<PAGE>
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Becton, Dickinson and Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Becton, Dickinson and Company
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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Notes:
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CLATEO CASTELLINI
Chairman of the Board
[LETTERHEAD OF BECTON DICKINSON AND COMPANY APPEARS HERE]
December 23, 1996
To Our Shareholders:
On behalf of the Board of Directors, I am pleased to invite you to the Annual
Meeting of Shareholders of Becton, Dickinson and Company to be held at 2:30 P.M.
on Tuesday, February 11, 1997, at the offices of the Company, 1 Becton Drive,
Building II, Franklin Lakes, New Jersey. Directions to Franklin Lakes and a map
showing the location of the offices is on the back cover of the Proxy Statement.
I look forward to greeting you and reporting on the progress of your company.
The matters expected to be acted upon at the meeting are listed in the Notice
of Meeting and described in detail in the Proxy Statement.
So that your shares will be represented at the meeting, I encourage you to
vote, complete and mail the enclosed proxy card in the return envelope that is
provided, whether or not you expect to attend. Even if you previously have
returned your proxy card, you may attend the Annual Meeting and vote in person.
I look forward to seeing you at the meeting.
Sincerely,
/s/ Clateo Castellini
CLATEO CASTELLINI
Chairman of the Board
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OF
BECTON, DICKINSON AND COMPANY
1 BECTON DRIVE
FRANKLIN LAKES, NEW JERSEY 07417-1880
-----------------
The Annual Meeting of Shareholders of BECTON, DICKINSON AND COMPANY will be
held at 2:30 P.M. on Tuesday, February 11, 1997, at the offices of the Company,
1 Becton Drive, Building II, Franklin Lakes, New Jersey, to consider and act
upon the following proposals:
1. The election of directors;
2. The approval of the selection of independent auditors;
3. A shareholder proposal relating to cumulative voting;
4. A shareholder proposal relating to a report on the Company's operations in
Mexico; and
5. Such other business as may properly come before the meeting.
Shares represented by properly executed proxies hereby solicited by the Board
of Directors of Becton, Dickinson and Company will be voted in accordance with
instructions specified therein. Shares represented by proxies which are not
limited to the contrary will be voted in favor of the election as directors of
the persons nominated in the accompanying Proxy Statement, for proposal 2 and on
other matters as recommended by the Board.
It is desirable that as large a proportion as possible of the shareholders'
interest be represented at the meeting. Therefore, if you are unable to be
present in person or otherwise represented at the meeting, you are requested to
sign and return the enclosed proxy in order that your shares will be
represented.
Only shareholders of record at the close of business on December 16, 1996 will
be entitled to vote at this meeting.
By order of the Board of Directors,
/s/ Raymond P. Ohlmuller
RAYMOND P. OHLMULLER
Vice President and Secretary
Dated: December 23, 1996
<PAGE>
PROXY STATEMENT
-----------------
1997 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 11, 1997
-----------------
BECTON, DICKINSON AND COMPANY
1 BECTON DRIVE
FRANKLIN LAKES, NEW JERSEY 07417-1880
-----------------
GENERAL INFORMATION
The enclosed proxy/voting instruction card ("proxy") is solicited by the Board
of Directors (the "Board") of Becton, Dickinson and Company, a New Jersey
corporation (the "Company") for use at the Annual Meeting of Shareholders to be
held at 2:30 P.M. on Tuesday, February 11, 1997, at the offices of the Company,
1 Becton Drive, Building II, Franklin Lakes, New Jersey. A proxy may be revoked
at any time before it is voted by sending written notice of revocation to the
Secretary of the Company, by delivering a duly executed proxy bearing a later
date or by voting in person at the meeting. This proxy statement and the proxy
are being mailed to shareholders of the Company on or about December 27, 1996.
At the close of business on December 16, 1996, the record date fixed by the
Board for determining shareholders entitled to notice of and to vote at the
meeting, there were 122,885,693 shares of the Company's Common Stock (the
"Common Stock") outstanding, each entitled to one vote. In addition, on December
16, 1996, there were 889,686 shares of the Company's Series B ESOP Convertible
Preferred Stock (the "ESOP Preferred Stock") outstanding, all of which are held
by State Street Bank and Trust Company, as Trustee of the Company's Savings
Incentive Plan ("SIP"). The shares of ESOP Preferred Stock are entitled to vote
on all matters submitted to a vote of the Company's shareholders and also carry
one vote per share. Each employee participating in SIP is entitled to instruct
the Trustee how to vote all shares of Common Stock and ESOP Preferred Stock
allocated to that employee's SIP accounts as well as how to vote a proportionate
number of such shares held in SIP for which voting instructions are not received
by the Trustee from other SIP participants or which are not allocated to
participants' accounts (the "unvoted and/or unallocated shares"). Unless
otherwise instructed by a SIP participant, the enclosed proxy will serve as
voting instructions to the Trustee with respect to both the allocated and the
unvoted and/or unallocated SIP shares. SIP shares for which no voting
instructions are received from any SIP participants will be voted by the Trustee
in its discretion.
The shares of Common Stock held by Wachovia Bank of North Carolina, N.A., as
Trustee of the Company's Salary and Bonus Deferral Plan ("SBDP"), as well as the
shares of Common Stock held by Banque Internationale a Luxembourg ("BIL") in
connection with the Company's Global Share Investment Program ("GSIP"), also are
entitled to vote on all matters submitted to a vote of the Company's
shareholders and carry one vote per share. Each employee participating in SBDP
and, if so provided under the terms of the local country GSIP plan, in GSIP, is
entitled to instruct the Trustee or BIL, as the case may be, how to vote all
shares of Common Stock allocated to that employee's SBDP or GSIP account, as
well as how to vote a proportionate number of shares held in SBDP or GSIP,
respectively, for which voting instructions are not received by the Trustee or
BIL, as the case may be, from other SBDP or GSIP participants. The enclosed
proxy card will serve as voting instructions by a SBDP participant or a GSIP
participant with respect to both allocated and unvoted SBDP shares or GSIP
shares, as the case may be.
<PAGE>
Proxies representing shares of Common Stock held of record also will represent
shares held under the Company's Automatic Dividend Reinvestment Plan and, in
addition, shares of Common Stock and ESOP Preferred Stock, if any, allocated to
employees' accounts under SIP, SBDP and GSIP, if the registrations are the same.
Separate mailings will be made for shares not held under the same registrations.
Directors are elected by a plurality of the votes cast at the meeting.
Abstentions with respect to one or more of the nominees will not be counted as
votes cast for such individuals and, accordingly, will have no effect on the
outcome of the vote. Similarly, shares which brokers do not have the authority
to vote in the absence of timely instructions from the beneficial owners
("broker non-votes"), if any, will not be counted and, accordingly, will have no
effect on the outcome of the vote.
Approval of Proposals 2, 3 and 4 requires the affirmative vote of a majority
of the votes cast on such proposal. Under New Jersey law, in determining whether
the proposal has received the requisite number of affirmative votes, abstentions
and any broker non-votes will not be counted as votes cast and, accordingly,
will have no effect on the outcome of the vote.
The Board of Directors is not aware of any matters to be presented at the
meeting other than those set forth in the accompanying notice. If any other
matters properly come before the meeting, the persons named in the proxy will
vote in accordance with their best judgment.
In addition to solicitation by mail, directors, officers and other employees
of the Company may solicit proxies personally, by telephone or by telegram.
Brokers and other nominees will be requested to solicit proxies or
authorizations from beneficial owners and will be reimbursed for their
reasonable expenses in doing so. The Company has retained Hill and Knowlton,
Inc. to assist in soliciting proxies for a fee not to exceed $12,500 plus
expenses. The cost of soliciting proxies will be borne by the Company.
SHARE OWNERSHIP OF
MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
According to CDA Investment Technologies, Inc., a firm that monitors
institutional share ownership, as of September 30, 1996, Oppenheimer & Co.,
L.P., 1 World Financial Center, New York, New York 10281, was the beneficial
owner of 20,945,432 shares of Common Stock, constituting 16.9% of the then
outstanding Common Stock, and State Street Bank & Trust Co., 225 Franklin
Street, Boston, Massachusetts 02110, was the beneficial owner of 6,569,920
shares of Common Stock, constituting 5.3% of the then outstanding Common Stock.
