregate amounts awarded from the Reserve with respect to the years 1973 through 1977 to each person named in the Remuneration Table on page 7, to all directors and officers as a group and to all employees have been as follows: T. F. Ahrensfeld, $231,790; J. C. Bowling, $306,750; J. E. Cookman, $280,200; J. A. Cordido-Freytes, none; Hugh Cullman, $472,830; J. F. Cullman 3rd, $755,000; C. H. Goldsmith, $491,190; J. T. Landry, $304,890; Hamish Maxwell, $240,950; R. R. Millhiser, $555,630; J. A. Murphy, $381,350; George Weissman, $590,420; all directors and officers, $7,553,940; all employees, $16,642,799. ADDITIONAL INFORMATION In addition to the Profit-Sharing and Incentive Plans, the Company, its subsidiaries and affiliates maintain various benefit plans for their employees, the most important of which are described below. The Company maintains a non-contributory retirement plan for approximately 16,000 employees. Under this plan, an employee normally retires at the age of 65 (earlier under certain circumstances) on a full retirement allowance based on the average amount of annual compensation received during the 60 highest paid consecutive months of the last 120 months of accredited service. (See "Remuneration of Directors and Officers" for examples of full retirement allowances.) The Company's contribution to the retirement 13

14 I r l plan for the fiscal year ended December 31, 1977 amounted to $18,233,678. Retirement plans maintained by subsidiaries and affiliates vary over a wide range depending upon the country in which the subsidiary or affiliate is located and other factors. The cost of these plans is not significant in relation to the enterprise as a whole. The Company also main- tains a Long-Term Disability Plan and a Survivor Income Benefit Plan. The former plan protects most employees and their families against loss of income due to long-term dis- ability. Prior to age 65, the maximum annual benefit is $24,000. At age 65, benefits cease unless the employee had five years of accredited service at the time of disability, in which case benefits would be payable equal to a full retirement allowance computed as if the employee had worked during the entire period of disability (until age 65) at the compen- sation being received at the time of disability. The Company's contribution to the Long- Term Disability Plan Trust for the year 1977 amounted to $641,524. Disability plans are also maintained by subsidiaries. The Survivor Income Benefit Plan provides annual income benefits to the family of a salaried employee who dies while in active service or after retirement. Subject to certain exceptions, the spouse of a salaried employee who dies while in active service and prior to age 65 receives, until the date such employee would have attained age 65, an annual amount, commencing in the fifth year after the employee's death, equal to 25% of the employee's basic annual compensation at the time of death. Commencing with the date the deceased employee would have attained age 65, the spouse receives an annual amount for life equal to what he or she would have received under the Company's retire- ment plan if the employee had lived, had remained in the employ of the Company to age 65 at the compensation in effect at death and had elected the option giving the spouse 50% of an actuarially reduced full retirement allowance for life. If the employee dies after retirement or after age 65 while in active service, the annual income payments equal 50% of the employee's actuarially reduced retirement allowance. In certain instances, benefits are also payable to dependent children. The Company's contribution to the Survivor Income Benefit Plan Trust for the year 1977 was $455,672. In 1977, the Company adopted, effective January 1, 1976, an Employee Stock Ownership Plan pursuant to the Federal Tax Reduction Act of 1975. Annually, an amount equal to 1% of qualified investments (as defined in the Internal Revenue Code as being eligible for investment credit under Section 38 thereof) of the Company and its domestic subsidiaries is paid in cash or Common Stock of the Company to a trust and allocated among participants according to their compensation. Any cash contribution is invested in the Common Stock of the Company. Generally speaking, salaried employees of the Company and most of its domestic subsidiaries in the lower compensation grades with 3 years of service participate. No contributions by participants are permitted, and distribution of a participant's share in the trust occurs upon termination of employment. For 1976, the Company's contribution was $1,901,862, which was claimed as a credit against 1976 Federal income taxes.

Prior to 1977, the Company, with stockholder approval, had adopted various stock option plans. These plans provided for the granting of options to purchase the Company's Com- mon Stock at fair market value on date of grant; the options were intended to constitute qualified stock options ("qualified options") under the Internal Revenue Code or options that were not so qualified ("non-qualified options"). No further options may be granted under these plans. However, outstanding options may still be exercised until their expira- tion, which is generally 5 years from the date of grant in the case of qualified options and 10 years in the case of non-qualified options. Each optionee has agreed to remain in the employ of the Company or a subsidiary for one year from the date of the granting of the option at such rate of compensation (not less than the rate then in effect) as the Company may from time to time determine. In 1977, the stockholders approved the 1977 Stock Unit Plan providing for the granting to key employees of the Company and its affiliates of units with respect to a total of 1,000,000 shares of Common Stock. Each recipient of a unit must agree to remain in the employ of the Company or its affiliates for one year from the date of the grant at such rate of compensation (not less than the rate then in effect) as the Company or its affiliates may from time to time determine. Subject to certain exceptions with respect to persons who are subject to the reporting requirements of the Securities Exchange Act of 1934, upon exercise of a unit, the unit holder is entitled to do one of the following: purchase one share of Common Stock at not less than the fair market value on the date the unit was granted; or receive, in the form of Common Stock or Common Stock and cash, the amount by which the fair market value of a share of Common Stock on the date of exercise of the unit exceeds the fair market value of such a share on the date the unit was granted (the "Appreciation Value" of such unit), provided that such unit holder at the same time exercises a second unit and purchases one share of Common Stock; or receive, in the form of Common Stock or Common Stock and cash, an amount equal to one-half of the Appreciation Value of such unit on the date of exercise (the "Reduced Appreciation Value"). No unit holder may, upon exercise, receive in cash more than one- half of the Appreciation Value or Reduced Appreciation Value of all of the units such unit holder is exercising at such time. The maximum term for a unit is ten years. No unit may be exercised during the first year of its term. During the second year, any number of units up to 25% of the total covered by the grant may be exercised and, during the third and fourth years, any number of units which, when added to those previously exercised, do not exceed 50% and 75%, respec- tively, of the total number granted. During the fifth and following years, the unit holder may exercise any number of units which, when added to units previously exercised, does not exceed the total number of units covered by the grant. The last reported sales price of the Company's Common Stock on the New York Stock Exchange on March 13, 1978 was $581/4 per share. The following table shows the reported 15

