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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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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 Section 240.14a-11(c) or Section 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)
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[X] No fee required
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Union Carbide Corporation
[LOGO OF UNION CARBIDE]
Notice of Annual Meeting of Stockholders
to be held on April 26, 2000 and
Proxy Statement
March 9, 2000
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[LOGO OF UNION CARBIDE] 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 26, 2000
March 9, 2000
We at Union Carbide are very excited about the prospects of our planned
merger with The Dow Chemical Company and are pleased that you, our stockholders,
resoundingly endorsed the merger at the special meeting held on December 1,
1999. Since the merger is still pending we must continue to conduct business as
usual. Therefore, we plan to hold our regularly scheduled annual meeting of the
stockholders of Union Carbide Corporation at 10:00 a.m. on Wednesday, April 26,
2000, in the John C. Creasy Health Education Center, 24 Hospital Avenue,
Danbury, Connecticut, 06810, for the following purposes:
1. To elect a Board of nine directors for the ensuing year.
2. To ratify the selection of KPMG LLP as independent auditors for 2000.
3. To consider management's proposal to adopt an amendment to the 1997
Union Carbide Long-Term Incentive Plan.
4. To consider management's proposal to reapprove performance goals under
the 1995 Union Carbide Performance Incentive Plan.
5. To transact such other business as may properly come before the meeting.
Your vote is important. So that your stock will be represented at the
meeting in the event that you do not attend, please vote your proxy by following
the instructions attached to the proxy card.
We hope that many of you will be able to attend the annual meeting. If you
plan to do so, you will need to obtain a ticket. Please call the toll free
number -- 1-800-934-3350 -- and a member of our Shareholder Services Department
will process your ticket request.
By Order of the Board of Directors
/s/ BRUCE D. FITZGERALD
BRUCE D. FITZGERALD
Vice-President, General Counsel and Secretary
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[LOGO OF UNION CARBIDE] Union Carbide Corporation
39 Old Ridgebury Road, Danbury, CT 06817-0001
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PROXY STATEMENT
Table of Contents
Page
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 ............................................. 11
Health, Safety and Environmental Affairs ........................ 11
Nominating ...................................................... 12
Public Policy ................................................... 12
Compensation of Directors ......................................... 12
Five Year Cumulative Total Return ................................. 13
Report of Compensation and Management Development Committee ....... 14
Summary Compensation Table ........................................ 17
Stock Options Granted-- 1999 ...................................... 18
Stock Options Exercised-- 1999 .................................... 19
Retirement Program ................................................ 19
Security Ownership of Management .................................. 20
Section 16(a) Beneficial Ownership Reporting Compliance ........... 21
Security Ownership of Certain Beneficial Owners ................... 21
Change in Control Arrangements .................................... 22
2. Management Proposal to Ratify KPMG LLP as
Independent Auditors for 2000 ...................................... 24
3. Management Proposal to adopt an amendment to the 1997
Union Carbide Long-Term Incentive Plan ............................. 25
4. Management Proposal to reapprove performance goals under
the 1995 Union Carbide Performance Incentive Plan .................. 29
5. Other Business ..................................................... 31
Stockholder Proposals for 2001 Annual Meeting ............................. 31
Proxy Solicitation ........................................................ 31
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General Information for Stockholders
Merger with The Dow Chemical Company
On August 3, 1999, the Corporation and The Dow Chemical Company ("Dow")
entered into an Agreement and Plan of Merger, pursuant to which the Corporation
agreed to merge with a subsidiary of Dow. Upon the merger, the Corporation will
become a subsidiary of Dow and the Corporation's stockholders will receive 0.537
of a share of Dow common stock for each share of the Corporation's common stock
they own as of the date of the merger subject to proportional adjustment for any
Dow stock split or stock dividend. At the Special Meeting of Stockholders held
on December 1, 1999 the stockholders of Union Carbide voted to adopt The
Agreement and Plan of Merger. Completion of the merger is subject to certain
conditions including review by antitrust regulatory authorities in the United
States, Europe and Canada.
How To Vote
Proxies are solicited from stockholders by the Board of Directors of the
Corporation 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. Your vote is important. Please execute the enclosed proxy card promptly.
The shares represented will be voted by the proxyholders named on the card in
accordance with your directions. If the proxy card is executed 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 account, and all shares will be voted
in accordance with the instructions on the proxy card.
As of January 31, 2000, 13,522,840 shares of common stock ("ESOP Stock")
were 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. By the terms of the applicable trust agreements, the trustees
of the Savings and Investment Program for Employees of Union Carbide and the
Union Carbide Employee Stock Ownership Plan will vote stock allocated to
individual participants' accounts as instructed by such participants and will
vote any allocated shares for which instructions are not received and, with
respect to the Employee Stock Ownership Plan all unallocated shares, in the same
proportion as the trustee votes allocated shares for which voting instructions
are received. As of January 31, 2000, 7,350,206 shares of ESOP Stock were
allocated to individual participants accounts.
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 executed. 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 two individuals designated
as 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.
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Confidential Voting
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 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 sign a statement of 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.
Matters Not Listed In Proxy
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.
Stockholders Entitled To Vote
Stockholders of record at the close of business on March 6, 2000 are
entitled to notice of the meeting and to vote the shares held on that date at
the meeting. Each share of common stock of the Corporation is entitled to one
vote. As of January 31, 2000, 134,387,396 shares of common stock of the
Corporation were outstanding. Those shares were held by 42,094 stockholders of
record.
Votes Required
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 and to approve the two management proposals.
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.
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Matters to be Considered at the Annual Meeting
1. Election of Directors
Unless individual stockholders specify otherwise, each executed proxy will
be voted for the election to the Board of Directors of the Corporation of the
nine 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, 2000.
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[PHOTO]
C. Fred Fetterolf, age 71, Director since 1987, 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 Teledyne Technologies, Inc., Commonwealth Industries,
Inc., Dentsply International, Inc., Praxair, Inc. and Allegheny Technologies,
Inc., a trustee of Carnegie Mellon University, Grove City College 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, Executive and Nominating Committees of
Union Carbide's Board.
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[PHOTO]
Rainer E. Gut, age 67, Director since 1994, Chairman of the Board of Directors
of Credit Suisse Group, Credit Suisse First Boston and Credit Suisse, all of
Zurich, Switzerland. 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 Credit Suisse Group. Mr. Gut is Vice-Chairman
of the Board of Directors and Chairman elect of Nestle S.A., Vevey and a member
of the Board of Directors of Pechiney, Paris, and Sofina S.A., Brussels. Mr. Gut
is Chairman of the Finance and Pension Committee and a member of the
Compensation and Management Development and Nominating Committees of Union
Carbide's Board.