No changes in these holdings have come to the Company's attention since then.
The Company is not aware of any other beneficial owner of more than 5% of its
Common Stock.
The following tables set forth, as of October 31, 1996, information concerning
the beneficial ownership of Common Stock and ESOP Preferred Stock by each
director and nominee for director, by each executive officer named in the
Summary Compensation Table, by all directors and executive officers as a group,
and by the beneficial owner of more than 5% of the outstanding ESOP Preferred
Stock. None of the individuals listed below owns more than 1% of the outstanding
Common Stock. All directors and executive officers as a group are the beneficial
owners of approximately 3.4% of the Common Stock, including shares which may be
acquired by them within 60 days.
2
<PAGE>
COMMON STOCK
<TABLE>
<CAPTION>
SHARES WHICH
SHARES OWNED MAY BE ACQUIRED
DIRECTLY AND WITHIN 60
NAME INDIRECTLY(1)* DAYS(2)*
---- -------------- -----------------
<S> <C> <C>
Harry N. Beaty . . . . . . . . . . . . . 6,360 0
Henry P. Becton, Jr. . . . . . . . . . . 80,046(3) 0
Clateo Castellini. . . . . . . . . . . . 61,166 1,010,832
Albert J. Costello . . . . . . . . . . . 2,000 0
Gerald M. Edelman. . . . . . . . . . . . 4,184 0
Edmund B. Fitzgerald . . . . . . . . . . 4,786 0
John W. Galiardo . . . . . . . . . . . . 99,506 698,708
Richard W. Hanselman . . . . . . . . . . 9,204 0
Walter M. Miller . . . . . . . . . . . . 46,795(4) 525,324
Frank A. Olson . . . . . . . . . . . . . 26,630 0
James E. Perrella. . . . . . . . . . . . 2,640 0
Gloria M. Shatto . . . . . . . . . . . . 4,604 0
Mark C. Throdahl . . . . . . . . . . . . 11,248 189,936
Raymond S. Troubh. . . . . . . . . . . . 48,026(5) 0
Kenneth R. Weisshaar . . . . . . . . . . 6,390 241,350
All Directors and Executive officers as a
group (23 persons), including those
named above . . . . . . . . . . . . . . 456,009 3,690,508
</TABLE>
- ---------
* The Common Stock was split two-for-one, resulting in the distribution on
August 15, 1996 of one additional share of Common Stock for each share owned
by shareholders of record as of August 5, 1996.
(1) Includes Common Stock allocated to individual accounts under the Savings
Incentive Plan as follows: Mr. Castellini, 4,942 shares, Mr. Galiardo, 8,776
shares, Mr. Miller, 4,921 shares, Mr. Throdahl, 3,219 shares, Mr. Weisshaar,
938 shares, and all Directors and Executive Officers as a group, 43,536
shares. Also includes Common Stock allocated to individual accounts under the
Salary and Bonus Deferral Plan as follows: all Directors and Executive
Officers as a group, 2,929 shares.
(2) Consists of Stock Options available for exercise.
(3) Includes 51,440 shares held by a trust of which Mr. Becton is a co-trustee
with shared investment and voting power and 26,000 shares held by a
corporation owned by the trust. Does not include 15,800 shares owned by Mr.
Becton's wife, 800 shares owned by a daughter or 48,220 shares held in trusts
for the benefit of his children, as to which he disclaims beneficial
ownership.
(4) Does not include 600 shares owned by Mr. Miller's children, as to which he
disclaims beneficial ownership.
(5) Does not include 20,000 shares owned by Mr. Troubh's wife, as to which he
disclaims beneficial ownership.
ESOP PREFERRED STOCK
<TABLE>
<CAPTION>
SHARES OWNED
DIRECTLY AND
INDIRECTLY
---------------
<S> <C>
Clateo Castellini . . . . . . . . . . . . . . . . . . 331(1)
John W. Galiardo. . . . . . . . . . . . . . . . . . . 413(1)
Walter M. Miller. . . . . . . . . . . . . . . . . . . 421(1)
Mark C. Throdahl. . . . . . . . . . . . . . . . . . . 258(1)
Kenneth R. Weisshaar. . . . . . . . . . . . . . . . . 313(1)
All Directors and Executive Officers as a group (23
persons) . . . . . . . . . . . . . . . . . . . . . . 3,469(1)
State Street Bank and Trust Company . . . . . . . . . 893,535(2)
225 Franklin Street
Boston, Massachusetts 02110
(as Trustee of the Savings Incentive Plan)
</TABLE>
- ---------
(1) Shares allocated to individual accounts under the ESOP component of the
Savings Incentive Plan ("SIP"). Such shares constitute less than 1% of the
total beneficial ownership of the ESOP Preferred Stock.
(2) As Trustee, holding 100% of the outstanding shares of ESOP Preferred Stock.
3
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors to file initial reports of their ownership of
the Company's equity securities and reports of changes in such ownership with
the Securities and Exchange Commission (the "SEC") and the New York Stock
Exchange. Executive officers and directors are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on a review of copies of such forms and written representations from the
Company's executive officers and directors, the Company believes that for the
period from October 1, 1995 through September 30, 1996, all of its executive
officers and directors were in compliance with the disclosure requirements of
Section 16(a).
BOARD OF DIRECTORS
MEETINGS; CERTAIN COMMITTEES
The Board of Directors, which held seven meetings during the fiscal year ended
September 30, 1996, has seven standing committees, including the Audit
Committee, the Corporate Responsibility Committee, the Compensation and Benefits
Committee and the Committee on Directors, which serves as a nominating
committee. All directors attended more than 75 percent of the aggregate of the
total number of meetings of the Board and the committees on which each director
served, except for Edmund B. Fitzgerald.
The Audit Committee reviews and discusses the plan and results of the annual
audit with the Company's independent and internal auditors and reviews non-audit
services provided by the independent auditors. This Committee also reviews the
Company's internal auditing, control and accounting systems. In addition, this
Committee makes recommendations to the Board concerning the selection of
independent auditors. The members of this Committee, which met three times
during the year, are Harry N. Beaty, Chairman, Albert J. Costello, Gerald M.
Edelman, Edmund B. Fitzgerald, Gloria M. Shatto and Raymond S. Troubh.
The Corporate Responsibility Committee reviews the Company's policies and
procedures affecting its role as a responsible corporate citizen, including
those relating to issues such as equal employment opportunity and community
relations, as well as health, safety and environmental matters and proper
business practices. The members of this Committee, which met once during the
year, are Gerald M. Edelman, Chairman, Harry N. Beaty, Henry P. Becton, Jr.,
Clateo Castellini, John W. Galiardo and Gloria M. Shatto.
The Compensation and Benefits Committee reviews annually the overall
compensation program for the Company's corporate officers; approves the
compensation of the executive officers and approves all employment or consulting
contracts of the Company or any subsidiary with corporate officers who are not
also directors. In addition, this Committee serves as the granting and
administrative committee for the Company's stock option plans and its Stock
Award Plan. This Committee also oversees the administration of employee benefits
and benefit plans for the Company. The members of this Committee, which met five
times during the year, are Henry P. Becton, Jr., Chairman, Albert J. Costello,
Edmund B. Fitzgerald, Richard W. Hanselman, Frank A. Olson, James E. Perrella
and Raymond S. Troubh.
The Committee on Directors recommends candidates for election as directors to
the Board. It also reviews and makes recommendations concerning the composition,
organization and function of the Board and its committees, as well as the
performance and compensation of directors. The members of this Committee, which
met three times during the year, are Richard W. Hanselman, Chairman, Henry P.
Becton, Jr., Gerald M. Edelman, Frank A. Olson and James E. Perrella.
Any shareholder may recommend nominees for director to the Committee on
Directors by writing to the Secretary of the Company. Submissions should include
the full name and address and a statement of the qualifications of the proposed
nominee.
