<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
UNION CARBIDE CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO OF UNION CARBIDE CORPORATION APPEARS HERE]
Union Carbide Corporation
Notice of Annual Meeting of Stockholders
to be held on April 23, 1997 and
Proxy Statement
March 12, 1997
<PAGE>
[LOGO OF UNION CARBIDE CORPORATION APPEARS HERE]
Union Carbide Corporation
39 Old Ridgebury Road, Danbury, CT 06817-0001
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NOTICE
of Annual Meeting of Stockholders
to be held on April 23, 1997
March 12, 1997
The annual meeting of the stockholders of Union Carbide Corporation will
be held at 10:00 a.m. on Wednesday, April 23, 1997, in the John C. Creasy Health
Education Center, 24 Hospital Avenue, Danbury, Connecticut, 06810, for the
following purposes:
1. To elect a Board of twelve directors for the ensuing year.
2. To ratify the selection of KPMG Peat Marwick LLP as independent
auditors for 1997.
3. To consider management's proposal to adopt the 1997 Union Carbide
Long-Term Incentive Plan.
4. To consider management's proposal to adopt the 1997 Stock Option Plan
for Non-Employee Directors of Union Carbide Corporation.
5. To transact such other business as may properly come before the
meeting.
So that your stock will be represented at the meeting in the event that
you do not attend, please sign the proxy and return it in the enclosed envelope.
By Order of the Board of Directors
[signature appears here]
Vice-President, General Counsel and Secretary
3
<PAGE>
[LOGO OF UNION CARBIDE APPEARS HERE]
Union Carbide Corporation
39 Old Ridgebury Road, Danbury, CT 06817-0001
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PROXY STATEMENT
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
General Information for Stockholders............................................... 5
Matters to be Considered at the Annual Meeting:
1. Election of Directors.................................................... 7
Committees of the Board:
Audit............................................................... 11
Compensation and Management Development............................. 11
Executive........................................................... 11
Finance and Pension................................................. 12
Health, Safety and Environmental Affairs............................ 12
Nominating.......................................................... 12
Public Policy....................................................... 13
Compensation of Directors.............................................. 13
Five Year Cumulative Total Return...................................... 14
Report of Compensation and Management Development Committee............ 15
Summary Compensation Table............................................. 20
Stock Options/SARs Granted--1996....................................... 21
Stock Options/SARs Exercised--1996..................................... 22
Retirement Program..................................................... 22
Security Ownership of Management....................................... 23
Section 16(a) Beneficial Ownership Reporting Compliance ............... 24
Security Ownership of Certain Beneficial Owners........................ 24
Change in Control Arrangements......................................... 25
2. Management Proposal to Ratify KPMG Peat Marwick LLP as
Independent Auditors for 1997............................................ 26
3. Management Proposal to adopt the 1997 Union Carbide
Long-Term Incentive Plan................................................. 27
4. Management Proposal to adopt the 1997 Stock Option Plan for
Non-Employee Directors of Union Carbide Corporation...................... 31
5. Other Business........................................................... 33
Stockholder Proposals for 1998 Annual Meeting...................................... 33
Proxy Solicitation................................................................. 33
Appendix A -- 1997 Union Carbide Long-Term Incentive Plan.......................... 34
Appendix B -- 1997 Stock Option Plan for Non-Employee Directors of
Union Carbide Corporation............................................ 42
Appendix C -- By-Law Amendment..................................................... 47
</TABLE>
4
<PAGE>
General Information for Stockholders
Proxies are solicited from stockholders by the Board of Directors of the
Corporation in order to provide every stockholder an opportunity to vote on all
matters scheduled to come before the meeting, whether or not he or she attends
in person. When the enclosed proxy card is properly executed and returned, the
shares represented will be voted by the proxyholders named on the card in
accordance with the stockholder's directions. Stockholders may vote on a matter
by marking the appropriate box on the card. If the card is executed and
returned, and no choice is specified for a matter, the shares will be voted as
recommended by the Board of Directors on that matter. If a stockholder is a
participant in the Corporation's Dividend Reinvestment and Stock Purchase Plan,
the proxy card will represent both the number of shares registered in the
participant's name and the number of whole shares credited to the participant's
Plan account, and all such shares will be voted in accordance with the
instructions on the proxy card.
It is Union Carbide's policy that all stockholder proxies, ballots and
voting tabulations that identify the votes of specific stockholders be kept
permanently confidential except as may be required by law or to carry out the
purpose of this policy or in the event of a contested proxy solicitation. Access
to proxies and other stockholder voting records will be limited to independent
inspectors of election, independent tabulators and to certain Union Carbide
employees engaged in the receipt, count and tabulation of proxies. Such
employees will be advised of this policy, instructed to comply therewith, and
will sign a statement specifying such compliance. The independent inspectors of
election, in their report to the Board of Directors, will confirm that, to the
best of their knowledge, the Corporation's policy was followed in the tabulation
of the votes. This policy shall not operate to prohibit stockholders from
disclosing the nature of their votes to the Corporation or the Board of
Directors if any stockholder so chooses or to impair free and voluntary
communication between the Corporation and its stockholders.
Management knows of no matters other than those set forth on the proxy
card that will be presented for action at the meeting. Execution of a proxy,
however, confers on the designated proxyholders discretionary authority to vote
the shares represented in accordance with their best judgment on any other
business that may come before the meeting, including stockholder proposals
excluded from the Proxy Statement pursuant to SEC rule 14a-8. Stockholder
proposals to be included in the Corporation's Proxy Statement must comply with
rule 14a-8. See page 33.
Any stockholder executing a proxy may revoke that proxy or submit a
revised one at any time before it is voted. A stockholder may also vote by
ballot at the annual meeting, thereby canceling any proxy previously returned as
to any matter voted on by ballot. A stockholder wishing to name as his or her
proxy someone other than those designated on the proxy card may do so by
crossing out the names of the three designated proxies and inserting the name(s)
of the person(s) he or she wishes to have act as his or her proxy. No more than
three individuals should be so designated. In such a case, it will be necessary
that the proxy be delivered by the stockholder to the person(s) named, and that
the person(s) named be present and vote at the meeting. Proxy cards on which
alternate proxies have been named should not be mailed directly to the
Corporation.
Stockholders of record at the close of business on March 4, 1997 are
entitled to notice of the meeting and to vote the shares held on that date at
the meeting. Each share of common stock and each share of ESOP Convertible
Preferred Stock ("ESOP Stock") of the Corporation is entitled to one vote. A
holder of ESOP Stock is entitled to notice of the meeting and to vote on all
matters submitted to a stockholder vote, voting together with the holders of
common stock as one class. As of January 31, 1997, 126,487,011 shares of common
stock of the Corporation were outstanding. Those shares were held by 50,732
stockholders of record.
5
<PAGE>
As of January 31, 1997, 16,013,876 shares of ESOP Stock were
outstanding. Those shares are held by State Street Bank and Trust Company as
Trustee of the Corporation's Employee Stock Ownership Plan ("ESOP"), which is
part of the Corporation's Savings Program, for the benefit of employees who
participate in the Savings Program. By the terms of a trust agreement, the ESOP
Trustee will vote ESOP Stock allocated to individual participants' accounts
(5,829,968 shares as of January 31, 1997) as directed by such participants, and
will vote all other unallocated shares or any shares for which directions were
not received in the same proportion as the Trustee votes allocated shares for
which voting directions are received.
The nominees receiving a plurality of the votes cast will be elected as
directors. An affirmative vote of a majority of the votes cast is required to
ratify the appointment of auditors. An affirmative vote of a majority of the
combined total of the outstanding shares of the Corporation's common stock and
ESOP Stock is required to adopt the 1997 Union Carbide Long-Term Incentive Plan
and the 1997 Stock Option Plan for Non-Employee Directors of Union Carbide
Corporation. Only those votes cast for or against a proposal are used in
determining the results of a vote. Abstentions are counted for quorum purposes
only. Broker non-votes have the same effect as abstentions.
6
<PAGE>
Matters to be Considered at the Annual Meeting
1. Election of Directors
Unless individual stockholders specify otherwise, each returned proxy will be
voted for the election to the Board of Directors of the Corporation of the
twelve nominees who are named on the following pages. These nominees were
recommended by the Nominating Committee and approved by the Board. Each director
has consented to being named as a nominee for director and agreed to serve if
elected. Each director, if elected, would serve for a term of one year. If any
of those named is not available for election at the time of the annual meeting,
discretionary authority will be exercised to vote for substitutes unless the
Board chooses to reduce the number of directors. Management is not aware of any
circumstances that would render any nominee named herein unavailable. All
nominees are currently serving on the Corporation's Board of Directors. The ages
of the nominees are as of March 1, 1997.
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[PHOTO OF JOHN J. CREEDON APPEARS HERE]
John J. Creedon, age 72, Director since 1984, is Consultant and Director of
Various Corporations and Retired President and Chief Executive Officer of
Metropolitan Life Insurance Company. Mr. Creedon attended New York University
undergraduate and law schools, where he was awarded a B.S. degree in 1952, an
LL.B. in 1955 and an LL.M. in 1962. Mr. Creedon joined Metropolitan Life in
1942. He became an officer of Metropolitan Life in 1962 and was appointed Senior
Vice-President and General Counsel in 1973. In 1976, Mr. Creedon became an
Executive Vice-President of Metropolitan Life. He was named President and
elected a director of Metropolitan Life in 1980 and became Chief Executive
Officer in 1983. He served as President and Chief Executive Officer until
retiring on September 1, 1989. Mr. Creedon is a director of Praxair, Inc.,
Rockwell International and Sonat Inc. He is also a director, trustee or member
of a number of business, educational and civic organizations. Mr. Creedon is
Chairman of the Audit Committee and a member of the Compensation and Management
Development, Executive and Health, Safety and Environmental Affairs Committees
of Union Carbide's Board.
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[PHOTO OF C. FRED FETTEROLF APPEARS HERE]
C. Fred Fetterolf, age 68, Director since 1987, is Director of Various
Corporations and Retired Director, President and Chief Operating Officer of
Aluminum Company of America. Mr. Fetterolf is a graduate of Grove City (PA)
College, where he received a B.S. in chemistry in 1952. He joined the Aluminum
Company of America that same year and, following a number of sales and marketing
assignments and service as Vice-President -- Operations, Primary Products, he
was named Vice-President -- Science and Technology in February 1981 and
Executive Vice-President -- Mill Products later that year. Mr. Fetterolf became
President and a member of the Board of Directors in 1983 and in 1985 he assumed
the additional responsibility of Chief Operating Officer until retiring in 1991.
Mr. Fetterolf is a director of Allegheny Teledyne Corporation, Dentsply
International, Inc., Mellon National Bank, Praxair, Inc., Quaker State
Corporation and Commonwealth Aluminum Corp., a trustee of Carnegie Mellon
University and Eastern College and serves on a number of non-profit boards. He
is Chairman of the Health, Safety and Environmental Affairs Committee and a
member of the Audit, Compensation and Management Development and Nominating
Committees of Union Carbide's Board.
7
<PAGE>
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[PHOTO OF JOSEPH E. GEOGHAN APPEARS HERE]
Joseph E. Geoghan, age 59, Director since 1990, is Vice-President, General
Counsel and Secretary of Union Carbide Corporation. Mr. Geoghan was graduated
from St. John's University, where he received a B.B.A. degree in 1959, and from
Fordham University's School of Law, where he received the degree of J.D. in
1964. He joined Union Carbide in 1957, became a member of Union Carbide's Law
Department in 1963 and in 1973 was appointed Chief International Counsel. He was
named Senior Group Counsel in 1976, Assistant General Counsel in 1980 and, in
1985, was appointed Deputy General Counsel. Mr. Geoghan was elected Vice-
President and General Counsel of the Corporation in 1987 and in 1990 was elected
to the additional office of Corporate Secretary. At that time, he also assumed
responsibility for government affairs. He is a director and past president of
The Corporate Bar Association of Westchester-Fairfield, a director of the Fund
for Modern Courts and a member of the American Bar Association, the New York
City Bar, the New York State Bar Association and the Association of General
Counsel. Mr. Geoghan is a member of the Executive and Public Policy Committees
of Union Carbide's Board.
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[PHOTO OF THOMAS P. GERRITY APPEARS HERE]
Thomas P. Gerrity, age 55, Director since 1997, is Dean of the Wharton School of
the University of Pennsylvania. Dr. Gerrity received the degrees of B.S. and
M.S. in Electrical Engineering in 1963 and 1964 from the Massachusetts Institute
of Technology. Dr. Gerrity served on the faculty of the Sloan School of
Management at the Massachusetts Institute of Technology from 1968 to 1972 and
received his Ph.D. in Management from that institution in 1970. He was a Rhodes
Scholar in economics at Oxford University in 1964 and 1965. Dr. Gerrity was the
founder and Chief Executive Officer of the Index Group, a consulting firm in
business reengineering and strategic change from 1969 to 1989. In 1990, he
became the eleventh Dean of the Wharton School of the University of
Pennsylvania. Dr. Gerrity is a director of CVS Corporation, Digital Equipment
Corporation, the Federal National Mortgage Association, Reliance Group Holdings,
Inc., and the Sun Company, Inc. He is a member of the Executive Committee of
Technology Leaders, L.P., a Trustee of MAS Funds and serves on the advisory
boards for the publication of "Directors & Boards" and the University of
Pennsylvania's Institute for Human Gene Therapy. Dean Gerrity is a member of the
Audit Committee of Union Carbide's Board.
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[PHOTO OF RAINER E. GUT APPEARS HERE]
Rainer E. Gut, age 64, Director since 1994, is Chairman of the Board of
Directors of Credit Suisse Group and Credit Suisse First Boston, and Chairman
designate of Credit Suisse. Mr. Gut was graduated from Cantonal School of Zug,
Switzerland, and had professional training in Switzerland, Paris and London.
Prior to his nomination in 1971 as Chairman and Chief Executive Officer of Swiss
American Corporation, Credit Suisse's U.S. investment banking affiliate at that
time, Mr. Gut was a general partner of Lazard Freres & Co. in New York. Elected
as a Member of the Executive Board of Credit Suisse in 1973, he became its
Speaker in 1977 and its President in 1982. In 1983, he was elected to Credit
Suisse's Board of Directors and became its Chairman. Since 1986 Mr. Gut has
chaired the Board of Directors of CS Holding, the corporation that was renamed
Credit Suisse Group as of January 1, 1997. Mr. Gut is Vice-Chairman of the Board
of Directors of Nestle S.A., Vevey, and is a Member of the Board of Directors of
Daimler-Benz Holding, Zurich, Pechiney, Paris, and Sofina S.A., Brussels. Mr.
Gut is a member of the Compensation and Management Development, Finance and
Pension and Nominating Committees of Union Carbide's Board.
8
<PAGE>
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[PHOTO OF VERNON E. JORDAN, JR. APPEARS HERE]
Vernon E. Jordan, Jr., age 61, Director since 1987, is Senior Partner, Akin,
Gump, Strauss, Hauer & Feld, LLP. Mr. Jordan is a graduate of DePauw University
where he received the degree of B.A. in 1957. He received the degree of J.D.
from Howard University Law School in 1960 and a fellowship from the Institute of
Politics, John F. Kennedy School of Government of Harvard University in 1969.
Mr. Jordan has also received honorary degrees from numerous colleges and
universities. Mr. Jordan, former Executive Director of The United Negro College
Fund and President of the National Urban League, Inc. became a partner in the
law firm of Akin, Gump, Strauss, Hauer & Feld in 1982. He is a member of the
Arkansas Bar, District of Columbia Bar, Georgia Bar, The U.S. Supreme Court Bar,
The American Bar Association, The National Bar Association and The Council on
Foreign Relations. He is a director of the American Express Company, Bankers
Trust Company, Bankers Trust New York Corporation, Dow Jones & Co., Inc., The
Ford Foundation, J.C. Penney Company, Inc., Revlon Group, Inc., Ryder System
Inc., Sara Lee Corporation and Xerox Corporation and a trustee of Howard
University. Mr. Jordan is Chairman of the Nominating Committee and a member of
the Executive, Finance and Pension and Public Policy Committees of Union
Carbide's Board.
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[PHOTO OF WILLIAM H. JOYCE APPEARS HERE]
William H. Joyce, age 61, Director since 1992, is Chairman of the Board,
President and Chief Executive Officer of Union Carbide Corporation. Dr. Joyce
was graduated from Penn State University in 1957 with the degree of B.S. in
chemical engineering and from New York University with the degree of M.B.A. in
1971 and a Ph.D. in Business in 1984. He joined the Chemicals and Plastics
Division of Union Carbide in 1957 and has been associated primarily with the
Corporation's chemicals and plastics business throughout his career. Dr. Joyce
became President of the Silicones and Urethane Intermediates Division in 1982
and was appointed President of the Polyolefins Division in 1985. Dr. Joyce
became Executive Vice-President, Union Carbide Chemicals and Plastics Company
Inc. in 1990, and that same year was elected a Vice-President of the
Corporation. Subsequent to the Corporation's restructuring in 1992, Dr. Joyce
was elected Executive Vice-President of the Corporation responsible for
operations, and in 1993, was elected President and Chief Operating Officer. In
1995, Dr. Joyce was elected President and Chief Executive Officer and effective
January 1, 1996, he was also elected Chairman of the Board. In 1993, Dr. Joyce
received a Medal of Technology from President Clinton. He is a director of CVS
Corporation, Reynolds Metals Company, The Chemical Manufacturers Association and
The American Plastics Council and a trustee of Universities Research
Association, Inc. Dr. Joyce is Chairman of the Executive Committee of Union
Carbide's Board.