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[PHOTO]
Vernon E. Jordan, Jr., age 64, Director since 1987, Senior Managing Director,
Lazard Freres & Co., Of Counsel, 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. joined the law firm of Akin, Gump, Strauss, Hauer & Feld in 1982 as
Senior Partner. On January 1, 2000, Mr. Jordan joined Lazard Freres & Co. as
Senior Managing Director and continues as Of Counsel to Akin, Gump, Strauss,
Hauer & Feld, LLP. 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, Callaway Golf Co., AMFM Inc., Dow Jones & Co.,
Inc., 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]
William H. Joyce, age 64, Director since 1992, 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
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. In 1990, he was elected
a Vice-President of the Corporation. 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 the Medal of
Technology from President Clinton. He is a director of CVS Corporation, Reynolds
Metals Company and The American Plastics Council, director and treasurer of
Society of Chemical Industry 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]
Robert D. Kennedy, age 67, Director since 1985, 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 served as Chairman and Chief Executive Officer of
UCAR International, Inc. from March 18, 1998 to July 1, 1998 and as Chairman to
September, 1999. Mr. Kennedy is a director of Chase Industries, International
Paper Company, Kmart Corporation, Lion Ore Mining International Ltd., Sunoco,
Inc., and UCAR International, Inc. He is also a member of the Advisory Boards of
The Blackstone Group, RFE Investment Partners and Sullivan Associates, past
Chairman of the Chemical Manufacturers Association, a member of the Board of
Trustees of Cornell University, member and past Chairman of the New Hampton
School Trustees, past Chairman 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.
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[PHOTO]
Ronald L. Kuehn, Jr., age 64, Director since 1984, Director and Chairman of the
Board of El Paso Energy Corporation. Mr. Kuehn received the degrees of B.S. in
1957 and LL.B. in 1964 from Fordham University. He joined the legal staff of
Sonat Inc. 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. In October, 1999 El Paso Energy Corporation merged
with Sonat Inc. and Mr. Kuehn was elected director and Chairman of the Board of
El Paso. Mr. Kuehn is a director of AmSouth Bancorporation, The Dun & Bradstreet
Corporation, Praxair, Inc., Protective Life Corporation, Transocean Sedco Forex
Inc., and a number of civic organizations. He is a member of the Board of
Trustees of Tuskegee University. Mr. Kuehn is Chairman of the Compensation and
Management Development Committee and a member of the Executive, Finance and
Pension and Health, Safety and Environmental Affairs Committees of Union
Carbide's Board.
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[PHOTO]
Rozanne L. Ridgway, age 64, 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, Emerson Electric Co., Minnesota Mining
and Manufacturing Company, Nabisco, Inc. 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 non-profit 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]
James M. Ringler, age 54, Director since 1996, Vice Chairman of Illinois Tool
Works, Inc. Mr. Ringler received the degree 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, was appointed Chief Executive Officer in 1996
and was elected Chairman in 1997. In November, 1999 Illinois Tool Works, Inc.
acquired Premark International, Inc. and Mr. Ringler was elected Vice Chairman
of Illinois Tool Works, Inc. in December, 1999. Mr. Ringler is a director of
Reynolds Metals Company, National Association of Manufacturers, the Business
Round Table and Evanston Hospital and is a trustee of the Manufacturers'
Alliance for Productivity and Innovation and a national trustee of the Boys and
Girls Clubs of North America, Midwest Region. Mr. Ringler also serves on the
Board of Directors of the Lyric Opera of Chicago. He is Chairman of the Audit
Committee and a member of the Compensation and Management Development, Finance
and Pension and Health, Safety and Environmental Affairs Committees of Union
Carbide's Board.
9
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[PHOTO]
Paul J. Wilhelm, age 58, Director since 1998, President of the U.S. Steel Group
of USX Corporation and a Director of USX Corporation. Mr. Wilhelm received the
degree of B.S. in Mechanical Engineering in 1964 from Carnegie Mellon
University. He joined U.S. Steel that same year and following a series of
production and engineering assignments, was named Vice-President - Technology
and Management Services in 1992. In 1993, he was named President of USS/Kobe
Steel Company, the partnership formed by USX Corporation and Kobe Steel, Ltd. He
was named Vice-President - Operations for the U.S. Steel Group in 1994 and was
elected President later that year. He was elected to the USX Board of Directors
in 1995. Mr. Wilhelm is past Chairman of the American Iron & Steel Institute, a
member of the Association of Iron & Steel Engineers, Chairman of the Board for
the Greater Pittsburgh Council Boy Scouts of America and Chairman of the Japan
America Society of Pennsylvania. He is a member of the Board of Trustees of
Carnegie Mellon University, Chairman of the Board of the Duquesne Club and a
member of the University of Pittsburgh's Board of Visitors for the Katz School
of Business and College of Business Administration. Mr. Wilhelm is a member of
the Audit, Finance and Pension, Health, Safety and Environmental Affairs and the
Public Policy Committees of Union Carbide's Board.
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During 1999, there were nine regular and three special meetings of the
Board of Directors. At present, there are nine directors. Pursuant to action by
the Board, the number of directors to be elected at the annual meeting will be
nine. 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. Employee directors, except the Chief
Executive Officer, will retire from the Board at the time of their retirement
from the Corporation. Of the nine nominees for election at the annual meeting of
stockholders, one is currently an officer of the Corporation. Eight are
non-employee directors, one of whom is a retired Chief Executive Officer 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. Each director attended 82%
or more of the aggregate of the meetings of the Board and of the Board
committees on which he or she served. Average attendance by all directors at
meetings of the Board and its committees was 97%.
Vernon E. Jordan was senior partner of the law firm of Akin, Gump, Strauss,
Hauer and Feld, LLP in 1999, and that firm was retained by and rendered services
to the Corporation in 1999.
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.
10
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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 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 of the financial statements and to internal controls. The
Committee met four times during 1999. Members of the Committee are: James
M. Ringler, Chairman; C. Fred Fetterolf; Robert D. Kennedy; Rozanne L.
Ridgway and Paul J. Wilhelm.
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
five times during 1999. Members of the Committee are: Ronald L. Kuehn, Jr.,
Chairman; C. Fred Fetterolf; Rainer E. Gut and James M. Ringler.
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 1999. Members of the Committee
are: William H. Joyce, Chairman; C. Fred Fetterolf; Vernon E. Jordan, Jr.;
Robert D. Kennedy and Ronald L. Kuehn, Jr.
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 once during 1999. Members of the
Committee are: Rainer E. Gut, Chairman; Vernon E. Jordan, Jr.; Ronald L.
Kuehn, Jr.; James M. Ringler and Paul J. Wilhelm.
Health, Safety and Environmental Affairs-- The Health, Safety and
Environmental Affairs Committee was established in 1985 to expand the
Board's review of 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 issue and management's response
to the issue and reviews relevant scientific, legislative, governmental and
judicial developments and their effect on corporate policies. The Committee
met three times during 1999. Members of the Committee are: C. Fred
Fetterolf, Chairman; Ronald L. Kuehn, Jr.; Rozanne L. Ridgway; James M.
Ringler and Paul J. Wilhelm.
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Nominating-- The Nominating Committee was established in 1977. The
Committee recommends to the Board nominees for election as officers and
directors and periodically reviews potential candidates.
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 two times during 1999.
Members of the Committee are: Vernon E. Jordan, Jr., Chairman; C. Fred
Fetterolf; Rainer E. Gut; Robert D. Kennedy and Rozanne L. Ridgway.
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 issues facing the
Corporation. 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 14 preceding the annual meeting at
which directors will be elected by the stockholders.
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
twice during 1999. Members of the Committee are: Rozanne L. Ridgway,
Chairman; Vernon E. Jordan, Jr.; Robert D. Kennedy and Paul J. Wilhelm.