4
<PAGE>
DIRECTORS' COMPENSATION
Each director who is not employed by the Company receives an annual retainer
of $45,000 for Board service, plus attendance fees of $1,000 for special
meetings of the Board and $1,000 for committee meetings. An annual fee of $2,000
also is paid to committee chairmen. Directors may defer, in cash or shares of
Common Stock, all or part of their attendance, committee and chairmen's fees, as
well as all or part of their annual retainers until up to ten years after
retirement from the Board pursuant to either the 1994 Restricted Stock Plan for
Non-Employee Directors or the 1996 Directors' Deferral Plan. In addition, Gerald
M. Edelman was engaged by the Company during the fiscal year as a consultant in
the fields of cell biology and solid tissue diagnostics. The Company paid Dr.
Edelman a fee of $65,000 for his consulting services.
In July 1996, the Board of Directors voted to terminate its pension
arrangements for directors and to adjust director compensation as described
below. Effective December 1, 1996 (the "Termination Date"), the Company froze
all accrued past service pension benefits payable to current directors and
ceased accruing any additional pension benefits for their accounts. No change
was made to the retirement benefits being paid to directors that had retired
prior to the Termination Date.
In liquidation of benefits that would have been payable under the terminated
arrangements, directors were offered a one-time election either to receive
payment of the actuarially determined present value, as of the Termination Date,
of his or her previously earned and accrued past service pension benefits (the
"Pension Amount") or to enter into a consulting agreement with the Company,
following retirement, at an annual fee equal to the retainer paid from time to
time to active non-employee directors, for a term equal to the number of years,
as of the Termination Date, of the director's service on the Board. Under the
1996 Directors' Deferral Plan, directors can defer receipt of their Pension
Amounts, until up to ten years after retirement, in an unfunded cash account or
in an account credited with shares of Common Stock.
Commencing in February 1997, each director elected at, or continuing as a
director after, each annual meeting of shareholders, also will be granted 400
shares of Common Stock, to be deferred in a Common Stock account under the 1996
Directors' Deferral Plan and distributed no earlier than retirement. Prior to
the distribution of shares of Common Stock credited to the accounts of directors
under the 1996 Directors' Deferral Plan, the number of shares credited will be
increased to reflect the payment and reinvestment of dividends on the Common
Stock.
As of the Termination Date, directors no longer are required to receive
one-fourth of the annual retainer in shares of restricted Common Stock, but
still can elect to have one or more of their quarterly retainer payments paid in
shares of restricted Common Stock pursuant to the 1994 Restricted Stock Plan for
Non-Employee Directors or in deferred shares of Common Stock under the 1996
Directors' Deferral Plan, rather than in cash.
In July 1996, the Board also voted to amend the formal stock ownership
guidelines, so as to require all non-employee directors, with limited
exceptions, to own five (rather than three) times the amount of the annual
retainer in shares of Company stock within five years from the date of the
original July 1995 guidelines.
BOARD EVALUATION
In fiscal 1996, the Board's Committee on Directors undertook a new process of
evaluation of Board performance and effectiveness, whereby each director
completed a Board Evaluation Questionnaire. The questionnaire provided a range
of grades and trend indicators to be completed by each director, as well as
space for written comments, with respect to each of the following sixteen
criteria:
1. The Board knows, understands and approves the Company's mission statement,
values and objectives, as well as its strategic and operating plans.
5
<PAGE>
2. The Board understands the industries in which the Company operates and the
implications of current general economic and political trends to those
businesses.
3. The Board evaluates the Company's research and development performance and
level of commitment.
4. The Board considers the performance of peer companies when assessing
Company performance.
5. The Board evaluates and reviews the performance and values of the chief
executive officer and other members of senior management.
6. The Board reviews senior management development and compensation and
considers the correlation between compensation levels and Company
performance.
7. Board meetings foster open communication and timely resolution of issues
presented.
8. The Board oversees ethical conduct and legal compliance by the Company.
9. The Board assesses and modifies, as necessary, the structure of the Board
and its Committees.
10. The Board ensures that each Board member's experiences are optimally and
appropriately utilized in terms of Committee appointments.
11. The Board monitors the availability, content and timeliness of information
provided to it and prepares appropriately for Board meetings.
12. The Board verifies the independence of each non-employee director and
considers the impact, if any, of changes in the principal employment of
non-employee directors.
13. The Board monitors and understands current issues and trends in corporate
governance.
14. The Board reviews and adopts annual capital and operating budgets and
monitors Company performance against them during the year.
15. The Board reviews the adequacy of existing accounting and financial
controls.
16. The Board reviews succession plans for the chief executive officer and
senior management.
The collective ratings and comments of the directors were compiled and
presented by the Chairman of the Committee on Directors to the full Board for
discussion and the development of recommendations to enhance the Board's
effectiveness.
PROPOSAL 1.
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes, the terms of which
expire alternately over a three-year period. The Board proposes the election of
Albert J. Costello to serve for two years until the 1999 Annual Meeting and of
Harry N. Beaty, Clateo Castellini, John W. Galiardo and Frank A. Olson to serve
for three years until the 2000 Annual Meeting, and in each case until their
successors have been elected and have qualified. Mr. Costello was elected to his
present term by the Board effective July 26, 1996. Dr. Beaty and Messrs.
Castellini, Galiardo and Olson are incumbent directors who were elected to their
present terms by the shareholders.
6
<PAGE>
NOMINEES FOR DIRECTOR--TERM TO EXPIRE 2000
[Photo of Harry N. Beaty appears here]
(ART)
Harry N. Beaty, M.D., 64, has been a director since 1985. He is a Professor of
Medicine and Dean of the Northwestern University Medical School and Chairman
of the Board of the Northwestern Medical Faculty Foundation. Dr. Beaty is a
specialist in internal medicine and a subspecialist in infectious diseases.
[Photo of Clateo Castellini appears here]
(ART)
Clateo Castellini, 61, has been a director, Chairman of the Board, President
and Chief Executive Officer since June, 1994. Prior thereto he served as
Sector President--Medical.
[Photo of John W. Galiardo appears here]
(ART)
John W. Galiardo, 62, has been a director and Vice Chairman of the Board and
General Counsel since June, 1994. Prior thereto he served as Vice President
and General Counsel. Mr. Galiardo is a director of New Jersey Manufacturers
Insurance Co., Inc. and VISX, Incorporated.
[Photo of Frank A. Olson appears here]
(ART)
Frank A. Olson, 64, has been a director since 1985. He is Chairman of the
Board and Chief Executive Officer of The Hertz Corporation, a transportation
company. Mr. Olson is a director of Cooper Industries, Inc., Fund America
Corporation, The Hertz Corporation and Unicom Corp.
7
<PAGE>
TERM TO EXPIRE 1999
[Photo of Albert J. Costello appears here]
(ART)
Albert J. Costello, 61, has been a director since 1996. He is the Chairman,
President and Chief Executive Officer of W.R. Grace & Co., a global supplier
of packaging and speciality chemicals. Mr. Costello previously was Chairman of
the Board and Chief Executive Officer of American Cyanamid Company, a
technology based life sciences company in agriculture, pharmaceuticals and
medical devices. Mr. Costello is a director of W.R. Grace and Co. and FMC
Corporation.
CONTINUING DIRECTORS
The directors listed below were elected by the shareholders to terms expiring
in 1998 and 1999, respectively, and will continue to serve.
TERM TO EXPIRE 1998
[Photo of Henry P. Becton, Jr. appears here]
(ART)
Henry P. Becton, Jr., 53, has been a director since 1987. He is President and
General Manager of WGBH Educational Foundation. WGBH is a producer and
broadcaster of public television and radio programs. It also produces books
and other educational materials. Mr. Becton is a director of The Providence
Journal Company and various Scudder mutual funds.
[Photo of Gerald M. Edelman, M.D., Ph.D. appears here]
(ART)
Gerald M. Edelman, M.D., Ph.D., 67, has been a director since 1982. He is a
Member of the Scripps Research Institute, Chairman of its Department of
Neurobiology, and Director of The Neurosciences Institute. His research is
concerned with the developmental biology of the brain. In 1972, Dr. Edelman
was the recipient of the Nobel Prize in Physiology or Medicine. Dr. Edelman is
a director of General American Investors Co., Inc.
