<PAGE>
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:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(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):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] 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:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
CLATEO CASTELLINI BECTON DICKINSON AND COMPANY
Chairman of the Board 1 Becton Drive
Franklin Lakes, New Jersey 07417-1880
Helping All People Live Healthy Lives
------------------------------------------------------------------------
BECTON
- --------------
DICKINSON
December 22, 1997
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 10, 1998, at the offices of the Company, 1 Becton
Drive, Building II, Franklin Lakes, New Jersey. A map showing directions to the
meeting site is on the back cover of the Proxy Statement. I look forward to
greeting as many of you as possible and reporting on the progress of your
Company.
Details of 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/voting instruction 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.
Thank you for your continued interest in Becton Dickinson.
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 10, 1998, 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. The adoption of the 1998 Stock Option Plan;
4. A shareholder proposal relating to cumulative voting; 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
proposals 2 and 3 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, please sign and return the
enclosed proxy/voting instruction card in the accompanying addressed envelope
in order that your shares will be represented.
Only shareholders of record at the close of business on December 16, 1997
will be entitled to vote at this meeting.
By order of the Board of
Directors,
Bridget M. Healy
/s/ Bridget M. Healy
Vice President and Secretary
Dated: December 22, 1997
<PAGE>
PROXY STATEMENT
----------------
1998 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 10, 1998
----------------
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 10, 1998, 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 22, 1997.
At the close of business on December 16, 1997, the record date fixed by the
Board for determining shareholders entitled to notice of and to vote at the
meeting, there were 121,708,935 shares of the Company's Common Stock (the
"Common Stock") outstanding, each entitled to one vote. In addition, on
December 16, 1997, there were 858,850 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") and the
Company's 1996 Directors' Deferral Plan ("DDP"), 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 director participating in DDP and 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 person's DDP,
SBDP or GSIP account, as well as how to vote a proportionate number of shares
held in DDP, SBDP or GSIP, respectively, for which voting instructions are not
received by the Trustee or BIL, as the case may be, from other DDP, SBDP or
GSIP participants. The enclosed proxy card will serve as voting instructions
by a DDP participant, a SBDP participant and a GSIP participant with respect
to both allocated and unvoted DDP shares, SBDP shares and GSIP shares, as the
case may be.
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
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Preferred Stock, if any, allocated to directors' accounts under DDP or 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 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 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 broker non-votes will not be counted as votes cast and,
accordingly, will have no effect on the outcome of the vote.
Approval of Proposal 3 requires the affirmative vote of a majority of the
votes cast on such proposal, provided that the total of the votes cast
represents over fifty percent in interest of all shares of Common Stock and
ESOP Preferred Stock entitled to vote. Abstentions and 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 Georgeson & Company, a firm that monitors institutional share
ownership, as of September 30, 1997, Oppenheimer & Co., L.P., 1 World
Financial Center, New York, New York 10281, was the beneficial owner of
22,650,924 shares of Common Stock, constituting 18.6% of the then outstanding
Common Stock, and Fidelity Management & Research Company (FMR), 82 Devonshire
Street, Boston, Massachusetts 02109, was the beneficial owner of 8,350,770
shares of Common Stock, constituting 6.8% 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, 1997, 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 beneficially 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 SHARES WHICH
OWNED DIRECTLY MAY BE ACQUIRED
NAME AND INDIRECTLY(1) WITHIN 60 DAYS(2)
- ---- ------------------- -------------------
<S> <C> <C>
Harry N. Beaty......................... 13,331 0
Henry P. Becton, Jr.................... 112,771(3) 0
Clateo Castellini...................... 72,082 998,832
Albert J. Costello..................... 3,332 0
Gerald M. Edelman...................... 4,594 0
John W. Galiardo....................... 98,832 685,508
Richard W. Hanselman................... 9,616 0
Edward J. Ludwig....................... 10,813 217,750
Walter M. Miller....................... 44,251(4) 492,324
Frank A. Olson......................... 33,490 0
James E. Perrella...................... 4,793 0
Gloria M. Shatto....................... 7,928 0
Raymond S. Troubh...................... 48,461(5) 0
Margaretha af Ugglas................... 1,000 0
Kenneth R. Weisshaar................... 11,675 228,350
All Directors and Executive Officers as
a group (23 persons),
including those named above........... 537,768 3,600,358
</TABLE>
- --------
(1) Includes Common Stock allocated to individual accounts under the Savings
Incentive Plan as follows: Mr. Castellini, 5,257 shares, Mr. Galiardo,
8,868 shares, Mr. Ludwig, 6,484 shares, Mr. Miller, 4,973 shares, Mr.