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[PHOTO OF ROBERT D. KENNEDY APPEARS HERE]
Robert D. Kennedy, age 64, Director since 1985, is Retired Chairman of the Board
and Chief Executive Officer of Union Carbide Corporation. Mr. Kennedy is a
graduate of Cornell University where he received a B.S. degree in Mechanical
Engineering in 1955. He joined Union Carbide that same year. Mr. Kennedy became
President of the Linde Division in 1977, was elected a Senior Vice-President of
the Corporation in 1981 and an Executive Vice-President in 1982. In 1985, he was
elected a Director and President of Union Carbide Corporation, responsible for
the Chemicals and Plastics Group. In April 1986, he was elected President and
Chief Executive Officer of Union Carbide Corporation and effective December 1986
he was elected Chairman of the Board. He retired from the Corporation on
December 31, 1995. Mr. Kennedy is a director of Birmingham Steel Corporation,
General Signal Corporation, Kmart Corporation, Sun Company, Inc., Union Camp
Corporation and UCAR International, Inc. He is also a member of the Advisory
Boards of The Blackstone Group and RFE Investment Partners, past Chairman of the
Chemical Manufacturers Association, a member of the Board of Trustees of Cornell
University, Chairman of the New Hampton School Trustees, past Chairman of
INROADS, Inc., past Board Member of the Fairfield/Westchester County Chapter of
INROADS, Inc., a member of the Business Council, past member of the Business
Round Table and of the Business Round Table's Education Task Force and its
Environmental Task Force, past Chairman and past member of the Connecticut
Business For Education Coalition (CBEC) and past member of the Commission on
Education Excellence for Connecticut. He is a member of the Audit, Executive,
Nominating and Public Policy Committees of Union Carbide's Board.
9
<PAGE>
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[PHOTO OF RONALD L. KUEHN, JR. APPEARS HERE]
Ronald L. Kuehn, Jr., age 61, Director since 1984, is Director, Chairman,
President and Chief Executive Officer of Sonat Inc. Mr. Kuehn received the
degrees of B.S. in 1957 and LL.B. in 1964 from Fordham University. He joined
Sonat's legal staff in 1970 and was named Vice-President in 1979. He was elected
Senior Vice-President in 1980 and Executive Vice-President in January 1981. In
April 1981, he was elected a director of the Company and was named President and
Chief Operating Officer in 1982. He was appointed Chief Executive Officer in
1984 and elected Chairman in 1986. Mr. Kuehn is a director of various wholly-
owned subsidiaries of Sonat Inc., and a director of AmSouth Bancorporation, The
Dun & Bradstreet Corporation, Praxair, Inc., Protective Life Corporation,
Transocean Offshore Inc., Gas Research Institute and a number of civic
organizations. He is a member of the Board of Trustees of Southern Research
Institute, Birmingham-Southern College, Tuskegee University and a member of The
University of Alabama President's Council. Mr. Kuehn is Chairman of the
Compensation and Management Development Committee and a member of the Finance
and Pension and Health, Safety and Environmental Affairs Committees of Union
Carbide's Board.
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[PHOTO OF ROZANNE L. RIDGWAY APPEARS HERE]
Rozanne L. Ridgway, age 61, Director since 1990, former Assistant Secretary of
State for Europe and Canada. A retired diplomat in the Foreign Service of the
United States, Ambassador Ridgway's 32 year career included ambassadorial
assignments to Finland, to the German Democratic Republic, for Oceans and
Fisheries Affairs and as Counselor of the United States State Department. She
served as Assistant Secretary of State for European and Canadian Affairs from
1985 to 1989. She was President of the Atlantic Council from 1989 through 1992
and Co-Chairman through June, 1996. Ambassador Ridgway is a director of Bell
Atlantic Corporation, The Boeing Company, Citicorp, Citibank N.A., Emerson
Electric Co., Minnesota Mining and Manufacturing Company, RJR Nabisco and Sara
Lee Corporation. She is a member of the International Advisory Board of the New
Perspective Fund and a trustee of The CNA Corporation and the National
Geographic Society. She is a member of several nonprofit institutions concerned
with public policy and serves as non-executive chairman of the Board of the
Baltic-American Enterprise Fund. Ambassador Ridgway is chairman of The Public
Policy Committee and a member of the Audit, Health, Safety and Environmental
Affairs and Nominating Committees of Union Carbide's Board.
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[PHOTO OF JAMES M. RINGLER APPEARS HERE]
James M. Ringler, age 51, Director since 1996, is President and Chief Executive
Officer of Premark International, Inc. Mr. Ringler received the degrees of B.S.
in Business Administration in 1967 and an MBA degree in Finance in 1968 from the
State University of New York. Mr. Ringler was President and Chief Operating
Officer of the Tappan Company from 1982 to 1986 and President of White
Consolidated Industries' Major Appliance Group from 1986 to 1990. Both companies
are subsidiaries of Electrolux AB. He joined Premark International, Inc. in 1990
as Executive Vice-President and was elected to the company's Board of Directors.
He became President and Chief Operating Officer in 1992 and was appointed Chief
Executive Officer in 1996 upon the completion of the spin-off of Tupperware. Mr.
Ringler is a director of Reynolds Metals Company, Thiokol Corporation and
Evanston Hospital and is a trustee of the Manufacturers' Alliance for
Productivity and Innovation. He is a member of the Finance and Pension Committee
of Union Carbide's Board.
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[PHOTO OF WILLIAM S. SNEATH APPEARS HERE]
William S. Sneath, age 70, Director since 1969, is Director of Various
Corporations and Retired Chairman of the Board and Chief Executive Officer of
Union Carbide Corporation. Mr. Sneath joined Union Carbide in 1950 after
graduating from Williams College with the degree of B.A. and from the Harvard
Graduate School of Business Administration with the degree of M.B.A. He was
elected Treasurer of Union Carbide in 1961 and Vice-President and Chief
Financial Officer in 1965. Mr. Sneath was elected a director in 1969 and
President and Chief Operating Officer in 1971. He served as Chairman of the
Board and Chief Executive Officer from 1977 to 1982. He is a director of
Metropolitan Life Insurance Company and Rockwell International Corporation and
is a member of The Business Council. Mr. Sneath is Chairman of the Finance and
Pension Committee and a member of the Executive, Health, Safety and
Environmental Affairs and Nominating Committees of Union Carbide's Board.
10
<PAGE>
During 1996, there were eight regular meetings of the Board of Directors. At
present, there are 12 directors and pursuant to action by the Board, the number
of directors to be elected at the annual meeting will be 12. The retirement
policy of the Board provides that non-employee directors are not eligible for
re-election after reaching age 72 unless an exception is granted by a majority
of the Board. Mr. Creedon was granted a one year exception by unanimous vote of
the Board to permit him to stand for reelection at the 1997 Annual Meeting of
Stockholders. Employee directors, except the Chief Executive Officer, will
retire from the Board at the time of their retirement from the Corporation. Of
the 12 nominees for election at the annual meeting of stockholders, two are
currently officers of the Corporation. Ten are non-employee directors, two of
whom are retired Chief Executive Officers of the Corporation.
Each director is required to be a stockholder of the Corporation. Each
director serves on one or more committees of the Board that oversee such vital
matters as audits, compensation, finance, health, safety and environmental
affairs, nominations, and public policy. Average attendance by directors at
meetings of the Board and its committees during 1996 was 91%. Each director
attended 75% or more of the aggregate of the meetings of the Board and of the
Board committees on which he or she served, except Mr. Gut who attended 56% of
the meetings.
In addition to attending Board and committee meetings, the directors devoted
time during the year to conferring with officers regarding corporate matters and
to reviewing material submitted by management to the Board and Board committees
for consideration and action.
Committees of the Board -- The Board has seven standing committees. Their
functions are described below:
Audit -- The Audit Committee was established in 1972. The Committee supports
the independence of the Corporation's independent and internal auditors and
the objectivity of the Corporation's financial statements; reviews the
Corporation's principal policies for accounting, internal control and
financial reporting; recommends to the Board the engagement or discharge of
the independent auditors; reviews with the independent auditors the plan,
scope and timing of their audit; reviews the auditors' fees and, after
completion of the audit, reviews with management and the independent auditors
the auditors' report.
The Committee also reviews the annual financial statements of the
Corporation; and the procedures for monitoring compliance with the
Corporation's policies on business integrity and ethics and conflicts of
interest. The Committee also performs a number of other review functions
related to auditing the financial statements and internal controls. The
Committee met four times during 1996. Members of the Committee are: John J.
Creedon, Chairman; C. Fred Fetterolf; Thomas P. Gerrity; Robert D. Kennedy
and Rozanne L. Ridgway.
Compensation and Management Development -- The Compensation and Management
Development Committee was established in 1972. The Committee reviews and
recommends to the Board the direct and indirect compensation and employee
benefits of the Chairman of the Board, and other executive officers of the
Corporation; reviews, recommends to the Board and administers any incentive
plans and variable compensation plans that include executive officers; and
reviews the Corporation's policies relating to the compensation of senior
management and, generally, other employees. In addition, the Committee
reviews management's long-range planning for executive development and
succession; establishes and periodically reviews policies on management
perquisites; and performs certain other review functions relating to
management compensation and employee relations policies. The Committee met
three times during 1996. Members of the Committee are: Ronald L. Kuehn, Jr.,
Chairman; John J. Creedon; C. Fred Fetterolf and Rainer E. Gut.
Executive -- The Executive Committee was established in 1917. Subject to any
limitations prescribed by law or by the Board, the Executive Committee has
and may exercise, when the Board is not in session, all the powers of the
Board. The Committee did not meet during 1996. Members of the Committee are:
William H. Joyce, Chairman; John J. Creedon; Joseph E. Geoghan; Vernon E.
Jordan, Jr.; Robert D. Kennedy and William S. Sneath.
11
<PAGE>
Finance and Pension -- The Finance and Pension Committee was established in
1980. The Committee reviews periodically the Corporation's financial policies
and objectives; monitors the Corporation's financial condition and its
requirements for funds; reviews management recommendations as to the amounts,
timing, types and terms of public stock issues and public and private debt
issues; and reviews periodically the Corporation's dividend policy and foreign
exchange operations. The Committee also reviews the financial, investment and
actuarial policies and objectives of the pension program and, periodically,
other employee benefit programs and the investment performance of the fund
established for the pension program. The Committee also performs certain other
review functions related to finance and pension matters. The Committee met four
times during 1996. Members of the Committee are: William S. Sneath, Chairman;
Rainer E. Gut; Vernon E. Jordan, Jr.; Ronald L. Kuehn, Jr. and James M. Ringler.
Health, Safety and Environmental Affairs -- The Health, Safety and Environmental
Affairs Committee was established in 1985, for the purpose of enabling the Board
to expand its review functions with respect to health, safety and environmental
matters. Prior to January 1985, those matters were reviewed by the Public Policy
Committee. The Health, Safety and Environmental Affairs Committee reviews the
Corporation's policies for health, safety and environmental affairs ("HS&EA");
reviews the Corporation's HS&EA performance and its compliance with HS&EA
policies and legal requirements; reviews the Corporation's system for monitoring
its compliance with HS&EA policies and legal requirements; reviews any
significant HS&EA problem and management's response to the problem; and reviews
significant scientific, legislative, governmental and judicial developments and
their effect on corporate policies. The Committee met four times during 1996.
Members of the Committee are: C. Fred Fetterolf; Chairman; John J. Creedon;
Ronald L. Kuehn, Jr.; Rozanne L. Ridgway and William S. Sneath.
Nominating -- The Nominating Committee was established in 1977. The Committee
recommends to the Board nominees for election as directors, and periodically
reviews potential candidates, including incumbent directors.
The Committee reviews policies with respect to the composition,
organization and practices of the Board, and developments in corporate
governance matters generally. The Committee met three times during 1996. Members
of the Committee are: Vernon E. Jordan, Jr., Chairman; C. Fred Fetterolf; Rainer
E. Gut; Robert D. Kennedy; Rozanne L. Ridgway and William S. Sneath.
Candidates for nomination as director are considered on the basis of
their broad business, financial and public service experience; their ability to
represent the interests of all stockholders, rather than the special interests
of a particular group; their reputation, capability and integrity within their
fields or professions; and their ability and willingness to devote the time
required to serve effectively as a director and as a member of one or more Board
committees. In addition, candidates are considered on the basis of their
ability, as a group, to bring to the Board familiarity with national and
international business matters, an appreciation of the appropriate role of the
Corporation in today's society and diverse points of view regarding the many
areas in which the Corporation is involved. Nominees must also be free of any
conflicts of interest, legal impediments or other considerations that might
preclude service as a director of the Corporation.
The Committee will consider nominees recommended by stockholders. All
letters of nomination should be sent to the Secretary of the Corporation and
should include the nominee's name and qualifications and a statement from the
nominee that he or she consents to being named in the proxy statement and will
serve as a director if elected. In order for any nominee to be considered by the
Nominating Committee and, if accepted, to be included in the proxy statement,
such recommendation should be received by the Secretary on or before November 1
preceding the annual meeting at which directors will be elected by the
stockholders.
12
<PAGE>
Public Policy -- The Public Policy Committee was established in 1972.
The Committee reviews the Corporation's policies on and responses to
important social, political and public issues, including matters
relating to international operations, equal employment opportunity,
charitable and education contributions, and legislative issues, as well
as policies on and responses to important stockholder issues, including
stockholder proposals for the proxy statement. The Committee also
performs various other functions relating to public policy matters
generally. The Committee met once during 1996. Members of the Committee
are: Rozanne L. Ridgway, Chairman; Joseph E. Geoghan; Vernon E. Jordan,
Jr. and Robert D. Kennedy.
Compensation of Directors
No director who is an employee is compensated for service as a member of
the Board or any Committee of the Board. Each non-employee director receives an
annual retainer of $30,000. Each non-employee director receives a $1,500 fee for
each Board meeting attended and a $1,500 fee for each committee meeting
attended. The Chairman of a meeting of a Committee of the Board receives a
$3,000 meeting fee. Non-employee directors who perform special services at the
request of the Chairman are compensated by a per diem fee of $1,500. No per diem
fees were paid in 1996. Reimbursement for travel expense is paid when
appropriate. Non-employee directors are not eligible to participate in the
incentive compensation plans or benefit plans which the Corporation maintains
for its employees.
Stock Compensation Plan for Non-Employee Directors -- This plan was approved by
the stockholders on April 22, 1992. The following description gives retroactive
effect to antidilution adjustments made as a result of the spinoff of Praxair,
Inc. in 1992. Each non-employee director on that date received 479 shares for
each year the director was eligible to serve as a director between that date and
December 31, 1996, generally five years. Shares become non-forfeitable at the
rate of 479 shares a year. Also, a director's shares become non-forfeitable when
the director retires, dies or becomes disabled. All shares become non-
forfeitable upon a Change in Control of the Corporation. A participant may vote
and receive dividends on non-forfeitable shares. The sale or transfer of shares
is subject to certain restrictions. At the time shares become non-forfeitable, a
director receives a payment to cover the income tax liability. The plan expired
January 1, 1997.
During 1996, 3,832 shares became non-forfeitable for all nonemployee
directors as a group and the Corporation paid $93,742 to such directors to cover
the income tax liability on those shares.
Non-Employee Directors' Retirement Plan -- The Plan provides a retirement
benefit for non-employee directors who have completed at least five years of
service. The annual benefit equals the annual base retainer in effect when the
director's service ends. Currently, the annual base retainer is $30,000. The
benefit period is for the director's life commencing at the later of age 65 or
termination of service. The present value of the benefit is paid in a lump sum
at termination of service. If a director dies while in service, after having
completed five years of service as a director, then the director's surviving
spouse receives a benefit equal to 50% of the annual retainer for ten years. The
present value of the surviving spouse's benefit is paid in a lump sum at the
time of the director's death. If a director becomes disabled or dies before
completing five years of service, the Nominating Committee may authorize payment
of a benefit to the director or the surviving spouse. Payments are made by the
Corporation or through a grantor trust adopted by the Corporation.
In accordance with the retirement policy of the Board, James M. Hester,
a director for over 32 years, did not stand for reelection at the 1996 Annual
Meeting. Under the Plan, a lump sum payment of $268,999 was paid to Dr. Hester
upon his retirement.
The Board terminated the Plan effective February 1, 1997. The net
present value of the benefits earned by each participant will be credited to the
participant's account under the Non-Employee Directors' Compensation Deferral
Plan which was adopted by the Board effective February 1, 1997.
13
<PAGE>
Non-Employee Directors' Compensation Deferral Plan -- The plan, adopted by the
Board effective February 1, 1997, allows non-employee directors to defer all or
part of their annual retainer and meeting fees, generally until separation of
service as a non-employee director. Participants in this unfunded plan will be
credited with a return on the deferred amounts measured on the same choice of
investment features as those offered under an employee deferral plan, including
a fixed income rate, discounted common stock of the Corporation and five
Fidelity Fund alternatives.
Other -- The Union Carbide Corporation Group Life Insurance Plan for Non-
Employee Directors extends group life insurance coverage of $50,000 to each non-
employee director who elects to participate in the Plan. Costs of premiums are
shared by the participating directors and the Corporation. The Corporation's
share of such premiums in 1996 was $1,368.
