(Upjohn logo)
THE UPJOHN COMPANY
7000 PORTAGE ROAD
KALAMAZOO, MICHIGAN 49001
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 17, 1994
To Our Shareholders:
The Annual Meeting of Shareholders of The Upjohn Company, a Delaware
corporation, will be held at the Radisson Plaza Hotel, 100 West Michigan
Avenue, Kalamazoo, Michigan on Tuesday, May 17, 1994, at 1:30 p.m., EDT, for
the following purposes:
1. To elect four directors for a term of three years in
accordance with the By-Laws of the Company.
2. To vote on three shareholder proposals.
3. To transact such other business as may properly come before
the meeting.
Shareholders of record at the close of business on March 18, 1994 are
entitled to notice of and to vote at the meeting or any adjournments thereof.
Kalamazoo, Michigan By Order of the Board
April 8, 1994 Kenneth M. Cyrus
Secretary
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN THE PROXY AND
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.<PAGE>
THE UPJOHN COMPANY
7000 PORTAGE ROAD
KALAMAZOO, MICHIGAN 49001
PROXY STATEMENT
This proxy statement and related proxy are being mailed to shareholders of
The Upjohn Company on or about April 8, 1994 in connection with the
solicitation by the Company of proxies to be used at the Annual Meeting of
Shareholders of the Company to be held at the Radisson Plaza Hotel,
Kalamazoo, Michigan on Tuesday, May 17, 1994, at 1:30 p.m., EDT, and at all
adjournments thereof.
Any person giving a proxy has the power to revoke it at any time before it
is voted. The Company will bear the costs of solicitation of proxies. The
Company may also reimburse persons holding stock in their names or in those
of their nominees for their reasonable expenses in sending proxy material to
their principals and obtaining their proxies. The solicitation is being made
by mail and may also be made by telephone or by telegraph by officers,
directors and regular employees of the Company. In addition, the Company has
engaged the services of D. F. King & Co., Inc., to assist in the solicitation
of proxies for a fee not to exceed $20,000, plus out-of-pocket expenses.
It is the Company's policy that all proxies, ballots and voting tabulations
that identify how shareholders voted will be kept confidential, except where
disclosure may be required by applicable law, where disclosure is expressly
requested by a shareholder, and in proxy solicitations not approved and
recommended by the Board of Directors, and that the tabulators and the
inspectors of election be independent and not employees of the Company.
Shareholders of record at the close of business on March 18, 1994 are
entitled to notice of and to vote at the meeting. At the close of business
on February 28, 1994, the Company had 173,584,181 shares (excluding
17,007,342 treasury shares) of Common Stock outstanding, each share being
entitled to one vote. These shares will be voted as specified in the
shareholder's proxy. The Company's fiscal year is a calendar year.
At the close of business on February 28, 1994, shares of Series B
Convertible Perpetual Preferred Stock of the Company were held by The Upjohn
Company Employee Stock Ownership Trust pursuant to The Upjohn Employee
Savings Plan having votes equivalent to 7,372,278 shares of Common Stock.
Shares under The Upjohn Employee Savings Plan that have been allocated to
participant accounts will be voted as specified in the participant's proxy.
If a participant is also a shareholder of record, the proxy given by such
person will govern the voting of shares held by the participant both directly
and through the Plan. State Street Bank and Trust Company, as the Trustee of
the Plan, will vote unallocated and unvoted shares in the same proportion as
shares voted by Plan participants.
If a shareholder participates in the Company's Dividend Reinvestment and
Stock Purchase Plan, any proxy given by such shareholder will also govern the
voting of all full shares held for the shareholder's account under that Plan.
Matters submitted to a vote of shareholders must be approved by the holders
of a majority of the shares voting on such matter at the Annual Meeting. In
determining whether a quorum exists at the meeting for purposes of all
matters to be voted on, all votes "for" or "against," as well as all
abstentions (including votes to withhold authority to vote in certain cases),
with respect to the proposal receiving the most such votes, will be counted.
Abstentions with respect to a particular proposal will be counted as part of
the base number of votes to be used in determining if that particular
proposal has received the requisite percentage of base votes for approval,
while broker non-votes will not be counted in such base for such proposal.
Thus, an abstention will have the same effect as a vote "against" such
proposal while a broker non-vote will have no effect. If an individual has
signed a proxy card but failed to indicate a vote "for," "against" or
"abstaining" from a particular proposal, such proxy will be voted for all
nominees and against all shareholder proposals in accordance with the
discretion granted to the proxies.
ELECTION OF FOUR DIRECTORS
The Board of Directors is composed of three classes of members. One class
of directors is elected each year to hold office for a three-year term and
until successors of such class are duly elected and qualified. Except where
the authority to do so has been withheld, it is the intention of the persons
named in the proxy to vote to elect Frank C. Carlucci, William D. Mulholland,
R. T. Parfet, Jr., and John L. Zabriskie, Ph.D., as directors for three-year
terms. However, Mr. Parfet will become age 72 in October 1994, which is the
current retirement age for directors, and Mr. Parfet intends to retire at
that time. The Board may then either reduce the size of the Board or appoint
a successor director who would serve until the next Annual Meeting of
Shareholders, at which time such director would be nominated for election by
the shareholders for the remainder of Mr. Parfet's term.
It is expected these nominees will serve, but if, for any unforeseen cause,
any of them should decline or be unable to serve, the proxies will be voted
to fill any vacancy so arising before the Annual Meeting of Shareholders in
accordance with the discretionary authority of the persons named in the
proxy.
Information with respect to the nominees for election and the directors
continuing in office with respect to age, positions with the Company or other
principal occupations for the past five years, other directorships and the
year each was initially elected a director of the Company is as follows:
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
For Three-Year Term Expiring in 1997
[Photo to be Inserted]
FRANK C. CARLUCCI, age 63, Chairman, The Carlyle Group, a merchant bank in
Washington, D.C. Mr. Carlucci was vice chairman of The Carlyle Group from
1989 to 1993. He served as U.S. Secretary of Defense from 1987 to 1989.
Mr. Carlucci is currently on the board of directors of Ashland Oil, Inc.;
Bell Atlantic Corporation; Connecticut Mutual Life Insurance Company; East
New York Savings Bank; Ecotech, Inc.; General Dynamics Corporation;
International Planning and Analysis Center; Kaman Corporation; Neurogen
Corporation; Northern Telecom Limited; The Quaker Oats Company; SunResorts,
Ltd., N.V.; Texas Biotechnological Corporation; Westinghouse Electric
Corporation; and serves on the board of trustees for the nonprofit Rand
Corporation. Mr. Carlucci has served as a Director of The Upjohn Company
since 1990 and is a member of the Audit; the Compensation and Incentive; the
Finance; and the Nominating Committees of the Board of Directors.
[Photo to be Inserted]
WILLIAM D. MULHOLLAND, age 67, former Chairman of the Board and Chief
Executive Officer of the Bank of Montreal. Mr. Mulholland is currently a
director of the Bank of Montreal; Brooks Fashion Stores, Inc. and Canadian
Pacific Ltd. He is a trustee of Queen's University and a member of the
Advisory Committee on Canadian Studies at the School of Advanced
International Studies, Johns Hopkins University. Mr. Mulholland has received
honorary Doctor of Laws degrees from Memorial University and Queen's
University. He has served as a Director of The Upjohn Company since 1977 and
is a member of the Compensation and Incentive; the Executive; the Finance;
and the Nominating Committees of the Board of Directors.