Weisshaar, 948 shares, and all Directors and Executive Officers as a group,
46,892 shares. Also includes Common Stock allocated to individual accounts
under the Salary and Bonus Deferral Plan as follows: all Executive Officers
as a group, 4,563 shares, and Common Stock allocated to individual accounts
under the 1996 Directors' Deferral Plan as follows: Dr. Beaty, 9,331
shares, Mr. Becton, 5,365 shares, Mr. Castellini, 2,346 shares, Mr.
Costello, 1,332 shares, Dr. Edelman, 1,092 shares, Mr. Galiardo, 403
shares, Mr. Hanselman, 1,616 shares, Mr. Olson, 23,490 shares, Mr. Perella,
2,993 shares, Dr. Shatto, 3,604 shares, Mr. Troubh, 4,461 shares, and all
Directors, as a group, 56,033 shares.
(2) Consists of Stock Options available for exercise.
(3) Includes 78,800 shares held by trusts of which Mr. Becton is a co-trustee
with shared investment and voting power and 26,000 shares held by a
corporation owned by one of such trusts. Does not include 15,800 shares
owned by Mr. Becton's spouse, 800 shares owned by a daughter, 49,495 shares
held in trusts for the benefit of his children or 45,000 shares held in a
charitable trust of which he is one of eight trustees, and as to each of
which he disclaims beneficial ownership.
(4) Does not include 460 shares owned by Mr. Miller's children, or 7,960 shares
owned by his spouse, as to each of which he disclaims beneficial ownership.
(5) Does not include 20,000 shares owned by Mr. Troubh's spouse, as to which he
disclaims beneficial ownership.
ESOP PREFERRED STOCK
<TABLE>
<CAPTION>
SHARES
OWNED DIRECTLY
AND INDIRECTLY
--------------
<S> <C>
Clateo Castellini............................................... 351(1)
John W. Galiardo................................................ 456(1)
Edward J. Ludwig................................................ 345(1)
Walter M. Miller................................................ 464(1)
Kenneth R. Weisshaar............................................ 353(1)
All Directors and Executive Officers as a group (23 persons).... 3,957(1)
State Street Bank and Trust Company............................. 863,668(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, 1996 through September 30, 1997, all of its
executive officers and directors were in compliance with the disclosure
requirements of Section 16(a), except that disclosure of two charitable
remainder trusts in which Henry P. Becton, Jr., a director of the Company, has
remainder interests and as to which he serves as co-trustee, was inadvertently
omitted.
BOARD OF DIRECTORS
MEETINGS; CERTAIN COMMITTEES
The Company is governed by a Board of Directors and various committees of
the Board which meet regularly throughout the year. The Board of Directors,
which held seven meetings during the fiscal year ended September 30, 1997, has
six principal 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. Each
director attended more than 75 percent of the aggregate of the total number of
meetings of the Board and the committees on which such director served, except
for Frank A. Olson and Gloria M. Shatto.
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 audit, control and accounting systems and 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, Gloria M.
Shatto, Raymond S. Troubh and Margaretha af Ugglas.
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 three
times during the year, are Gerald M. Edelman, Chairman, Harry N. Beaty,
Henry P. Becton, Jr., John W. Galiardo, James E. Perella, Gloria M. Shatto and
Margaretha af Ugglas.
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 and
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, 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
4
<PAGE>
committees, as well as the performance and compensation of directors. The
members of this Committee, which met twice 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.
DIRECTORS' COMPENSATION
Each director who is not employed by the Company is compensated for services
as a director by an annual retainer of $45,000 for Board service, plus
attendance fees of $1,000 for special meetings of the Board and for committee
meetings. In addition, an annual fee of $2,000 is paid to committee chairmen.
Directors may defer, in an unfunded cash account or in 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 the provisions of the 1994 Restricted Stock Plan for
Non-Employee Directors and 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. The
Company reimburses all directors for travel and other necessary business
expenses incurred in the performance of their services for the Company.
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, in installments or as a lump-sum.
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.
The Board has adopted formal stock ownership guidelines, requiring each non-
employee director, with limited exceptions, to own shares of Common Stock
valued at five times or more the amount of the annual retainer fee at or prior
to the later of July 24, 2000 and the date of the director's fifth anniversary
on the Board. Based upon the closing price of the Company's Common Stock on
December 16, 1997, these guidelines represent approximately 4,380 shares, and
all but two of the Company's non-employee directors already own sufficient
shares to comply with the guidelines.