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 1999. 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 Option Plan for Non-Employee Directors -- The plan was approved by
stockholders in 1997 and provides for awards of options to purchase shares of
the Corporation's common stock. Under the Plan, the number of shares subject to
options may not exceed 200,000 and no award may be granted subsequent to the
date of the meeting of stockholders in 2002. The option price will not be less
than the closing price of the Corporation's common stock as listed on the New
York Stock Exchange-Composite Transactions on the date the option is granted,
the term of the option may not be longer than ten years duration and the option
will be exercisable only after the earliest of (i) the second anniversary of
date of grant; (ii) the participant's death; or (iii) a change in control of the
Corporation as defined in the Plan. During 1999, each non-employee director was
granted 3,000 options.
12
<PAGE>
Non-Employee Directors' Compensation Deferral Plan -- The plan, adopted by the
Board effective in 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 the 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 1999 was $912.
The Corporation has 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 a cost of approximately
$450,000 per annum.
Compensation Committee Interlocks and Insider Participation-- The members of the
Compensation and Management Development Committee are: Ronald L. Kuehn, Jr.,
Chairman; C. Fred Fetterolf; Rainer E. Gut and James M. Ringler.
Five Year Cumulative Total Return(1)
- --------------------------------------------------------------------------------
End of Year 1994 = 100
[GRAPH]
End of Year
(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, 1994 and that all dividends were reinvested. Past performance is not
necessarily an indicator of future results.
Graph Dollar Values 1995 1996 1997 1998 1999
UCC 128.45 142.40 152.08 153.55 245.38
S&P 500 137.53 169.07 225.40 289.85 350.94
S&P Chemicals 130.67 169.74 209.85 197.07 233.91
13
<PAGE>
Report of the Compensation and Management
Development Committee on Executive Compensation
The Corporation's compensation programs are approved and administered by
the Compensation and Management Development Committee of the Board of Directors
consisting only of non-employee Directors. The Committee meets several times a
year to review the Corporation's performance against corporate goals, to
evaluate executive performance and determine appropriate compensation and to
review management development and succession planning.
The objectives of the Corporation's compensation programs are:
. to set compensation at levels sufficient to attract and retain highly
competent executives;
. to provide incentives to achieve the Corporation's strategic, financial and
operational goals; and
. to reward individual achievement of business objectives with compensation
based on performance.
Components of the Compensation Package -- The compensation package for the
Corporation's executives has four components: base salary, which reflects the
executive's scope and level of responsibility; profit sharing, based on the
Corporation's Return on Capital ("ROC") performance; variable compensation,
which reflects relative corporate, business unit and individual performance and
long-term incentives, which align executives with shareholder interests.
An independent consultant provides the Committee with information
concerning competitive compensation levels for base salaries, long-term
incentives and total compensation, based upon a group of comparison companies
that include both chemical companies and the chemicals and plastics segments of
major oil companies. The Committee believes these companies require executive
talents and capabilities similar to those required by the Corporation.
The Committee targets compensation for executives that will produce median
total compensation opportunity for similar jobs in the industry. Base salary
targets for executives are established at 10% below median base salaries of
comparison companies. When combined with profit sharing and a highly leveraged
variable compensation program, total cash compensation including base salaries
is targeted to pay at the median of the comparison companies when program goals
are met. Total cash compensation will exceed the median when goals are exceeded
and will fall below the median when goals are not met.
Base Salary -- At least once a year, the Committee reviews the base salary of
the Chairman/CEO and, in consultation with the Chairman/CEO, reviews the base
salaries of executive officers. Based on individual performance, as well as
competitive pay levels, the Committee determines whether an adjustment to base
salary is warranted for each executive officer. Dr. Joyce was granted an
increase in 2000 of $50,000 in base pay based on his performance and salaries
paid to chief executive officers of the comparison companies.
Profit Sharing -- The cash profit sharing plan and ESOP profit sharing plan
cover virtually all employees, including the Corporation's officers.
Participants in the plans have the opportunity to earn extra pay every quarter.
Base salary targets for all employees, other than executives, are set 5% below
the median base salaries of comparison companies. When ROC for the Corporation
equals a predetermined level based upon the long-term cost of capital, employees
earn back 5% of base pay. Depending on the degree to which ROC surpasses that
level, employees can earn up to an additional 10%. The maximum payout is ten
days' base salary per calendar quarter or approximately 15% of base pay. For
1999, participants received five days' pay, including one day to cover taxes on
a voluntary early withdrawal, all of which was paid by allocation of ESOP stock
to the participants' accounts in the savings plan.
14
<PAGE>
Annual Incentives -- The Corporation's variable compensation programs include
the Performance Incentive Plan and the Variable Compensation Plan. They are
largely based on relative performance against groups of companies that are
within as well as outside the S&P Chemical Index.
Performance Incentive Plan (PIP) -- The PIP is based on the Corporation's
ROC performance, and ROC performance relative to the ROC comparison companies
over a 12 month fiscal year ending September 30. The companies selected for the
ROC performance comparison include companies which best approximate the
Corporation's businesses and are similarly affected by margins in the product
markets in which the Corporation competes. The Corporation's expenses for the
plan are deductible for federal income tax purposes under Section 162(m) of the
Internal Revenue Code. The Committee awarded $287,000 to Dr. Joyce for 1999 ROC
performance under the PIP.
Variable Compensation Plan (VCP) -- The VCP sets targets for performance in
the market to book ratio of the Corporation's common stock relative to the
market to book comparison companies, growth in sales volume over three years and
productivity measured by actual fixed cost per pound of product. These financial
measures represent 60% of the VCP award at target. The companies selected for
the market to book ratio comparison are publicly traded companies listed in the
S&P Chemical Index that are considered investment alternatives in the chemical
industry. These companies are slightly different than the companies used to
compare compensation discussed above.
The balance of the VCP award is based on the Corporation's performance
relative to Corporate Measures of Performance (MOPs) set annually by the CEO and
approved by the Board of Directors. The MOPs include specific objectives in
Health, Safety and Environment, People Excellence, Operating Performance,
Information Technology, Capital Program and Technology Leadership, etc.
The Board approved the 1999 VCP award at its February, 2000 meeting. The
level of payment recommended by the Committee and approved by the Board balanced
varying levels of performance results against the metrics and measures of
performance. The Committee and Board gave particular consideration to the
substantial improvement in market to book ratio, the 14% increase in worldwide
sales volume and the 12% increase in productivity over last year. The Committee
and Board also noted the successful implementation of the Corporation's
enterprise-wide information system ("Powernet") and Y2K preparation, as well as
continued improvement in key performance indicators, including Responsible
Care,(R) operating performance and plant effectiveness, customer focus, employee
communications and leadership alignment during a most challenging year. Based on
the above assessment, Dr. Joyce was awarded a VCP payment of $654,000 after
deduction of the amount placed at risk pursuant to the 1997 Earnings Per Share
Incentive Plan.
Long-Term Incentives -- The Committee regularly reviews the competitiveness of
the Corporation's long-term incentive programs targeted at the median of
long-term compensation at compensation comparison companies.
Stock Options -- Stock options serve both the Corporation and shareholder
interests by linking all executives to the goal of increasing shareholder value.