[Photo to be Inserted]
(1)RAY T. PARFET, JR., age 71, former Chairman of the Board and Chief Executive
Officer of the Company. Mr. Parfet is also a former chairman of the
Pharmaceutical Manufacturers Association. He has served as a director for
The ARO Corporation, Michigan Bell Telephone Company and Union Pump Company
and as a trustee of Bronson Healthcare Group, Inc. and the National 4-H
Council in Washington, D.C. He is currently a director of The W. E. Upjohn
Unemployment Trustee Corporation. He has served as a Director of The Upjohn
Company since 1958 and is a member of the Executive Committee of the Board of
Directors.
[Photo to be Inserted]
JOHN L. ZABRISKIE, Ph.D., age 54, Chairman of the Board and Chief Executive
Officer of the Company. Prior to joining the Company earlier this year,
Dr. Zabriskie had spent his entire career with Merck & Co., Inc. During the
last five years, he has held several officer positions with Merck in sales,
marketing, public affairs and manufacturing, serving most recently as
executive vice president of Merck & Co., Inc., and president, Merck
Manufacturing Division. He is active in the debate over U. S. health care
reform as a member of the Jackson Hole Group for Healthcare Reform and the
Healthcare Leadership Council. He is also active in the Pharmaceutical
Manufacturers Association. Dr. Zabriskie has served on the boards of
Penjerdel Corporation; Pennsylvania Biotechnology Association; the National
Pharmaceutical Council, Inc.; Morristown Memorial Hospital and Wells College;
he is currently a director of First of America Bank Corporation. He began
serving as a Director of The Upjohn Company in January 1994 and is a member
of the Executive and the Finance Committees of the Board of Directors.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
Term Expiring in 1995
[Photo to be Inserted]
M. KATHRYN EICKHOFF, age 54, President, Eickhoff Economics Incorporated,
economic consultants. Ms. Eickhoff is the former associate director for
Economic Policy, United States Office of Management and Budget. She serves
as a director of AT&T, National Westminster Bancorp. Inc. and Tenneco Inc.
Ms. Eickhoff is a member of several business organizations including The
Conference of Business Economists, The Economic Club of New York and the
National Association of Business Economists. She served as a Director of The
Upjohn Company from 1982 to 1985 and returned as a Director in 1987. She is
a member of the Audit; the Executive; the Finance; and the Nominating
Committees of the Board of Directors.
[Photo to be Inserted]
DARYL F. GRISHAM, age 67, President and Chief Executive Officer, Parker House
Sausage Company. Mr. Grisham joined Parker House Sausage Company in 1954.
He has been a director of that company since 1961 and was promoted to his
current position in 1969. Mr. Grisham is a former director for G. D. Searle
and Company and Illinois Bell Telephone Co. He serves as a director of
Harris Bankcorp, Inc.; Lincoln Park Zoological Society and the Rehabilitation
Institute of Chicago. He also serves as a trustee for the Chicago Museum of
Science & Industry and Northwestern University. He was named to the Chicago
Business Hall of Fame in 1984. He has served as a Director of The Upjohn
Company since 1989 and is a member of the Compensation and Incentive; the
Executive; the Nominating; and the Social Responsibility Committees of the
Board of Directors.
[Photo to be Inserted]
LAWRENCE C. HOFF, age 65, former President and Chief Operating Officer of the
Company. Mr. Hoff has long been active in major industry and educational
associations including: director, American Diabetes Association, Inc.;
trustee, Borgess Medical Center; director, Council on Family Health;
chairman, Pharmaceutical Manufacturers Association; member, U.S. Chamber of
Commerce, International Policy Committee. He holds an honorary Doctor of
Science in Pharmacy degree from Massachusetts College of Pharmacy and Allied
Health Sciences, and is currently a director of Alpha Beta Technology, Inc.;
Curative Technologies, Inc.; and MedImmune, Inc. He has served as a Director
of The Upjohn Company since 1973 and is a member of the Audit and the Social
Responsibility Committees of the Board of Directors.
[Photo to be Inserted]
JERRY R. MITCHELL, M.D., Ph.D., age 52, Vice Chairman of the Board and
President, Upjohn Laboratories. Previously, Dr. Mitchell had been Executive
Vice President and President, Upjohn Laboratories (1991-92); Senior Vice
President and President, Upjohn Laboratories (1990); and Vice President for
Pharmaceutical Research (1989-90). Prior to joining The Upjohn Company,
Dr. Mitchell was a professor of internal medicine and the director of the
Center for Experimental Therapeutics, Baylor College of Medicine and
Affiliated Hospitals. During his distinguished career, Dr. Mitchell has
served on many national advisory boards and committees and has received
numerous honors and scientific awards. He has published two books and has
written hundreds of manuscripts and abstracts. Dr. Mitchell has been a
Director of The Upjohn Company since 1991.
[Photo to be Inserted]
(1)WILLIAM U. PARFET, age 47, President and Chief Executive Officer of
Richard-Allan Medical Industries, Inc., a manufacturer of surgical equipment
and medical supplies. Prior to joining Richard-Allan in October 1993, Mr.
Parfet had been Vice Chairman of the Board of the Company, and was President
(1991-93) and Executive Vice President (1989-91) before that. Mr. Parfet
serves on various boards of directors, including CMS Energy Corporation, the
Financial Accounting Foundation, Flint Ink Corporation, Old Kent Financial
Corporation, Stryker Corporation and Universal Foods, Inc. He has served as
a Director of The Upjohn Company since 1985 and is a member of the Finance
and the Social Responsibility Committees of the Board of Directors.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
Term Expiring in 1996
[Photo to be Inserted]
RICHARD H. BROWN, age 46, Vice Chairman of Ameritech Corp., a
telecommunications company. Mr. Brown was elected Ameritech vice chairman in
January 1993. He joined Illinois Bell as president and chief executive
officer in 1990 and, prior to that, he was executive vice president of United
Telecom and U. S. Sprint. He is secretary of the Illinois Business
Roundtable, a member of the Economic Club of Chicago and serves actively in
many nonprofit organizations in Illinois. Mr. Brown is a director of
Ameritech Corp. and serves on a number of other boards. He has served as a
Director of The Upjohn Company since September 1993 and is a member of the
Compensation and Incentive; the Nominating; and the Social Responsibility
Committees of the Board of Directors.
[Photo to be Inserted]
GERALDINE A. KENNEY-WALLACE, age 51, President and Vice-Chancellor of
McMaster University, Hamilton, Ontario, Canada. Dr. Kenney-Wallace is a
member of the board of directors of the Bank of Montreal, Dofasco Inc., DMR
Inc., General Motors (Canada) and Northern Telecom Ltd. She serves on the
advisory board of the Canadian Foundation for AIDS Research, the Manning
Foundation, and is currently the Honorary Chairman of the Canadian Donner
Foundation. During her scientific career in lasers, ultra-fast phenomena and
opto-electronics, Dr. Kenney-Wallace has received numerous honors and
scientific awards. She has served as a Director of The Upjohn Company since
September 1993 and is a member of the Audit; the Finance; and the Social
Responsibility Committees of the Board of Directors.
[Photo to be Inserted]
WILLIAM E. LAMOTHE, age 67, former Chairman of the Board and Chief Executive
Officer of Kellogg Company, a food company. Mr. LaMothe is a former director
of the Food and Drug Law Institute, Kimberly Clark Corporation, Unisys
Corporation and the Western Michigan University Foundation. He is currently
a director of Allstate Insurance Companies, Kellogg Company and Sears Roebuck
and Company; and he is a member of the board and a trustee for the W. K.
Kellogg Foundation Trust. Mr. LaMothe serves on the board of governors of
the Battle Creek Community United Arts Council and The Battle Creek Community
Foundation. He has served as a Director of The Upjohn Company since 1986 and
is a member of the Audit; the Compensation and Incentive; the Executive; and
the Nominating Committees of the Board of Directors.
[Photo to be Inserted]
LEY S. SMITH, age 59, President and Chief Operating Officer of the Company.