BOARD EVALUATION
Much like the year before, in fiscal 1997 the Board's Committee on Directors
undertook the process of evaluating Board performance and effectiveness,
whereby each director completed a Board Evaluation Questionnaire. The
questionnaire was developed by the Committee on Directors and 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 seventeen
criteria:
1. The Board understands and approves the Company's mission statement,
values and objectives, as well as its strategic and operating plans.
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.
5
<PAGE>
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 Committee on Directors reviews and communicates the Board's
expectations concerning director responsibilities and monitors the
productivity of Board and Committee meetings.
9. The Board assesses and modifies, as necessary, the structure of the
Board and its Committees, as well as the frequency of the Board and
Committee Meetings.
10. The Board establishes criteria and policies to ensure the
representation of characteristics and expertise among its membership
necessary to its effectiveness.
11. The Board seeks to optimally and appropriately utilize each Board
member's experiences in terms of Committee appointments.
12. The Board reviews the availability, content and timeliness of
information provided to it, prepares appropriately for Board meetings
and requests additions or changes to the material provided, when
appropriate.
13. 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.
14. The Board monitors and understands current issues and trends in
corporate governance.
15. The Board reviews and adopts annual capital and operating budgets and
monitors Company performance against them during the year.
16. The Board reviews the adequacy of existing accounting and financial
controls and oversees ethical conduct and legal compliance by the
Company.
17. 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, for the assessment of progress in the areas targeted for
improvement a year earlier, and for 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, however, proposes the
election of Richard W. Hanselman for two years only until the 2000 Annual
Meeting and until his successor has been elected and qualified, so as to
comply with the Company's policy establishing the mandatory retirement date of
each director as the date of the Annual Meeting of shareholders next following
his or her 72nd birthday. Mr. Hanselman will be 72 in October 1999. The Board
also proposes the election of Henry P. Becton, Jr., Gerald M. Edelman and
Margaretha af Ugglas to serve for three years until the 2001 Annual Meeting
and in each case until their successors have been elected and have qualified.
Mrs. af Ugglas was elected to her present term by the Board effective May 20,
1997. Dr. Edelman and Messrs. Hanselman and Becton, Jr. are incumbent
directors who were elected to their present terms by the shareholders.
6
<PAGE>
NOMINEE FOR DIRECTOR--TERM TO EXPIRE 2000
Richard W. Hanselman, 70, 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. and Gryphon Holdings Inc.
NOMINEES FOR DIRECTOR--TERM TO EXPIRE 2001
Henry P. Becton, Jr., 54, 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
various Scudder mutual funds, A.H. Belo Company and The Public
Broadcasting Service (PBS).
Gerald M. Edelman, M.D., Ph.D., 68, 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.
Margaretha af Ugglas, 58, has been a director since 1997. She
is the former Minister of Foreign Affairs of Sweden. She is a
director of the University of Stockholm and of the Jarl
Hjalmarson Foundation.
7
<PAGE>
CONTINUING DIRECTORS
The directors listed below were elected by the shareholders to terms
expiring in 2000 and 1999, respectively, and will continue to serve.
TERM TO EXPIRE 2000
Harry N. Beaty, M.D., 65, has been a director since 1985. He
is a Professor of Medicine and Emeritus Dean of the
Northwestern University Medical School. Dr. Beaty is a
specialist in internal medicine and a subspecialist in
infectious diseases.
Clateo Castellini, 62, has been a director, Chairman of the
Board, President and Chief Executive Officer since 1994. Prior
thereto he served as Sector President--Medical. Mr. Castellini
is a director of CPC International Inc.
John W. Galiardo, 63, has been a director and Vice Chairman of
the Board and General Counsel since 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.
Frank A. Olson, 65, 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 and The
Hertz Corporation.
8
<PAGE>
TERM TO EXPIRE 1999
Albert J. Costello, 62, has been a director since 1996. He is
Chairman of the Board, 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 and President 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 & Co. and FMC
Corporation.
James E. Perrella, 62, has been a director since 1995. He is a
director and Chairman of the Board, President and Chief
Executive Officer of Ingersoll-Rand Company, a manufacturer of
industrial machinery and related products. He is also a
director of Cincinnati Milacron.
Gloria M. Shatto, 66, has been a director since 1986. She is
President of Berry College Inc. She is a director of Georgia
Power Co., Southern Company and Texas Instruments
Incorporated.