Except for an adjustment 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. Consequently executives do not benefit from stock price appreciation
until and unless shareholders also benefit. Additionally, the Corporation has
not re-priced options whose current value is below the value at grant. Based on
the analysis of competitive data, and recognition of the role played by Dr.
Joyce in creating shareholder value, the Committee awarded Dr. Joyce 220,000
stock options in December 1999. This award was within the range of options
possible, based on competitive market data.
15
<PAGE>
Earnings Per Share Program -- Under the 1997 Earnings Per Share Incentive
Plan, a limited number of senior managers agreed to forfeit a portion of their
compensation if the Corporation's earnings per share for the year 2000 were less
than $4.00, and were to receive cash awards if earnings per share of at least
$4.00 were achieved for 1999 and 2000. The plan also provides that, in the event
a change of control, such as the Dow merger, occurs before the end of 2000, the
Compensation and Management Development Committee of the Union Carbide Board of
Directors may approve payments under the Plan.
Stock Ownership -- In 1993, the Board of Directors initiated stock ownership
guidelines to encourage significant stock ownership by senior management, link
their interests to those of shareholders and create an incentive to increase the
market value of the Corporation's stock. Under the guidelines, the Chairman/CEO
is expected to own stock valued at four times his annual base salary. Corporate
officers are expected to own stock valued at one times their base salary. Other
managers are expected to own stock equivalent to one-third their base salary.
All are in compliance with the guidelines. Dr. Joyce now owns approximately 14
times his annual base salary in the Corporation's stock.
Compensation Deferral Program -- The Corporation maintains a voluntary unfunded
compensation deferral program which allows participants to 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. For those executive officers who
elected to participate in the program, their allocations into deferral program
stock units are reported in the Security Ownership of Management table on page
20.
Summary -- The Compensation and Management Development Committee believes that
the objectives of the compensation and incentive programs at Union Carbide
Corporation are consistent with programs maintained by comparable industrial
companies and serve to keep management closely aligned with shareholder interest
in building value for the enterprise.
Compensation and Management Development Committee
Ronald L. Kuehn, Jr., Chairman
C. Fred Fetterolf Rainer E. Gut James M. Ringler
16
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
- ----------------------------------------------------------------------------------------------------------------------
Long-Term All Other
Annual Compensation Compensation Compensation(3)
-------------------------------------------------- ------------ ---------------
Number of
Securities
Annual Other Underlying
Variable Annual Options
Name and Principal Position Year Salary Compensation(1) Compensation(2) Granted
- --------------------------- ---- ------ --------------- --------------- -------
<S> <C> <C> <C> <C> <C> <C>
William H. Joyce 1999 $966,667 $941,000 $ 18,750 220,000 $196,081
Chairman, President and 1998 918,750 650,000 48,918 175,000 142,700
Chief Executive Officer 1997 841,667 850,000 117,692 135,000 118,045
Lee P. McMaster 1999 $345,000 $288,000 $ 6,635 37,500 $ 63,826
Corporate Vice-President/ 1998 315,000 208,000 16,659 32,000 35,682
General Manager - Specialty 1997 285,000 283,000 39,461 25,000 24,282
Polymers and Products
Joseph C. Soviero 1999 $363,750 $216,000 $ 7,019 33,000 $ 42,360
Corporate Vice-President, 1998 350,000 183,000 18,510 30,000 18,146
Corporate Ventures 1997 341,250 226,000 48,461 25,000 14,712
Roger B. Staub 1999 $341,250 $207,000 $ 6,827 33,000 $ 28,113
Corporate Vice-President/ 1998 325,000 190,000 17,981 30,000 20,294
General Manager - Unipol Systems 1997 308,333 189,000 44,308 25,000 32,245
John K. Wulff 1999 $330,000 $216,000 $ 6,442 35,000 $ 51,389
Corporate Vice-President, 1998 316,667 140,000 16,923 28,000 33,007
CFO and Controller 1997 300,000 197,000 41,539 24,000 29,885
</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. The amounts in this column do not include amounts which have
been placed at risk pursuant to the 1997 Earnings Per Share Incentive Plan.
(2) Other Annual Compensation in 1997 represents cash profit sharing and ESOP
profit sharing and in 1998 and 1999, ESOP profit sharing.
(3) All Other Compensation includes employer contributions to the Savings
Program, allocations to the nonqualified compensation deferral program and
the dollar value of the benefit from premiums paid for split dollar life
insurance policies projected on an actuarial basis. For 1999, employer
contributions to the Savings Program were $9,000 for Dr. Joyce and Messrs.
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), the maximum amount of compensation that may be recognized for
employer matching contributions is limited to $160,000 per year. Additional
allocations to the nonqualified compensation deferral program for 1999
include $91,399 for Dr. Joyce; $18,406 for Mr. McMaster; $6,320 for Mr.
Soviero; $4,241 for Mr. Staub and $18,946 for Mr. Wulff. For 1999 the
dollar value of the benefit from premiums paid for split dollar life
insurance policies projected on an actuarial basis was $95,682 for Dr.
Joyce, $36,420 for Mr. McMaster, $27,040 for Mr. Soviero, $14,872 for Mr.
Staub and $23,443 for Mr. Wulff.
17
<PAGE>
Stock Options Granted 1999
<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 Assumed Potential Assumed Potential
Options 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 220,000 12.8% $60.4375 12/01/09 $98.4463 $8,361,936 $156.7593 $21,190,796
Chairman, President and
Chief Executive Officer
Lee P. McMaster 37,500 2.2% $60.4375 12/01/09 $98.4463 $1,425,330 $156.7593 $3,612,068
Corporate Vice-President/
General Manager - Specialty
Polymers and Products
Joseph C. Soviero 33,000 1.9% $60.4375 12/01/09 $98.4463 $1,254,290 $156.7593 $3,178,619
Corporate Vice-President,
Corporate Ventures
Roger B. Staub 33,000 1.9% $60.4375 12/01/09 $98.4463 $1,254,290 $156.7593 $3,178,619
Corporate Vice-President/
General Manager - Unipol Systems
John K. Wulff 35,000 2.0% $60.4375 12/01/09 $98.4463 $1,330,308 $156.7593 $3,371,263
Corporate Vice-President,
CFO and Controller
Gain of All Recipients of -- -- -- -- $98.4463 1.3%(2) $156.7593 1.3%(2)
1999 Stock Options as %
of All Shareholders Gain
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The assumed annual rates of stock price appreciation of 5% and 10% are set
by a 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, 1999 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.
18
<PAGE>
Stock Options Exercised in 1999 and Stock Option Values at 12/31/99
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Number of Securities
Underlying Unexercised Value of Unexercised
Options In-the-Money Options
Shares Held at 12/31/99 Held at 12/31/99(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- 750,000 395,000 $25,996,635 $ 5,391,875
Lee P. McMaster
Corporate Vice-President/
General Manager - Specialty
Polymers and Products 13,800 $667,267 184,600 69,500 $ 6,787,736 $ 968,719
Joseph C. Soviero
Corporate Vice-President,
Corporate Ventures -0- -0- 180,000 63,000 $ 6,524,575 $ 894,563
Roger B. Staub
Corporate Vice-President/
General Manager - Unipol Systems 6,000 $255,480 233,000 63,000 $ 9,596,440 $ 894,563
John K. Wulff
Corporate Vice-President,
CFO and Controller -0- -0- 168,000 63,000 $ 6,705,032 $ 861,438
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based on a closing price of $66.75 per share on December 31, 1999 as
reported on NYSE-Composite Transactions. No stock appreciation rights were
outstanding in 1999.