Mr. Smith was elected President, Chief Operating Officer and Acting Chief
Executive Officer in 1993; he became Vice Chairman of the Board in 1991; and
was elected Executive Vice President in January 1989. Mr. Smith is active in
a wide variety of business, community, and medical- and pharmaceutical-
related activities, including the Pharmaceutical Manufacturers Association;
the Virginia Neurological Institute; the Health, Welfare and Retirement
Income Task Force of the Business Roundtable; and the Greater Kalamazoo
United Way. He has served as a Director of The Upjohn Company since 1989.
_______________________________
(1)R. T. Parfet, Jr., is the father of W. U. Parfet and D. R. Parfet, Executive
Vice President for Administration of the Company. As noted above, R. T.
Parfet, Jr., intends to retire from the Board in October 1994, when he
reaches age 72, the current retirement age for directors.<PAGE>
INFORMATION CONCERNING SECURITY OWNERSHIP
Under regulations of the Securities and Exchange Commission,
persons who have power to vote or dispose of shares of the Company, either
alone or jointly with others, are deemed to be beneficial owners of such
shares. Because the voting or dispositive power of certain shares listed in
the following table is shared, the same securities in such cases are listed
opposite more than one name in the table. The total number of shares of
Common Stock of the Company listed below for directors and executive officers
as a group eliminates such duplication.
Pursuant to a Schedule 13G filed with the Securities and Exchange
Commission by State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02110, as Trustee of The Upjohn Employee Savings Plan,
the Bank indicated beneficial ownership equivalent to 7.4% of the Company's
outstanding Common Stock as of December 31, 1993.
Pursuant to a Schedule 13G filed with the Securities and Exchange
Commission by The Capital Group, Inc., 333 South Hope Street, Los Angeles,
California 90071, Capital Research and Management Company, a registered
investment adviser and an operating subsidiary of The Capital Group, Inc.,
exercised, as of December 31, 1993, investment discretion, but not voting
power, with respect to 11,001,900 shares, or 6.3% of outstanding shares of
the Company's Common Stock, which were owned by various institutional
investors.
Set forth in the following table are the beneficial holdings as of
the close of business on March 31, 1994 of individual directors and nominees,
the five most highly compensated executive officers for 1993 and all
directors and executive officers as a group.
<TABLE>
<CAPTION>
Shares of Common Stock Beneficially Owned(1)
Shared
Sole Voting Voting Options
and/or and/or Exercisable
Dispositive Dispositive Within 60 % of
Power Power Days Class
<S> <C> <C> <C> <C>
Richard H. Brown(2) 591 (3) -- -- *
Frank C. Carlucci 5,628 (3) -- -- *
M. Kathryn Eickhoff 1,500 -- -- *
Daryl F. Grisham 6,729 (3) -- -- *
Lawrence C. Hoff(2) 37,714 -- -- *
Geraldine A. Kenney-Wallace 250 -- -- *
William E. LaMothe(2) 9,795 (3) -- -- *
Jerry R. Mitchell 8,777 (4) -- 116,000 *
William D. Mulholland 3,007 -- -- *
Donald R. Parfet(2) 556,870 (4) 1,394,690 (5)(6)(7) 138,300 1.1
Ray T. Parfet, Jr.(2) 961,868 (8) 4,099,952 (5)(6) -- 2.7
William U. Parfet 517,422 (4) 284,000 (6) 208,438 *
Robert C. Salisbury 15,470 (4) 5,700 (7) 111,354 *
Ley S. Smith(2) 12,834 (4) -- 185,250 *
Gerald A. Welch 17,224 (4) -- 133,450 *
John L. Zabriskie 36,500 -- -- *
Directors and Executive Officers (3)(4) (5)(6)
as a Group (18 persons)(2) 2,231,424 (8) 5,216,342 (7) 1,079,674 4.5
<FN>
* Less Than 1%<PAGE>
(1) Excludes the following share units which were awarded under the
Company's Incentive Compensation Plans but payment of which is
deferred: L. C. Hoff, 6,264; J. R. Mitchell, 1,955; D. R. Parfet,
1,890; R. T. Parfet, Jr., 24,533; W. U. Parfet, 3,365; R. C.
Salisbury, 6,725; L. S. Smith, 2,769; G. A. Welch, 1,840; and
directors and executive officers as a group, 63,215.
(2) Excludes 350 shares held by the spouse of R. H. Brown; 10,000 shares
held by the spouse of L. C. Hoff; 733 shares held by the spouse of W.
E. LaMothe; 283,194 shares held by the spouse of R. T. Parfet, Jr.;
13,219 shares held by the spouse of D. R. Parfet; 2,200 shares held
by the spouse of L. S. Smith; and 309,696 shares held by the spouses
of directors and executive officers as a group; also excludes 289,656
shares held in trust over which the spouse of R. T. Parfet, Jr., has
sole voting and dispositive power as trustee; beneficial ownership is
disclaimed as to all such shares.
(3) Includes the following number of shares representing deferred
directors' fees payable in stock with respect to which the individual
has sole voting power: R. H. Brown, 291; F. C. Carlucci, 5,128; D.
F. Grisham, 6,629; and W. E. LaMothe, 7,595.
(4) Includes the following number of shares or share equivalents credited
under The Upjohn Employee Savings Plan with respect to which the
individual has sole voting power: J. R. Mitchell, 777; D. R. Parfet,
2,625; W. U. Parfet, 4,195; R. C. Salisbury, 4,015; L. S. Smith,
1,644; G. A. Welch, 7,224; and directors and executive officers as a
group, 32,134.
(5) Includes shares over which D. R. Parfet and R. T. Parfet, Jr., have
sole or shared voting or dispositive power as members of the Board of
Trustees of The W. E. Upjohn Unemployment Trustee Corporation, a
non-profit corporation which supports research on economic and social
problems related to unemployment.
(6) Includes shares held in trust over which voting and/or dispositive
power is shared in his capacity as trustee under various trusts.
(7) Includes shares over which D. R. Parfet and R. C. Salisbury have
shared voting and dispositive power as members of the Subcommittee on
Endowment Management of the Board of Trustees of Kalamazoo College,
serving as trustees under a charitable remainder trust.
(8) Includes shares held in trust over which R. T. Parfet, Jr., has sole
voting and/or dispositive power in his capacity as trustee under
various trusts.
</TABLE>
<PAGE>
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held 16 meetings during 1993. Ten
non-employee directors and one employee director serve on one or more
committees of the Board.
The Compensation and Incentive Committee of the Board of Directors
met eight times during 1993 to administer awards under the Company's
Incentive Compensation and Stock Option Plans, take certain other actions
relating to compensation matters and benefit plans and recommend to the Board
the salaries of all corporate officers. The current members of the
Compensation and Incentive Committee are R. H. Brown, F. C. Carlucci, D. F.
Grisham, W. E. LaMothe and W. D. Mulholland, none of whom is an employee nor
eligible for incentive compensation or stock option awards.
The Audit Committee met four times during 1993. The Committee
recommended to the Board of Directors the selection of Coopers & Lybrand as
the Company's independent accountants; reviewed the annual financial
statements and discussed them with the auditors and financial staff of the
Company prior to their submission to the Board of Directors; reviewed the
independence of the independent accountants conducting the audit; reviewed
the services provided by the independent accountants; reviewed the scope of
the Company's internal audit program; discussed with management and the
auditors the Company's accounting system and related systems of internal
control; reviewed the Company's information security program; reviewed
analyses of officers' expenses and use of Company assets; and consulted as it
deemed necessary with the independent accountants, internal auditors and the
Company's internal financial staff. Current members of the Audit Committee
are F. C. Carlucci, M. K. Eickhoff, L. C. Hoff, G. A. Kenney-Wallace and W.