Raymond S. Troubh, 71, has been a director since 1977. He is a
financial consultant in New York City and a former Governor of
the American Stock Exchange. Mr. Troubh is a director of
America West Airlines Inc., ARIAD Pharmaceuticals Inc.,
Diamond Offshore Drilling, Inc., Foundation Health Systems,
Inc., 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 and Benefits Committee determines and administers the
compensation of the executive officers of the Company, including the
individuals named in the Summary Compensation Table. The Committee is composed
exclusively of non-employee directors, as defined in applicable rules and
regulations of the Securities and Exchange Commission, and none of the members
of the Committee is an employee or former employee of the Company or eligible
to participate in any of the Company's executive compensation programs. Each
of the Members of this Committee also satisfies the criteria necessary for
purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code").
COMPENSATION PHILOSOPHY
The goal of the Company's executive compensation program 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, to foster a strong entrepreneurial mentality,
and to reward sustained performance.
The Company's compensation for all employees of the Company, including
executive officers, expresses the Company's values and vision, and is tightly
linked to the Company's business strategy and objectives. Its defining
characteristics are the following:
. COMPETITIVENESS OF TOTAL COMPENSATION: The Company emphasizes and
focuses on the competitiveness of total compensation, which is targeted
at the top quartile of the range of total compensation of a comparator
group of companies engaged in similar businesses with which the Company
competes for management talent (the "Comparator Group").
. EQUITY OWNERSHIP: The executive compensation structure includes a
significant equity-based piece to instill and develop ownership thinking
and to closely link management and shareholder interests. Consistent
with this approach, the Company requires executives to own shares of
Common Stock valued at varying multiples, depending on the amount of a
person's base salary, and discourages the disposition of Common Stock
acquired through any equity-based Company plan.
. STRATEGIC ALIGNMENT AND GOAL ORIENTATION: The Company's incentive
compensation program is linked to the achievement of specific short and
long-term objectives by the Company, the individual and the business
unit.
PRINCIPAL COMPENSATION ELEMENTS
The key elements of executive compensation are base salary, annual incentive
awards, and long-term 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 individual, business unit and Company results.
BASE SALARY
Each executive officer's base salary level is determined by the Committee
following an assessment of individual performance relative to the
responsibilities of his or her position and an assessment of the executive
10
<PAGE>
officer's experience, current salary relative to market data regarding
salaries paid for comparable positions, scope of responsibilities and
potential for advancement. The Company generally targets executive officer
salaries to approximate the median levels expected to be paid by companies in
the Comparator Group to persons holding equivalent positions. Those surveys,
as well as related data analyses, are conducted by external compensation
consultants. The Comparator Group includes companies in the selected peer
group of companies that has been used beginning this year in preparing the
Performance Graph set forth on page 19 hereof, and other high quality
healthcare institutions with which the Company competes for management talent.
Based upon these factors, the executive officers' salaries were reviewed and
adjusted in 1997.
ANNUAL INCENTIVES
The Company's 1997 Management Incentive Plan ("Plan") is designed to reward
executives based on the overall performance of the Company, as well as on the
performance of each executive officer and that of his or her area of
responsibility or operating group. Performance measures address financial and
strategic goals. For fiscal 1997, the financial measures used to determine the
amounts of the incentive awards included earnings per share growth and
improvement in economic value added (EVA(R)). The strategic accomplishments
measured included, but were not limited to, maximizing growth through new
products and geographic expansion; preserving profitability through operations
excellence and improvements in productivity, quality, and customer service;
and enhancing organizational effectiveness through empowerment, teamwork and
open communications. Individual incentive targets are established for Plan
participants based on survey data collected with respect to the Comparator
Group companies, with annual incentive target levels set at the median range
for such companies.
The Committee relies heavily, but not exclusively, on these criteria. It
exercises subjective judgment and discretion in light of these measures and in
view of the Company's compensation objectives and policies described above to
determine overall incentive funds and individual incentive amounts.
STOCK OPTIONS
In 1997, the Committee further 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 are 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 top quartile of
the competitive range for comparable positions in the marketplace, provided
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 tend to be more heavily weighted toward performance-based,
longer-term compensation than those of the Comparator Group companies.
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, as established in 1990, is an indexed
stock option program intended to compensate executive officers for absolute
growth in shareholder value and for relative Company Common Stock price
performance, as 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 results 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 Index and for an increased number of shares
when performance exceeds the S&P 500 Index.