Messrs. McMaster, Soviero, Staub 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
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 1999, the amount of
income received by Mr. Staub as a result of the exercise of Praxair options
was $1,416,372.
Retirement Program
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Average Final
Compensation Estimated Annual Retirement Benefits at Age 65
Used for for Years of Service Indicated
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, 1999, William H. Joyce, age 64 was credited with 42 years;
Lee P. McMaster, age 57, 27 years; Joseph C. Soviero, age 61, 34 years;
Roger B. Staub, age 65, 43 years and John K. Wulff, age 51, 12 years. In
the event of a change in control of the Corporation, these officers may be
entitled to enhanced retirement benefits. Refer to change in control
discussion on pages 22 and 23.
19
<PAGE>
Security Ownership of Management
At February 1, 2000, all directors and officers as a group (17 persons)
beneficially owned 3,519,674 shares (2.45%) 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.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Number of Shares Beneficially Owned(1)
Common ESOP Deferral Plan Exercisable
Name Stock Stock(2) Stock(3) Stock Options(4) Total
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
W. H. Joyce 296,160(5) 4,964 85,755 737,000 1,123,879
Director, Chairman, President
and Chief Executive Officer
L. P. McMaster 8,825 4,009 11,585 184,600 209,019
Corporate Vice-President/
General Manager - Specialty
Polymers and Products
J. C. Soviero 13,205 4,880 575 180,000 198,660
Corporate Vice-President,
Corporate Ventures
Roger B. Staub 32,499 4,719 13,986 233,000 284,204
Corporate Vice-President
General Manager - Unipol Systems
J. K. Wulff 40,318 4,753 20,498 168,000 233,569
Corporate Vice-President,
CFO and Controller
C. F. Fetterolf, Director 2,678(6) -- 7,851 5,800 16,329
R. E. Gut, Director 5,000 -- 4,219 5,800 15,019
V. E. Jordan, Jr., Director 4,137 -- 908 5,800 10,845
R. D. Kennedy, Director 231,748(7) -- -- 585,800 817,548
R. L. Kuehn, Jr., Director 6,096 -- 4,908 5,800 16,804
R. L. Ridgway, Director 3,149 -- 6,900 5,800 15,849
J. M. Ringler, Director 479 -- 4,709 5,800 10,988
Paul J. Wilhelm, Director 400 -- -- -- 400
All Officers and
Directors (17 persons) 709,118 36,141 185,645 2,588,770 3,519,674
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Except as noted in the footnotes below, the individuals listed above had
sole voting power and sole investment power with respect to the shares of
common stock indicated.
(2) The beneficial owners had shared voting power and shared investment power
with respect to the shares of ESOP Stock held by the Trustee. (See note 2
on the following table.)
(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 and the Union Carbide
Non-Employee Directors' Compensation Deferral Program. 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) There are no voting rights with respect to Stock Options.
(5) The shares of common stock listed as beneficially owned by Dr. Joyce
include 12,000 shares that are owned by his children as to which beneficial
ownership is disclaimed.
(6) The shares of common stock listed as beneficially owned by Mr. Fetterolf
include 500 shares that are held by The Fetterolf Family Foundation in
which Mr. and Mrs. Fetterolf have shared investment and voting power and
disclaim beneficial ownership.
(7) The shares of common stock listed as beneficially owned by Mr. Kennedy
include 49,000 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.
20
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
One 16(a) report was filed late. The report covering 2000 employee stock
options beneficially owned by Mrs. Byck at the time of her marriage to Mr. J. S.
Byck in March, 1996 was reported on February 14, 2000 by Mr. Byck. Mr. Byck
disclaims beneficial ownership of the options.
Security Ownership of Certain Beneficial Owners
<TABLE>
<CAPTION>
Number of Shares Title of Percent of
Name and Address Beneficially Owned Class Class
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sanford C. Bernstein & Co., Inc.
767 Fifth Avenue
New York, N.Y. 10153 18,864,450(1) Common Stock 14.1%
FMR Corp.
82 Devonshire Street
Boston, Massachusetts 02109 6,824,769(2) Common Stock 5.1%
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110 15,860,932(3) Common Stock 11.8%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) In a Schedule 13G dated February 8, 2000, Sanford C. Bernstein & Co., Inc.
stated that it beneficially owned 18,864,450 shares of common stock of the
Corporation at December 31, 1999. As to such shares, Sanford C. Bernstein &
Co., Inc. has sole voting power for 10,072,154 shares, shared voting power
for 2,315,733 shares and sole investment power for 18,864,450 shares.
(2) In a Schedule 13G dated February 14, 2000, FMR Corp. stated that it
beneficially owned 6,824,769 shares of the common stock of the Corporation
at December 31, 1999. As to such shares, FMR Corp. has sole voting power
for 197,169 shares and sole investment power for 6,824,769 shares.
(3) As of December 31, 1999, State Street Bank and Trust Company held
13,557,336 shares of common stock ("ESOP Stock") 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. Participants in the Saving Program are entitled to
notice of the meeting. By the terms of a trust agreement, the ESOP Trustee
will vote ESOP Stock allocated to individual participants' accounts
(7,350,206 shares as of January 31, 2000) as instructed by such
participants, and will vote any allocated shares for which instructions are
not received and all unallocated shares in the same proportion as the
Trustee votes allocated shares for which voting instructions are received.
As of December 31, 1999, the ESOP Stock represented 10.1% of the total of
common stock outstanding. The shares shown above include the ESOP Stock
shown in the preceding table. In a Schedule 13G dated February 9, 2000,
State Street Bank and Trust Company stated that as of December 31, 1999, in
its capacity as trustee for various collective investment funds, index
accounts and personal trusts, it also beneficially owned 2,303,596 shares
(1.7%) of the Corporation's common stock. As to such shares, State Street
Bank and Trust Company has sole voting power for 2,108,258 shares, shared
voting power for 5,238 shares, sole investment power for 2,293,778 shares
and shared investment power for 9,818 shares.
21
<PAGE>
Change in Control Arrangements
On August 3, 1999, the Corporation entered an Agreement and Plan of Merger
with Dow, pursuant to which the Corporation agreed to merge with a subsidiary of
Dow. On December 1, 1999 the Corporation's stockholders voted to adopt The
Agreement and Plan of Merger. Completion of the merger is subject to certain
conditions including review by antitrust regulatory authorities in the United
States, Europe and Canada.
At the effective time of the merger, Dr. William H. Joyce and one other
current director of the Corporation will be appointed as members of Dow's board
of directors. Dr. Joyce will also be appointed Vice Chairman of Dow's board. The
other director to be appointed has not been determined.
The Corporation has severance compensation agreements with certain senior
managers including the officers named in the Summary Compensation Table. If a
change in control of the Corporation, as defined in the severance compensation
agreements occurs, and the officer resigns or is terminated as a result of one
or more of the following events within a period of 36 months thereafter, the
officer will be entitled to severance payments 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.