Effective March 1, 1997, the Corporation purchased Director's and
Officer's liability insurance from Corporate Officers and Directors Assurance
Ltd., X.L. Insurance Company, Ltd., and ACE Limited to provide continuing
coverage for the individual directors and officers of the Corporation and its
subsidiaries at an annual cost of approximately $550,000.
Compensation Committee Interlocks and Insider Participation -- The members of
the Compensation and Management Development Committee are: Ronald L. Kuehn, Jr.,
Chairman; John J. Creedon; C. Fred Fetterolf and Rainer E. Gut. For the period
January 1, 1996 to April 24, 1996, Vernon E. Jordan, Jr. was a member of the
Committee. Mr. Jordan is a partner of the law firm of Akin, Gump, Strauss, Hauer
& Field and that law firm was retained by and rendered services to the
Corporation in 1996.
Five Year Cumulative Total Return/(1)/
- --------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
(1) For fiscal years ending December 31. Total return assumes that the value
of an investment in UCC common stock and each index was $100.00 on
December 31, 1991 and that all dividends, including the distribution of
Praxair, Inc. stock, were reinvested. Past performance is not necessarily
an indicator of future results.
<TABLE>
<CAPTION>
Graph Dollar Values 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
UCC 206.48 289.25 396.70 509.55 564.91
S&P 500 107.59 118.40 119.93 164.95 202.75
S&P Chemicals 109.53 122.50 141.59 185.01 240.46
</TABLE>
14
<PAGE>
Report of the Compensation and Management
Development Committee on Executive Compensation
The Corporation's management compensation programs are approved and
administered by the Compensation and Management Development Committee of the
Board of Directors (the Committee), consisting since its inception only of non-
employee ("outside") Directors. The programs have three fundamental objectives:
to set compensation at levels sufficient to attract and retain a diverse mix of
experienced, highly competent executives; to provide incentives to improve the
Corporation's financial performance and performance against strategic and
operational goals (comprising corporate metrics and "measures of performance" or
"MOPs" as discussed in detail below); and to evaluate, reinforce and reward
individual achievement of business objectives and demonstration of "leadership
behaviors" with pay that fluctuates with performance. Programs that meet these
objectives help ensure that the Corporation is well managed and provide
substantial assurance to shareholders that management's interest in building
value is closely aligned with that of its shareholders, as we believe to be the
case at Union Carbide.
The Committee has a central role in approving corporate goals and
reviewing performance in conjunction with the full Board. The Committee meets
early each year to review the Corporation's prior year performance against goals
set at the start of the year, to review executive compensation in light of
performance, and to consider MOPs for the new year in conjunction with the full
Board. It meets again later in the year with the Chairman/CEO and non-employee
Directors to evaluate executive performance and review management development
and succession planning, and meets at other times during the year with
independent consultants well acquainted with industry practice to review
executive compensation and to consider revisions or improvements to programs
that may be useful in linking compensation more closely to performance. The
Committee met three times during 1996.
Significant organizational changes occurred in November 1995 with the
election of Dr. William H. Joyce as Chairman, effective January 1, 1996. Dr.
Joyce added this role to his ongoing duties as President and CEO -- (having been
elected CEO in April 1995). Dr. Joyce succeeded Mr. Robert D. Kennedy, who
retired from the Corporation on December 31, 1995 and remains on the Board of
Directors.
Sources of Competitive Data -- The Corporation surveys compensation data for a
limited number of companies to establish pay ranges by grade level for base
salary and total compensation which are competitive with industry generally.
Competitive compensation data for executive level positions are also obtained
through consultants. The data base thus obtained includes both chemical
companies and the chemicals and plastics segments of major oil companies. Since
the size of these comparison companies (as measured by sales) varies, the
consultant makes adjustments to the competitive analysis to account for this
variable. The Corporation believes these companies represent an appropriate
benchmark group, whose executive positions require talents and capabilities
similar to UCC's own executive positions.
For financial performance comparisons, the Corporation looks at various
groupings within the surveyed companies, which include several of the companies
in the S&P Chemicals Index. These groupings are different for the Return on
Capital (ROC) performance comparison and the Market to Book ratio comparison
described on page 17. The companies in the ROC performance group best
approximate UCC's businesses and are similarly affected by margins in the
product markets in which the Corporation competes. The companies in the market
to book ratio comparison are publicly traded chemical companies -- both those in
the S&P Chemicals Index as well as others -- which are considered chemical
industry investment alternatives. The Committee believes that comparison with
the companies in each group -- for ROC and market to book performance,
respectively -- is more appropriate than exclusive comparison with the companies
currently comprising the S&P Chemicals Index.
15
<PAGE>
Components of the Compensation Package -- The compensation package for the
Corporation's executives has four components: base salary, which reflects the
executive's pay grade and level of responsibility and permits income
predictability; profit sharing, typically paid in cash (also ESOP Stock
beginning with 1996), which places a small percentage of base pay at risk and
provides for upside potential; variable compensation, typically paid in cash,
which reflects relative corporate, business unit and individual performance as
well as the individual's grade level; and long-term incentives, consisting
chiefly of stock options (which create value only if the price of the
Corporation's shares appreciates) and restricted stock (which encourages share
ownership and long term retention).
The Committee targets compensation decisions for executives to produce
median total compensation opportunity for similar jobs found in the surveyed
companies. However, the performance-based nature of the overall package may
produce total compensation above or below the median based on corporate,
business unit and individual performance.
Base Salary -- At least once a year, the Committee reviews the base salary of
the Chairman and CEO, and in consultation with the Chairman and CEO, reviews the
base salaries of executive officers, evaluating their individual performance to
determine if adjustments are warranted. For executive positions, this is an
assessment of the overall manner in which the role is carried out. As noted, the
Committee also compares base salary levels with the average of those in the
companies surveyed to make sure they remain competitive. The objective is to
approximate the average base pay for a given position, after adding back the
"pay at risk" for profit sharing, described below as 5% -- the amount earned
when the Corporation's return on capital equals its average cost of capital.
Dr. Joyce is relatively new to his position and grade level and, as a
result, his base pay is below the competitive group average. As a consequence of
this and his noteworthy performance, the Committee elected to grant an increase
in February 1997 of 13% of base pay. The executive officers as a group
(exclusive of Dr. Joyce) were granted base pay increases averaging approximately
5% effective at various times during the next twelve months.
Profit Sharing -- The profit sharing plan and the ESOP profit sharing plan cover
virtually all employees. Participants in the plans have the opportunity to earn
extra pay every quarter in which return on invested capital for the Corporation
exceeds a predetermined level. The maximum payout is ten days' base salary per
calendar quarter. Profit sharing returned 29 days' pay for 1996 performance. To
accomplish the "pay at risk" concept, the Corporation has set base salaries for
all job grades about 5% below the average of the surveyed companies. Through
profit sharing, the 5% can be earned back to restore base pay to competitive
levels, and in exceptional years, to exceed the competitive average by up to
10%. The Corporation's officers participate in both profit sharing plans.
Subject to Internal Revenue Code limits, the officers received an allocation of
ESOP Stock under the ESOP profit sharing plan for the first 16 days of 1996
profit sharing, with an additional allocation worth 4 days' pay to cover certain
income and excise taxes on voluntary withdrawals of this ESOP Stock from the
plan. Any portion of this 20 days pay that could not be allocated under the ESOP
profit sharing plan because of Internal Revenue Code limits was credited to the
officer under the Compensation Deferral Plan discussed below. Any remaining
profit sharing was paid in cash.
Variable Compensation -- Because earnings in the chemicals and plastics industry
are significantly affected by the chemical business cycle, the Corporation's
variable compensation program is largely based on relative performance against
the financial comparison companies, most of which are similarly affected by the
cycle. Variable compensation is also based on the degree of success in achieving
individual as well as corporate measures of performance. Given the Corporation's
policy to "pay for performance," when performance exceeds the competitive group
average, the combination of base salary, profit sharing and variable
compensation should also exceed the competitive group average. Similarly, when
performance falls short of the competitive group average, total compensation
should fall below the average as well.
16
<PAGE>
Variable compensation serves to focus executives on those activities
most directly within their control, for which they should be held accountable.
It recognizes that individual performance can be strong or weak despite business
results that year, affording an opportunity to recognize outstanding individual
contributions in any year. An implication of this design is that there may be
years in which some executives receive considerably larger variable compensation
payments than others. These differences indicate the presence of a "pay for
performance" environment. There are two plans which provide variable
compensation to corporate officers -- the Performance Incentive Plan [PIP] and
the Variable Compensation Plan [VCP], both described below. There are ten
executive officers covered under both plans for 1996.
The PIP was effective January 1, 1995 and was approved by shareholders
in April 1995. The Plan is based exclusively on the Corporation's relative ROC
performance against financial comparison companies over a 12 month fiscal year
ending September 30. Since payouts under this Plan qualify as "performance
based," they are deductible by the Corporation under the provisions of Section
162(m) of the Internal Revenue Code, even if total compensation exceeds $1
million to any one individual. The Committee retains discretion to reduce
payouts calculated by formula under this Plan, but has no discretion to increase
individual awards above the maximum specified under the Plan. Pursuant to the
PIP, the Committee awarded $740,000 to Dr. Joyce for 1996 ROC performance. Total
payments under the PIP to the executive officers as a group (including Dr.
Joyce) were $2,104,000 for 1996 ROC performance.
Variable Compensation Plan payments for executive officers are
determined by the Committee. The calculation is based on specific measurable
criteria known as "metrics," progress against non-financial corporate measures
of performance and each executive officer's contribution to achievement of the
metrics and MOPs. The metrics include:
Relative Shareholder Value -- as measured by the Market to Book ratio of the
Corporation's common stock vs. the market to
book comparison companies
Growth -- as measured by growth in sales volume over
three years
Productivity -- as measured by actual fixed cost per pound of
product
The above three metrics collectively represent 60% of the VCP award
value at target, leaving 40% consideration for the other key non-financial
corporate MOPs. In any given year, the weighting of one performance measure over
another may vary.
The 1996 MOPs included a number of ambitious short term goals. These
included continued improvement in Health, Safety and Environmental performance
under the Responsible Care(R) Program; "people excellence," with an emphasis on
upward mobility of women and minorities, human asset management, career
planning, and training and education; attainment of corporate financial targets,
as well as profit enhancement and capital program goals; strategic plan
implementation and technology leadership, including successful implementation of
global joint ventures which rely on the Corporation's competitively advantaged
technology and yield high returns consistent with UCC's ROC goals; continued
progress in implementing UCC's corporate wide information system; continued
excellence in customer focus; and continued effectiveness in communicating
clearly and credibly with our critical internal and external constituencies.
At its February 1997 meeting, the Committee gave heaviest weight to
UCC's Responsible Care(R) Goals, Corporate Financial Performance, Strategic Plan
Implementation and Technology Leadership as particularly significant measures of
performance.
With respect to Responsible Care(R), substantial consideration was given
to the fact that the Corporation now has completed five consecutive years
without a fatality or significant process related event. The Committee also took
note of additional improvement in Health, Safety and Environment statistics,
particularly progress in worker safety (recordable illness and injury rate) and
the reduced number and quantity of key spills.
17
<PAGE>
Of particular note with respect to Corporate Financial Performance were
excellent fixed cost control during 1996 and the fact that the Corporation was
ahead of schedule on its $637 million cost saving/profit improvement program,
having passed the half-way mark by the end of the third quarter.
Highlights under Strategic Plan Implementation were completion of the
financing for the EQUATE joint venture project and continued progress in the
Corporation's information systems transformation. The new voice and data
infrastructure was fully operational by year-end and the Corporation was moving
into the implementation phase of conversion to new SAP-based information
systems.
With respect to Technology Leadership, particular consideration was
given to reaching agreement with Exxon Chemical to form a polyethylene
technology, licensing and catalyst joint venture and to research and development
progress being made in three major chemicals growth programs based on new
process technologies.
Other significant factors considered were increased employee acceptance
of "people excellence" as a major goal and increased employee recognition of the
value of diversity; capital spending in line with expectations; mechanical
completion of the ethylene propylene rubber plant at Seadrift, Texas; awards and
other recognition from customers for the high quality of our products and
services; and continued consistency and clarity of communications.
Based on the above assessment, the Committee rewarded Dr. Joyce's
leadership in advancing the Corporation's strategic plan and elected to award a
Variable Compensation Plan payment of $310,000, which when combined with his
award under the Performance Incentive Plan, produced a total award of
$1,050,000 -140% of his December 1996 base salary. In authorizing this award,
the Committee took special note of the Corporation's strong performance against
the growth and productivity metrics as well as the performance against the
Corporation's MOPs discussed above. Consistent with similar award practices in
the U.S. chemical industry, standard individual awards under the two variable
compensation programs (the Performance Incentive Plan and Variable Compensation
Plan) can range from 5 to 60% of annual base salary, depending on pay grade, but
can be considerably greater (up to 150% of annual salary, at the Chairman and
CEO level) in years of exceptional performance. Awards may also be withheld
entirely when corporate performance falls short of goals, as happened in the
case of senior executive officers for 1991 performance.
Long-Term Incentives: Stock Options and Restricted Stock Matching -- Stock
options are generally granted annually, at the closing price of the
Corporation's common stock as reported on the New York Stock Exchange --
Composite Transactions on the date of the grant. Since 1989, they have specified
a holding period of at least two years from the grant date. Options expire after
ten years. Except for adjustments to reflect major changes in the Corporation's
capital base, as occurred after the industrial gases spin-off in 1992, the
Corporation has neither adjusted the price nor amended the financial terms of
outstanding options. This means executives cannot benefit from stock price
appreciation until and unless shareholders also benefit. Stock options serve
both Corporation and shareholder interests by linking all executives to a common
goal -- increasing shareholder value -- regardless of where in the Corporation
they work.
Beginning in 1995, the Restricted Stock Matching Program (authorized
under the 1994 Long-Term Incentive Plan) was made available to all employees
eligible for variable compensation (approximately 1,900 worldwide). Participants
have 60 days from receipt of their variable compensation to deposit with the
Corporation for a period of three years UCC stock worth up to 25% of their
variable compensation. The Corporation then grants a share for share match of
restricted stock which vests after 3 years. Since the Restricted Stock Matching
Program was meant to complement the Stock Option Program, the value of the
restricted stock grant for which an employee was eligible in 1996 was offset in
the December 1996 stock option grant in a 3 to 1 ratio (i.e. 3 fewer options for
each share of restricted stock), delivering total competitive, long-term
incentive value to those participating in both programs. Stock option eligible
participants (approximately 535 worldwide) were given a choice in 1996 to either
participate in the restricted stock matching program (with the resulting offset
in stock options as described above) or forego restricted stock matching, and
receive a correspondingly higher stock option grant. The restricted stock
matching program was discontinued after the 1996 grants.
18
<PAGE>
The Committee regularly reviews the competitiveness of the Corporation's
long-term incentives and may in the future consider other forms of long-term
compensation. For 1996, stock options and restricted stock matching were the
Corporation's only incentives tied to long-term performance. Most of the
surveyed companies have more incentive programs tied to long-term results. To
keep total compensation competitive, the Committee has generally granted more
stock options than would be the case if Union Carbide had a greater number of
programs tied to long-term performance.
Stock options are valued with formulas which estimate the value of a 10
year option on the date of grant. At any point in time, this value may vary
based on the stock's volatility, price and dividend levels. As a consequence of
the stock's estimated value and the offset required for the value of the
restricted stock matching grant, the total number of shares authorized in
December 1996 was 10% less than authorized under the previous grant.
Given the 1996 performance of the Corporation, and Dr. Joyce's role in
particular, the Committee awarded him 130,000 stock options in December 1996.
Specifically, the Committee noted the excellent progress made in profitability
performance and the significant efforts underway to achieve continued
productivity and profitability gains under his stewardship. The size of the
grant to Dr. Joyce, as well as to the other executive officers, was
approximately at the median for long term incentives granted by the surveyed
companies for comparable positions (which includes the value of restricted stock
matching). In 1996, Dr. Joyce also participated in the Restricted Stock Matching
Program. After pledging 5,172 shares of UCC stock in his Savings Program
account, he received a matching grant of 5,172 restricted shares which will vest
in June 1999.
Stock Ownership -- Four years ago, the Board of Directors initiated stock
ownership guidelines for senior management to forge a direct link between
management and shareholders and create an incentive to increase the company's
market value. Under the guidelines, management would be expected to own stock
valued at four times the annual base salary for the Chairman/CEO; and amounts
equal to annual base salary for the remaining executive officers, with a five
year period to achieve these guidelines. Most officers already exceed their
guideline amount by a wide margin and the few who have not yet achieved them
have made substantial progress. Dr. Joyce, in particular, already holds over
twelve times his December base pay in the Corporation's stock, well above his
guideline of four times base pay. In October 1993, the Committee endorsed the
extension of these ownership guidelines to a broader group of managers
(approximately 110 others) who are expected to own stock valued at either one
times annual base salary or at one third of annual base salary, depending on
position level. They also have five years to achieve these stock ownership
levels. At year-end 1996, over 92% of the group had attained their guideline
level of ownership.
Compensation Deferral Program -- The Corporation maintains a voluntary unfunded
compensation deferral program into which participants may defer up to 25% of
their base salary and up to 85% of their variable compensation, with payout
generally commencing at or after retirement. A portion of these deferrals may be
subject to a matching employer contribution. All of the Corporation's executive
officers elected to participate in the program in 1996 and their allocations
into Deferred Plan stock units are reported in the Security Ownership of
Management table on page 23.