8
<PAGE>
[Photo of Richard W. Hanselman appears here]
(ART)
Richard W. Hanselman, 69, has been a director since 1981. He is a corporate
director and consultant. Mr. Hanselman was Chairman of the Board, President
and Chief Executive Officer of Genesco, Inc., a diversified manufacturer of
footwear and apparel, prior to 1986. Mr. Hanselman is a director of Arvin
Industries, Inc., BEC Group, Inc., Bradford Funds, Inc., Foundation Health
Corp., Gryphon Holdings Inc., and IMCO Recycling, Inc.
TERM TO EXPIRE 1999
[Photo of James E. Perrella appears here]
(ART)
James E. Perrella, 61, has been a director since July, 1995. He is Chairman,
President and Chief Executive Officer of Ingersoll-Rand Company, a
manufacturer of industrial machinery and related products. He is a director of
Cincinnati Milacron, the U.S. Chamber of Commerce, the U.S.-China Business
Council and the Business Council for the United Nations and chairman of the
National Foreign Trade Council.
[Photo of Gloria M. Shatto appears here]
(ART)
Gloria M. Shatto, 65, has been a director since 1986. She is President of
Berry College. She is a director of Georgia Power Co., The Southern Company
and Texas Instruments Inc.
[Photo of Raymond S. Troubh appears here]
(ART)
Raymond S. Troubh, 70, has been a director since 1977. He is a financial
consultant. Mr. Troubh is a director of ADT Ltd., America West Airlines Inc.,
Applied Power Inc., ARIAD Pharmaceuticals Inc., Diamond Offshore Drilling,
Inc., Foundation Health Corp., General American Investors Co., Inc., Olsten
Corp., Petrie Stores Corp., Time Warner, Inc., Triarc Companies Inc. and WHX
Corporation.
9
<PAGE>
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION AND BENEFITS COMMITTEE
ON EXECUTIVE COMPENSATION
The compensation of the Company's executive officers is determined by the
Compensation and Benefits Committee of the Board. The Committee has seven
members, each of whom is independent of management. None of the members of the
Committee has any insider or interlocking relationship with the Company, and
each of them is a non-employee director, as these terms are defined in
applicable rules and regulations of the SEC.
COMPENSATION PHILOSOPHY
The Company's executive compensation philosophy is to align the interests of
executive management with shareholder interests and with the Company's business
strategy and success, through an integrated executive compensation program that
considers short-term performance, the achievement of long-range strategic goals
and growth in total shareholder value. The aggregate compensation package is
designed to attract and retain individuals critical to the long-term success of
the Company, to motivate these persons to perform at their highest levels, and
to reward sustained performance.
The Company's compensation program for all employees of the Company, including
executive officers, is based on the following principles:
. STRATEGIC ALIGNMENT: Alignment of compensation with Company values,
strategic objectives and business results;
. COMPETITIVENESS AND FLEXIBILITY: Market level compensation systems that
allow for managerial discretion;
. COMPETITIVENESS OF TOTAL COMPENSATION: Competitiveness of the Company's
compensation parameters through regular surveys of peer company pay
practices, comprehensive and cost-effective benefits programs, and
participation by employees in the success of the Company through bonus and
equity compensation incentives;
. EQUITY OWNERSHIP: Alignment of employee and shareholder goals through
compensation and benefits programs that encourage and provide employees on a
worldwide basis with the opportunity to become shareholders of the Company;
and
. GOAL ORIENTATION: Variable compensation linked to individual, as well as
Company, results.
PRINCIPAL COMPENSATION ELEMENTS
The key elements of executive compensation are base salary, annual incentive
awards, and equity participation. These components are administered with the
goal of providing total compensation that is competitive in the marketplace,
motivates individuals to perform at their highest levels, rewards sustained
superior performance, and provides above average rewards when merited by both
individual and Company results.
BASE SALARY
Base salary levels for executive officers are determined not only on the basis
of the Committee's assessment of individual performance, but also on the total
compensation, including salaries, paid by companies engaged in similar
businesses (the "Survey Group"), to persons holding equivalent
10
<PAGE>
positions. Those surveys, as well as related data analyses, are conducted by
external compensation consultants. The Survey Group includes companies in the
Standard & Poor's ("S&P") Health Care (Medical Products & Supplies) Index
utilized in preparing the Performance Graph set forth on page 19 hereof, as well
as other high quality healthcare companies with which the Company competes for
management talent. The Company generally sets salaries to approximate median
levels expected for companies in the Survey Group, adjusted for differences in
size between the Company and those companies surveyed. Base salaries and annual
increases are determined following an assessment of each executive officer's
individual performance, experience, current salary in relation to market data
with respect to salaries paid for comparable positions, scope of
responsibilities and potential for advancement, as well as the performance of
the Company as a whole. Based upon these factors, the executive officers'
salaries were reviewed and adjusted in 1996.
ANNUAL INCENTIVES
The Company's Executive Incentive Plan is designed to reward executives based
on the overall performance of the Company, as well as on the performance of each
executive officer's area of responsibility or operating group. Measures of
performance are both financial and strategic. Financial elements stress annual
performance in achieving earnings levels that meet or exceed annual budgets,
improvements in profitability, and enhancing the Company's return on net assets.
Strategic accomplishments measured include, but are not limited to, new product
introductions, geographic expansion, technological or quality improvements,
improvements in operations and contributions to business success. Individual
incentive targets are established for plan participants based on survey data
with respect to the Survey Group of companies. Incentive target levels are set
so as to result in annual cash compensation in the mid- to upper range of
competitive practice, depending on Company and individual performance.
In July 1996, the Committee approved modifications to the Executive Incentive
Plan effective for the fiscal year beginning October 1, 1996. The amendments to
the program are intended to link more closely incentive awards to an objective
measure that correlates with increases in shareholder value and to reinforce a
culture of performance and ownership among the Company's managers. To that end,
a portion of all awards to executive officers and other senior managers under
the Executive Incentive Plan will be based on the generation of improved
economic value added ("EVA"). In basic terms, EVA consists of net after-tax
operating profit, as reduced by a charge for the Company's annual cost for
capital used in its business. Thus, by including an EVA component in determining
executive incentive awards, the Company rewards executives who increase
shareholder value by most effectively deploying the capital contributed by the
shareholders. For fiscal 1997, the amount of incentive awards paid to
participants also will be subject to the achievement of certain earnings and
strategic goals.
STOCK OPTIONS
In September 1996, the Committee expanded the number of employees eligible for
stock option grants so as to award stock options more broadly and deeply
throughout the organization and thus provide additional incentive to employees
to maximize shareholder value. Actual grants will be based on individual
performance and contribution.
Stock option grant levels and terms are established to provide senior
management with the opportunity for compensation levels at the higher end of the
competitive range for comparable positions in the marketplace, if management is
successful in achieving above-average long-term growth in total shareholder
value. As a consequence, compensation packages for the Company's executive
officers are more heavily weighted toward performance-based, longer-term
compensation than those of the Survey Group of peer companies.
11
<PAGE>
Stock options are awarded each year by the Committee to members of senior
management in accordance with the Company's Senior Executive Option Policy. The
Senior Executive Option Policy continues the concept established in 1990 of an
indexed stock option program intended to compensate executive officers both for
absolute growth in shareholder value and for relative Company Common Stock price
performance compared to the performance of the Standard & Poor's 500 Composite
Stock Price Index (the "S&P 500 Index"). As amended by the Committee in
September 1995, "relative" performance will result in an option exercisable at
the fair market value on the date of grant for a reduced number of shares when
performance is below the S&P 500 and an increased number of shares when
performance exceeds the S&P 500. This policy applies to approximately forty
senior executives.
The operation of the Senior Executive Option Policy provides for an annual
grant through 1999 to each of the participants, whereby the number of options is
indexed each year, unless otherwise provided by the Committee, to the change
from January 23, 1995 (for most participants), and from May 24, 1994 (for
Messrs. Castellini, Galiardo and Miller), in the S&P 500 Index.