A "change in control" for these purposes means the occurrence of any of the
following events: (i) stockholders of the Corporation approve a plan of complete
liquidation or dissolution of the Corporation; (ii) a consolidation,
reorganization or merger of all or substantially all of the assets of the
Corporation ("a Business Combination") unless, following such Business
Combination, (a) the stockholders of the Corporation prior to such Business
Combination own more than 50% of the common stock of the corporation resulting
from such Business Combination; (b) no person or group owns 20% or more of the
common stock of the corporation resulting from such Business Combination; and
(c) at least a majority of the board of directors of the corporation resulting
from such Business Combination were members of the Board of Directors of the
Corporation immediately prior to such Business Combination; (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; (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; 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.
A change in control of the Corporation would occur upon the completion of
the planned Dow merger.
Under the severance compensation agreements, if any of the officers named
in the Summary Compensation Table resigns or is terminated under the conditions
described above, he will receive a lump sum severance payment equal to three
times his total annual compensation based on the greater of his current or
average of his last three years' base salary, annual variable compensation,
profit sharing and stock option awards. Based on current compensation, these
lump sum payments would be approximately as follows: Dr. Joyce, $17,720,000; Mr.
McMaster $4,139,000; Mr. Soviero $3,659,000; Mr. Staub $3,666,000; Mr. Wulff
$3,616,000. The severance compensation agreements also provide enhanced life,
disability, accident and health insurance, outplacement and financial counseling
and enhanced pension benefits. As of January 1, 2000, the value of these
enhancements would be approximately as follows: Dr. Joyce, $1,190,000; Mr.
McMaster $741,000; Mr. Soviero $433,000; Mr. Staub $370,000; Mr. Wulff
$1,609,000. In addition, under the Mid-Career Hire Plan, Mr. Wulff will be
entitled to a retirement benefit
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after the merger as if he had additional years of service with the Corporation
equal to his years of service with his immediate prior employer. The approximate
value of this benefit would be $1,971,000 if Mr. Wulff's employment had
terminated on January 1, 2000. The Corporation is also required to make a
gross-up payment to these officers to fully offset the effect of any excise tax
imposed by Section 4999 of the Internal Revenue Code, whether made under the
severance compensation agreement or otherwise.
Outstanding stock options generally become exercisable two years from the
date of grant. Upon a change in control of the Corporation such as the Dow
merger, all outstanding stock options held by officers and directors which are
not yet exercisable become exercisable and restrictions on distribution of
deferred compensation accounts may lapse.
Under Union Carbide's 1997 Earnings Per Share Incentive Plan, a limited
number of senior managers including the officers named in the Summary
Compensation Table agreed to forfeit a portion of their compensation if Union
Carbide's earnings per share for the year 2000 were less than $4.00, and were to
receive cash awards if earnings per share of at least $4.00 were achieved for
1999 and 2000. The plan also provides that, in the event a change in control,
such as the Dow merger, occurs before the end of 2000, the Compensation and
Management Development Committee of the Union Carbide Board of Directors may
approve payments under the plan. Under the Agreement and Plan of Merger with
Dow, such payments are subject to the approval of Union Carbide's chief
executive officer after he consults with Dow's chief executive officer and is
limited to $25,000,000 in the aggregate, including any award to Union Carbide's
chief executive officer.
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2. Management Proposal to Ratify KPMG LLP as Independent Auditors for 2000
The Board of Directors, on the recommendation of the Audit Committee, has
selected the firm of KPMG LLP as independent auditors to examine the financial
statements of the Corporation and its consolidated subsidiaries for the year
2000.
KPMG 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 its peer
review results to date to the Audit Committee of the Board. 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 LLP and its predecessor firms have been serving the Corporation in the
capacity of independent auditors for many years. KPMG 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 LLP as
independent auditors of this Corporation and its consolidated subsidiaries for
the year 2000 is ratified.
The Board of Directors Recommends a Vote FOR this Proposal.
Representatives of KPMG 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.
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3. Management Proposal to Adopt an Amendment to the 1997 Union Carbide
Long-Term Incentive Plan
In April 1997, the Corporation's stockholders approved the 1997 Union
Carbide Long-Term Incentive Plan (the "Plan"). In order to provide enough shares
for the remaining life of the Plan, the Board has approved, subject to
shareholder approval, an amendment to the Plan to provide an additional
2,500,000 shares of common stock for award under the Plan and to limit to
400,000 the total number of shares of Restricted Stock which can be granted out
of the total shares authorized under the Plan. The amendment does not extend the
duration of the Plan which provides that no awards may be granted after the
annual meeting of stockholders in 2002.
The Plan, as originally approved, authorized up to 6,000,000 shares for
award under the Plan. To date, a total of 4,864,947 shares have been allocated,
including 214,217 shares of Restricted Stock.
The Board of Directors believes that authorization of the additional shares
is necessary to continue to provide competitive long-term incentive awards to
key employees that are linked to the creation of shareholder value. 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 be assured of employing and retaining superior senior managers who
are dedicated to increasing the value of the Corporation. If the Dow merger is
completed by December, 2000 the additional shares will not be needed.
Except for the amendment described above, there are no other changes to the
Plan. The principal features of the Plan as amended are described below. The
amendment will not become effective unless stockholder approval is obtained.
Plan Description
The number of shares of common stock of the Corporation (the "Shares") to
be awarded under the Plan since its inception in 1997, may not exceed 8,500,000
which includes the original 6,000,000 authorized by shareholders and the
additional 2,500,000 shares for which the approval of stockholders is being
sought at this meeting. 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.
The Plan will be administered by the Compensation and Management
Development Committee, which is composed entirely of non-employee directors.
Under the terms of the Plan, 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 Restricted Stock or (4) performance awards. However, no
grants of exercise payment rights or performance awards have been made under the
Plan and the Corporation does not intend to grant any such rights or awards
prior to expiration of the Plan. Grants of Restricted Stock are limited as
described below. 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.
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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 520 employees
would be eligible participants under the Plan for all types of awards. In
addition, approximately 1,415 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 stockholders 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. 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 29, 2000, the
closing price of the Shares was $53.6875 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 (see discussion under "Change in Control
Arrangements" above).
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 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.
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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. Any dividend payments made with
respect to the stock option being exercised during the period that such option
was outstanding will be offset against the exercise payment. 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. While exercise payments
are permitted under the Plan, the Corporation has not granted and does not
intend to grant any such awards through the expiration of the Plan.
Restricted Stock
The Committee, in its discretion, may make a grant of Restricted Stock to a
participant on such terms as the Committee shall determine and make a cash
payment to a participant granted Restricted Stock to allow the participant to
satisfy tax obligations arising out of receipt of the Restricted Stock.
Restricted Stock is subject to restrictions on transfer, forfeitability or other
limitations or restrictions as determined by the Committee. 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 400,000 shares of Restricted Stock are available for grant under the Plan.
Performance Awards
Performance awards 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. While performance awards are permitted under the Plan, the
Corporation has not granted and does not intend to grant any such awards through
the expiration of the Plan.
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.
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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.
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
Committee shall have the right to approve 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 ISO. 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 ISO 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.
Resolution
Accordingly, the following resolution will be offered at the meeting:
RESOLVED: That the amendment to the 1997 Union Carbide Long-Term Incentive
Plan to provide an additional 2,500,000 shares of common stock for award under
the Plan and to limit to 400,000 the total number of shares of Restricted Stock
which can be granted under the Plan, is hereby approved and authorized.