Summary -- The Compensation and Management Development Committee believes that
the objectives of the compensation and incentive programs at the Corporation are
consistent with programs maintained by comparable industrial companies and serve
to keep shareholder and management interest in building value closely aligned.
The Corporation's senior executives have successfully positioned the
organization for global competition and their continuing efforts during 1996
have greatly expanded its worldwide opportunities for profitable growth.
Compensation and Management Development Committee
Ronald L. Kuehn, Jr., Chairman John J. Creedon C. Fred Fetterolf
Rainer E. Gut
19
<PAGE>
Summary Compensation Table
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
All Other
Annual Compensation Long Term Compensation Compensation/(4)/
--------------------------------- ------------------------------------------- ----------------
Number of
Securities
Annual Other Underlying
Variable Annual Restricted Options/SARs
Name and Principal Position Year Salary Compensation Compensation/(2)/ Stock/(3)/ Granted
- --------------------------- ---- ------ ------------ ----------------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
William H. Joyce 1996 $737,500 $1,050,000(1) $95,192 $222,396 130,000 $166,538
Chairman, President and 1995 550,000 825,000 92,308 119,325 111,000 114,740
Chief Executive Officer 1994 445,833 465,000 42,404 -0- 90,000 44,902
Joseph E. Geoghan 1996 $378,750 $ 265,000(1) $54,575 $ 74,132 26,000 $ 56,142
Vice-President, General 1995 368,750 275,000 63,444 68,007 30,000 46,674
Counsel and Secretary 1994 350,000 265,000 42,436 -0- 41,000 25,980
Lee P. McMaster 1996 $262,083 $ 265,000(1) $36,173 $ 62,006 21,000 $ 53,514
Corporate Vice-President/General 1995 241,667 230,000 40,000 46,192 25,000 33,502
Manager - Ethylene Oxide/Glycol 1994 221,667 180,000 22,615 -0- 29,000 18,513
Joseph C. Soviero 1996 $333,750 $ 265,000(1) $42,519 $ 63,339 21,000 $ 50,428
Corporate Vice-President, 1995 320,000 235,000 56,081 51,318 25,000 30,786
Ventures & Purchasing 1994 303,333 200,000 30,154 -0- 29,000 17,687
Roger B. Staub 1996 $290,000 $ 265,000(1) $38,077 $ 70,090 21,000 $ 63,852
Corporate Vice-President/ 1995 271,667 260,000 43,077 55,163 25,000 53,040
General Manager-Unipol Systems 1994 255,000 215,000 24,500 -0- 29,000 38,058
John K. Wulff 1996 $280,000 $ 215,000(1) $35,538 $ 56,631 14,000 $ 41,353
Corporate Vice-President, 1995 271,667 210,000 43,077 46,192 15,000 27,422
CFO and Controller 1994 264,167 180,000 25,442 -0- 25,000 8,777
</TABLE>
- --------------------------------------------------------------------------------
(1) Annual Variable Compensation includes payments under both the Performance
Incentive Plan and the Variable Compensation Plan. The Performance
Incentive Plan rewards executive officers exclusively for ROC performance.
The Variable Compensation portion of the annual award is based on
performance against other key metrics and corporate "Measures of
Performance" (MOPs).
(2) Other Annual Compensation in 1994, 1995 and 1996 for Mr. Geoghan includes
financial planning and related tax advice and service as well as profit
sharing and, for 1996, ESOP profit sharing. The 1994, 1995 and 1996 amounts
for Dr. Joyce, and Messrs. McMaster, Soviero, Staub and Wulff include
profit sharing and, for 1996, ESOP profit sharing. Also included in this
column for Mr. Soviero is a tax equalization payment of $6,850 in 1995 on
the 1993 annuity purchase to fund the Corporation's obligations for certain
nonqualified retirement benefits.
(3) Restricted stock holdings as of December 31, 1996 and their fair market
value based on the per share closing price of the Company's common shares
on the New York Stock Exchange on December 31, 1996 ($40.875) were as
follows:
<TABLE>
<CAPTION>
W.H. Joyce J.E. Geoghan L.P. McMaster J. C. Soviero R. B. Staub J.K. Wulff
---------- ------------ ------------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
No. of Restricted Shares: 9,424 4,137 3,083 3,296 3,589 2,957
Value on Dec. 31, 1996: $385,226 $169,110 $126,036 $134,704 $146,718 $120,883
</TABLE>
Dividends are payable on the restricted shares to the extent and on the
same date as dividends are paid on all other Company common shares, are
reinvested in restricted shares, and their value is included in the totals
above.
(4) All Other Compensation includes annual life insurance premiums paid to
split dollar life insurance contracts and employer contributions to the
Savings Program. The amount of the whole life insurance portion reported as
paid for the named executive officer is the entire premium minus that
portion of the premium actually paid by the executive officer. For 1996,
life insurance premiums were $74,767 for Dr. Joyce; $42,080 for Mr.
Geoghan; $31,158 for Mr. McMaster; $36,366 for Mr. Soviero; $33,837 for Mr.
Staub and $13,573 for Mr. Wulff. Employer contributions to the Savings
Program were $8,437.50 for Dr. Joyce and Messrs. Geoghan, McMaster,
Soviero, Staub and Wulff. This matching contribution was made in the form
of ESOP Stock. Under the Omnibus Budget Reconciliation Act of 1993 (OBRA),
for 1996 the maximum amount of compensation that may be recognized for
employer matching contributions was limited to $150,000. Additional
allocations to the nonqualified compensation deferral program for 1996
include $83,333 for Dr. Joyce; $5,625 each for Messrs. Geoghan and Soviero;
$13,918 for Mr. McMaster, $21,578 for Mr. Staub and $19,343 for Mr. Wulff.
20
<PAGE>
Stock Options/SARs Granted -- 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Potential Realizable Value at Assumed
Annual Rates of Stock Price
Individual Grants Appreciation for Option Term/(1)/
--------------------------------------------------- -----------------------------------------------
5% 10%
------------------ -------------------------
Number of
Securities % of Total
Underlying Options/SARs Assumed Potential Assumed Potential
Options/SARs Granted to Exercise Expiration Stock Realizable Stock Realizable
Name Granted Employees Price Date Price Value Price Value
- -------------------------- ------------ ------------- -------- ---------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William H. Joyce 130,000 11.3% $45.625 12/3/06 $74.318 $3,730,090 $118.339 $9,452,820
Chairman, President and
Chief Executive Officer
Joseph E. Geoghan 26,000 2.3% $45.625 12/3/06 $74.318 $ 746,018 $118.339 $1,890,564
Vice-President, General
Counsel and Secretary
Lee P. McMuster 21,000 1.8% $45.625 12/3/06 $74.318 $ 602,553 $118.339 $1,526,994
Corporate Vice-President/
General Manager -
Ethylene Oxide/Glycol
Joseph C. Soviero 21,000 1.8% $45.625 12/3/06 $74.318 $ 602,553 $118.339 $1,526,994
Corporate Vice-President,
Ventures & Purchasing
Roger B. Staub 21,000 1.8% $45.625 12/3/06 $74.318 $ 602,553 $118.339 $1,526,994
Corporate Vice-President/
General Manager -
Unipol Systems
John K. Wulff 14,000 1.2% $45.625 12/3/06 $74.318 $ 401,702 $118.339 $1,017,996
Corporate Vice-President,
CFO and Controller
Gain of All Recipients of
1996 Stock Options as % --- --- --- --- $74.318 0.9%/(2)/ $118.339 0.9%/(2)/
of All Shareholders Gain
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The assumed annual rates of stock price appreciation of 5% and 10% are set
by SEC rule and are not intended as a forecast of possible future
appreciation in stock prices.
(2) Assumes that the number of shares of common stock outstanding at December
31, 1996 is the same number outstanding at the relevant future date.
Note: Stock Options are generally exercisable two years from the date of grant.
In the event of a Change of Control of the Corporation, all outstanding stock
options become immediately exercisable. Options also become immediately
exercisable upon the death of the participant. Refer to Change in Control
discussion on page 25 for further provisions regarding Change in Control.
21
<PAGE>
Stock Options/SARs Exercised in 1996 and Stock Option/SAR Values at 12/31/96
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs In-the-Money Options/SARs
Shares Held at 12/31/96 Held at 12/31/96(1)
Acquired Value -------------------------- --------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------ ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William H. Joyce
Chairman, President and Chief
Executive Officer -0- -0- 416,000 241,000 $9,187,067 $55,500
Joseph E. Geoghan
Vice-President, General Counsel
and Secretary 60,000 $2,108,940 206,000 56,000 $4,224,350 $15,000
Lee P. McMaster
Corporate Vice-President/
General Manager - Ethylene
Oxide/Glycol -0- -0- 127,400 46,000 $2,695,509 $12,500
Joseph C. Soviero
Corporate Vice-President,
Ventures & Purchasing 78,000 $2,678,117 109,000 46,000 $2,090,250 $12,500
Roger B. Staub
Corporate Vice-President/General
Manager - Unipol Systems 7,000 $ 235,088 186,800 46,000 $4,561,867 $12,500
John K. Wulff
Corporate Vice-President,
CFO and Controller -0- -0- 127,000 29,000 $2,901,604 $ 7,500
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based on a closing price of $40.875 per share on December 31, 1996 as
reported on NYSE-Composite Transactions. No stock appreciation rights
(SARs) were exercised during 1996 and none are outstanding.
Messrs. Geoghan, McMaster, Soviero, Staub, Wulff and Dr. Joyce may also
receive income from the exercise of certain options to purchase the stock
of Praxair, Inc. which were granted in connection with the spinoff of
Praxair, Inc. to the Corporation's stockholders on June 30, 1992. On that
date, each holder of UCC options received an equal number of Praxair
options and the exercise prices of the UCC options were reduced.
Immediately after the spinoff, the combined exercise prices of the UCC
options and Praxair options equaled the exercise prices of the UCC options
prior to the spinoff. In 1996, the amount of income received by Messrs.
Geoghan, Soviero, Staub, Wulff and Dr. Joyce as a result of the exercise of
Praxair options was $607,038, $2,558,168, $288,378, $608,949 and $325,533,
respectively.
<TABLE>
<CAPTION>
Retirement Program
- ------------------------------------------------------------------------------------------------------------------------------------
Average Final Estimated Annual Retirement Benefits at Age 65
Compensation for Years of Service Indicated
Used for
Calculating ----------------------------------------------------------------------------------------------------
Retirement Benefits(1) 15 Yrs. 20 Yrs. 25 Yrs. 30 Yrs. 35 Yrs. 40 Yrs. 45 Yrs.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 100,000 $ 22,500 $ 30,000 $ 37,500 $ 45,000 $ 52,500 $ 60,000 $ 67,500
150,000 33,750 45,000 56,250 67,500 78,750 90,000 101,250
250,000 56,250 75,000 93,750 112,500 131,250 150,000 168,750
500,000 112,500 150,000 187,500 225,000 262,500 300,000 337,500
750,000 168,750 225,000 281,250 337,500 393,750 450,000 506,250
1,000,000 225,000 300,000 375,000 450,000 525,000 600,000 675,000
1,500,000 337,500 450,000 562,500 675,000 787,500 900,000 1,012,500
2,000,000 450,000 600,000 750,000 900,000 1,050,000 1,200,000 1,350,000
2,500,000 562,500 750,000 937,500 1,125,000 1,312,500 1,500,000 1,687,500
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The compensation covered by the Retirement Program includes base salary,
annual variable compensation and eligible profit sharing. Benefits are
determined by average final compensation, are computed on a straight-life
annuity basis, and are subject to an offset for Social Security. The table
reflects the combination of qualified and nonqualified pension benefits. As
of December 31, 1996, William H. Joyce, age 61 was credited with 39 years;
Joseph E. Geoghan, age 59, 39 years; Lee P. McMaster, age 54, 24 years;
Joseph C. Soviero, age 58, 31 years; Roger B. Staub, age 62, 40 years and
John K. Wulff, age 48, 9 years.
22
<PAGE>
Security Ownership of Management
At February 1, 1997, all directors and officers as a group (20 persons)
beneficially owned 3,145,296 shares (2.06%) of the Corporation's common stock.
As required by SEC rule, the number of shares of common stock beneficially owned
includes shares as to which a right to acquire ownership exists, such as through
the exercise of employee stock options and conversion of convertible securities.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Number of Shares Title of
Name Position Beneficially Owned/(l)/ Class
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
W. H. Joyce Director,Chairman,President and 218,863/(2)/ Common Stock
Chief Executive Officer 3,453 ESOP Convertible Preferred Stock
9,424 Restricted Stock
34,634 Deferral Plan Stock/(3)/
416,000 Exercisable Stock Options
------- -----------------------------------
682,374 Total
J. E. Geoghan Director, Vice-President, 23,278 Common Stock
General Counsel and Secretary 3,391 ESOP Convertible Preferred Stock
4,137 Restricted Stock
206,000 Exercisable Stock Options
------- -----------------------------------
236,806 Total
L. P. McMaster Corporate Vice-President, 5,852 Common Stock
General Manager - 2,597 ESOP Convertible Preferred Stock
Ethylene Oxide/Glycol 3,083 Restricted Stock
4,688 Deferral Plan Stock/(3)/
127,400 Exercisable Stock Options
------- -----------------------------------
143,620 Total
J. C. Soviero Corporate Vice-President, 10,935 Common Stock
Ventures and Purchasing 3,358 ESOP Convertible Preferred Stock
3,296 Restricted Stock
109,000 Exercisable Stock Options
------- -----------------------------------
126,589 Total
Roger B. Staub Corporate Vice-President 25,647 Common Stock
General Manager - Unipol Systems 3,250 ESOP Convertible Preferred Stock
3,589 Restricted Stock
8,179 Deferral Plan Stock/(3)/
180,500 Exercisable Stock Options
------- -----------------------------------
221,165 Total
J. K. Wulff Corporate Vice-President, 44,234 Common Stock
Chief Financial Officer and Controller 3,297 ESOP Convertible Preferred Stock
2,957 Restricted Stock
7,586 Deferral Plan Stock/(3)/
127,000 Exercisable Stock Options
------- -----------------------------------
185,074 Total
J. J. Creedon Director 13,412 Common Stock
C. F. Fetterolf Director 4,608 Common Stock
T. P. Gerrity Director 1,000 Common Stock
R. E. Gut Director 5,000 Common Stock
V. E. Jordan, Jr. Director 3,974 Common Stock
R. D. Kennedy Director 250,057/(4)/ Common Stock
8,146 Restricted Stock
750,000 Exercisable Stock Options
------- -----------------------------------
1,008,203 Total
R. L. Kuehn, Jr. Director 6,096 Common Stock
R. L. Ridgway Director 2,984 Common Stock
J. M. Ringler Director 479 Common Stock
W. S. Sneath Director 17,865/(5)/ Common Stock
All Officers and 728,593 Common Stock
Directors (20 persons) 30,260 ESOP Convertible Preferred Stock
41,198 Restricted Stock
62,295 Deferral Plan Stock/(3)/
2,282,950 Exercisable Stock Options
--------- -----------------------------------
3,145,296 Total
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Except as noted in the footnotes below, the beneficial owners of the shares
shown above had sole voting power and sole investment power with respect to
the shares of common stock and shared voting power and shared investment
power with respect to the shares of ESOP Stock.
(2) The shares of common stock listed as beneficially owned by Dr. Joyce
include 2,000 shares that are owned by his children as to which beneficial
ownership is disclaimed.
(3) Deferral Plan Stock represents units based on the price of the
Corporation's common stock into which deferred compensation has been
allocated pursuant to the Compensation Deferral Plan. There are no voting
rights with respect to Deferral Plan Stock. The value of the units of
Deferral Plan Stock varies with the price of the Corporation's common stock
and, at the time of payout, the units are payable in common stock of the
Corporation.
(4) The shares of common stock listed as beneficially owned by Mr. Kennedy
include 50,000 shares that are held by The Arnold F. Baggins Foundation in
which Mr. and Mrs. Kennedy have shared investment and voting power and
disclaim beneficial ownership.
(5) The shares of common stock listed as beneficially owned by Mr. Sneath
include 873 shares that are owned by his spouse as to which beneficial
ownership is disclaimed.
23
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
During 1996, two section 16(a) reports were filed late. The report covering
the purchase of 500 shares of common stock of the Corporation by Mr. C. Fred
Fetterolf on January 25, 1996 was filed February 29, 1996. The report of the
election of Mr. James M. Ringler as a director of the Corporation effective
December 3, 1996 was filed on January 10, 1997. The grant of 479 shares of
common stock of the Corporation to Mr. Ringler under the Stock Compensation Plan
for Non-Employee Directors was filed on time.
<TABLE>
<CAPTION>
Security Ownership of Certain Beneficial Owners
Number of Shares Title of Percent of
Name and Address Beneficially Owned Class Class
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
J.P. Morgan & Co. Incorporated
60 Wall Street
New York, New York 10260 9,256,993(1) Common Stock 7.32%
FMR Corp.