E. LaMothe.
The Nominating Committee met 15 times during the year. The
Committee makes recommendations to the full Board regarding nominees to fill
Board vacancies, nominees for membership on Board committees, policies on
Board composition, criteria for Board membership, criteria for continuation
on the Board, and removal of directors, if and when required. The Committee
will consider director nominees recommended by shareholders. Any such
recommendations should be made in writing to the Secretary of the Company at
7000 Portage Road, Kalamazoo, Michigan 49001. Current members of the
Nominating Committee are R. H. Brown, F. C. Carlucci, M. K. Eickhoff, D. F.
Grisham, W. E. LaMothe and W. D. Mulholland.
BOARD OF DIRECTORS COMPENSATION
Compensation for non-employee members of the Board of Directors
consists of an annual retainer fee of $25,000 plus a $1,000 fee for each
Board meeting attended; a $1,000 fee for attending the first committee
meeting held on any day and a $750 fee for attending subsequent committee
meetings held on the same day. In addition, the chairperson for each
committee receives a quarterly retainer fee of $1,000. Employee directors do
not receive compensation for serving on the Board or on the Board's
committees. The Company maintains a retirement plan for outside directors
which provides that a director will receive retirement benefits for a period
of time equal to the length of his non-employee Board service in an amount
equal to 50% of his last annual retainer after 5 years of non-employee
service plus 5% for each additional year of non-employee Board service up to
a total of 100% of his last annual retainer. The Company also maintains a
deferred compensation plan for outside directors, which enables a director to
defer payment of his fees until he leaves the Board.
REPORT OF THE COMPENSATION AND INCENTIVE COMMITTEE
The Compensation and Incentive Committee, consisting of five
independent directors, none of whom has ever served as an officer or employee
of the Company or has any known conflicts, recommends to the Board the
salaries of all corporate officers and administers the Company's incentive
compensation plans. The Committee also reviews with the Board its
recommendations relating to the future direction of corporate compensation
and benefit policies and practices.
Annually, the Compensation and Incentive Committee reviews:
(a) the financial and operational performance of the Company and
its major business segments;
(b) the performance of each corporate officer;
(c) the compensation paid key executives in similar positions
within the pharmaceutical industry and industry generally;
and
(d) the design and appropriate use of specific short-term and
long-term reward vehicles that will support the achievement
of business goals and commitment to the Company's
shareholders.
In general, the Company seeks to encourage and reward executive
efforts which create shareholder value through achievement of corporate
objectives, business strategies and performance goals, by blending annual and
long-term cash and equity compensation and, in so doing, to align the
interests of executives with those of shareholders.
The Committee's policies through 1993 can be summarized as follows:
(a) to increase the proportion of total compensation comprised of
variable, or incentive-based, compensation, while reducing
the proportion of fixed compensation;
(b) to place increasing reliance upon individual and business
unit performance when awarding individual incentive
compensation, while reducing the proportion based upon total
corporate performance;
(c) to place increasing reliance upon external standards of
competitive performance rather than internally defined
standards when fixing the total amount of incentive
compensation that may be awarded; and
(d) to maintain a competitive level of total executive
compensation for competitive performance; and, similarly, to
recognize superior performance.
For 1993, the proportion of senior executive compensation that was
fixed (base salary) ranged from 50% to 60%. Base salary is set at
competitive levels and based on job level, experience and performance. The
remaining 40% to 50% was variable, or incentive-based, compensation, 75% of
which was dependent upon the extent to which actual corporate earnings before
tax ("EBT") met budgeted EBT levels and 25% of which was based upon the
Company's earnings growth as compared with the median earnings growth of our
peer companies. The comparator group used to assess competitive practices is
the group of companies included in the peer group index identified on page
17.
In addition to the stock options granted in February 1993, the
Committee granted special stock options in December 1993 to selected
employees whose individual performance and leadership were deemed critical to
the Company's future success. These stock options will become exercisable if
the Company's stock price appreciates by certain thresholds over the market
price on the date of grant.
In reviewing the compensation policies at the end of 1993, the
Committee determined that it had approached an appropriate level of variable
compensation based upon our existing business objectives. In addition, the
Committee decided that a greater proportion of the variable compensation
should be based on the Company's performance relative to that of peer
pharmaceutical companies. Accordingly, the Committee's policies were revised
for 1994 and can be summarized as:
(a) total executive compensation should be maintained at a
competitive level for competitive performance and, similarly,
superior performance should be recognized;
(b) variable, or incentive-based, compensation should range from
30% to 50% of total compensation, with the higher-ranking
executives having a greater proportion of variable or
incentive-based compensation;
(c) with respect to variable, or incentive-based, compensation,
at least 50% should be based upon external standards of
competitive performance rather than internally established
financial goals; and
(d) equity-based compensation (stock options, restricted stock,
performance shares and deferred incentive compensation)
should be increasingly used to link employee performance to
shareholder interests, promote and encourage stock ownership
in the Company and provide an incentive to create long-term
shareholder value.
Listed below are several actions that illustrate the Committee's
commitment to these revised policies.
In 1994, 50% of incentive compensation will be dependent upon the
extent to which actual corporate EBT meets budgeted corporate EBT levels, and
the remaining 50% will be determined by Upjohn's Total Market Return
performance relative to the average Total Market Return of peer
pharmaceutical companies.
Consistent with our focus on performance-driven compensation, the
Company eliminated the Christmas Bonus for 1994 and subsequent years (which
had been equal to 5% of base salary after eight years of service), and
increased incentive compensation target ranges by 5% of base salary.
As in prior years, 20% of incentive compensation earned each year
will be deferred in shares of Company stock which will not vest until
retirement.
The Committee grants annual ten-year stock options, having a value
based on the level of stock price appreciation over the market price on the
date of grant. The Committee considers the level of stock options granted by
competitive companies and the number of Upjohn stock options previously
granted, currently outstanding and proposed to be granted in reaching its
decision to make additional grants of stock options to executive officers.
Restricted stock, which cannot be sold or transferred until earned in future
years, is issued on an infrequent and selective basis according to the
Committee's assessment of appropriate recognition and retention factors.
To further increase executive stock ownership and enhance the focus
on the long-term competitive financial performance of the Company, the
Committee made two initial grants of performance shares in 1994, one measured
over a two-year period and one measured over a three-year period. The
utilization of performance shares was approved by shareholders as part of The
Upjohn Management Incentive Program of 1992. The stock reserved for payment
of performance share awards was reallocated from the stock that would
normally have been reserved for issuance as stock options. The Performance
Shares will be payable in shares of the Company's Common Stock and will be
earned based upon the Company's relative Total Market Return, Return on Net
Assets and Net Earnings Growth, as compared to the group of peer
pharmaceutical companies.
Because of the extensive time required to discover, develop, test
and obtain approval to sell new drugs, a process which often takes ten or
more years, performance of executives in the pharmaceutical industry cannot
be adequately measured by short-term changes in stock price. Efforts
expended today will not reap benefits until several years in the future.
Management has taken many difficult but significant steps to position the
Company for the future, including realigning its core businesses, sharpening
the focus of its research, streamlining product development and regulatory
activities, implementing cost containment measures, reducing the number of
employees, globalizing operations, forming new strategic partnerships and
establishing a corporate commitment to total quality.
The Internal Revenue Code was recently amended to limit the Company's
ability to deduct more than $1 million of an executive's nonperformance-based
compensation. The Committee will endeavor in the future to design and
administer the Company's performance-based compensation plans (incentive
compensation, stock options and performance shares) in a manner that will
comply with the IRS exclusion for performance-based compensation, including
shareholder approval, administration by disinterested directors and use of
nondiscretionary, preestablished performance goals. Base salary will be
determined on the basis of job performance and competitive requirements and
may, therefore, exceed the $1 million deduction limit, although currently no
base compensation exceeds $800,000. In recruiting Dr. Zabriskie to serve as
the Company's Chairman and Chief Executive Officer, the Company committed to
pay a minimum performance bonus for 1995 that will not be fully deductible
under the new limitation.