With respect to the January 1996 grant of options, the S&P 500 Index had
increased 31.7% from January 1995 to January 1996, while the Company's per share
fair market value had increased by 60%, resulting in a stock option grant of
142.5% of the target number of options. For the May option grant, the S&P 500
Index had grown by 48% from May 1994 to May 1996, while the Company's per share
fair market value had increased 123%, resulting in a grant of 170.5% of the
target number of options. All grants are made at the fair market value of the
Company's Common Stock on the date of grant. Each annual grant is exercisable
for a period of ten years from the date of grant.
COMPENSATION OF THE CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
The compensation of Mr. Castellini consists of the same elements as that of
other senior executives, namely base salary, annual incentives and stock
options.
In determining Mr. Castellini's aggregate compensation package, the Committee
reviewed the Company's financial and business performance for fiscal year 1996.
This review was based on an assessment of a number of both financial and
non-financial factors, including sales and earnings growth, return on equity,
and the creation of shareholder value.
Mr. Castellini's base salary was increased to $750,000 per year based upon the
Committee's evaluation of his performance and contribution toward achievement of
the Company's financial, strategic and other goals, as well as upon competitive
chief executive officer compensation information.
Mr. Castellini received an award of 306,832 stock options (adjusted to reflect
the August 1996 stock split) in May 1996 in accordance with the Senior Executive
Option Policy. This number of options awarded was 170.5% of the targeted option
number, reflecting the strong fair market price performance of the Company's
Common Stock relative to the S&P 500 from May 24, 1994 to May 26, 1996. The
Committee believes these options represent the most valuable component of Mr.
Castellini's compensation, and they are the only vehicle now used to provide
long-term compensation to him. By relying solely upon stock option grants
indexed to the performance of the S&P 500, the Committee believes it is
providing Mr. Castellini significant incentive to achieve sustained, long-term
increases in shareholder value that are superior to the average performance of
the market.
The Committee authorized an annual incentive bonus of $675,000 for Mr.
Castellini for fiscal 1996.
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<PAGE>
1996 COMPENSATION ACTIONS: OTHER EXECUTIVE OFFICERS
The other executive officers, including the named executives (as defined
below), received salary increases that averaged 11.6%, and which included merit
and promotional increases, as well as market adjustments. The Committee
authorized annual incentive awards for the executive officers that ranged from
110% to 141% of target. The executive officers received indexed stock options
under the Senior Executive Option Policy during 1996.
STOCK OWNERSHIP PROGRAM
In September 1995, the Committee adopted a formal stock ownership program.
Under the guidelines of this program, by September 1998, Mr. Castellini is
expected to own Company Common Stock equal in value to no less than five times
his annual base salary. The program also extends to other senior managers,
including the other named executive officers, who are expected to own Company
Common Stock within three years from the later of the date of the guidelines or
the date the executives become subject to them, equal in value to between two
and four times their annual base salaries, depending upon applicable salary
levels.
INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code")
precludes a public corporation from taking a deduction for compensation in
excess of $1 million for its chief executive officer or any of its four other
highest paid executive officers, unless certain specific and detailed criteria
are satisfied.
The Committee considers the anticipated tax treatment to the Company and to
the executive officers in its review and establishment of compensation programs
and payments. The deductibility of some types of compensation payments can
depend upon the timing of an executive's vesting or exercise of previously
granted rights. Interpretations of and changes in applicable tax laws and
regulations as well as other factors beyond the control of the Committee also
can affect deductibility of compensation. For these and other reasons, the
Committee has determined that it will not necessarily seek to limit executive
compensation to that deductible under Section 162(m) of the Code. The Committee
will continue to monitor developments and assess alternatives for preserving the
deductibility of compensation payments and benefits to the extent reasonably
practicable, consistent with its compensation policies and as determined to be
in the best interests of the Company and its shareholders.
COMPENSATION DATA
The tables and graph following this report set forth information on the
compensation for the Company's chief executive officer and the four most highly
compensated officers other than the chief executive officer (the "named
executives").
COMPENSATION AND BENEFITS COMMITTEE
HENRY P. BECTON JR., CHAIRMAN
ALBERT J. COSTELLO FRANK A. OLSON
EDMUND B. FITZGERALD JAMES E. PERRELLA
RICHARD W. HANSELMAN RAYMOND S. TROUBH
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<PAGE>
COMPENSATION OF NAMED EXECUTIVES
GENERAL
The following table shows, for the fiscal years ended September 30, 1994, 1995
and 1996, compensation provided by the Company to each of the named executives
in all capacities in which they served.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------------- ----------------------
SECURITIES
OTHER RESTRICTED UNDERLYING
NAME AND FISCAL ANNUAL STOCK OPTIONS/ ALL OTHER
PRINCIPAL POSITION YEAR SALARY(A) BONUS(A) COMPENSATION(B) AWARDS(C) SARS(D)* COMPENSATION(E)
- ------------------ ------ --------- -------- --------------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Clateo Castellini 1996 $679,167 $675,000 0 0 306,832 $ 99,274
Chairman, President and 1995 543,750 600,000 0 0 180,000 110,710
Chief Executive Officer 1994 376,042 380,000 0 0 192,000 52,275
John W. Galiardo 1996 429,958 300,000 0 0 187,508 15,362
Vice Chairman and 1995 386,042 275,000 0 0 110,000 15,362
General Counsel 1994 308,375 200,000 0 0 120,000 5,468
Walter M. Miller 1996 336,833 185,000 0 0 119,324 11,980
Senior Vice President-- 1995 326,667 185,000 0 0 70,000 11,980
Strategy and Development 1994 316,667 165,000 0 0 72,000 4,750
Mark C. Throdahl 1996 262,500 150,000 0 0 99,750 20,000
Senior Vice President 1995 225,000 155,000 0 0 70,000 21,981
1994 181,500 70,000 0 $70,555 12,000 5,490
Kenneth R. Weisshaar 1996 261,500 150,000 0 0 99,750 19,500
Senior Vice President 1995 226,833 135,000 0 0 70,000 19,590
1994 192,500 82,000 0 $85,625 20,000 20,775
</TABLE>
- ---------
* 1994 and 1995 numbers have been adjusted to reflect the August 1996 stock
split.
(A) Amounts shown reflect salary and bonuses earned by the named executives for
the applicable fiscal year. Bonuses are paid in the fiscal year following the
fiscal year for which they are earned, unless deferred at the election of the
executive.
(B) None of the named executives received perquisites and other personal
benefits exceeding the lesser of $50,000 or 10% of each named executive's
annual salary and bonus.
(C) Messrs. Castellini, Galiardo and Miller have not been eligible for further
awards under the Company's Stock Award Plan since the adoption of the Senior
Executive Option Policy in May, 1990. Effective with their January, 1995 grant
under the Senior Executive Option Policy, Messrs. Throdahl and Weisshaar were
not eligible for further awards under the Company's Stock Award Plan. The
value of Messrs. Throdahl's and Weisshaar's restricted stock awards was
determined based on the closing market price of the Company's Common Stock on
the date of grant.
The following table contains information relating to the outstanding holdings
of restricted stock of the named executives, which all relate to undistributed
portions of awards granted under the Stock Award Plan.
<TABLE>
<CAPTION>
CURRENT MARKET
NUMBER OF VALUE OF
UNDISTRIBUTED UNDISTRIBUTED
CURRENT DEFERRED RESTRICTED RESTRICTED
NAME PORTION PORTION SHARES HELD SHARES HELD
---- ------- -------- ------------- ----------------
<S> <C> <C> <C> <C>
Clateo Castellini. . . . 0 19,956 19,956 $883,053
John W. Galiardo . . . . 0 18,504 18,504 818,802
Walter M. Miller . . . . 0 13,408 13,408 593,304
Mark C. Throdahl . . . . 3,358 3,714 7,072 312,936
Kenneth R. Weisshaar . . 4,078 5,654 9,732 430,641
</TABLE>
Under the terms of the Stock Award Plan, none of the holdings reflected for
Messrs. Castellini, Galiardo or Miller may be distributed prior to their
retirement or termination of employment. 3,714 shares for Mr. Throdahl (53% of
his total holdings) and 5,654 shares for Mr. Weisshaar (58% of his total
holdings) may not be distributed prior to retirement or termination of
employment.