82 Devonshire Street
Boston, Massachusetts 02109 16,911,590(2) Common Stock 13.35%
State Street Bank and Trust Company
as Trustee of the Union Carbide Corporation 16,027,417(3) ESOP Convertible 100.00%
Employee Stock Ownership Plan Preferred Stock
200 Newport Avenue 1,469,664(3) Common Stock 1.16%
Quincy, Massachusetts 02171
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) In a Schedule 13G dated February 15, 1997, J.P. Morgan & Co. Incorporated
stated that it beneficially owned 9,256,993 shares of the common stock of
the Corporation at December 31, 1996. As to such shares, J.P. Morgan & Co.
Incorporated has sole voting power for 5,586,973 shares, shared voting power
for 110,810 shares, sole investment power for 8,975,364 shares, and shared
investment power for 185,829 shares.
(2) In a Schedule 13G dated February 14, 1997, FMR Corp. stated that it
beneficially owned 16,911,590 shares of the common stock of the Corporation
at December 31, 1996. As to such shares, FMR Corp. has sole voting power for
622,361 shares and sole investment power for 16,911,590 shares.
(3) As of December 31, 1996, the ESOP Trustee held 16,027,417 shares of ESOP
Stock representing 100% of that class of stock. Each such share has the same
voting rights as, and is convertible into, one share of common stock. As of
that date, the ESOP Stock represents 11.2% of the total of common stock and
ESOP Stock outstanding. The Trustee has shared voting power and shared
investment power with respect to the ESOP Stock. The shares shown above
include the ESOP Stock shown in the preceding table. In a Schedule 13G dated
February 10, 1997, State Street Bank and Trust Company stated that as of
December 31, 1996, in its capacity as trustee for various collective
investment funds, index accounts and personal trusts, it also beneficially
owned 1,469,664 shares (1.2%) of the Corporation's common stock. As to such
shares, State Street Bank and Trust Company has sole voting power for
1,027,010 shares, shared voting power for 3,831 shares, sole investment
power for 1,458,058 shares and shared investment power for 11,606 shares.
24
<PAGE>
Change in Control Arrangements
The Corporation has severance compensation agreements with the officers
named in the Summary Compensation Table and certain other officers and
employees. If a Change in Control of the Corporation, as defined in the
severance compensation agreements occurs, and one or more of the following
events occurs within a period of up to 24 months thereafter, an executive may
resign and receive a lump sum payment and other benefits. The events include:
(1) a change or diminution of the executive's responsibilities or compensation;
(2) relocation; (3) discontinuance of compensation plans in which the executive
participated; (4) reduction of life insurance, medical, health and accident,
disability and certain other benefits for the executive; (5) failure by a
successor corporation to assume the severance compensation agreement; and (6)
termination of the executive's employment contrary to the terms of the severance
compensation agreement.
If an executive resigns because of one of the foregoing after a Change in
Control, the executive will receive: (1) a lump sum severance payment equal to
2.99 times the executive's average annual compensation (including base salary,
variable compensation, profit sharing, ordinary income from stock option
exercises and other "fringe" compensation, which amounts may differ from amounts
shown in the Summary Compensation Table), for the five calendar years preceding
the Change in Control; and (2) enhanced life, disability, accident and health
insurance and enhanced pension benefits. Payments will be made by the
Corporation or through a grantor trust adopted by the Corporation.
The severance compensation agreements terminate if the executive's
employment by the Corporation is terminated by the executive or the Corporation
prior to a Change in Control. In addition, the Corporation may terminate the
agreement at any time prior to a Change in Control with five days prior written
notice.
In the event of a Change in Control of the Corporation, all outstanding
stock options become exercisable.
A "Change in Control" for these purposes means the occurrence of any of the
following events: (i) a change in control for purposes of SEC Form 8-K; (ii) a
consolidation or merger where the Corporation is not the surviving company or
where the Corporation's common stock is converted, other than a merger in which
shareholders retain the same proportion of ownership; (iii) a sale or other
transfer of all or substantially all of the Corporation's assets; (iv)
acquisition by a person or group of more than 20% of the Corporation's
outstanding voting stock, except as approved by the Board of Directors; (v)
acquisition by a person or group of the right to vote more than 20% of the
Corporation's outstanding voting stock for (a) the election of directors; (b) a
merger or consolidation of the Corporation; or (c) any other matter, except as
approved by the Board of Directors; or (vi) in a 24 consecutive month period,
present directors and/or new directors approved by at least two-thirds of the
directors, cease to constitute a majority of the Board of Directors.
25
<PAGE>
2. Management Proposal to Ratify KPMG Peat Marwick LLP as Independent Auditors
for 1997
The Board of Directors, on the recommendation of the Audit Committee, has
selected the firm of KPMG Peat Marwick LLP as independent auditors to examine
the financial statements of the Corporation and its consolidated subsidiaries
for the year 1997.
KPMG Peat Marwick LLP is a member of the SEC Practice Section of the
American Institute of Certified Public Accountants and has submitted a copy of
each of their peer review results to date. The peer review consists of a review
and evaluation of the quality of a firm's accounting and auditing services by
partners and managers from another CPA firm or from several CPA firms.
KPMG Peat Marwick LLP and its predecessor firms have been serving the
Corporation in the capacity of independent auditors for many years. KPMG Peat
Marwick LLP states that no partner or professional employee of that firm has any
direct financial interest or any material indirect financial interest in the
Corporation or in any of its subsidiaries.
Accordingly, the following resolution will be offered at the meeting:
RESOLVED: That the selection by the Board of Directors of KPMG Peat Marwick
LLP as independent auditors of this Corporation and its consolidated
subsidiaries for the year 1997 is ratified.
The Board of Directors Recommends a Vote FOR this Proposal.
Representatives of KPMG Peat Marwick LLP will be present at the meeting,
will have an opportunity to make a statement if they wish to do so, and will be
available to respond to appropriate questions from stockholders.
26
<PAGE>
3. Management Proposal to Adopt the 1997 Union Carbide Long-Term Incentive Plan
The Board of Directors strongly urges shareholders to adopt the 1997 Union
Carbide Long-Term Incentive Plan (the "Plan"). As the Corporation operates in an
increasingly competitive global business environment, the Corporation's
financial success depends more than ever on its ability to attract, retain and
motivate key employees of outstanding competence. Compensation programs must
therefore compare favorably with those of major competitors. They should also
provide real incentive for promoting the profitable growth of the Corporation.
The Board is convinced that only by tying a significant portion of compensation
to an increase in stock price can the Corporation and its shareholders be
assured of employing and retaining a cadre of superior senior managers who are
dedicated to increasing the value of the Corporation.
Therefore, based on the recommendation of the Compensation and Management
Development Committee of the Board of Directors (the "Committee"), the Board of
Directors believes that the Corporation should adopt the 1997 Union Carbide
Long-Term Incentive Plan (the "Plan"). The Corporation's former Long-Term
Incentive Plan for key employees ("the 1994 Plan") previously approved by
stockholders will expire following the Corporation's annual meeting of
shareholders in 1997. After that date, no further awards may be made under the
1994 Plan. Awards currently outstanding under the 1994 Plan, however, would not
be affected. If the Plan is approved by stockholders, it will become effective
upon such approval. The Plan is substantially similar to the 1994 Plan, with the
major differences being provisions for share withholding to pay the option
prices and/or satisfy tax obligations; elimination of stock appreciation rights;
transferability of options to family members if specifically authorized for a
given grant, a restriction in the dilution of shareholders' equity to 2,000,000
shares by providing that the Corporation reacquire up to an additional
4,000,000 shares of the Corporation's common stock if additional shares are
needed above the 2,000,000 authorized for grant under the Plan, and a lower
limit on the number of shares which may be granted under the Plan. Each of
these provisions is described more fully below and in the full text of the Plan
set forth in Appendix A.
Under the Plan, the number of shares of common stock of the Corporation (the
"Shares") granted or subject to options may not exceed 2,000,000 and no
participant may be granted, in the aggregate, awards which would result in the
employee receiving more than 15% of the maximum number of shares available for
award under the Plan.
If the Corporation (i) reacquires Shares (including, but not limited to,
repurchases on the open market or in private transactions), (ii) withholds
Shares in connection with the exercise of an option, or (iii) withholds Shares
as a result of the exercise of an option or a similar provision under another
incentive or stock option plan of the Corporation to meet applicable tax
withholding requirements, then additional Shares may be optioned or granted
under the Plan equal to the number of Shares so reacquired or withheld, except
that no more than 4,000,000 additional Shares may be optioned or granted.
The Plan will be administered by the Committee, which is composed entirely of
non-employee directors. The Committee, in its discretion, may select the
individuals to receive grants of any or all of the following types of awards:
(1) stock option awards, including incentive stock options, (2) exercise payment
rights, (3) grants of stock, including Restricted Stock (as defined in the Plan)
and, (4) performance awards. The Committee will authorize awards to eligible
participants, specify the terms and conditions of such awards, interpret the
Plan, establish administrative regulations and take any other action necessary
to the proper operation of the Plan. The Committee may delegate to the Chief
Executive Officer of the Corporation the right to allocate awards among
employees who are not subject to Section 16 of the Securities Exchange Act of
1934, as amended.
Employees of the Corporation and its subsidiaries and affiliates serving in a
managerial, administrative, or professional position, who are selected by the
Committee, are eligible to participate in the Plan. Approximately 535 employees
would be eligible participants under the Plan for all types of awards. In
addition, approximately 1,400
27
<PAGE>
other employees would be eligible to receive grants of Restricted Stock as
described below. No award may be granted under the Plan subsequent to the date
of the meeting of shareholders of the Corporation in 2002 at which Directors are
to be elected.
The Board of Directors may amend the Plan, but may not increase the maximum
number of Shares authorized to be optioned or granted under the Plan without
stockholder approval.
Stock Option Awards
The Committee will determine with respect to each stock option award whether
the participant is to receive an incentive stock option (ISO) or a nonqualified
stock option (NSO). The option price would not be less than the closing price of
the Shares as listed on the New York Stock Exchange-Composite Transactions on
the date the grant is authorized. On February 28, 1997, the closing price of the
Shares was $47.250 per share. The option term may not be longer than 10 years
duration and options are exercisable only after the earliest of (i) the time
determined by the Committee (in no event less than one year following the date
of grant), (ii) the participant's death, or (iii) a Change in Control of the
Corporation (as defined in the Plan).
An option may be exercised after termination of employment only as follows:
(i) if the termination resulted from a participant's death, disability or
retirement with the right to receive a non-actuarially reduced pension
("Retirement"); (ii) during the three-year period commencing on the date of a
participant's termination of employment by the Corporation other than for cause;
(iii) during a three-year period commencing on the date of a participant's
termination of employment by the Corporation or the participant after a Change
in Control of the Corporation (as defined in the Plan) unless such termination
is for cause, or (iv) if the Committee decides that it is in the best interests
of the Corporation to allow exercise of an option following a participant's
termination of employment. In no event may an option be exercised after the
expiration date of the option. Payment for such Shares must be (i) in cash, (ii)
in Shares owned by the participant prior to exercising the option, (iii) by
having the Corporation withhold a number of Shares from the exercise or (iv) in
a combination of cash and Shares owned prior to the exercise or cash and the
withholding of Shares from the exercise.
The Committee may, in its discretion, grant to holders of stock options the
right to receive with respect to each Share covered by an option "dividend
payments" of amounts equal to the regular cash dividend paid to holders of the
Corporation's common stock during the period that the option is outstanding.
Except as provided below, an option by its terms shall not be transferable by
a participant other than by will or the laws of descent and distribution, and,
during the participant's lifetime, will be exercisable only by the participant.
The Committee may grant a nonqualified stock option which, by its terms, may
permit the participant to transfer the option to (i) his or her spouse, children
or grandchildren ("Family Members"), (ii) a trust or trusts for the exclusive
benefit of such Family Members, or (iii) a partnership in which such Family
Members are the only partners. Any transfer shall be subject to the following:
(A) there may be no consideration for any such transfer; (B) the Committee must
approve the stock option agreement pursuant to which such options are granted,
and must expressly provide for transferability; and (C) subsequent transfers of
a transferred option shall be prohibited except those made by will or the laws
of descent and distribution. Following a transfer, any such options shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer. The events of death, disability, Retirement and
termination of employment shall continue to be applied with respect to the
original participant, following which the options shall be exercisable by the
transferee only to the extent to which the participant would otherwise have been
able to exercise the option had the transfer not occurred.
Exercise Payments
The Committee may award participants holding stock options the right to
receive exercise payments when they exercise a stock option while an active
employee of the Corporation. The amount of the exercise payment will be
determined by the Committee in its discretion. Such amount will be reduced by
the aggregate total which may have
28
<PAGE>
been received as dividend payments with respect to the stock option being
exercised during the period that such option was outstanding. At the discretion
of the Committee, the exercise payments may be made in cash, common stock,
restricted stock or a combination thereof. In the case of the participant's
death, any exercise payments awarded to the participant will be paid if the
stock options are exercised within nine months after a participant's death, but
before the expiration of the term of the stock option. In the case of a
participant's Retirement, any exercise payments awarded to the participant will
be paid if the stock options are exercised within the later of (i) three months
after Retirement or (ii) three months after such options become exercisable, but
before the expiration of the term of the stock option.
No rights to receive exercise payments were awarded under the prior Plan.
Restricted Stock
The Committee, in its discretion, may make a grant of stock or Restricted
Stock to a participant on such terms as the Committee shall determine and make a
cash payment to a participant granted stock or Restricted Stock to allow the
participant to satisfy tax obligations arising out of receipt of the stock or
Restricted Stock. The participant shall have, with respect to Restricted Stock,
all of the rights of a shareholder of the Corporation, including the right to
vote the Shares and the right to receive any dividends, unless the Committee
shall otherwise determine. Not more than 20% of the shares available for grant
under the Plan (this includes 20% of additional shares available to the extent
the Corporation reacquires or withholds its shares as discussed above) can be
issued as Restricted Stock.
Performance Awards
Performance awards shall entitle the Participant to receive an award if
previously established measures of performance are met. Performance awards may
be paid in common stock, cash or any other form of property as the Committee
shall determine.
U.S. Federal Income Tax Consequences
Under the present Internal Revenue Service Regulations, the federal income
tax consequences of awards granted under the Plan are summarized as follows:
The grant of a stock option will create no tax consequences for the
participant or the Corporation. The participant will have no taxable income upon
exercising an ISO (except the alternative minimum tax may apply), and the
Corporation will not receive a deduction when an ISO is exercised. If the
participant does not dispose of the shares acquired on exercise of an ISO within
the two-year period beginning on the day after the grant of the ISO or within
one year after the transfer of the shares to the participant, the gain or loss
on a subsequent sale will be a capital gain or loss. If the participant disposes
of the shares within the two-year or one-year period described above, the
participant generally will realize ordinary income and the Corporation will be
entitled to a corresponding deduction. Upon exercising a nonqualified stock
option, the participant must recognize ordinary income in an amount equal to the
difference between the exercise price and the fair market value of the stock on
the exercise date. The Corporation will receive a deduction for the same amount.
With respect to other awards granted under the Plan that are settled in cash
or stock that is either transferable or not subject to a substantial risk of
forfeiture, the participant must recognize ordinary income in an amount equal to
the cash or the fair market value of the shares received. With respect to other
awards granted under the Plan that are settled in stock that is subject to
restrictions as to transferability and subject to a substantial risk of
forfeiture, the participant must recognize ordinary income in an amount equal to
the fair market value of the shares received at the first time the shares become
transferable or not subject to a substantial risk of forfeiture, whichever
occurs earlier. The Corporation will receive a deduction for the amount
recognized as income by the participant subject to the provisions of the Omnibus
Budget Reconciliation Act of 1993 which provides for a possible denial of a tax
deduction to the Corporation on compensation for any executive officer listed in
the Summary Compensation Table in excess of $1,000,000.
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In order to enable the Corporation to meet any applicable federal withholding
tax requirements arising as a result of the exercise of an option, a participant
shall (i) pay the Corporation the amount of tax to be withheld, (ii) elect to
satisfy such obligation by having the Corporation withhold Shares that otherwise
would be delivered to the participant pursuant to the exercise of the option for
which tax is being withheld, (iii) deliver to the Corporation Shares owned by
the participant prior to exercising the option, or (iv) make a payment to the
Corporation consisting of a combination of cash and such Shares. The
Administrator shall have the right to determine the method of payment by the
participant.
The tax treatment upon disposition of shares acquired under the Plan will
depend on how long the shares have been held. In the case of shares acquired
through exercise of an option, the tax treatment will also depend on whether or
not the shares were acquired by exercising an incentive stock option. There will
be no tax consequences to the Corporation upon the disposition of shares
acquired under the Plan except that the Corporation may receive a deduction in
the case of disposition of shares acquired under an incentive stock option
before the applicable incentive stock holding period has been satisfied.
The tax consequences for recipients who are non-U.S. citizens living outside
the United States can vary by location.
If the 1997 Long Term Incentive Plan had been in effect during 1996, the
number of stock options granted to the executive officers would have been the
amounts shown in the Table for Stock Options / SARs Granted -- 1996 on page 21.
Resolution
Accordingly, the following resolution will be offered at the meeting:
RESOLVED: That the 1997 Union Carbide Long-Term Incentive Plan as presented
in the Proxy Statement for this meeting is hereby approved and authorized.
The Board of Directors Recommends a Vote FOR this Proposal.