The Board of Directors Recommends a Vote FOR this Proposal
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4. Management Proposal to Reapprove Performance Goals Under the 1995 Union
Carbide Performance Incentive Plan
The Board of Directors believes the Corporation's success depends, in large
measure, on its ability to attract, retain and motivate key employees of
superior competence. The Corporation's compensation programs must, therefore,
compare favorably with those of major competitors. Those programs should also
provide incentives for promoting the growth and profitability of the
Corporation, and payouts should be based on performance against established
objectively determined measures. The Board believes that, in order for the
Corporation's compensation programs to be competitive and provide incentive for
top performance, a significant part of the total compensation of key executives
should be related to the Corporation's return on capital ("ROC") and other such
objective financial criteria. Therefore, the Board recommends that the
stockholders reapprove the performance goals (the "Performance Goals")
established under the 1995 Union Carbide Performance Incentive Plan (the "Plan")
described below.
Based on the recommendations of the Compensation and Management Development
Committee of the Board of Directors, the Board of Directors believes that the
Corporation should reapprove the Performance Goals. The Performance Goals are
identical to those originally established under the Plan in 1995. The
Corporation is required by law to have the Performance Goals reapproved by
shareholders every five years. The Performance Goals measure relative ROC
performance, as compared to the average of a peer group of companies. High
absolute ROC performance would not generate maximum payouts unless the relative
ROC performance is above average. The covered corporate officers would also be
eligible for consideration under the Corporation's current Variable Compensation
Plan for performance against corporate metrics (excluding ROC performance) and
corporate measures of performance.
The Plan is administered by the Committee, which is composed entirely of
non-employee directors. Prior to the beginning of each calendar year, the
Committee may designate employees who will be eligible for awards under the
Plan. The Committee is authorized to specify awards for 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 also make adjustments in the
performance goals established for a calendar year to reflect any extraordinary
accounting or other changes which might alter the basis upon which performance
levels were determined. The Committee may delegate its authority under the Plan,
provided the delegation does not jeopardize requirements under Section 162(m) of
the Internal Revenue Code for "disinterested" administration of the Plan.
Each year the Committee will adopt in writing objective performance goals
for the calendar year based on the Corporation's ROC compared to a peer group of
companies or other such relative financial criteria the Committee may determine.
The Committee will establish an award schedule based on achievement of these
goals in the calendar year. The schedule and performance goals will be approved
by the Committee not later than 90 days after the start of the calendar year.
An individual award to the Chairman or CEO cannot exceed $1,500,000 and to
all others cannot exceed $800,000 for any Award Year. The Committee may reduce
(or not pay) awards, but may not increase them above the maximum.
The Committee must certify that performance goals have been satisfied
before payment will be made.
The Plan was effective as of January 1, 1995 and does not have an
expiration date. No further payments may be made under the Plan until the
Performance Goals have been reapproved by stockholders. All payments under the
Plan are to be made in cash. Nine corporate officers are eligible participants
under the Plan. If a participant terminates employment during a calendar year,
the Committee will determine whether a payment should be made and the amount of
any such award.
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The Plan is considered an unfunded incentive compensation arrangement for a
select group of key executives. Participants' rights to payment are the same as
those of any unsecured general creditor of the Corporation. Payments are made
from general funds, not from segregated assets or a trust fund.
The grant of an award will result in ordinary income for the participant
and is subject to all applicable tax liabilities (federal, state, local, Social
Security and Medicare). It is intended that the Plan qualifies for the
performance based exemption from Section 162(m) of the Internal Revenue Code, so
that the Corporation will receive a tax deduction for amounts paid under the
Plan.
The Board of Directors may amend, suspend, or terminate the Plan at any
time, but any amendment, suspension or termination shall not adversely affect
the rights of participants (or beneficiaries) to receive awards granted prior to
such action.
Resolution
Accordingly, the following resolution will be offered at the meeting:
"RESOLVED: That the Performance Goals established under the 1995 Union
Carbide Performance Incentive Plan are hereby reapproved."
The Board of Directors Recommends a Vote FOR this Proposal
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5. Other Business
On the date this Proxy Statement went to press, 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, 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 2001 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 2001 proxy statement must be
received at the Corporation's principal executive office on or before November
9, 2000. At the present time, the Corporation plans to hold the 2001 annual
meeting in Danbury, Connecticut on April 25, 2001.
The Corporation's by-laws 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 year's annual
meeting. Matters to be raised by a stockholder at the 2001 annual meeting must
be submitted on or after December 27, 2000 but no later than January 26, 2001.
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.
Management carefully considers all proposals from stockholders. When
adoption of a proposal is clearly in the best interests of the Corporation and
the stockholders generally, and does not require stockholder approval, it is
considered for adoption by the Board.
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 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 may engage a
proxy solicitation firm to assist in the solicitation of proxies.
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PRINTED ON RECYCLED PAPER
UC-1978 PRINTED IN U.S.A.
<PAGE>
AMENDED AND RESTATED 1997 UNION CARBIDE LONG-TERM INCENTIVE PLAN
Section 1: Purpose
The purpose of the 1997 Union Carbide Long-Term Incentive Plan (hereinafter
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) if 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, (b)
no Person (excluding any corporation resulting from such
Business Combination or any employee
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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 "Non-Qualified 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.
2
<PAGE>
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 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 from its adoption by shareholders in 1997 shall not exceed
4,500,000 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 (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 8,500,000 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.
3
<PAGE>
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 shall be by its terms 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.
(b) Notwithstanding the provisions of subsection (a), the terms of a
NonQualified 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.
4
<PAGE>
(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. 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 included 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.
5
<PAGE>
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.
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 Restricted Stock
8:1 The Committee may grant, either alone or in addition to other awards
granted under the Plan, shares of 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
Restricted Stock under the Plan to allow such Participant to satisfy tax
obligations arising out of receipt of the Restricted Stock. Alternatively, the
terms of the 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 shares 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 400,000 shares of stock available for award under this Plan shall be
granted to Participants as Restricted Stock.
8.3 In the event that a Participant terminates employment with the
Corporation prior to the date that the Restricted Stock satisfies a vesting
period, such Restricted Stock shall be forfeited except (i) in the case of the
Participant's death, disability or Retirement, (ii) in the case of a
Participant's termination of employment by the Corporation other than for
cause, (iii) in the case of a Change in Control of the Corporation, or (iv) if
the Committee determines it is in the best interests of the Corporation to
permit individual exceptions.
6
<PAGE>
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.
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.
7
<PAGE>
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.
8
<PAGE>
Union Carbide Corporation
39 Old Ridgebury Road, Danbury, CT 06817-0001
===========================
Your Control Number is:
===========================
To our Stockholders:
Formal notice of the April 26, 2000 Annual Meeting of Stockholders is in the
enclosed proxy statement. Please read the proxy statement and vote promptly.
YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY.
By voting in accordance with this form, you will be authorizing the proxies
named below to vote all shares registered in your name and shares held for you
through the Union Carbide Dividend Reinvestment and Stock Purchase Plan
("DRISP"), if any.
For this Annual Meeting, you may vote by mail, telephone, fax or the Internet.