On January 27, 1997, the Committee awarded the final grant under the 1990
Senior Executive Option Policy to approximately forty participants, including
Messrs. Castellini, Galiardo and Miller who in prior years had received option
grants in May. All participants received options indexed to the change in the
S&P 500 Index from January 23, 1995, except for Messrs. Castellini, Galiardo
and Miller, who for historical reasons were
- --------
EVA(R) is a registered trademark of Stern Stewart & Co.
11
<PAGE>
indexed to the change from May 24, 1994. Options granted in January 1996, May
1996 and January 1997 to certain members of senior management may be
transferred by them, subject to certain conditions, to their spouses, children
and grandchildren and to family trusts and family limited partnerships
established solely for the benefit of such family members.
With respect to the January 1997 option grant, the S&P 500 Index had
increased 64% from January 1995 to January 1997, while the Company's per share
fair market value had increased by 98%, resulting in a stock option grant of
148.0% of the target number of options for all participants except for Messrs.
Castellini, Galiardo and Miller. Based on the measurement period commencing
May 24, 1994 which was used for Messrs. Castellini, Galiardo and Miller, the
S&P 500 Index had grown by 68% from May 1994 to January 1997, while the
Company's per share fair market value had increased 165%, resulting in a grant
based on 182.8% of the target number of options. Messrs. Castellini, Galiardo
and Miller received prorated grants to reflect their change in grant dates
from May to January. All grants were made at the fair market value of the
Company's Common Stock on the date of grant and each grant is exercisable for
ten years from the date of grant.
In September 1997, the Committee approved a new Senior Executive Option
Policy, continuing the concept of an indexed stock option program, but
providing for additional fine-tuning of the criteria used to measure success.
The amendments to the program are intended to focus management on the long-
term creation of shareholder value by linking incentive compensation to
quantifiable measures of individual, business unit and Company performance and
rewarding high achievement, continuous improvement and individual
responsibility and initiative. Beginning in fiscal year 1998, the Company's
total shareholder return will be measured against that of a selected peer
group of companies listed on page 18 (the "Peer Group"). Internal measures of
performance will include the achievement of certain earnings and strategic
goals, including improved EVA(R) and Company revenue growth. Three quarters of
the number of stock options to be granted under the new Senior Executive
Option Policy will be determined based on the Company's annualized, cumulative
total shareholder return over a three year period commencing October 1, 1997
relative to that of the Peer Group over the same three year period. The
remaining quarter of options to be granted will be determined based on the
Company's EVA(R) and revenue growth over such three year period.
Stock option grant levels and terms are established to provide senior
management with the opportunity for overall compensation levels targeted at
the top quartile of the range of total compensation of the Comparator Group,
with the opportunity and assumed risk, through indexing, to earn long-term
compensation at levels of between zero and 150% of target.
COMPENSATION OF THE CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Mr. Castellini participates in the same compensation program as do the other
executives of the Company. His 1997 compensation was set by the Committee,
applying the principles outlined above in the same manner as they were applied
to other members of senior management.
In determining Mr. Castellini's total compensation package, the Committee
reviewed the Company's financial and strategic performance for fiscal year
1997. This review considered a number of criteria, including growth in the
Company's earnings per share, EVA(R) and sales, continued improvements in
productivity and technology development and innovation.
Mr. Castellini's base salary was increased to $825,000 per year based upon
the Committee's evaluation of his performance and contribution toward the
achievement of the Company's financial, strategic and other goals, as well as
upon competitive chief executive officer compensation information. For fiscal
year 1997, the Committee authorized an annual incentive payment of $825,000
for Mr. Castellini.
Mr. Castellini received an award of 219,343 stock options in January 1997 in
accordance with the Senior Executive Option Policy. This number of options
awarded was 182.8% of the targeted option number, reflecting the strong fair
market price performance of the Company's Common Stock relative to the S&P 500
Index from May 24, 1994 to January 27, 1997. The Committee believes these
options represent the most valuable component of Mr. Castellini's
compensation.
The Committee believes that the structure of the Company's compensation
program, with its emphasis on long-term compensation, serves to focus Company
executives on attaining a sustained high level of Company performance and
creating long-term shareholder value.
12
<PAGE>
1997 COMPENSATION ACTIONS: OTHER EXECUTIVE OFFICERS
The other executive officers, including the named executives (as defined
below), received salary increases that averaged 5.7%, which included merit
increases and a number of market adjustments. The Committee authorized annual
incentive awards for the executive officers that ranged from 94.0% to 167.0%
of target. The executive officers received indexed stock options under the
Senior Executive Option Policy during 1997.