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4. Management Proposal to Adopt the 1997 Stock Option Plan for Non-Employee
Directors of Union Carbide Corporation
The Board of Directors (the "Board") believes that making a part of the
compensation of non-employee directors dependent upon an increase in the value
of the common stock of the Corporation is in the best interest of the
Corporation and its stockholders as it more closely aligns the directors'
interests with the interests of the stockholders. It is also intended to assist
the Corporation in securing and retaining highly qualified persons to serve as
non-employee directors, in which position they may contribute to the long-term
growth and profitability of the Corporation. To accomplish these goals, based on
the recommendation of the Nominating Committee of the Board (the "Committee"),
and taking into consideration the practices of the leading companies with regard
to directors' compensation, the Board recommends the adoption of the 1997 Stock
Option Plan for Non-Employee Directors of Union Carbide Corporation (the
"Plan"). Only non-employee directors are eligible to participate in the Plan.
The stockholders approved Stock Compensation Plans for Non-Employee Directors
of Union Carbide Corporation in 1987 and 1992. The 1992 Plan expired January 1,
1997. As a result, no further awards may be made under the 1992 Plan. Awards
currently outstanding under the 1992 Plan, however, are not affected by the
expiration of the 1992 Plan.
The Plan is different from the 1992 Plan in that instead of being paid part
of their compensation in shares of stock, a director will receive an option to
buy stock of the Corporation at a later date. In addition, the Plan provides for
share withholding to satisfy option prices and/or tax obligations and for the
transferability of options to family members if specifically authorized for a
given grant. Each of these provisions is described more fully below and in the
full text of the Plan set forth in Appendix B.
In consideration of their services, the Plan provides for awards to non-
employee directors of options to purchase shares of the Corporation's common
stock (the "Shares"). Under the Plan, the number of Shares subject to options
may not exceed 200,000.
The Plan will be administered by the Board or a committee of the Board or
subcommittee thereof designated by the Board (the Board, committee or
subcommittee so designated shall be referred to herein as the "Administrator").
The Administrator shall be authorized to interpret the Plan, to establish, amend
and rescind any rules and regulations relating to the Plan, and to make all
other determinations necessary or advisable for the administration of the Plan;
however, the Administrator shall have no discretion with respect to the
eligibility or selection of non-employee directors to receive options under the
Plan. The Administrator may amend the Plan, but may not increase the maximum
number of Shares authorized to be granted under the Plan without stockholder
approval.
All active members of the Board who are not, as of the date of any option
grant, employees of the Corporation or any of its subsidiaries or affiliates are
eligible to participate in the Plan. Ten non-employee directors are currently
eligible to participate in the Plan. No award may be granted under the Plan
subsequent to the date of the meeting of the shareholders of the Corporation in
2002 at which directors are to be elected.
Stock Option Awards
The Committee may award to each participant non-qualified stock options. The
option price will not be less than the closing price of the Shares as listed on
the New York Stock Exchange-Composite Transactions on the date the option is
authorized. On February 28, 1997, the closing price of the Shares was $47.250
per share. The option term may not be longer than 10 years duration and options
are exercisable only after the earliest of (i) the second anniversary of its
date of grant, (ii) the participant's death, or (iii) a Change in Control of the
Corporation (as defined in the Plan).
In the event of the termination of service on the Board by a director due to
the participant's voluntary resignation, disability, retirement or as a result
of not being reelected at an Annual Meeting of Shareholders, the then
outstanding options shall be exercisable on their stated exercisable dates and
shall expire on their stated expiration date. In the event of the participant's
death, the then outstanding options of the participant shall become immediate-
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ly exercisable, and shall be exercisable by the participant's beneficiary at any
time until the expiration date of the option. In the case of removal for cause,
the then outstanding options of the participant shall be exercisable only to the
extent that they were exercisable on the date of such removal and shall expire
six months after such removal or on their stated expiration date, whichever
occurs first. Options that are not exercisable on the date of such removal shall
be forfeited. In no event may an option be exercised after the expiration date
of the option.
Payment for such Shares must be (i) in cash, (ii) in common stock of the
Corporation owned by the participant prior to exercising the option, (iii) by
having the Corporation withhold a number of shares from the exercise or (iv) in
a combination of cash and common stock owned prior to the exercise or withheld
from the exercise.
Except as provided below, an option by its terms shall not be transferable by
a participant other than by will or the laws of descent and distribution, and,
during the participant's lifetime, will be exercisable only by the participant.
The Committee may grant a nonqualified stock option which, by its terms, may
permit the participant to transfer the option to (i) his or her spouse, children
or grandchildren ("Family Members"), (ii) a trust or trusts for the exclusive
benefit of such Family Members, or (iii) a partnership in which such Family
Members are the only partners. Any transfer shall be subject to the following:
(A) there may be no consideration for any such transfer; (B) the Committee must
approve the stock option agreement pursuant to which such options are granted,
and must expressly provide for transferability; and (C) subsequent transfers of
a transferred option shall be prohibited except those made by will or the laws
of descent and distribution. Following a transfer, any such options shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer. The events of death, disability, retirement and
termination of service shall continue to be applied with respect to the original
participant, following which the options shall be exercisable by the transferee
only to the extent to which the participant would otherwise have been able to
exercise the option had the transfer not occurred.
U.S. Federal Income Tax Consequences
Under the present Internal Revenue Service Regulations, the federal income
tax consequences of awards granted under the Plan are summarized as follows:
The grant of a stock option will create no tax consequences for the
participant or the Corporation. Upon exercising a nonqualified stock option, the
participant must recognize ordinary income in an amount equal to the difference
between the exercise price and the fair market value of the stock on the
exercise date. The Corporation will receive a deduction for the amount
recognized as income by the participant.
In order to enable the Corporation to meet any applicable federal withholding
tax requirements arising as a result of the exercise of a stock option, a
participant shall (i) pay the Corporation the amount of tax to be withheld, (ii)
elect to satisfy such obligation by having the Corporation withhold shares that
otherwise would be delivered to the participant pursuant to the exercise of the
option for which tax is being withheld, (iii) deliver to the Corporation shares
of the Corporation's common stock owned by the participant prior to exercising
the option, or (iv) make a payment to the Corporation consisting of a
combination of cash and such shares of common stock. The Administrator shall
have the right to determine the method of payment by the participant.
The tax treatment upon disposition of shares acquired under the Plan will
depend on how long the shares have been held.
Resolution
Accordingly, the following resolution will be offered at the meeting:
"RESOLVED, that the 1997 Stock Option Plan for Non-Employee Directors of
Union Carbide Corporation as presented in the Proxy Statement for the meeting is
hereby approved and authorized."
The Board of Directors Recommends a Vote FOR this Proposal.
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5. Other Business
As of the date of delivery of the text of this Proxy Statement to the
printer, management knew of no other business that will be presented for action
at the meeting. In the event that any other business should come before the
meeting, including proposals excluded from the Proxy Statement pursuant to SEC
rule 14a-8, it is the intention of the proxyholders named in the proxy card to
take such action as shall be in accordance with their best judgment.
Stockholder Proposals for 1998 Annual Meeting
Certain matters are required to be considered at the annual meeting of
stockholders, such as the election of directors. From time to time, the Board of
Directors may wish to submit to the stockholders other matters for
consideration, such as the ratification of the selection of auditors, management
proposals regarding new incentive programs, and most changes in the Certificate
of Incorporation. Additionally, stockholders may be asked to consider and take
action on proposals submitted by stockholders who are not members of management
that cover matters deemed proper under regulations of the Securities and
Exchange Commission and applicable state laws.
Stockholders' eligibility to submit proposals for inclusion in the
Corporation's Proxy Statement, proper subjects for such proposals and the form
of stockholder proposals are regulated by Rule 14a-8 under Section 14(a) of the
Securities Exchange Act of 1934. Each proposal submitted should be sent to the
Secretary of the Corporation, 39 Old Ridgebury Road, Danbury, CT 06817-0001. The
stockholder or his or her representative must appear in person at the annual
meeting and must present the proposal, unless he or she can show good cause for
not doing so.
Stockholder proposals for inclusion in the 1998 proxy statement must be
received at the Corporation's principal executive office on or before November
12, 1997. The Corporation plans to hold the 1998 annual meeting in Danbury,
Connecticut on April 22, 1998.
Management carefully considers all proposals and suggestions from
stockholders. When adoption of a suggestion or proposal is clearly in the best
interests of the Corporation and the stockholders generally, and does not
require stockholder approval, it is usually adopted by the Board, if
appropriate, rather than being included in the proxy statement.
In December, 1996 the Corporation's by-laws were amended to require
stockholders, who intend to propose the nominations of persons for election as
directors or other business to be considered by stockholders at the annual
meeting (other than stockholder proposals included in the Proxy Statement
pursuant to Rule 14a-8), to give written notice to the Secretary of the
Corporation at least 90 days but no more than 120 days prior to the anniversary
date of the previous years annual meeting. Matters to be raised by a stockholder
at the 1998 annual meeting must be submitted on or after December 24, 1997 but
no later than January 23, 1998. The written notice must include information
relating to a person or persons nominated for director and the person's written
consent to be named as nominee and to serve, if elected; a brief description of
the business, the reasons for conducting such business and any material interest
in such business by the stockholders. The full text of the by-law amendment is
set forth in Appendix C.
Proxy Solicitation
In addition to the solicitation of proxies by mail, officers or other
employees of the Corporation, without extra remuneration, may solicit proxies by
telephone or personal contact. The Corporation also will request brokerage
houses, nominees, custodians and fiduciaries to forward soliciting material to
beneficial owners of stock held of record and will pay such persons for
forwarding the material. All costs for the solicitation of proxies by the Board
of Directors will be borne by the Corporation. The Corporation has also engaged
Morrow & Co., Inc. to assist in solicitating proxies and expects to pay that
firm a fee of approximately $12,500 plus expenses for its services.
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APPENDIX A
1997 UNION CARBIDE LONG-TERM INCENTIVE PLAN
Section 1: Purpose
The purpose of the 1997 Union Carbide Long-Term Incentive Plan
(hereafter referred to as the "Plan") is to
(a) advance the interests of Union Carbide Corporation (the
"Corporation") and its stockholders by providing incentives and rewards to those
employees who are in a position to contribute to the long-term growth and
profitability of the Corporation;
(b) assist the Corporation and its subsidiaries and affiliates in
attracting, retaining, and motivating highly qualified employees for the
successful conduct of their business; and
(c) make the Corporation's compensation program competitive with
those of other major employers.
Section 2: Definitions
2.1: A "Change in Control of the Corporation" shall be deemed to occur
if any of the following circumstances shall occur:
(i) any "person" or "group" within the meaning of Sections 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934 ("Act") becomes the
"beneficial owner" as defined in Rule 13d-3 under the Act of more than 20% of
the then outstanding voting securities of the Corporation;
(ii) any "person" or "group" within the meaning of Sections 13(d)
and 14(d)(2) of the Act acquires by proxy or otherwise the right to vote for the
election of directors, for any merger or consolidation of the Corporation or for
any other matter or question with respect to more than 20% of the then
outstanding voting securities of the Corporation;
(iii) during any period of twenty-four consecutive months,
Present Directors and/or New Directors cease for any reason to constitute a
majority of the Board.
For these purposes, "Present Directors" shall mean individuals
who at the beginning of such consecutive twenty-four month period were members
of the Board and "New Directors" shall mean any director whose election by the
Board or whose nomination for election by the Corporation's stockholders was
approved by a vote of at least two-thirds of the Directors then still in office
who were Present Directors or New Directors;
(iv) the stockholders of the Corporation approve a plan of complete
liquidation or dissolution of the Corporation; or
(v) there shall be consummated:
(x) a reorganization, merger or consolidation of all or
substantially all of the assets of the Corporation (a "Business
Combination"), unless, following such Business Combination,
(a) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
outstanding Common Stock of the Corporation and outstanding
voting securities of the Corporation immediately prior to such
Business Combination beneficially own, directly or indirectly,
more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction
owns the Corporation or all or substantially all of the
Corporation's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of
the outstanding Common Stock of the Corporation and outstanding
voting securities of the Corporation, as the case may be,
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(b) no Person (excluding any corporation resulting from
such Business Combination or any employee benefit plan (or
related trust) of the Corporation or such corporation resulting
from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then
outstanding voting securities of such corporation except to the
extent that such ownership existed prior to the Business
Combination and
(c) at least a majority of the members of the board of
directors of the corporation resulting from such Business
Combination were members of the Board at the time of the
execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
(y) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or
substantially all, of the assets of the Corporation, provided,
that the divestiture of less than substantially all of the
assets of the Corporation in one transaction or a series of
related transactions, whether effected by sale, lease,
exchange, spin-off, sale of the stock or merger of a subsidiary
or otherwise, shall not constitute a Change in Control.
Notwithstanding the foregoing, a Change in Control shall
not be deemed to occur pursuant to Subparagraphs (i) and (ii) above, solely
because twenty percent (20%) or more of the combined voting power of the
Corporation's then outstanding securities is acquired by one or more employee
benefit plans maintained by the Corporation.
2.2: "Code" means the Internal Revenue Code of 1986, as now or hereafter
amended.
2.3: "Employee" means all employees of the Corporation or of a
subsidiary or affiliate of the Corporation participating in the Plan, including
officers of the Corporation, as well as officers of the Corporation who are also
directors of the Corporation. However, an individual who is a member of the
Committee shall not be an "employee" for purposes of this Plan.
2.4: "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
2.5: "Exercise Payment" is a payment upon the exercise of a stock option
of an amount determined by the Committee in its discretion, which amount shall
not be greater than 60% of the excess of the Market Price over the option price
of the stock acquired upon the exercise of the option.
2.6: "Incentive Stock Option" means any stock option granted pursuant to
this Plan which is designated as such by the Committee and which complies with
Section 422 of the Code.
2.7: "Market Price" is the mean of the high and low prices of the common
stock of the Corporation as reported in the New York Stock Exchange - Composite
Transactions on the date the option is exercised (or on the next preceding day
such stock was traded on a stock exchange included in the New York Stock
Exchange - Composite Transactions if it was not traded on any such exchange on
the date the option is exercised).
2.8: "Nonqualified Stock Option" means any stock option granted pursuant
to this Plan which is not an Incentive Stock Option.
2.9: "Retirement" shall mean retirement from employment by the
Corporation or a subsidiary or affiliate with the right to receive immediately a
non-actuarially reduced pension under the Corporation's Retirement Program.
2.10: "Restricted Stock" means stock of the Corporation subject to
restrictions on the transfer of such stock, conditions of forfeitability of such
stock, or any other limitations or restrictions as determined by the Committee.
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Section 3: Participation
The Participants in the Plan ("Participants") shall be those Employees
serving in a managerial, administrative, or professional position who are
selected to participate in the Plan by the Committee of the Board of Directors
of the Corporation named to administer the Plan pursuant to Section 4.
Section 4: Administration
The Plan shall be administered and interpreted by a Committee of three
or more members of the Board of Directors (hereinafter referred to as the
"Committee") appointed by the Board. The Committee shall consist of "nonemployee
directors" within the meaning of Rule 16b-3 under the Exchange Act. All
decisions and acts of the Committee shall be final and binding upon all
Participants. The Committee shall:
(i) determine the number and types of awards to be made under the Plan;
(ii) select the awards to be made to Participants;
(iii) set the option price, the number of options to be awarded, and the
number of shares to be awarded out of the total number of shares available for
award;
(iv) delegate to the Chief Executive Officer of the Corporation the right
to allocate awards among Employees who are not executive officers or directors
of the Corporation within the meaning of the Exchange Act, such delegation to be
subject to such terms and conditions as the Committee in its discretion shall
determine;
(v) establish administrative regulations to further the purpose of the
Plan; and
(vi) take any other action desirable or necessary to interpret, construe
or implement properly the provisions of the Plan.
Section 5: Awards
Awards under this Plan may be in any of the following forms (or a
combination thereof):
(i) stock option awards;
(ii) exercise payment rights;
(iii) grants of stock or Restricted Stock; or
(iv) performance awards.
Except as otherwise defined herein, "stock" shall mean the common stock, $1.00
par value, of the Corporation. All awards shall be made pursuant to award
agreements between the Participant and the Corporation. The agreements shall be
in such form as the Committee approves from time to time.
(a) Maximum Amount Available. The total number of shares of stock
(including Restricted Stock, if any) optioned or granted under this Plan during
the term of the Plan shall not exceed 2,000,000 shares; provided, however, that
if, during the term of the Plan, the Corporation
(i) reacquires shares of stock (including, but not limited to,
repurchases of shares on the open market or in private transactions),
(ii) withholds shares in connection with the exercise of an option
pursuant to Section 6.4 of this Plan, or
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(iii) withholds shares as a result of the exercise of an option
pursuant to Section 6.7 of this Plan, or a similar provision under another
incentive or stock option plan of the Corporation, to meet any applicable
federal, state or local withholding tax requirements arising as a result of the
exercise of an option,
then additional shares of stock may be optioned or granted under this Plan equal
to the number of shares so reacquired or withheld, except that no more than
4,000,000 additional shares (for a total of 6,000,000 shares under the Plan)
shall be authorized for options or grants under this provision. No Participant
may be granted, in the aggregate, awards which would result in the Participant
receiving more than 15% of the maximum number of shares available for award
under the Plan. Solely for the purpose of computing the total number of shares
of stock optioned or granted under this Plan, there shall not be counted any
shares which have been forfeited and any shares covered by an option which,
prior to such computation, has terminated in accordance with its terms or has
been canceled by the Participant or the Corporation.