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<PAGE>
Current market values are determined by multiplying the number of
undistributed shares by $44.25, the September 30, 1996 closing price for the
Company's Common Stock. No discount has been taken to reflect (1) the
continuing restrictions on distribution and transferability, or (2) the fact
that undistributed shares are not dividend-bearing.
(D) Certain option grants for Messrs. Castellini, Galiardo and Miller, prior to
1996, reflect a discount (or premium) to current market value, depending upon
the Company's cumulative share price growth compared to the S&P 500 Index, and
in each case adjusted to reflect the August 1996 stock split, as follows:
1995 $5.26 per share discount
1994 ($1.30) per share premium
(E) Amounts shown represent the sum of (1) the Company's matching contributions
to the Company's Savings Incentive Plan ("SIP"), a qualified defined
contribution plan available to U.S. employees at all levels, and (2) the
dollar value of split-dollar life insurance policies provided for each of the
named executives.
During fiscal 1996, the Company made contributions to SIP of $4,500 for each
of Messrs. Castellini, Galiardo, Miller, Throdahl and Weisshaar. These amounts
represent Company matching contributions at a 50% rate of the first 6% of base
pay contributed to SIP by each of the named executives, in accordance with
applicable SIP rules and subject to limits imposed by the IRS upon maximum
contributions to such tax-qualified plans.
The Company has made a split-dollar life insurance policy available to the
named executives in lieu of full participation in the Company's group life
insurance program. The death benefit payable to the beneficiary of an insured
named executive is two times that executive's base salary. Under this
split-dollar arrangement, the premiums are paid by the Company in a fixed time
period during the initial years in which the policies are in effect. If
assumptions about mortality, dividends and other factors are realized, the
Company will recover all of its payments for premiums from the cash value of
the policy at the later of a designated period or retirement of the named
executive. Full ownership of the policy will be transferred to the named
executive at that time. The premiums paid on behalf of each named executive
during fiscal 1996 have been prorated to reflect the current value of term
life insurance coverage for the fiscal year plus the deferred reimbursement to
the Company of the premium payments. The compensatory portion of the premium
payments for each named executive during the year was $94,774 for Mr.
Castellini, $10,862 for Mr. Galiardo, $7,480 for Mr. Miller, $15,500 for Mr.
Throdahl and $15,000 for Mr. Weisshaar.
STOCK OPTION GRANTS
The following table contains information relating to stock option grants and
tandem stock appreciation rights ("SARs") made in fiscal 1996 under the 1995
Stock Option Plan through the Senior Executive Option Policy described above.
OPTION/SAR GRANTS IN FISCAL YEAR 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO GRANT DATE
OPTIONS/SARS EMPLOYEES IN EXERCISE EXPIRATION PRESENT
NAME GRANTED(A) FISCAL YEAR PRICE DATE VALUE(B)
---- ------------ ------------ ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Clateo Castellini . . 306,832 9.34% $41.815 5/20/06 $ 4,965,280
John W. Galiardo . . 187,508 5.70% 41.815 5/20/06 3,034,330
Walter M. Miller . . 119,324 3.63% 41.815 5/20/06 1,930,949
Mark C. Throdahl . . 99,750 3.04% 40.065 1/22/06 1,410,759
Kenneth R. Weisshaar 99,750 3.04% 40.065 1/22/06 1,410,759
--------- ------ ------- -------- -----------
TOTAL . . . . . . . . 813,164 24.75% $41.125 N/A $12,752,077
All Optionees . . . . 3,285,684 100.00% $40.377 N/A $47,747,164
</TABLE>
- ---------
(A) All option grants to the named executives are for a ten-year term. They are
exercisable immediately, subject to applicable rules and regulations of the
SEC. These option grants are issued in tandem with limited SARs, exercisable
only in the event of a tender offer for the Company's Common Stock or a change
in control of the Company, as defined in the 1995 Stock Option Plan.
(B) This estimate of value has been developed solely for purposes of comparative
disclosure in accordance with the rules and regulations of the SEC, and does
not necessarily reflect the Company's view of the appropriate value or
methodology for purposes of financial reporting. The estimated value has been
determined by application of the Black-Scholes option pricing model, based
upon the terms of the option grant and the Company's stock price performance
history as of the date of the
15
<PAGE>
grant. The key assumptions set forth below used in the valuation are based
upon experience, and are not a forecast of future stock price or volatility or
of future dividend policy. No adjustments have been made for the risk of
forfeitures or nontransferability.
<TABLE>
<CAPTION>
January 22, 1996 Grant May 20, 1996 Grant
---------------------- ------------------
<S> <C>
Dividend Yield: 0.0164 Dividend Yield: 0.0162
Volatility: 0.2104 Volatility: 0.2106
Risk-free Rate of Return: 5.70% Risk-free Rate of Return: 6.69%
Expected Exercise Period: Expected Exercise Period:
10 years 10 years
</TABLE>
STOCK OPTION EXERCISES
The following table contains information relating to the exercise of stock
options by the named executives in fiscal 1996, as well as the number and value
of their unexercised options as of September 30, 1996.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 1996 AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
VALUE SECURITIES UNDERLYING VALUE OF UNEXERCISED
REALIZED UNEXERCISED IN-THE-MONEY
SHARES (MARKET VALUE OPTIONS/SARS AT OPTIONS/SARS AT
ACQUIRED LESS FISCAL YEAR-END FISCAL YEAR-END
NAME ON EXERCISE EXERCISE PRICE) (ALL EXERCISABLE)(B) (ALL EXERCISABLE)(A)(B)
---- ----------- --------------- --------------------- -------------------------
<S> <C> <C> <C> <C>
Clateo Castellini . . 16,000 $397,000 1,010,832 $18,331,686
John W. Galiardo . . 16,000 452,579 698,708 13,397,243
Walter M. Miller . . 34,190 841,704 525,324 10,488,563
Mark C. Throdahl . . 4,000 90,955 189,936 2,273,189
Kenneth R. Weisshaar -0- -0- 241,350 3,678,647
</TABLE>
- ---------
(A) The value of unexercised options represents the difference between the
closing price of the Company's Common Stock on September 30, 1996 ($44.25) and
the exercise price of each unexercised option held by the named executives.
(B) All option grants to the named executives are for a ten-year term. They are
exercisable immediately, subject to applicable rules and regulations of the
SEC. These option grants are issued in tandem with limited SARs, exercisable
only in the event of a tender offer for the Company's Common Stock or a change
in control of the Company, as defined under the Company's 1995 Stock Option
Plan.
RETIREMENT PLAN
The Company's Retirement Plan (the "Retirement Plan") is a non-contributory
defined benefit plan. It provides for normal retirement at age 65 and permits
earlier retirement in certain cases. Benefits are based upon years of service
and compensation (comprised of salary, commissions, bonuses and stock award
distributions ("Covered Compensation")) for the five consecutive calendar years
which produce the highest average compensation ("Maximum Average Compensation").
The Retirement Plan is integrated with Social Security.
The Code limits the maximum annual benefit which may be paid to any individual
from the Retirement Plan's trust fund and the amount of compensation that may be
recognized. Under the Company's Retirement Benefit Restoration Plan (the
"Restoration Plan"), the Company will make supplemental, unfunded payments to
offset any reductions in benefits which may result from such limitations. The
Company's obligations to pay retirement benefits under the Restoration Plan and
employment agreements with certain key employees of the Company (including the
named executives, whose employment agreements are more fully discussed below
under "Contractual Obligations"), as
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<PAGE>
well as deferred amounts under the Executive Bonus Plan, are secured by a trust.
The trust is currently secured by a letter of credit. The trustee is required to
draw on the letter of credit, up to specified limits, following a change in
control of the Company (as defined in the trust agreement).
The table below shows the estimated annual retirement benefits payable under
the Retirement Plan and the Restoration Plan at normal retirement date to all
eligible employees, including the named executives, in specified remuneration
and years of service classifications.