Compensation and Incentive Committee
R. H. Brown F. C. Carlucci D. F. Grisham W. E. LaMothe W. D.Mulholland<PAGE>
EXECUTIVE COMPENSATION
The following table shows the total compensation received for the
last three calendar years by the Company's Acting Chief Executive Officer at
year-end; by the next four most highly compensated executive officers who
were in office at year-end; and by T. Cooper, M. Novitch and W. U. Parfet who
were executive officers for part of 1993. Footnotes to the table are
included on the next page.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long-Term Compensation
Other Securities All
Annual Restricted Under- Other
Compen- Stock lying Compen-
Base Bonus sation Awards Options sation
Name and Principal Position Year Salary (1) (2) (3) (#) (4)
<S> <C> <C> <C> <C> <C> <C> <C>
L. S. Smith, 1993 $415,417 $373,999 $ 88,409 $ 0 40,000 $5,494
President and Chief 1992 $380,000 $224,609 $ 51,506 $166,250 40,000 $5,726
Operating Officer; formerly 1991 $330,000 $216,759 $ 50,173 $231,000 40,000 $6,331
President, Chief Operating
Officer and Acting Chief
Executive Officer (4/14/93-
12/31/93); and formerly Vice
Chairman of the Board
J. R. Mitchell, 1993 $366,875 $244,421 $ 58,409 $ 0 40,000 $6,368
Vice Chairman of the Board 1992 $335,000 $164,247 $ 39,020 $403,750 30,000 $6,621
and President, Upjohn 1991 $285,000 $134,633 $ 32,266 $ 0 25,000 $5,532
Laboratories
G. A. Welch(5), 1993 $285,000 $183,824 $ 42,394 $ 0 30,000 $6,368
Executive Vice President 1992 $282,500 $154,347 $ 35,118 $212,109 30,000 $6,621
1991 $255,000 $141,524 $ 32,266 $ 0 25,000 $7,297
D. R. Parfet, 1993 $266,000 $175,338 $ 40,509 $ 0 30,000 $6,368
Executive Vice President 1992 $266,000 $137,914 $ 31,216 $ 0 30,000 $6,621
for Administration 1991 $236,000 $119,097 $ 26,889 $ 0 25,000 $7,280
R. C. Salisbury, 1993 $275,000 $168,251 $ 38,625 $ 0 45,000 $6,368
Executive Vice President for 1992 $272,083 $130,373 $ 29,265 $132,250 25,000 $6,621
Finance and Chief Financial 1991 $240,000 $119,272 $ 26,889 $ 0 23,000 $7,297
Officer; formerly Senior Vice
President for Finance and
Chief Financial Officer
T. Cooper, 1993 $267,308 $243,426 $ 0 $ 0 75,000 See (6) below
Chairman of the Board and 1992 $860,000 $529,239 $117,069 $690,375 75,000 $6,621
Chief Executive Officer 1991 $860,000 $472,470 $107,555 $ 0 75,000 $7,297
(until 4/14/93)
M. Novitch, 1993 $368,535 $311,044 $ 0 $ 0 40,000 See (7) below
Vice Chairman of the Board 1992 $380,000 $222,751 $ 51,506 $166,250 40,000 $6,621
(until 12/20/93) 1991 $330,000 $218,605 $ 51,423 $228,750 40,000 $7,269
W. U. Parfet, 1993 $368,535 $329,000 $ 0 $ 0 40,000 See (8) below
Vice Chairman of the Board 1992 $380,000 $224,609 $ 51,506 $166,250 40,000 $4,962
(4/14/93-9/30/93); formerly 1991 $330,000 $198,650 $ 45,173 $226,500 40,000 $7,284
President
<FN>
(1) Bonus represents 80% of Incentive Compensation Plan awards and other
bonuses.
(2) Other Annual Compensation represents 20% of Incentive Compensation Plan
awards that are deferred and subject to forfeiture if employment is
terminated other than for retirement, death or disability.
(3) The restricted stock included in the table represents the fair market
value of the entire restricted stock award on the date of grant, including
the value of any supplemental payment in cash or stock that vests ratably
as the restricted stock vests. Dividends are paid on the restricted stock
at the same time and at the same rate as paid to all shareholders. As of
December 31, 1993, based on the market price of the Company's Common Stock
on that date of $29.25, L. S. Smith held 4,000 shares of restricted stock
valued at $117,000 and the equivalent of 1,000 shares payable in either
cash or stock valued at $29,250, which will be earned equally in 1994 and
1995; J. R. Mitchell held 8,000 shares of restricted stock valued at
$234,000 and the equivalent of 2,000 shares payable in cash valued at
$58,500, which will be earned at the rate of 15% in each of 1994, 1995 and
1996, 20% in 1997 and 35% in 1998; G. A. Welch held 4,000 shares of
restricted stock valued at $117,000, which would have been earned equally
in 1994 and 1995; and R. C. Salisbury held 2,400 shares of restricted
stock valued at $70,200, of which 800 shares will be earned in 1994 and
the remainder in 1995.
(4) Other represents the Company match under The Upjohn Employee Savings Plan.
(5) G. A. Welch retired from the Company on April 1, 1994.
(6) Under an agreement executed by T. Cooper when he joined the Company in
1980 that credited him with 2.25 years of service for each actual year of
service, Dr. Cooper's beneficiary received retirement death benefits equal
to approximately $7.2 million, $1.1 million of which was paid from the
Company's qualified retirement plan. In addition, his beneficiary
received at his death his remaining shares of restricted stock. Dr.
Cooper also received $1,592 representing the Company match under The
Upjohn Employee Savings Plan.
(7) M. Novitch retired as a corporate officer and member of the Board of
Directors in December 1993. Under an agreement executed by Dr. Novitch
when he joined the Company in 1985, he was credited with 2.5 years of
service for each actual year of service. In connection with his
retirement, Dr. Novitch also received (i) the value of restricted stock,
incentive compensation and stock options granted or earned in 1993 and
(ii) nonqualified, supplemental retirement benefits equal to approximately
$1.3 million beyond the benefits accrued under his agreement, representing
the approximate additional amount he would have received if he had worked
until December 31, 1995. The 4,000 shares of restricted stock that he was
to have earned in 1994 and 1995 were forfeited. Dr. Novitch also received
$6,383 representing the Company match under The Upjohn Employee Savings
Plan.
(8) W. U. Parfet resigned as a corporate officer in September 1993 (although
he remains on the Board of Directors). In connection with his
resignation, Mr. Parfet received (i) the value of restricted stock,
incentive compensation and stock options granted or earned in 1993, (ii)
non-qualified supplemental retirement benefits equal to approximately $1.8
million beyond his accrued benefits, and (iii) a special cash payment of
approximately $1.8 million. The 4,000 shares of restricted stock that he
was to have earned in 1994 and 1995 were forfeited. In addition, Mr.
Parfet received $5,708 representing the Company match under The Upjohn
Employee Savings Plan.
</TABLE>
The following table shows the number and percentage of stock
options granted to the named executive officers during 1993, the exercise
price and expiration date of the options and the potential realizable value
of each grant assuming that the market price of the stock appreciates in
value from the date of grant to the expiration date at assumed annualized 5%
and 10% rates. Options can be exercised in full after one year of employment
from the date of grant with payment in either cash or shares of the Company's
Common Stock. Upon a stock-for-stock exercise, the optionee will receive a
new, non-qualified reloaded stock option at the then current market price for
the number of shares tendered to exercise the option. No reloaded stock
options were issued to executive officers in 1994. The reloaded stock option
will have an exercise term equal to the remaining term of the exercised
option. Options may only be exercised during employment or within three
months after employment ceases, except that following retirement at or after
age 65 or other approved termination of employment (as was the case with M.