I high and low sales prices of the Company's Common Stock on the New York Stock Exchange, adjusted to give effect to stock split-ups: High Low 1973 .......................... $683/a $483/4 1974 .......................... 613/a 341/a 1975 .......................... 591/4 40~/a 1976 .......................... 631/4 493/4 1977 .......................... 647/a 511/2 1978 through March 13 .......... 613/4 557/8 With respect to options granted under the Company's stock option plans and units granted under the Stock Unit Plan, the following tabulation shows, as to certain directors and officers and as to all directors and officers as a group, 51 persons, (i) the number of shares subject to options and units and the average per share price as to options and units granted since January 1, 1973, (ii) the number of shares for which options were exercised during such period, the aggregate option price and the aggregate market value of shares acquired on date of exercise, (iii) the number of shares of Common Stock sold during the period by those persons who exercised options, and (iv) the number of shares subject to options and units and the average per share exercise price as to shares subject to all unexercised options and units held as of January 31, 1978. Figures in the tabulation have been adjusted, where appropriate, to reflect stock split-ups. COMMON STOCK, $i PAR VALUE T. F. Ahrensfeld J. C. Bowling J. E. Cookman Hugh Cullman J. F. Cullman 3rd C. H. Goldsmith J. T. Landry Hamish Maxwell R. R. Millhiser J. A. Murphy George Weissman Group GRANTED(1)-1973 TO JANUARY 31, 1978 EXERCISED(2)-1973 TO JANUARY 31, 1978 SALES-1973 JANUARY 31, 1978(3) UNEXERCISED(1) AT 1ANUARY 31, 1978 Number of Shares Average Per Share Exercise Price Number of Shares Aggregate Option Price of Options Exercised Aggregate Market Value of Shares on Date Options Exercised Number of Shares Number of Shares Average Per Share Exercise Price 14,000 $53.46 4,000 $ 120,500 $ 214,750 3,000 14,000 $53.46 14,000 53.63 12,000 253,000 640,000 4,000 14,000 53.63 - - 6,000 151,000 340,500 13,000 - - 13,700 52.47 28,000 497,313 1,713,500 12,500 13,700 52.47 - - 24,000 506,000 1,328,000 50,360 - - 23,300 51.95 6,000 156,250 332,000 22,000 23,300 51.95 15,500 52.76 15,800 339,725 838,375 12,500 15,500 52.76 14,700 53.18 12,000 323,500 656,500 800 12,700 53.60 29,700 51.18 7,000 198,625 402,625 - 29,700 51.18 20,000 53.64 24,000 583,250 1,154,250 8,550 20,000 53.64 15,700 52.44 17,500 389,375 967,313 4,100 15,700 52.44 333,500 $52.96 275,100 $6,836,975 $15,382,200 199,259 330,000 $52.98 (1 ) The number shown is the combined number of shares for which options and units were granted. Units were granted as follows: T. F. Ahrensfeld, 3,000; J. C. Bowling, 3,000; 16 q t-.i 0 ~ i-+fU ~ LJi

Hugh Cullman, 5,700; C. H. Goldsmith, 6,300; J. T. Landry, 3,500; Hamish Maxwell, 3,500; R. R. Millhiser, 6,700; J. A. Murphy, 5,500; George Weissman, 6,700; Group, 84,350. The unit exercise price of all the foregoing units is $60.0625. (2) No units have been exercised. (3) Sales by directors and officers who exercised options during the period January 1, 1973 to January 31, 1978. In addition, during the period, other employees were granted options for 591,250 shares at a weighted average option price per share of $53.25 and 214,350 units at a unit exercise price of $60.0625. SELECTION OF AUDITORS The Audit Committee of the Board of Directors, consisting of Messrs. Dammann, Lasker, Maisonrouge, Marschalk and Reed, has recommended to the Board that Coopers & Lybrand, who have been the Company's auditors since 1933, be continued in that capacity. The stockholders are being asked to approve the Board's decision to retain Coopers & Lybrand for the fiscal year ending December 31, 1978. A representative of Coopers & Lybrand will be present at the meeting, will be given an opportunity to make a statement if he desires to do so and will be available to answer questions. OTHER MATTERS Management knows of no other business which will be presented to the meeting. If other matters properly come before the meeting, the persons named as proxies will vote on them in accordance with their best judgment. The cost of this solicitation of proxies will be borne by the Company. In addition to the use of the mails, some of the officers and regular employees of the Company may solicit proxies by telephone and telegraph and will request brokerage houses and other custod- ians, nominees and fiduciaries to forward soliciting material to the beneficial owners of the stock held of record by such persons. The Company will reimburse such persons for expenses incurred in forwarding such soliciting material. It is contemplated that additional solicitation of proxies will be made in the same manner under the engagement and direc- tion of D. F. King & Co., Inc., 20 Exchange Place, New York, N.Y. 10005, at an anticipated cost to the Company of $15,000. The Company's 1977 Annual Report, including financial statements for the two years ended December 31, 1977, has been mailed to all stockholders. The Annual Report is not to be considered proxy soliciting material. Eugene J. T. Flanagan, Secretary March 17, 1978 17