ESTIMATED ANNUAL RETIREMENT BENEFITS
<TABLE>
<CAPTION>
MAXIMUM YEARS OF CREDITED SERVICE
AVERAGE --------------------------------------------------------------------
COMPENSATION 10 15 20 25 30 35 40
- ------------- -------- -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 200,000 $ 28,704 $ 43,056 $ 57,408 $ 71,760 $ 86,112 $100,464 $114,816
300,000 43,704 65,556 87,408 109,260 131,112 152,964 174,816
400,000 58,704 88,056 117,408 146,760 176,112 205,464 234,816
500,000 73,704 110,556 147,408 184,260 221,112 257,964 294,816
600,000 88,704 133,056 177,408 221,760 266,112 310,464 354,816
700,000 103,704 155,556 207,408 259,260 311,112 362,964 414,816
800,000 118,704 178,056 237,408 296,760 356,112 415,464 474,816
900,000 133,704 200,556 267,408 334,260 401,112 467,964 534,816
1,000,000 148,704 223,056 297,408 371,760 446,112 520,464 594,816
1,100,000 163,704 245,556 327,408 409,260 491,112 572,964 654,816
1,200,000 178,704 268,056 357,408 446,760 536,112 625,464 714,816
1,300,000 193,704 290,556 387,408 484,260 581,112 677,964 774,816
1,400,000 208,704 313,056 417,408 521,760 626,112 730,464 834,816
</TABLE>
Covered Compensation includes all components of each named executive's Annual
Compensation as set forth in the Summary Compensation Table on page 14 hereof,
plus the distributed portion of awards granted to him through January, 1990
under the Company's Stock Award Plan for Messrs. Castellini, Galiardo and Miller
and through January, 1993 for Messrs. Throdahl and Weisshaar. Amounts shown are
calculated on a straight-life annuity basis, and are not subject to any further
deduction for Social Security benefits or other offsets. Employees may elect to
receive the actuarial value of their retirement benefits in a lump sum in lieu
of a lifetime pension.
Under the Retirement Plan, years of credited service as of December 31, 1996,
and Covered Compensation for the calendar year ending December 31, 1996, are 18
years and $1,379,166 for Mr. Castellini, 19 years and $734,208 for Mr. Galiardo,
16 years and $524,583 for Mr. Miller, 8 years and $481,320 for Mr. Throdahl, and
8 years and $496,758 for Mr. Weisshaar.
In addition, employment agreements with three of the named executives (more
fully discussed below under "Contractual Obligations") provide for a
supplemental pension computed by assuming additional years of credited service
for purposes of calculating this benefit under the Retirement Plan in the event
of termination of employment under certain stated conditions. This calculation
would result in 15 additional years for Mr. Castellini, 15 additional years for
Mr. Galiardo, and 12 additional years for Mr. Miller. These supplemental pension
amounts would be offset by any pensions payable from prior employers.
CONTRACTUAL OBLIGATIONS
Messrs. Castellini, Galiardo and Miller have employment agreements with the
Company which provide for continuation of their base salaries and fringe
benefits for two years after termination by the
17
<PAGE>
Company other than for cause or by the employee for good reason at a date more
than three years following a change in control of the Company. The terms
"cause", "good reason" and "change in control" are defined in the agreements. In
the event of termination other than for cause or for good reason within three
years following a change in control, each of the three named executives would
receive a payment equal to two times his highest aggregate annual compensation
(salary, bonus and stock award distributions) in any of the three calendar years
preceding the calendar year in which termination occurs, and his fringe
benefits, reduced to the extent provided by any subsequent employer, would be
continued for life. Had Messrs. Castellini, Galiardo and Miller been terminated
on September 30, 1996 following a change in control, they would have been
entitled to cash payments of $2,424,072, $1,395,763 and $1,089,906,
respectively.
In the event of termination other than for cause or for good reason within
three years following a change in control, each of the three named executives
would be entitled to all of the pension benefits which he would have earned had
he remained an employee until age 65. If any termination payments to a named
executive pursuant to his agreement should be subject to the excise tax imposed
by Section 4999 of the Code (the "Excise Tax"), the Company would reimburse him
in an amount such that he would retain the same amount, net of all taxes, that
he would have retained had the Excise Tax not been in effect.
18
<PAGE>
PERFORMANCE COMPARISON
The following graph presents a comparison of cumulative total return to
shareholders for the five-year period ended September 30, 1996, for the Company,
the S&P 500 Index and the S&P Medical Products and Supplies Index. This is the
comparison period required by applicable rules and regulations of the SEC.
Cumulative total return to shareholders is measured by dividing total dividends
(assuming dividend reinvestment) plus per share price change for the period by
the share price at the beginning of the measurement period. The Company's
cumulative shareholder return is based on an investment of $100 on September 30,
1991 and is compared to the cumulative total return of the S&P 500 Index and the
S&P Medical Products and Supplies Index over the same period with a like amount
invested.
Companies measured in the S&P Medical Products and Supplies Index, in addition
to the Company, are C.R. Bard, Inc., Bausch & Lomb, Inc., Baxter International
Inc., Biomet, Inc., Boston Scientific, Guidant, Medtronic, Inc., St. Jude
Medical, Inc. and United States Surgical Corporation.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG BECTON DICKINSON & COMPANY, THE S&P 500 INDEX AND THE
S&P HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) INDEX
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
BECTON DICKINSON S&P HEALTH CARE
& COMPANY S&P 500 (MEDICAL PRODUCTS & SUPPLIERS)
---------------- ------- ------------------------------
<S> <C> <C> <C>
9/91 100 100 100
12/91 101 108 123
3/92 105 106 104
6/92 111 108 103
9/92 112 111 97
12/92 118 117 105
3/93 110 122 92
6/93 121 122 85
9/93 115 125 74
12/93 109 128 80
3/94 115 124 74
6/94 126 124 82
9/94 150 130 94
12/94 150 130 95
3/95 170 143 112
6/95 183 156 125
9/95 198 169 153
12/95 237 179 161
3/96 260 189 167
6/96 255 197 165
9/96 282 203 183
</TABLE>
19
<PAGE>
PROPOSAL 2.
SELECTION OF INDEPENDENT AUDITORS
The Board of Directors, pursuant to the recommendation of the Audit Committee,
has selected Ernst & Young LLP to audit the accounts of the Company and its
subsidiaries for the fiscal year ending September 30, 1997. A representative of
Ernst & Young LLP will attend the Annual Meeting to respond to appropriate
questions and will have the opportunity to make a statement.
The Board of Directors recommends a vote FOR approval of the selection of
Ernst & Young LLP. If approval is withheld, the Board will reconsider its
selection.
SHAREHOLDERS' PROPOSALS
PROPOSAL 3.
PROPOSAL ON CUMULATIVE VOTING
Mrs. Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Avenue N.W.,
Suite 215, Washington D.C. 20037, owner of 200 shares of Common Stock, has
informed the Company that she plans to introduce the following resolution at the
meeting:
RESOLVED: "That the stockholders of Becton Dickinson assembled in Annual
Meeting in person and by proxy, hereby request the Board of Directors to take
the necessary steps to provide for cumulative voting in the election of
directors, which means each stockholder shall be entitled to as many votes as
shall equal the number of shares he or she owns multiplied by the number of
directors to be elected, and he or she may cast all such votes for a single
candidate, or any two or more of them as he or she may see fit."
The shareholder's statement in support of this resolution is as follows:
REASONS: "Many states have mandatory cumulative voting, so do National
Banks."
"In addition, many corporations have adopted cumulative voting."
"If you AGREE, please mark your proxy FOR this resolution."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL 3.
The Board of Directors regards its constituency to be all the shareholders and
believes that it can function most effectively as a Board by sharing the common
objective of advancing the best interests of all shareholders rather than those
of any particular group. Directors elected through cumulative voting tend to
represent the interests of those shareholders who elected them at the expense of
the overall interests of the shareholders as a whole.
Cumulative voting also would interfere with the continuing task of the
Committee on Directors to develop a balanced Board comprised of individuals with
the wide range of knowledge and experience needed to most effectively perform
its function.
20
<PAGE>
PROPOSAL 4.
REPORT ON OPERATIONS IN MEXICO
The Congregation of Divine Providence, P.O. Box 197, Helotes, Texas 78023,
owner of 400 shares of Common Stock, has informed the Company that it plans to
present the following resolution at the meeting:
WHEREAS:
"We believe U.S. corporations operating in Mexico should practice
fundamental principles of safe environmental practices, establish adequate
health and safety standards and promote a fair and dignified quality of life
for workers and their communities."