Novitch and W. U. Parfet), stock options may be exercised for periods up to
five years (but not beyond the original expiration date of the option). The
Company is unable to predict or estimate the Company's actual future stock
price or place a reasonably accurate present value on the options granted.
<TABLE>
ORIGINAL STOCK OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term
Number of
Securities % of Total
Under- Options
lying Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted Fiscal Year ($/Sh) Date 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
L. S. Smith. . . . . . . 40,000 1.88% $28.1875 2/16/03 $709,100 $1,796,900
J. R. Mitchell . . . . . 40,000 1.88% $28.1875 2/16/03 $709,100 $1,796,900
G. A. Welch. . . . . . . 30,000 1.41% $28.1875 2/16/03 $531,800 $1,347,700
D. R. Parfet . . . . . . 30,000 1.41% $28.1875 2/16/03 $531,800 $1,347,700
R. C. Salisbury. . . . . 25,000 1.18% $28.1875 2/16/03 $443,200 $1,123,100
20,000 * .94% $32.25 11/16/03 $405,600 $1,028,000
T. Cooper. . . . . . . . 75,000 3.53% $28.1875 4/22/93 ** 0 ** 0 **
M. Novitch . . . . . . . 40,000 1.88% $28.1875 12/20/98 $311,500 $ 688,300
W. U. Parfet . . . . . . 40,000 1.88% $28.1875 12/20/98 $311,500 $ 688,300
<FN>
* One-half exercisable when stock price exceeds $37.0875 and one-half
exercisable when stock price exceeds $42.57 but exercisable for all
remaining shares after November 16, 2000 regardless of stock price.
** Grant canceled due to death of optionee prior to grant becoming
exercisable.
</TABLE>
The following table shows the number of stock options exercised and
the value realized by the named executive officers during 1993 and the number
of unexercised stock options remaining at year end and the potential value
thereof based on the year-end market price of the Company's Common Stock of
$29.25:
<TABLE>
AGGREGATED STOCK OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
FY-End (#) FY-End ($)
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
<S> <C> <C> <C> <C>
L. S. Smith. . . . . . . . 0 0 145,250/40,000 $ 0/42,500
J. R. Mitchell . . . . . . 0 0 76,000/40,000 $ 0/42,500
G. A. Welch. . . . . . . . 20 $83.75 103,450/30,000 $ 18,810/31,875
D. R. Parfet . . . . . . . 0 0 108,300/30,000 $ 42,438/31,875
R. C. Salisbury. . . . . . 0 0 86,354/45,000 $ 34,971/26,563
T. Cooper. . . . . . . . . 0 0 211,402/0 0/0
M. Novitch . . . . . . . . 0 0 150,387/40,000 $ 0/42,500
W. U. Parfet . . . . . . . 0 0 168,438/40,000 $209,342/42,500
</TABLE>
COMPARISON OF CUMULATIVE TOTAL SHAREHOLDER RETURN
The following graphs compare the yearly change over the last five
years and, for a longer-term perspective, over the last ten years, in the
Company's cumulative total shareholder return (stock price appreciation plus
the cumulative value of reinvested dividends) compared to the Standard &
Poor's 500 Stock Index and a Combined Standard & Poor's Drug Group Index
consisting of Abbott Laboratories; American Cyanamid Co.; American Home
Products Corporation; Bristol-Myers Squibb Company; Johnson & Johnson; Eli
Lilly and Company; Merck & Co., Inc.; Pfizer Inc.; Schering-Plough
Corporation; Syntex Corporation; The Upjohn Company and Warner Lambert
Company. Under this peer group index, the returns of each component company
are weighted according to their respective stock market capitalization as of
the beginning of each period for which a return is indicated. The graphs
assume $100 was invested on December 31, 1988 (for five-year graph) and
December 31, 1983 (for ten-year graph) and that all dividends were
reinvested. The stock performance as shown on the Performance Graph should
not be interpreted as a prediction of future stock performance.
<TABLE>
5 YEAR TOTAL RETURN
Fiscal Year Basis: December
<CAPTION>
Return Return Return Return Return
Company \ Index Name 1989 1990 1991 1992 1993
<S> <C> <C> <C> <C> <C>
Upjohn Company 37.81 1.35 11.01 -17.27 -6.70
S&P 500 Index 31.69 -3.11 30.47 7.62 10.08
Peer Group 39.43 17.35 55.92 -17.04 -6.66
<CAPTION>
Indexed \ Cumulative Returns
Base
Period Return Return Return Return Return
Company \ Index Name 1988 1989 1990 1991 1992 1993
<S> <C> <C> <C> <C> <C> <C>
Upjohn Company 100 137.81 139.67 155.05 128.28 119.68
S&P 500 Index 100 131.69 127.60 166.47 179.15 197.21
Peer Group 100 139.43 163.63 255.13 211.66 197.56
Peer Group Population
Abbott Laboratories
American Cyanamid Co
American Home Products Corp
Bristol Myers Squibb
Johnson & Johnson
Lilly (Eli) & Co
Merck & Co
Pfizer Inc
Schering-Plough
Syntex Corp
Upjohn Co
Warner-Lambert Co
This total shareholders return model assumes reinvested dividends.<PAGE>
</TABLE>
<TABLE>
10 YEAR TOTAL RETURN
Fiscal Year Basis: December
<CAPTION>
Return Return Return Return Return Return Return Return Return Return
Company \ Index Name 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Upjohn Company 23.74 95.94 42.25 -2.14 -1.82 37.81 1.35 11.01 -17.27 -6.70
S&P 500 Index 6.22 31.64 18.56 5.10 16.61 31.69 -3.11 30.47 7.62 10.08
Peer Group 9.03 47.26 37.44 8.59 14.84 39.43 17.35 55.92 -17.04 -6.66
<CAPTION>
Indexed \ Cumulative Returns
Base
Period Return Return Return Return Return Return Return Return Return Return
Company \ Index Name 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Upjohn Company 100 123.74 242.45 344.88 337.50 331.34 456.62 462.79 513.74 425.05 396.55
S&P 500 Index 100 106.22 139.83 165.78 174.24 203.18 267.55 259.25 338.24 364.00 400.69
Peer Group 100 109.03 160.55 220.67 239.61 275.16 383.66 450.24 702.01 582.40 543.60
Peer Group Population
Abbott Laboratories
American Cyanamid Co
American Home Products Corp
Bristol Myers Squibb
Johnson & Johnson
Lilly (Eli) & Co
Merck & Co
Pfizer Inc
Schering-Plough
Syntex Corp
Upjohn Co
Warner-Lambert Co
This total shareholders return model assumes reinvested dividends.<PAGE>
</TABLE>
Retirement Benefits
The following table illustrates the estimated annual benefits
payable under the Company's pension plan upon retirement to persons in the
specified remuneration and years-of-service classifications, assuming
retirement at the normal Social Security retirement age and assuming the
participant's remuneration is equivalent to his Final Average Salary under
the plan and is equal to or greater than 150% of his Social Security Covered
Compensation. The amounts shown include additional non-qualified pension
benefits, represent straight-life annuity amounts notwithstanding the
availability of joint survivorship provisions and are not subject to any
offset or reduction for Social Security benefits.