INTERNAL REVENUE CODE SECTION 162(M)
Internal Revenue Code Section 162(m) of 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
RICHARD W. HANSELMAN
FRANK A. OLSON
JAMES E. PERRELLA
RAYMOND S. TROUBH
13
<PAGE>
COMPENSATION OF NAMED EXECUTIVES
GENERAL
The following table shows, for the fiscal years ended September 30, 1995,
1996 and 1997, respectively, compensation provided by the Company to each of
the named executives in all capacities in which they served.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
AWARDS COMPENSATION
------------------- ------------
SECURITIES
RESTRICTED UNDERLYING
NAME AND FISCAL STOCK OPTIONS/ ALL OTHER
PRINCIPAL POSITION YEAR SALARY(A) BONUS(A) AWARDS(B) SARS(C) COMPENSATION(D)
- ------------------ ------ --------- -------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Clateo Castellini....... 1997 $771,875 $825,000 0 219,343 $106,861
Chairman, President and 1996 679,167 675,000 0 306,832 99,274
Chief Executive Officer 1995 543,750 600,000 0 180,000 110,710
John W. Galiardo........ 1997 447,250 330,000 0 146,229 15,662
Vice Chairman and 1996 429,958 300,000 0 187,508 15,362
General Counsel 1995 386,042 275,000 0 110,000 15,362
Edward J. Ludwig........ 1997 300,000 205,000 0 103,608 4,800
Senior Vice President-- 1996 258,750 150,000 0 99,750 19,500
Finance & Chief
Financial Officer 1995 225,000 140,000 0 70,000 19,942
Walter M. Miller........ 1997 346,000 200,000 0 91,393 12,280
Senior Vice President-- 1996 336,833 185,000 0 119,324 11,980
Strategy and Development 1995 326,667 185,000 0 70,000 11,980
Kenneth R. Weisshaar.... 1997 300,000 190,000 0 103,608 4,800
President--Worldwide 1996 261,500 150,000 0 99,750 19,500
Consumer Health Care 1995 226,833 135,000 0 70,000 19,590
</TABLE>
- --------
(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) 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. Ludwig and
Weisshaar were not eligible for further awards under the Company's Stock
Award Plan.
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 $965,471
John W. Galiardo............... 0 18,504 18,504 895,223
Edward J. Ludwig............... 1,368 4,920 6,288 304,213
Walter M. Miller............... 0 13,408 13,408 648,679
Kenneth R. Weisshaar........... 2,160 5,654 7,814 378,041
</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. 4,920 shares for Mr. Ludwig (78%
of his total holdings) and 5,654 shares for Mr. Weisshaar (72% of his total
holdings) may not be distributed prior to retirement or termination of
employment.
Current market values are determined by multiplying the number of
undistributed shares by $48.38, the September 30, 1997 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.
(C) The 1995 option grants for Messrs. Castellini, Galiardo and Miller
reflected a $5.26 discount per share to market value, based upon the
Company's cumulative share price growth compared to the S&P 500 Index.
14
<PAGE>
(D) 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 1997, the Company made contributions to SIP of $4,800 for
each of Messrs. Castellini, Galiardo, Ludwig, Miller 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 1997 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 $102,061 for Mr. Castellini, $10,862 for
Mr. Galiardo, $0 for Mr. Ludwig, $7,480 for Mr. Miller, and $0 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 1997 under the 1995
Stock Option Plan through the Senior Executive Option Policy described above.
OPTION/SAR GRANTS IN FISCAL YEAR 1997
<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....... 219,343 6.7% $49.625 1/27/07 $ 3,102,168
John W. Galiardo........ 146,229 4.4% 49.625 1/27/07 2,068,117
Edward J. Ludwig........ 103,608 3.1% 49.625 1/27/07 1,465,328
Walter M. Miller........ 91,393 2.8% 49.625 1/27/07 1,292,571
Kenneth R. Weisshaar.... 103,608 3.1% 49.625 1/27/07 1,465,328
--------- ----- ------- ------- -----------
TOTAL................... 664,181 20.1% $49.625 1/27/07 $ 9,393,512
All Optionees........... 3,295,072 100.0% $49.625 1/27/07 $46,602,203
</TABLE>
- --------
(A) All option grants to the named executives are for a ten-year term. They
are exercisable 50% after two years from date of grant and 100% after
three years from date of grant. 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
Securities and Exchange Commission ("SEC") and is consistent with the
assumptions the Company is using for FAS 123 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 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 for limitations on transferability.