Telephone or Internet votes must be received by 11:59 P.M. EDT on the day before
the Meeting or any adjournments or postponements to be counted. Mail or fax
votes must be received before the polls close. Do not mail this proxy card if
you elect to vote by telephone, fax or the Internet.
Vote 24 hours a day, 7 days a week!
- --------------------------------------------------------------------------------
Vote by Telephone Have this proxy card available when you call the toll-
free number 1-800-250-9081 using a touch-tone phone.
Enter you Control Number when asked and follow the simple
prompts.
- --------------------------------------------------------------------------------
Vote by Fax Please mark, sign and date this proxy card and fax it to
1-412-299-9191.
- --------------------------------------------------------------------------------
Vote by the Internet Have this proxy card available when you access the
website at http://www.votefast.com - enter your Control
Number where indicated and follow the simple prompts.
- --------------------------------------------------------------------------------
Vote by Mail Please mark, sign and date this proxy card and return it
to Corporate Election Services, P.O. Box 1150,
Pittsburgh, Pennsylvania 15230 in the enclosed postage-
paid envelope.
- --------------------------------------------------------------------------------
--------------------------------------------------------
Please fold and detach card here when voting by mail
--------------------------------------------------------
PROXY - Solicited by The Board of Directors of Union Carbide Corporation -
Annual Meeting of Stockholders on April 26, 2000
The Board of Directors Recommends a Vote FOR Proposals 1,2,3, and 4
- --------------------------------------------------------------------------------
Proposal 1 - Election of Directors: FOR all WITHHELD from
(01) C. Fred Fetterolf, (02) Rainer Gut, Nominees all nominees
(03) Vernon E. Jordan, Jr. (04) William H. Joyce.
(05) Robert D. Kennedy, (06) Ronald L. Kuehn, Jr., [_] [_]
(07) Rozanne L. Ridgeway, (08) James M. Ringler,
(09) Paul J. Wilhelm
[_] FOR ALL NOMINEES, EXCEPT AS CIRCLED: 01, 02, 03, 04, 05, 06, 07, 08, 09
FOR AGAINST ABSTAIN
Proposal 2 - Ratification of KPMG LLP as
Independent Auditors [_] [_] [_]
Proposal 3 - Amend the 1997 Union Carbide
Long-Term Incentive Plan [_] [_] [_]
Proposal 4 - Reapprove the performance goals
under the 1995 Union Carbide Performance
Incentive Plan [_] [_] [_]
- --------------------------------------------------------------------------------
I or we authorize W.H. Joyce and B.D. Fitzgerald, and any one or both of them as
proxies, with full power of substitution to vote all stock of Union Carbide
Corporation registered in my name or our names or held for me or us through the
Union Carbide DRISP on any matters that come before the 2000 Annual Meeting or
any adjournments or postponements of the Meeting. The proxies will vote (1) as
specified on this card; (2) as the Board of Directors recommends where no choice
is specified and (3) as the proxies decide on any other matter.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature
- --------------------------------------------------------------------------------
Signature
- -----------------------------------------------------------------------, 2000
Date
<PAGE>
Union Carbide Corporation
39 Old Ridgebury Road, Danbury, CT 06817-0001
===========================
Your Control Number is:
===========================
To Our Stockholders:
Formal notice of the April 26, 2000 Annual Meeting is in the enclosed proxy
statement. Please read the proxy statement and vote promptly. YOUR VOTE IS
IMPORTANT. PLEASE VOTE TODAY.
For your convenience we have consolidated your holdings, except shares you may
hold at a bank or brokerage house, for which you will be receiving a voting
instruction card from your bank/broker.
By voting in accordance with this form you will be authorizing the proxies named
below to vote all shares registered in your name, including restricted stock,
and shares held through the Dividend Reinvestment and Stock Purchase Plan
("DRISP"). You also will be instructing the applicable trustee to vote shares
held for you through the Union Carbide. UCAR, OSi or Praxair Savings Programs
(the "Savings Programs") and the Union Carbide Employee Stock Ownership Plan
("ESOP"). If you do not vote, the trustee will vote your shares in the same
proportion as it votes shares for which it receives instructions.
For this Annual Meeting, you may vote by mail, telephone, fax or the Internet.
Telephone or Internet votes must be received by 11:59 P.M. EDT on the day before
the Meeting or any adjournments or postponements to be counted. Mail or fax
votes must be received before the polls close. Do not mail this proxy card if
you elect to vote by telephone, fax or the Internet.
Vote 24 hours a day, 7 days a week!
- --------------------------------------------------------------------------------
Vote by Telephone Have this proxy card available when you call the toll-
free number 1-800-250-9081 using a touch-tone phone.
Enter you Control Number when asked and follow the simple
prompts.
- --------------------------------------------------------------------------------
Vote by Fax Please mark, sign and date this proxy card and fax it to
1-412-299-9191.
- --------------------------------------------------------------------------------
Vote by the Internet Have this proxy card available when you access the
website at http://www.votefast.com - enter your Control
Number where indicated and follow the simple prompts.
- --------------------------------------------------------------------------------
Vote by Mail Please mark, sign and date this proxy card and return it
to Corporate Election Services, P.O. Box 1150,
Pittsburgh, Pennsylvania 15230 in the enclosed postage-
paid envelope.
- --------------------------------------------------------------------------------
--------------------------------------------------------
Please fold and detach card here when voting by mail
--------------------------------------------------------
PROXY - Solicited by The Board of Directors of Union Carbide Corporation -
Annual Meeting of Stockholders on April 26, 2000
The Board of Directors Recommends a Vote FOR Proposals 1, 2, 3, and 4
- --------------------------------------------------------------------------------
Proposal 1 - Election of Directors: FOR all WITHHELD from
(01) C. Fred Fetterolf, (02) Rainer Gut, Nominees all Nominees
(03) Vernon E. Jordan, Jr., (04) William H. Joyce.
(05) Robert D. Kennedy, (06) Ronald L. Kuehn, Jr., [_] [_]
(07) Rozanne L. Ridgeway, (08) James M. Ringler,
(09) Paul J. Wilhelm
[_] FOR ALL NOMINEES, EXCEPT AS CIRCLED: 01, 02, 03, 04, 05, 06, 07, 08, 09
FOR AGAINST ABSTAIN
Proposal 2 - Ratification of KPMG LLP as
Independent Auditors [_] [_] [_]
Proposal 3 - Amend the 1997 Union Carbide
Long-Term Incentive Plan [_] [_] [_]
Proposal 4 - Reapprove the performance goals
under the 1995 Union Carbide Performance
Incentive Plan [_] [_] [_]
- --------------------------------------------------------------------------------
I authorize W. H. Joyce and B. D. Fitzgerald, and any one or both of them as
proxies, with full power of substitution, to vote all stock of Union Carbide
Corporation registered in my name or held for me through the
Union Carbide DRISP on any matters that come before the 2000 Annual Meeting or
any adjournments or postponements of the Meeting. The proxies will vote (1) as
specified on this card; (2) as the Board of Directors recommends where no choice
is specified and (3) as the proxies decide on any other matter. I instruct the
applicable trustee to execute a proxy as indicated above to vote all shares
held for me in the Savings Programs or Union Carbide ESOP.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature
- -----------------------------------------------------------------------, 2000
Date