<TABLE>
<CAPTION> PENSION PLAN TABLE
Years of Service*
Remuneration 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years*
<S> <C> <C> <C> <C> <C> <C>
$ 500,000 . . . . . . . . .$147,000 $196,000 $245,000 $ 295,000 $ 307,000 $ 320,000
$ 700,000 . . . . . . . . .$207,000 $276,000 $345,000 $ 415,000 $ 432,000 $ 450,000
$ 900,000 . . . . . . . . .$267,000 $356,000 $445,000 $ 535,000 $ 557,000 $ 580,000
$1,100,000 . . . . . . . . . $327,000 $436,000 $545,000 $ 655,000 $ 682,000 $ 710,000
$1,300,000 . . . . . . . . . $387,000 $517,000 $646,000 $ 775,000 $ 805,000 $ 840,000
$1,500,000 . . . . . . . . . $447,000 $573,000 $716,000 $ 859,000 $ 931,000 $ 969,000
$1,700,000 . . . . . . . . . $507,000 $679,000 $849,125 $1,019,000 $1,057,000 $1,104,000
___________________
<FN>
* Service in excess of 40 years is not counted under the Company's pension
plan.
</TABLE>
The compensation included as remuneration is the amounts listed
under "Annual Compensation" in the Summary Compensation Table on page 13.
The current number of years of service credited for the following individuals
at December 31, 1993, were: L. S. Smith, 35 years; J. R. Mitchell, 8 years;
G. A. Welch, 34 years; D. R. Parfet, 16 years; and R. C. Salisbury, 19 years.
Employment Agreements and Termination of Employment Arrangements
Under an agreement made with J. L. Zabriskie when he joined the
Company, he will receive a base salary of $800,000 and a bonus of at least
$600,000 payable in March 1995 for services rendered in 1994. In addition,
he received 15,000 shares of restricted stock to be earned in equal amounts
in January 1995 and January 1996, which amount will be reduced by the value
of any future performance share awards received from his prior employer. He
was also granted a stock option for 250,000 shares that will become
exercisable on January 3, 1995; a stock option for 50,000 shares that will
become exercisable after January 3, 1996 when the stock price exceeds $34.06;
and a stock option for 50,000 shares that will become exercisable after
January 3, 1997 when the stock price exceeds $39.06. All of the stock
options have a ten-year term and an exercise price of $29.06 per share. When
Dr. Zabriskie retires, he will receive a retirement benefit under the
Company's plans as if he had been employed by Upjohn for 28 years plus his
actual years of service with the Company less the value of his pension from
former employment. If Dr. Zabriskie's employment is terminated within the
next four years, he will receive a severance payment of at least two years'
base salary.
Under an agreement made with J. R. Mitchell when he joined the
Company, he will receive a retirement benefit equal to that which he would
receive if he were granted 1.67 years of service for each actual year of
service under the Company's pension plans, reduced by the value of the
pension to be received by him from his former employment.
The Company has a separation payment plan for eligible individual
employee terminations, including executive officers, ranging from one week's
base pay for employees with three months' service to 31 weeks' base pay for
30 or more years of service. The Company also has a plan for employees,
including executive officers, who are terminated as a result of having their
position eliminated, which provides for separation payments ranging from two
weeks' base pay for employees with one year of service to 62 weeks' base pay
for employees with 30 or more years of service.
In addition, the Company has a change-in-control severance plan for eligible
employees, excluding executive officers, which may be terminated by the Board
of Directors at any time prior to a change in control of the Company, which
will provide severance benefits ranging from 4 weeks' base pay for employees
with one year of service to 104 weeks' base pay for employees with 30 or more
years of service payable in the event their employment is terminated within
two years following a change in control of the Company. The Company has
entered into a severance agreement with each executive officer providing for
the payment of severance pay equal to 2.5 times the officer's annualized
salary in the event his employment is terminated other than for cause,
disability or retirement within 24 months following a change in control of
the Company.
SHAREHOLDER PROPOSALS
For approval, each of the following proposals must receive the
affirmative vote of a majority of the total number of shares voting on such
matter at the Annual Meeting of Shareholders. The names and addresses of the
proponents of the following proposals and the number of shares of the Common
Stock of the Company owned by them will be furnished, orally or in writing as
requested, by the Secretary of the Company promptly upon receipt of any
written or oral request.
SHAREHOLDER PROPOSAL NO. 1 AND SHAREHOLDERS' STATEMENT IN SUPPORT
WHEREAS, we believe all U. S. citizens and corporate entities are
being called to sacrifice and to do their part in bringing about a more just
and equitable health care system.
During the 1980s, prescription drug prices increased at almost
three times the rate of general inflation in the United States.
The burden of these cost increases has been borne by individual
consumers such as the elderly and the underinsured in the retail market as
well as increased costs for the institutional health care facilities.
The drug companies have been criticized by citizens, organizations,
and U.S. government agencies as being unjust in the reaping of "excessive
profits at the expense of millions of U.S. citizens."
The price of drugs is consistently higher in the U.S. retail market
than in other industrialized countries.
The drug companies have argued that the higher prices in the U. S.
are necessary to recoup research and development costs. While all persons
who receive these drugs benefit from the research and development, U.S.
consumers bear the burden of these costs.
Pharmaceutical companies' recent efforts to limit overall price
increases to inflation have failed to significantly benefit retail consumers
due to discounted prices offered to volume purchasers such as HMOs and large
purchasing groups.
We believe U.S. citizens want reasonable limits on pharmaceutical
prices.
RESOLVED, the shareholders request the Board to create and
implement a policy of price restraint of pharmaceutical products for both the
average individual consumer and the institutional purchasers utilizing a
combination of approaches to keep drug prices to a reasonable level.
The Board will report to shareholders on positive changes in
policies and pricing procedures for our pharmaceutical products by September,
1994.
In creating this policy, the Board should consider a formula
whereby the individual price on each of the top five prescription drugs for
the retail market based on dollar volume in the U.S. for our Company be no
higher than 10% of the average price for each of the five drugs in the top
five markets of these same drugs in the industrialized world. If the price
differential is more than 10% for any one of the drugs, that a voluntary cap
be immediately placed on the price of said drug in the U.S. until the
differential is within the 10%.
Drug pricing has been a controversial topic for the last few years.
Now that we are facing major reforms in our health care system in the U.S.,
it seems most appropriate that all pharmaceutical companies take their share
of the responsibility in this reform effort.
BOARD OF DIRECTORS' STATEMENT AGAINST SHAREHOLDER PROPOSAL NO. 1
The Board shares the shareholders' concern with increasing
healthcare costs and supports healthcare reform. The Board believes that the
price of Upjohn products is reasonable. The estimated cost per day of
therapy of our top five U.S. pharmaceutical products, which represented 62%
of Upjohn's 1993 U.S. sales, based on the Upjohn catalog price before
wholesaler and retailer mark-up, is $1.51 for XANAX, $0.54 for MICRONASE,
$0.27 for PROVERA, $1.77 for ANSAID and $1.46 for ROGAINE. In terms of the
value that they provide to patients, the Board believes that these prices
offer superior value, especially when compared with other products society
buys for the same or higher prices. Further, the Board notes that the
Company had a net price decrease for 1993 for its entire line of U.S.
prescription products, compared to the CPI increase of 2.7%. Accordingly,
the Board recommends a vote AGAINST Shareholder Proposal No. 1.
SHAREHOLDER PROPOSAL NO. 2 AND SHAREHOLDER'S STATEMENT IN SUPPORT
This proposal is motivated by the history of repeated and
unjustified scare attacks on pharmaceuticals, agricultural chemicals,
electronic devices, trucks, and automobiles by the television networks ABC,
CBS, and NBC. It is presented to encourage Upjohn to take action to prevent
further damage to its market, in particular, and to the nation, in general.
While GM's recent proof of dishonest tests by NBC has had the
salubrious effect of displaying fraud by NBC, it does not solve the problem
of televised fraud in the discussion of engineering and scientific
achievements and the products they create.