"Research indicates many U.S. corporations with maquiladoras and other
Mexican operations are harming workers and their families through use of
solvents and other chemicals without proper safeguards and polluting both
sides of the U.S.-Mexico border through improper disposal of hazardous
wastes."
"Many maquiladoras do not provide adequate health and safety practices, a
fair standard of living with an adequate wage for employees or respect for
employee rights. For example, many U.S. companies pay a minimum wage that does
not meet the basic subsistence needs of an employee and their family."
RESOLVED:
"The shareholders request the Board of Directors to provide a comprehensive
report describing our Company's maquiladora operations in Mexico. The report
should be available to shareholders on request, may omit confidential
information and be prepared at reasonable cost."
The shareholders' statement in support of the resolution is as follows:
"NAFTA, the North America Free Trade Agreement, has already stimulated
investment along the border and in Mexico. We believe the growth of plants
known as maquiladoras on the border enables some U.S. corporations to use this
system as a means to increase profits and productivity by paying minimal
compensation to employees and by avoiding health, safety and environmental
regulations. To change this trend, companies which own maquiladoras must apply
high standards. The report requested will illustrate that our company is
serious about the welfare of its employees and the environment."
"We hope this report will include:
1. Operating policies for maquiladora plants.
2. Toxic chemical releases into air, water and land and the
environmental technologies used to control these amounts and dispose
of the wastes.
3. Toxic chemicals used in facilities and methods by which employees are
informed about and protected against adverse exposure.
4. Frequency and extent of plant inspections by environmental
consultants.
5. Information, as is available under U.S. Right to Know provisions,
provided to employees and communities on chemicals used in our
plants.
6. Minimum and average wages, profit sharing and other compensation paid
to employees and how wages compare with local cost of living. If
applicable, discuss employee use of company dormitories.
21
<PAGE>
7. Ways by which employee rights, such as the right to organize, are
protected and sexual harassment is prevented.
8. Actions taken to improve local infrastructure e.g., housing, potable
water, child care, sewers, upgrading management and mechanical skills
of workers, transfer of technology."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL 4.
The Company's policies call for fair and competitive wage and benefit
packages, along with safe workplaces, for all of its employees worldwide and
require strict compliance with all applicable health, safety and environmental
laws and regulations. The Company closely adheres to and enforces these policies
on a global basis, including in its operations in Mexico.
Consistent with the Company's policies and practices, the May/June 1996 issue
of Business Ethics magazine published a survey that ranked Becton Dickinson
ninth among the one hundred most socially responsible public companies
identified. The workers at our facility in Nogales, Mexico are valued members of
the Becton Dickinson worldwide team of employees and, as such, are treated
fairly with the same consideration as are other employees of the Company, both
in the United States and in other parts of the world. Further, the Company's
commitment to its employees and their families extends beyond them, to their
communities. In Nogales, for example, the Company actively supports many local
organizations, including the Red Cross, a local community college and several
orphanages, and participates in an innovative housing subsidy program to assist
its employees to purchase their first homes.
In summary, the Board is of the opinion that the Company's activities in
Mexico, where the Company has had a substantial presence for over 40 years, are
conducted in a manner that addresses the concerns raised by this proposal and
are consistent with and reflect the commitment of the Company to its worldwide
values.
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Shareholder proposals for the 1997 Annual Meeting must be received at the
principal executive offices of the Company, 1 Becton Drive, Franklin Lakes, New
Jersey 07417-1880, not later than August 28, 1997, for inclusion in the proxy
statement and form of proxy.
* * * *
22
<PAGE>
DIRECTIONS TO
BECTON, DICKINSON AND COMPANY
FROM WESTERN NJ FROM TAPPAN ZEE BRIDGE
Route 80 East to Route 287 Over Tappan Zee onto New York Thruway (287
North, to Route 208 South. Once West). Take Thruway to Exit 15 (Route 287 & 17
on Route 208, stay in extreme South) - to Exit 59 (208 South/Franklin
right lane to BECTON DICKINSON Lakes). Stay in extreme right lane, Follow
entrance ramp. Route 208 South for 1 mile. Entrance to BECTON
DICKINSON on right.
[MAP TO COMPANY APPEARS HERE]
(ART TO COME)
FROM NEWARK AIRPORT FROM LAGUARDIA AIRPORT
Interstate 95 North to Exit 16W Grand Central Parkway West (follow signs
(Route 3). Take Route 3 West to for George Washington Bridge) to Tri-Boro
Route 17 North, then Route 17 North Bridge. Over Bridge onto Major Deegan
to Route 4 West, to Route 208 Expressway North. Proceed to Cross Bronx
North. Proceed about 8 miles on Expressway, over the GW Bridge, onto Route
Route 208 North to BECTON DICKINSON 4 West, to Route 208. Proceed about 8
Entrance Ramp. miles on Route 208 to the BECTON DICKINSON
entrance ramp.
PARKING WILL BE AVAILABLE
<PAGE>
PROXY/VOTING INSTRUCTION CARD
BECTON, DICKINSON AND COMPANY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
ANNUAL MEETING ON FEBRUARY 11, 1997
The undersigned hereby appoints Clateo Castellini, John W. Galiardo, Bridget M.
Healy and Raymond P. Ohlmuller, and any of them, with full power of
substitution, proxies to attend the annual meeting of the shareholders of the
Company to be held at 2:30 P.M. on Tuesday, February 11, 1997, at the offices of
the Company, 1 Becton Drive, Building II, Franklin Lakes, New Jersey, and any
adjournment thereof, and to vote all shares of the Common Stock of the Company
which the undersigned is entitled to vote upon each of the matters referred to
in this proxy and, in their discretion, upon such other matters as may properly
come before the meeting.
This card constitutes voting instructions to the Trustee and the Custodian,
respectively, for any shares of Common Stock allocated to the undersigned under
the Company's Salary and Bonus Deferral Plan ("SBDP") and, when so provided,
under the Company's Global Share Investment Program ("GSIP") and also
constitutes voting instructions to the Trustee and the Custodian for a
proportionate number of shares of Common Stock in the SBDP and GSIP,
respectively, for which no instruction card has been received from other
participants.
This card also constitutes voting instructions to the Trustee for any shares of
Common Stock and Series B ESOP Convertible Preferred Stock allocated to the
undersigned under the Company's Savings Incentive Plan ("SIP") and unless the
appropriate box provided below is checked, also constitutes voting instructions
to the Trustee for a proportionate number of shares of Common Stock and Series B
ESOP Convertible Preferred Stock in the SIP that have not been allocated to
participants or for which no instruction card has been received from other
participants ("unallocated/unvoted SIP shares").
Election of Directors, Nominees:
TERM TO EXPIRE 1999 TERM TO EXPIRE 2000
Albert J. Costello Harry N. Beaty John W. Galiardo
Clateo Castellini Frank A. Olson
You are encouraged to specify your choices by marking the appropriate boxes, SEE
REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance
with the Board of Directors' recommendations. Please sign and return this card
using the enclosed envelope.
CONTINUED AND TO BE SIGNED, ON REVERSE SIDE
1
<PAGE>
[X] Please mark your votes as in this example.
This Proxy when properly executed will be voted in the manner directed herein.
If no direction is made, this proxy will be voted FOR election of Directors, FOR
Proposal 2 and AGAINST Proposals 3 and 4.
The Board of Directors recommends a vote FOR Proposals 1 and 2.
FOR WITHHELD
1. Election of Directors. [ ] [ ]
(see reverse)
FOR AGAINST ABSTAIN
2. Approval of independent auditors. [ ] [ ] [ ]
The Board of Directors recommends a vote AGAINST Proposals 3 and 4.
3. Cumulative voting. [ ] [ ] [ ]
4. Mexican operations report. [ ] [ ] [ ]
If this box is checked, this card does NOT constitute [ ]
voting instructions to the Trustee with respect to
unallocated/unvoted SIP shares.
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
Signature for all shares (OTHER THAN unallocated/unvoted SIP shares if the
box immediately above is checked):
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SIGNATURE(S) DATE
NO TEXT PRINT IN THIS ADDRESS AREA