JANUARY 27, 1997 GRANT
Dividend Yield: 1.42%
Volatility: 18.00%
Risk-free Rate of Return: 6.51%
Expected Exercise Period: 6 years
15
<PAGE>
STOCK OPTION EXERCISES
The following table contains information relating to the exercise of stock
options by the named executives in fiscal 1997, as well as the number and
value of their unexercised options as of September 30, 1997.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 1997 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) EXERCISABLE/UNEXERCISEABLE(B) EXERCISABLE/UNEXERCISEABLE(A)(B)
- ---- ----------- --------------- ---------------------------- --------------------------------
<S> <C> <C> <C> <C>
Clateo Castellini....... 12,000 $ 352,890 998,832/219,343 $22,109,252/$0.00
John W. Galiardo........ 13,200 413,021 685,508/146,229 15,846,020/ 0.00
Edward J. Ludwig........ 6,000 184,895 217,750/103,608 3,909,872/ 0.00
Walter M. Miller........ 33,000 1,122,083 492,324/91,393 11,582,434/ 0.00
Kenneth R. Weisshaar.... 13,000 393,205 228,350/103,608 4,241,321/ 0.00
</TABLE>
- --------
(A) The value of unexercised options represents the difference between the
closing price of the Company's Common Stock on September 30, 1997 ($48.38)
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.
Beginning with the January 1997 grant, options are exercisable 50% after
two years from date of grant and 100% after three years from date of
grant, subject to applicable rules and regulations of the SEC. All options
issued to the named executives prior to 1997 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 well as
deferred amounts under the 1997 Management Incentive 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).
16
<PAGE>
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>
YEARS OF CREDITED SERVICE
--------------------------------------------------------------
MAXIMUM
AVERAGE
COMPENSATION 10 15 20 25 30 35 40
- ------------ -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
$ 200,000 $ 28,621 $ 42,931 $ 57,242 $ 71,553 $ 85,863 $100,174 $114,484
300,000 43,621 65,431 87,242 109,053 130,863 152,674 174,484
400,000 58,621 87,931 117,242 146,553 175,863 205,174 234,484
500,000 73,621 110,431 147,242 184,053 220,863 257,674 294,484
600,000 88,621 132,931 177,242 221,553 265,863 310,174 354,484
700,000 103,621 155,431 207,242 259,053 310,863 362,674 414,484
800,000 118,621 177,931 237,242 296,553 355,863 415,174 474,484
900,000 133,621 200,431 267,242 334,053 400,863 467,674 534,484
1,000,000 148,621 222,931 297,242 371,553 445,863 520,174 594,484
1,100,000 163,621 245,431 327,242 409,053 490,863 572,674 654,484
1,200,000 178,621 267,931 357,242 446,553 535,863 625,174 714,484
1,300,000 193,621 290,431 387,242 484,053 580,863 677,674 774,484
1,400,000 208,621 312,931 417,242 521,553 625,863 730,174 834,484
</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. Ludwig 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,
1997, and Covered Compensation for the calendar year ending December 31, 1997,
are 19 years and $1,615,625 for Mr. Castellini, 20 years and $781,750 for Mr.
Galiardo, 18 years and $551,124 for Mr. Ludwig, 17 years and $547,750 for Mr.
Miller, and 9 years and $550,012 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 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 these 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
17
<PAGE>
subsequent employer, would be continued for life. Had Messrs. Castellini,
Galiardo and Miller been terminated on September 30, 1997 following a change
in control, they would have been entitled to cash payments of $2,758,333,
$1,468,416 and $1,049,166, 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.
PERFORMANCE COMPARISON
The following graph presents a comparison of cumulative total return to
shareholders for the five-year period ended September 30, 1997, for the
Company, the S&P 500 Index, the S&P Health Care (Medical Products and
Supplies) Index (the "S&P Medical Index"), and for the first time, for a peer
group of fifteen companies, selected on a line-of-business basis (the "Peer
Group"). The comparison period presented is 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, 1992 and is compared to the cumulative total return
of the S&P 500 Index, the S&P Medical Index and the weighted, average
performance of the Peer Group over the same period with a like amount
invested.
Companies measured in the S&P Medical Index, in addition to the Company, are
C.R. Bard, Inc., Bausch & Lomb, Inc., Baxter International Inc., Biomet, Inc.,
Boston Scientific Corp., Guidant Corp., Medtronic, Inc., St. Jude Medical,
Inc. and United States Surgical Corporation.