It is proposed, therefore, that shareholders request Upjohn, either
alone or with the cooperation of other manufacturers, to launch an aggressive
attack on televised fraud and deceit.
One form of this attack that should be considered is that of
sponsoring a series of weekly, prime time, television programs to convince
everyone that pharmacology played a central role in developing our present
level of health and comfort and plays an essential role in maintaining and
improving it.
For example, the series could begin with a sequence of dramas
depicting the living, and dying, conditions from Roman times through the
middle-ages, with emphasis on the plagues and diseases that made life short
and miserable. This sequence should introduce early efforts at using elixirs
and potions to mitigate disease and pestilence as viewed by mothers of sick
children, children of sick and wounded parents and by the healers of the
times.
After this introductory sequence, the next sequence could begin
with the founding of pharmaceutical companies in this country and in Europe,
with emphasis on the insight of their founders into the mechanism of disease
and disorders. It may then focus on the trials, failures, and successes in
developing specific pharmaceuticals. The expense of developing drugs and the
cost of the numerous, but educational, failures encountered along the way
should be emphasized. It should be demonstrated that failures are to be
expected because we extend our knowledge of the real world only by a
combination of reasoning and trial and error.
The series should also explain the fundamentals of scientific
reasoning; that only quantitative, or measurable, data is considered, that
differences in measured data is significant if it is larger than the
instrumentation errors involved in the measurements. The series should also
repeatedly demonstrate that numbers, magnitudes, and methods of use are
important whenever we evaluate materials: what is good in one amount may be
harmful in another.
These ideas are not difficult to demonstrate in an understandable
manner. For example, water is essential to life when used in proper amounts.
It can be fatal, however, when consumed to excess; and it is always fatal to
anyone who is completely submerged in it for 20 minutes without adequate
protection.
This series of programs should be well received because of its high
drama of lives and deaths of people and nations. If successful, it could,
with added sponsors, be continued indefinitely and extended to all
technologies to prevent future network attempts at suppressing progress
toward a better life in the United States. Although an extension of this
sort is not directly germane to Upjohn's activities, it is indirectly
important because it can be a means of educating the public to fundamentals
of careful scientific reasoning and thereby vitiate future media attempts at
alarming the public when a new pharmaceutical product is developed and
released.
BOARD OF DIRECTORS' STATEMENT AGAINST SHAREHOLDER PROPOSAL NO. 2
The Board supports the importance of having a positive image of the
Company and the pharmaceutical industry reflected in the media; however, it
does not believe that the foregoing proposal is the appropriate means. The
Board believes that actions similar to those already taken by the Company
would be a better approach. For example, Upjohn recently sponsored an eight-
part PBS series entitled "The Secret of Life" that explored recent advances
in genetic research and the impact of those discoveries on daily life. In
addition, Upjohn supports the media programs of the Pharmaceutical
Manufacturers Association, which recently launched a national television and
print campaign to explain why prescription medicines are the best hope to
cure many of America's leading diseases and that pharmaceutical research
companies are the source of more than 90 percent of those medicines. This
campaign will reach millions of people over the next few months. The Board
believes that these efforts are more effective than the foregoing proposal.
Accordingly, the Board recommends a vote AGAINST Shareholder Proposal No. 2.
SHAREHOLDER PROPOSAL NO. 3
(NO OTHER SHAREHOLDER'S STATEMENT IN SUPPORT SUBMITTED)
WHEREAS, in human fertilization, the uniting of the sperm and ovum,
a cellular process with unique genetic characteristics, different than the
mother and father, begins.
WHEREAS, many scientists and individuals believe a distinct human
life is formed after fertilization occurs.
WHEREAS, cellular evidence of personhood is admissible in a court
of law.
WHEREAS, some of the Company's products have effects that inhibit
the development of this genetically distinct human life after fertilization.
WHEREAS, any product that inhibits the development of unborn human
life may be considered an abortifacient.
WHEREAS, considering the sensitive nature of the subject of
abortion, women should have as much information as possible in making
informed decisions.
RESOLVED, the shareholders request the board of directors to form
a committee. The purpose of this committee would be to formulate an
educational plan that would inform literate and non-literate women of the
possible abortifacient action of any of the Company's products. The
committee would report to the board by November 1, 1994, with their specific
recommendations. This report, excluding any proprietary information, should
be made available to all shareholders at that time.
BOARD OF DIRECTORS' STATEMENT AGAINST SHAREHOLDER PROPOSAL NO. 3
The Board believes that women should have all appropriate
information regarding possible abortifacient effects of the Company's
products. The Company provides information regarding the reproductive
consequences of its products to physicians and pharmacists. In addition,
this information for most U.S. products is published in the Physician's Desk
Reference, which is publicly available in many libraries and bookstores.
However, the Company believes that a woman's physician is in the best
position to provide education about possible abortifacient effects of our
products. Accordingly, the Board recommends a vote AGAINST Shareholder
Proposal No. 3.
Relationship With Independent Accountants
Coopers & Lybrand, who have been the Company's independent
accountants for a number of years, have been selected by the Board of
Directors to be its independent accountants for the current year. A
representative of this firm will be present at the Annual Meeting of
Shareholders and will have an opportunity to make a statement if desired to
do so and will be available to respond to shareholder questions.
Receipt of Shareholder Proposals
For inclusion in the Company's 1995 proxy statement, all
shareholder proposals for consideration at the Annual Meeting of Shareholders
of the Company to be held in 1995 must be received at the Company's executive
offices by December 10, 1994. Such proposals must also comply with all other
regulations of the Securities and Exchange Commission.
Other Business
The Company knows of no other business to come before the meeting.
If, however, other matters properly come before the meeting, it is the
intention of the persons named in the enclosed proxy to vote the shares
represented thereby in accordance with their best judgment.
By order of the Board of Directors,
Kenneth M. Cyrus
Secretary
Dated: April 8, 1994<PAGE>
(Upjohn logo)
[FRONT]
THE UPJOHN COMPANY
7000 Portage Road, Kalamazoo, Michigan 49001
[Upjohn logo] PROXY
ANNUAL MEETING, MAY 17, 1994
This proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints K. M. Cyrus and J. L. Zabriskie, Ph.D., and
each of them, as proxies with power of substitution, to vote all the stock
of THE UPJOHN COMPANY, which the undersigned has the power to vote at its
Annual Meeting or at any adjournment thereof, as specified on the reverse
side and, in their discretion, upon any other business as may properly come
before the meeting.
/ / Check here for address change.
New Address: _________________________
______________________________________
______________________________________
/ / Check here if you plan to attend the meeting.
(continued and to be signed on other side)
<PAGE>
<TABLE>
[BACK]
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
If you sign this proxy without checking any boxes, this proxy shall
be voted FOR all nominees and AGAINST all proposals.
<S> <C> <C> <C>
WITHHELD
FOR all from all
nominees nominees FOR all nominees, except vote
withheld from the following
nominees:
1. Nominees: Frank C. Carlucci, William D. Mulholland, / / / / / /
R. T. Parfet, Jr., John L. Zabriskie, Ph.D.
____________________________
2. SHAREHOLDER PROPOSAL No. 1 FOR AGAINST ABSTAIN
/ / / / / /
3. SHAREHOLDER PROPOSAL No. 2 FOR AGAINST ABSTAIN
/ / / / / /
4. SHAREHOLDER PROPOSAL No. 3 FOR AGAINST ABSTAIN
/ / / / / /
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS. IF ACTING AS
ATTORNEY, EXECUTOR, TRUSTEE, OR IN REPRESENTATIVE CAPACITY,
SIGN NAME AND INDICATE TITLE.
_________________________________________ __________
Signature Date
_________________________________________ __________
Signature Date
PLEASE VOTE, SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
</TABLE>