(b) Adjustment in the Event of Recapitalization, etc. In the event of
any change in the outstanding shares of the Corporation by reason of any stock
split, stock dividend, recapitalization, merger, consolidation, combination or
exchange of shares or other similar corporate change or in the event of any
special distribution to the stockholders, the Committee shall make such
equitable adjustments in the number of shares and prices per share applicable to
options then outstanding and in the number of shares which are available
thereafter for Stock Option Awards (as defined in Section 6.1) or other awards,
both under the Plan as a whole and with respect to individuals, as the Committee
determines are necessary and appropriate. Any such adjustment shall be
conclusive and binding for all purposes of the Plan.
Section 6: Stock Options
6.1: The Corporation may award options to purchase common stock or
Restricted Stock of the Corporation (hereinafter referred to as "Stock Option
Awards") to such Participants as the Committee, or the Chief Executive Officer
of the Corporation, if the Committee in its discretion delegates the right to
allocate awards pursuant to Section 4, authorizes and under such terms as the
Committee establishes. The Committee shall determine with respect to each Stock
Option Award and designate in the grant whether a Participant is to receive an
Incentive Stock Option or a Non-Qualified Stock Option.
6.2: The option price of each share of stock subject to a Stock Option
Award shall be specified in the grant, but in no event shall the exercise price
be less than the closing price of the common stock of the Corporation on the
date the award is authorized as reported in the New York Stock Exchange -
Composite Transactions. If the Participant to whom an Incentive Stock Option is
granted owns, at the time of the grant, more than ten percent (10%) of the
combined voting power of the Participant's employer or a parent or subsidiary of
the employer, the option price of each share of stock subject to such grant
shall be not less than one hundred ten percent (110%) of the closing price
described in the preceding sentence.
6.3: (a) Except as set forth in subsection (b) below, a stock option by
its terms shall not be transferable by the Participant other than by will or the
laws of descent and distribution, and, during the Participant's lifetime, will
be exercisable only by the Participant. A stock option by its terms also shall
be of no more than 10 years' duration, except that an Incentive Stock Option
granted to a Participant who, at the time of the grant, owns stock representing
more than ten percent (10%) of the combined voting power of the Participant's
employer or a parent or subsidiary of the employer by its terms shall be of
no more than five (5) years' duration. A stock option by its terms shall be
exercisable only after the earliest of:
(i) such period of time as the Committee shall determine and
specify in the grant, but in no event less than one year following the date of
grant of such award;
(ii) the Participant's death; or
(iii) a Change in Control of the Corporation.
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(b) Notwithstanding the provisions of subsection (a), the terms of a
Non-Qualified Stock Option may permit the Participant to transfer the Stock
Option to:
(i) his or her spouse, children or grandchildren (referred to
herein as the Participant's "Family Members"),
(ii) a trust or trusts for the exclusive benefit of such Family
Members, or
(iii) a partnership in which such Family Members are the only
partners.
Any transfer pursuant to this subsection (b) shall be subject to the following:
(A) there may be no consideration for any such transfer;
(B) the stock option agreement pursuant to which such Stock
Options are granted must be approved by the Committee, and must expressly
provide for transferability in a manner consistent with this subsection (b); and
(C) subsequent transfers of transferred Stock Options shall
be prohibited except those in accordance with subsection (a) of this Section
6.3.
Following transfer, any such Stock Options shall continue to be subject to the
same terms and conditions as were applicable immediately prior to transfer,
provided that for purposes of Section 6.4 hereof, the term "Participant" shall
be deemed to refer to the transferee. The events of death, disability,
Retirement and termination of employment in the Plan hereof shall continue to be
applied with respect to the original Participant, following which the Stock
Options shall be exercisable by the transferee only to the extent and for the
periods specified in Sections 6.3(a) and (c) hereof.
(c) An option is only exercisable by a Participant (or, if subsection
(b) applies, the transferee) while the Participant is in active employment with
the Corporation, or its subsidiary, except:
(i) in the case of a Participant's death, Retirement or disability;
(ii) during a three-year period commencing on the date of a
Participant's termination of employment by the Corporation other than for cause;
(iii) during a three-year period commencing on the date of
termination, by the Participant or the Corporation, of employment after a Change
in Control of the Corporation, unless such termination of employment is for
cause; or
(iv) if the Committee decides that it is in the best interest of the
Corporation to permit individual exceptions. An option may not be exercised
pursuant to this paragraph after the expiration date of the option.
6.4: An option may be exercised with respect to part or all of the
shares subject to the option by giving written notice to the Corporation of the
exercise of the option. The option price for the shares for which an option is
exercised shall be paid on or within ten business days after the date of
exercise. The terms of the stock option may provide that the option price may be
paid
(i) in cash,
(ii) in whole shares of common stock of the Corporation owned by the
Participant prior to exercising the option,
(iii) by having the Corporation withhold a number of shares from the
exercise, equal in value to the option price, or
(iv) in a combination of cash and delivery of shares, or cash and
withholding of shares of common stock.
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The value of any share of common stock delivered or withheld in payment of the
option price shall be its Market Price on the date the option is exercised.
6.5: The Committee may, in its discretion, grant to Participants holding
stock options the right to receive, with respect to each share covered by an
option, payments of amounts equal to the regular cash dividends paid to holders
of the Company's common stock during the period that the option is outstanding
(such payments are hereinafter referred to as "Dividend Payments").
6.6: The aggregate fair market value of all shares of stock with respect
to which Incentive Stock Options are exercisable for the first time by a
Participant in any one calendar year, under this Plan or any other stock option
plan maintained by the Corporation (or by any subsidiary or parent of the
Corporation), shall not exceed $100,000. The fair market value of such shares of
stock shall be the mean of the high and low prices of the common stock of the
Corporation as reported in the New York Stock Exchange - Composite Transactions
on the date the related stock option is granted (or on the next preceding day
such stock was traded on a stock exchange in the New York Stock Exchange -
Composite Transactions if it was not traded on any such exchange on the date the
related stock option is granted).
6.7: In order to enable the Corporation to meet any applicable federal,
state or local withholding tax requirements arising as a result of the exercise
of a stock option, a Participant shall pay the Corporation the amount of tax to
be withheld or may elect to satisfy such obligation by having the Corporation
withhold shares that otherwise would be delivered to the Participant pursuant to
the exercise of the option for which the tax is being withheld, by delivering to
the Corporation other shares of common stock of the Corporation owned by the
Participant prior to exercising the option, or by making a payment to the
Corporation consisting of a combination of cash and such shares of common stock.
Such an election shall be subject to the following:
(a) the election shall be made in such manner as may be prescribed
by the Committee and the Committee shall have the right, in its discretion, to
disapprove such election; and
(b) the election shall be made prior to the date to be used to
determine the tax to be withheld and shall be irrevocable.
The value of any share of common stock to be withheld by the Corporation or
delivered to the Corporation pursuant to this Section 6.7 shall be the Market
Price on the date to be used to determine the amount of tax to be withheld.
Section 7: Exercise Payments
7.1: The Committee may, in its discretion, grant to Participants holding
stock options the right to receive Exercise Payments relating to such number of
shares covered by the Participant's stock options as the Committee determines in
its discretion. Exercise Payments shall be reduced by the total amount which may
have been received as Dividend Payments pursuant to Section 6.5 with respect to
the stock option that is being exercised.
7.2: At the discretion of the Committee, the Exercise Payment may be
made in cash, common stock, Restricted Stock, or a combination thereof. Exercise
Payments shall be paid within 20 business days following the exercise of a
related stock option; provided, however, that payment may be deferred by the
Committee, in its discretion, to such date and under such terms and conditions
as the Committee may determine.
7.3: Exercise Payments shall be paid only upon the exercise of related
stock options which are exercised by the Participant while an active Employee;
provided, however, that in the case of a Participant's death, Exercise Payments
will be paid if the related stock options are exercised within nine months after
death, but before the expiration of the stock option's term.
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In the case of a Participant's Retirement, any Exercise Payments awarded
to the Participant will be paid if the stock options are exercised within the
later of
(i) three months after Retirement, or
(ii) three months after such options became exercisable, but before
the expiration of the term of the stock option.
Section 8: Grants of Stock
8.1: The Committee may grant, either alone or in addition to other
awards granted under the Plan, shares of stock or Restricted Stock to such
Participants as the Committee, or the Chief Executive Officer of the
Corporation, if the Committee in its discretion delegates the right to allocate
awards pursuant to Section 4, authorizes and under such terms as the Committee
establishes. The Committee, in its discretion, may also make a cash payment to a
Participant granted shares of stock or Restricted Stock under the Plan to allow
such Participant to satisfy tax obligations arising out of receipt of the stock
or Restricted Stock. Alternatively, the terms of the stock or Restricted Stock
grant may allow for the Participant to satisfy tax withholding obligations by
delivering whole shares of common stock of the Corporation to the Corporation;
the value of any share of common stock delivered in payment of tax withholding
obligations shall be its Market Price on the date to be used to determine the
amount of tax to be paid.
8.2: Notwithstanding any provision in this Plan to the contrary, no more
than 20% of the maximum number of shares of stock available for award under this
Plan shall be granted to Participants as Restricted Stock.
Section 9: Performance Awards
9.1: The Committee may grant, either alone or in addition to other
awards granted under the Plan, awards of stock and other awards that are valued
in whole or in part by reference to, or are otherwise based on, the market value
of the common stock, Restricted Stock or other securities of the Corporation
("Performance Awards") to such Participants as the Committee, or the Chief
Executive Officer of the Corporation, if the Committee in its discretion
delegates the right to allocate awards pursuant to Section 4, authorizes and
under such terms as the Committee establishes. Performance Awards may be paid in
common stock, Restricted Stock or other securities of the Company, cash or any
other form of property as the Committee shall determine. Performance Awards
shall entitle the Participant to receive an award if the measures of performance
established by the Committee are met. The measures of performance shall be
established by the Committee in its absolute discretion.
9.2: The Committee shall determine the times at which Performance Awards
are to be made and all conditions of such awards.
9.3: The Participant shall not be permitted to sell, assign, transfer,
pledge or otherwise encumber shares received pursuant to this Section 9 prior to
the date on which any applicable restriction or performance period established
by the Committee lapses.
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Section 10: General Provisions
10.1: Subject to the provisions of Section 6.3(b), if applicable, any
assignment or transfer of any awards without the written consent of the
Corporation shall be null and void.
10.2: Nothing contained herein shall require the Corporation to segregate
any monies from its general funds, or to create any trusts, or to make any
special deposits for any immediate or deferred amounts payable to any
Participant for any year.
10.3: Participation in this Plan shall not affect the Corporation's right
to discharge a Participant.
10.4: Restricted Stock may not be sold or transferred by the Participant
until any restrictions that have been established by the Committee have lapsed.
10.5: The Participant shall have, with respect to Restricted Stock, all
of the rights of a stockholder of the Corporation, including the right to vote
the shares and the right to receive any dividends, unless the Committee shall
otherwise determine.
10.6: Upon a Participant's termination of employment during the period
any restrictions are in effect, all Restricted Stock shall be forfeited without
compensation to the Participant unless the Committee decides that it is in the
best interest of the Corporation to permit individual exceptions.
Section 11: Amendment, Suspension, or Termination
11.1: The Board of Directors may suspend, terminate, or amend the Plan,
including but not limited to such amendments as may be necessary or desirable
resulting from changes in the federal income tax laws and other applicable laws,
but may not, without approval by the holders of a majority of all outstanding
shares entitled to vote on the subject at a meeting of stockholders of the
Corporation, increase the total number of shares of stock that may be optioned
or granted under this Plan.
11.2: It is intended that grants and awards made under this Plan comply
with the requirements of Rule 16b-3 under the Exchange Act. Should the
requirements of Rule 16b-3 change, the Board of Directors may amend this Plan or
grants hereunder, as necessary, to comply with the requirements of that rule or
its successor provision or provisions.
Section 12: Effective Date and Duration of the Plan
This Plan shall be effective following approval by the stockholders of
the Corporation. No award shall be granted under this Plan subsequent to the
annual meeting of shareholders of the Corporation in 2002.
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APPENDIX B
1997 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
OF UNION CARBIDE CORPORATION
1. Purposes.
The 1997 Stock Option Plan for Non-Employee Directors of Union Carbide
Corporation (the "Plan") is established to attract, retain and compensate highly
qualified individuals who are not employees of Union Carbide Corporation (the
"Corporation") for service as members of the Board of Directors of the
Corporation ("Non-Employee Directors") and to provide them with an ownership
interest in the Corporation's common stock. The Plan will be beneficial to the
Corporation and its stockholders by allowing these Non-Employee Directors to
have a personal financial stake in the Corporation through an ownership interest
in the Corporation's common stock, in addition to underscoring their common
interest with stockholders in increasing the value of the Corporation's stock
over the long term.
2. Effective Date.
The Plan shall be effective following approval of the Plan by the
stockholders of the Corporation. Grants of options may be made under the Plan on
and after its effective date.
3. Administration of the Plan.
The Plan shall be administered by the Board of Directors of the
Corporation (the "Board") or a committee of the Board or subcommittee thereof
designated by the Board (the Board, committee or subcommittee so designated
shall be referred to herein as the "Administrator"). Subject to the provisions
of the Plan, the Administrator shall be authorized to interpret the Plan, to
establish, amend and rescind any rules and regulations relating to the Plan, and
to make all other determinations necessary or advisable for the administration
of the Plan; provided, however, that the Administrator shall have no discretion
with respect to the eligibility or selection of Non-Employee Directors to
receive options under the Plan. The Administrator's interpretation of the Plan,
and all actions taken and determinations made by the Administrator pursuant to
the powers vested in it hereunder, shall be conclusive and binding upon all
parties concerned including the Corporation, its stockholders and persons
granted options under the Plan. The Chairman of the Board and Chief Executive
Officer of the Corporation shall be authorized to implement the Plan in
accordance with its terms and to take or cause to be taken such actions of a
ministerial nature as shall be necessary to effectuate the intent and purposes
thereof.
4. Participation in the Plan.
All active members of the Board who are not, as of the date of any option
grant, employees of the Corporation or any of its subsidiaries or affiliates
shall be eligible to participate in the Plan.
5. Nonqualified Stock Options.
Only nonqualified stock options ("options") may be granted under this
Plan.
6. Terms, Conditions and Form of Options.
(a) Option Grant Dates. The Administrator may award options to purchase
common stock to participants in such number and under such terms as the
Administrator authorizes. Options to purchase shares of the Corporation's common
stock shall be granted on an annual basis to each eligible Non-Employee
Director.
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(b) Exercise Price. The exercise price per share of stock for which each
option is exercisable shall be not less than the closing price of the
Corporation's common stock on the date the option is authorized, as reported on
the New York Stock Exchange-Composite Transactions.
(c) Exercisability and Term of Options. Each option granted under the
Plan shall become exercisable on and after the second anniversary of its date of
grant, except that in the event of a Change in Control of the Corporation (as
deemed herein), the then outstanding options of each holder shall become
immediately exercisable on the date the Change in Control has been deemed to
have occurred. Each option granted under the Plan shall expire no later than ten
years from the date of grant, and shall be subject to earlier termination as
hereinafter provided.
(d) Termination of Service. In the event of the termination of service on
the Board by the holder of any option by reason of voluntary resignation,
retirement, disability (as defined below) or as a result of not being reelected
at an Annual Meeting of Shareholders, the then outstanding options of such
holder shall be exercisable on their stated exercisable dates and shall expire
on their stated expiration date. In the case of removal for cause, the then
outstanding options of such holder shall be exercisable only to the extent that
they were exercisable on the date of such removal and shall expire six months
after such removal or on their stated expiration date, whichever occurs first.
Options that are not exercisable on the date of such removal shall be forfeited.
"Disability" as used herein shall mean a participant's total physical or mental
inability to perform any work for compensation or profit in any occupation for
which the participant is reasonably qualified by reason of training, education
or ability, and which inability is adjudged to be permanent, as determined by
the Administrator.
(e) Death. In the event of the death of the holder of any option, each of
the then outstanding options of such holder shall become immediately
exercisable, and shall be exercisable by the holder's beneficiary at any time
until the expiration date of the option. Participants shall designate
beneficiaries in accordance with procedures established by the Administrator.
7. Exercise and Payment.
(a) Exercise. An option may be exercised by a participant with respect to
part or all of the shares subject to the option by giving written notice to the
Corporation of the exercise of the option. The option price for the shares for
which an option is exercised shall be paid by the participant on or within
twenty business days after the date of exercise, and such option price shall be
paid
(i) in cash,
(ii) in whole shares of common stock of the Corporation owned by the
participant prior to exercising the option,
(iii) by having the Corporation withhold a number of shares from the
exercise, equal in value to the option price, or
(iv) in a combination of cash and delivery of shares of common
stock, or cash and the withholding of shares of common stock.
The value of any share of common stock delivered in payment of the option price
shall be the mean of the high and low prices of the stock as reported in the New
York Stock Exchange - Composite Transactions on the date the option is
exercised.
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(b) Payment of Tax Withholding. In order to enable the Corporation to meet
any applicable federal, state or local withholding tax requirements arising as a
result of the exercise of a stock option, a participant shall pay the
Corporation the amount of tax to be withheld or may elect to satisfy such
obligation by having the Corporation withhold shares that otherwise would be
delivered to the participant pursuant to the exercise of the option for which
tax is being withheld, by delivering to the Corporation shares of the
Corporation's common stock owned by the participant prior to exercising the
option, or by making a payment to the Corporation consisting of a combination of
cash and such shares of common stock. Such an election shall be subject to the
following:
(i) the election shall be made in such manner as may be prescribed by the
Administrator and the Administrator shall have the right, in its discretion, to
disapprove such election; and
(ii) the election shall be made prior to the date to be used to determine
the tax to be withheld and shall be irrevocable.
The value of any share of common stock to be withheld by the Corporation or
delivered to the Corporation pursuant to this Section 7(b) shall be the mean of
the high and low prices of the stock as reported in the New York Stock Exchange
- - Composite Transactions on the date to be used to determine the amount of tax
to be withheld.
8. Shares of Stock Subject to the Plan.
The shares that may be purchased pursuant to options under the Plan shall
not exceed an aggregate of 200,000 shares of Corporation common stock (as
adjusted pursuant to Section 9). Any shares subject to an option grant which for
any reason expires or is terminated unexercised as to such shares shall again be
available for issuance under the Plan.
9. Dilution and Other Adjustment.
In the event of any change in the outstanding shares of Corporation stock by
reason of any stock split, stock dividend, recapitalization, merger,
consolidation, combination or exchange of shares or other similar corporate
change or in the event of any special distribution to the stockholders, the
Administrator shall make such equitable adjustments in the exercise price of
outstanding options and in the number of shares applicable to options then
outstanding and in the number of shares which are available thereafter, both
under the Plan as a whole and with respect to individuals, as the Administrator
determines are necessary and appropriate. Such adjustment shall be conclusive
and binding for all purposes of the Plan.
10. Miscellaneous Provisions.
(a) Rights as Stockholder. A participant under the Plan shall have no
rights as a holder of Corporation common stock with respect to option grants
hereunder, unless and until certificates for shares of such stock are issued to
the participant, or such shares are credited to the participant's Dividend
Reinvestment and Stock Purchase Plan Account.
(b) Assignment or Transfer. Except as set forth below, an option by its
terms shall not be transferable by the participant other than by will or the
laws of descent and distribution, and, during the participant's lifetime, will
be exercisable only by the participant.
Notwithstanding the foregoing, the terms of the option may permit the
participant to transfer the option to
(i) his or her spouse, children or grandchildren (referred to herein as
the participant's "Family Members"),
(ii) a trust or trusts for the exclusive benefit of such Family Members,
or
(iii) a partnership in which such Family Members are the only partners.
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Any transfer pursuant to this subsection (b) shall be subject to the
following:
(A) there may be no consideration for any such transfer;
(B) the option agreement pursuant to which such options are granted
must be approved by the Administrator, and must expressly provide for
transferability in a manner consistent with this subsection (b); and
(C) subsequent transfers of transferred options shall be prohibited
except those in accordance with this subsection (b).
Following the transfer, the transferred options shall continue to be
subject to the same terms and conditions as were applicable immediately prior to
the transfer, provided that for purposes of Section 7 hereof, the term
"participant" shall be deemed to refer to the transferee. The events of death,
disability, retirement and termination of service described in Section 6 hereof
shall continue to be applied with respect to the original participant, following
which the options shall be exercisable by the transferee only to the extent and
for the periods specified in Section 6 of the Plan.
(c) Agreements. All options granted under the Plan shall be evidenced by
agreements in such form and containing such terms and conditions (not
inconsistent with the Plan) as the Administrator shall adopt.
(d) Costs and Expenses. The costs and expenses of administering the Plan
shall be borne by the Corporation and not charged to any option or to any Non-
Employee Director receiving an option.
11. Amendment, Termination and Term of the Plan.
(a) Amendments. The Board may from time to time amend the Plan in whole or
in part; provided, that no such action shall adversely affect any rights or
obligations with respect to any options theretofore granted under the Plan. With
the consent of the Non-Employee Director affected, the Administrator may amend
outstanding agreements evidencing options under the Plan in a manner not
inconsistent with the terms of the Plan.
(b) Termination. The Corporation may terminate the Plan (but not any
options theretofore granted under the Plan) at any time.
(c) Term of the Plan. The Plan (but not any options theretofore granted
under the Plan) shall terminate on, and no options shall be granted after, the
Annual Meeting of Shareholders of the Corporation in 2002.
12. Governing Law.
The validity and construction of the Plan and any agreements entered into
thereunder shall be governed by the laws of the State of New York.
13. Change-in-Control.
A "Change in Control of the Corporation" shall be deemed to occur if any of
the following circumstances shall occur:
(i) any "person" or "group" within the meaning of Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934 ("Act") becomes the "beneficial
owner" as defined in Rule 13d-3 under the Act of more than 20% of the then
outstanding voting securities of the Corporation;
(ii) any "person" or "group" within the meaning of Sections 13(d) and
14(d)(2) of the Act acquires by proxy or otherwise the right to vote for the
election of directors, for any merger or consolidation of the Corporation or for
any other matter or question with respect to more than 20% of the then
outstanding voting securities of the Corporation;
(iii) during any period of twenty-four consecutive months, Present
Directors and/or New Directors cease for any reason to constitute a majority of
the Board.
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For these purposes, "Present Directors" shall mean individuals who at the
beginning of such consecutive twenty-four month period were members of the Board
and "New Directors" shall mean any director whose election by the Board or whose
nomination for election by the Corporation's stockholders was approved by a vote
of at least two-thirds of the Directors then still in office who were Present
Directors or New Directors;
(iv) the stockholders of the Corporation approve a plan of complete
liquidation or dissolution of the Corporation; or
(v) there shall be consummated:
(x) a reorganization, merger or consolidation of all or substantially
all of the assets of the Corporation (a "Business Combination"),
unless, following such Business Combination,
(a) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the outstanding Common
Stock of the Corporation and outstanding voting securities of the
Corporation immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of
such transaction owns the Corporation or all or substantially all of
the Corporation's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the
outstanding Common Stock of the Corporation and outstanding voting
securities of the Corporation, as the case may be,
(b) no Person (excluding any corporation resulting from such
Business Combination or any employee benefit plan (or related trust)
of the Corporation or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more
of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to
the Business Combination and
(c) at least a majority of the members of the board of directors
of the corporation resulting from such Business Combination were
members of the Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
(y) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all, or substantially all, of the
assets of the Corporation, provided, that the divestiture of less than
substantially all of the assets of the Corporation in one transaction
or a series of related transactions, whether effected by sale, lease,
exchange, spin-off, sale of the stock or merger of a subsidiary or
otherwise, shall not constitute a Change in Control.
Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur pursuant to Subparagraphs (i) and (ii) above, solely because
twenty percent (20%) or more of the combined voting power of the Corporation's
then outstanding securities is acquired by one or more employee benefit plans
maintained by the Corporation.
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APPENDIX C
BY-LAW AMENDMENT
Article 1.
Section 11. Notice of Stockholder Business and Nominations.
(a) Annual Meetings of Stockholders. (i) Nominations of persons for
election as directors and the proposal of business to be considered by the
stockholders may be made at an annual meeting of stockholders (A) pursuant to
the Corporation's notice of meeting, (B) by or at the direction of the Board or
(C) by any stockholder who was a stockholder of record at the time of giving of
notice provided for in this By-law, who is entitled to vote at the meeting and
who complies with the notice procedures set forth in this By-law.
(ii) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (C) of paragraph
(a)(i) of this By-law, the stockholder must have given timely notice thereof in
writing to the Secretary and such other business must otherwise be a proper
matter for stockholder action. To be timely, a stockholder's notice shall be
delivered to the Secretary at the principal executive offices of the Corporation
not later than the close of business on the 90th day nor earlier than the close
of business on the 120th day prior to the first anniversary of the preceding
year's annual meeting; provided, however, that in the event that the date of the
annual meeting is more than 30 days before or more than 60 days after such
anniversary date, notice by the stockholder to be timely must be so delivered
not earlier than the close of business on the 120th day prior to such annual
meeting and not later than the close of business on the later of the 90th day
prior to such annual meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made by the Corporation. In no
event shall the public announcement of an adjournment of an annual meeting
commence a new time period for the giving of a stockholder's notice as described
above. Such stockholder's notice shall set forth: (A) as to each person whom the
stockholder proposes to nominate for election or reelection as a director all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors in an election contest, or is
otherwise required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14a-11
thereunder (including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); (B) as to any
other business that the stockholder proposes to bring before the meeting, a
brief description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (C) as to the stockholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is made
(x) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner and (y) the class and number
of shares of the Corporation which are owned beneficially and of record by such
stockholder and such beneficial owner.
(iii) Notwithstanding anything in the second sentence of paragraph
(a)(ii) of this By-law, in the event that the number of directors to be elected
to the Board is increased and the public announcement by the Corporation naming
all of the nominees for director or specifying the size of the increased Board
occurs less than 100 days prior to the first anniversary of the preceding year's
annual meeting, a stockholder's notice required by this By-law shall also be
considered timely, but only with respect to mominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the 10th day following the day on which such public announcement is
first made.
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(b) Special Meetings of Stockholders.
Nominations of persons for election as directors may be made at a special
meeting of stockholders at which directors are to be elected pursuant to the
Corporation's notice of meeting (i) by or at the direction of the Board or (ii)
provided that the Board has determined that directors shall be elected at such
meeting, by any stockholder of the Corporation who is a stockholder of record at
the time of giving of notice provided for in this By-law, who shall be entitled
to vote at the meeting and who complies with the notice procedures set forth in
this By-law. In the event the Corporation calls a special meeting of
stockholders for the purpose of electing one or more directors to the Board, any
such stockholder may nominate a person or persons (as the case may be), for
election to such position(s) as are specified in the Corporation's notice of
meeting, if the stockholder's notice required by paragraph (a)(ii) of this By-
law shall be delivered to the Secretary at the principal executive offices of
the Corporation not earlier than the close of business on the 120th day prior to
such special meeting and not later than the close of business on the later of
the 90th day prior to such special meeting or the 10th day following the day on
which public announcement is first made of the date of the special meeting and
of the nominees proposed by the Board to be elected at such meeting. In no event
shall the public announcement of an adjournment of a special meeting commence a
new time period for the giving of a stockholder's notice as described above.
(c) General. (i) Only such persons who are nominated in accordance with
the procedures set forth in this By-law shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this By-law. The Chairman of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be brought before the
meeting was made or proposed, as the case may be, in accordance with the
procedures set forth in this By-law and, if any proposed nomination or business
is not in compliance with this By-law, to declare that such defective proposal
or nomination shall be disregarded.
(ii) For purposes of this By-law, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
(iii) Notwithstanding the foregoing provisions of this By-law, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this By-law. Nothing in this By-law shall be deemed to affect any
rights (A) of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or
(B) of the holders of any series of Preferred Stock to elect directors under the
circumstances specified by the terms of such Preferred Stock.
<PAGE>
Union Carbide Corporation
39 Old Ridgebury Road, Danbury, CT 06817-0001
To Our Stockholders:
It is my pleasure to invite you to our annual meeting. This year it will
be held on Wednesday, April 23, at 10:00 a.m., in the John C. Creasy Health
Education Center, 24 Hospital Avenue, Danbury, Connecticut 06810.
You will find the formal notice of the annual meeting in the enclosed
proxy statement. Please read the statement and when finished, promptly mark,
sign, and return the attached proxy card, to insure that your shares will be
represented. It is important that you exercise your right to vote, whether or
not you plan to attend the meeting.
We hope that many of you will be able to attend our annual meeting in
person. If you plan to do so, please return the enclosed ticket request. We will
send your ticket to you promptly together with directions to the meeting.
We appreciate the continuing interest of stockholders in the business of
Union Carbide and I look forward to seeing many of you at the Danbury meeting.
Sincerely yours,
/s/ W. H. Joyce
March 12, 1997
William H. Joyce
Chairman of the Board
* Detach Proxy Card here *
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF UNION CARBIDE CORPORATION
ANNUAL MEETING OF STOCKHOLDERS ON APRIL 23, 1997
I or we authorize V. E. Jordan Jr., W. H. Joyce, and J. E. Geoghan, and any one
or more of them, as proxies, to vote all stock of mine or ours in Union Carbide
Corporation on any matters that come before its 1997 Annual Meeting of
Stockholders or any adjournment of the meeting. Each proxy may substitute
another to act for him. Each item of business listed on the reverse side of this
card is described in the Proxy Statement.
The proxies will vote: (1) as you specify on this card, (2) as the Board of
Directors recommends where you do not specify a choice, and (3) as the proxies
decide on any other matter.
To vote as the Board of Directors recommends, just sign, date and return this
card.
- --------------------------------------------------------------------------------
Signature(s)
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(Please add your title if signing as agent, administrator,
executor, or trustee.)
, 1997
- --------------------------------------------------------------------------
Date
<PAGE>
The Board of Directors Recommends a Vote FOR Management Proposals 1, 2, 3 and 4.
1. Election of Directors
[_] FOR all Nominees [_] WITHHELD from all Nominees
[_] FOR, except for the following Nominee(s)
-----------------------------------------------
2. Ratification of KPMG Peat Marwick LLP as Independent Auditors
FOR [_] AGAINST [_] ABSTAIN [_]
3. Adoption of 1997 Union Carbide Long-Term Incentive Plan
FOR [_] AGAINST [_] ABSTAIN [_]
4. Adoption of 1997 Stock Option Plan for Non-Employee Directors of Union
Carbide Corporation
FOR [_] AGAINST [_] ABSTAIN [_]
Nominees for
Director of
Union Carbide
Corporation
John J. Creedon
C. Fred Fetterolf
Joseph E. Geoghan
Thomas P. Gerrity
Rainer E. Gut
Vernon E. Jordan, Jr.
William H. Joyce
Robert D. Kennedy
Ronald L. Kuehn, Jr.
Rozanne L. Ridgway
James M. Ringler
William S. Sneath
<PAGE>
Union Carbide Corporation
39 Old Ridgebury Road, Danbury, CT 06817-0001
To Our Stockholders:
It is my pleasure to invite you to our annual meeting. This year it will be held
on Wednesday, April 23, at 10:00 a.m., in the John C. Creasy Health Education
Center, 24 Hospital Avenue, Danbury, Connecticut 06810.
You will find the formal notice of the annual meeting in the enclosed proxy
statement. Please read the statement and when finished, promptly mark, sign, and
return the attached proxy card, to insure that your shares will be represented.
It is important that you exercise your right to vote, whether or not you plan to
attend the meeting. For your convenience and to reduce costs we have
consolidated your holdings except for those shares that you may hold at a
banking institution or brokerage house.
We hope that many of you will be able to attend our annual meeting in person. If
you plan to do so, please return the enclosed ticket request. We will send your
ticket to you promptly together with directions to the meeting.
We appreciate the continuing interest of stockholders in the business of Union
Carbide and I look forward to seeing many of you at the Danbury meeting.
Sincerely yours,
/s/ W. H. Joyce
March 12, 1997
William H. Joyce
Chairman of the Board
* Detach Proxy Card here *
The Board of Directors Recommends a Vote FOR Management Proposals 1, 2, 3 and 4.
1. Election of Directors
(Nominees: John J. Creedon, C. Fred Fetterolf, Joseph E. Geoghan, Thomas P.
Gerrity, Rainer E. Gut, Vernon E. Jordan, Jr., William H. Joyce, Robert D.
Kennedy, Ronald L. Kuehn, Jr., Rozanne L. Ridgway, James M. Ringler, William
S. Sneath)
[_] FOR all Nominees [_] WITHHELD from all Nominees
[_] FOR, except for the following Nominee(s)
_____________________________________________________
2. Ratification of KPMG Peat Marwick LLP as Independent Auditors
FOR [_] AGAINST [_] ABSTAIN [_]
3. Adoption of 1997 Union Carbide Long-Term Incentive Plan
FOR [_] AGAINST [_] ABSTAIN [_]
4. Adoption of 1997 Stock Option Plan for Non-Employee Directors of Union
Carbide Corporation
FOR [_] AGAINST [_] ABSTAIN [_]
If you wish to vote as the Board of Directors' recommends, you need not mark
this card. Just sign and date this card and return it promptly in the enclosed
envelope.
YOUR VOTE IS IMPORTANT -- PLEASE VOTE TODAY.
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Signature(s)
, 1997
- -----------------------------------------------------------------
Date
<PAGE>
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF UNION CARBIDE CORPORATION
ANNUAL MEETING OF STOCKHOLDERS ON APRIL 23, 1997
I or we authorize V. E. Jordan Jr., W. H. Joyce, and J. E. Geoghan, and any one
or more of them, as proxies, to vote all stock of mine or ours in Union Carbide
Corporation on any matters that come before its 1997 Annual Meeting of
Stockholders or any adjournment of the meeting. Each proxy may substitute
another to act for him. Each item of business listed on the reverse side of this
card is described in the Proxy Statement.
The proxies will vote: (1) as you specify on this card, (2) as the Board of
Directors recommends where you do not specify a choice, and (3) as the proxies
decide on any other matter.
For Participants in the Union Carbide Common Stock Savings Program, or ESOP
Preferred Program: As to those shares of Union Carbide Corporation, if any, that
are held for me, I instruct the Trustee of the applicable Savings Program to
sign a proxy for me in substantially the form set forth on the reverse side. The
Trustee shall mark the proxy as I specify. Where I do not specify a choice, my
shares will be voted in the same proportion as the trustee votes the shares for
which it receives instructions.