The companies composing the Peer Group consist of St. Jude Medical, Inc.,
Beckman Instruments Inc., Guidant Corp., Boston Scientific Corp., United
States Surgical Corporation, Allegan Inc., C.R. Bard, Inc., Bausch & Lomb,
Inc., Medtronic, Inc., Baxter International Inc., Abbott Laboratories, Pfizer,
Inc., American Home Products Corp., Bristol-Myers Squibb and Johnson &
Johnson.
The Company has determined to use the Peer Group's performance rather than
the S&P Medical Index as one of the bases against which to compare its change
in cumulative total shareholder return. This change is consistent with its
intent, beginning in fiscal 1998, to measure relative Company performance
against that of the Peer Group when determining the size of option grants
under the new Senior Executive Option Policy.
18
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COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG BECTON DICKINSON & COMPANY, THE S&P 500 INDEX,
THE S&P HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) INDEX
AND A SELECTED PEER GROUP
<TABLE>
<CAPTION>
9/92 12/92 3/93 6/93 9/93 12/93 3/94 6/94 9/94 12/94 3/95 6/95 9/95 12/95 3/96 6/96 9/96 12/96 3/97 6/97 9/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Becton
Dickinson
& Co. BDX 100 105 98 108 102 97 103 112 133 133 151 163 176 211 231 227 251 247 257 290 275
PEER GROUP PPEERO 100 105 93 91 87 96 85 92 103 109 122 135 152 170 179 190 207 211 221 284 277
S&P 500 I500 100 105 110 110 113 116 111 112 117 117 129 141 152 161 170 177 183 198 203 239 257
S&P HEALTH
CARE IMDP 100 108 94 87 76 82 79 84 97 98 115 129 157 165 171 169 188 190 188 224 235
(MED PRODS
& SUPPLIES)
</TABLE>
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, 1998. 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.
PROPOSAL 3.
APPROVAL OF 1998 STOCK OPTION PLAN
In view of the limited number of shares which remain available for the
granting of stock options under the 1995 Stock Option Plan, in November 1997
the Board of Directors adopted the 1998 Stock Option Plan (the "1998 Plan"),
subject to shareholder approval. The Board of Directors continues to believe
that stock-based
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incentives are important factors in attracting, retaining, and rewarding
employees and closely aligning their interests with those of the shareholders
and that the new Senior Executive Option Policy described on page 12 hereof
will further strengthen the alignment of pay and performance. If approved by
the shareholders, the Board of Directors has authorized for issuance under the
1998 Plan 5,000,000 shares of the Company's Common Stock for the granting of
options, which is 4.1% of the shares of Common Stock outstanding on October
31, 1997. The closing price of a share of Common Stock on the New York Stock
Exchange on December 16, 1997 was $51.38.
A brief description of the material provisions of the 1998 Plan follows:
1. Administration. The 1998 Plan will be administered by a committee of
directors, presently the Compensation and Benefits Committee (the
"Committee"). In administering the 1998 Plan, the Committee has the power to
interpret its provisions and to promulgate, amend, and rescind rules and
regulations for its administration, and to select individuals to receive
grants.
2. Option Grants. The 1998 Plan provides for the granting of both incentive
and nonqualified stock options. Options may be granted to officers and other
employees of the Company and its subsidiaries, as determined by the Committee.
Approximately 1,598 employees were granted stock options in fiscal 1997 and it
is anticipated that approximately 2,000 employees will be eligible to receive
stock options in fiscal 1998. The Committee also determines the times at which
options become exercisable, their transferability and the dates, not more than
ten years after the date of grant, on which options will expire. In the event
of a tender offer for more than 25% of the Company's outstanding stock, or a
"change in control" (as defined in the 1998 Plan) of the Company, all
outstanding options granted under the 1998 Plan become immediately
exercisable. The fair market value of the stock with respect to which
incentive stock options under the 1998 Plan or any other plan of the Company
first become exercisable may not exceed $100,000 in any year. The option price
of the stock options granted under the 1998 Plan is to be at least 100% of the
fair market value of the Common Stock on the date of grant.
It is not possible at this time to determine who may be selected to receive
options under the 1998 Plan or the number of options to be granted to any
individual. Such selections and determinations will be made by the Committee
on the basis of the duties, responsibilities, and present and future
contributions of individuals to the success of the Company. The 1998 Plan
does, however, establish a maximum number of 200,000 shares that may be
granted to an individual in any calendar year.
3. Stock Appreciation Rights. The 1998 Plan permits the Committee to grant
stock appreciation rights in connection with any stock options. These rights
enable an optionee to surrender an option and to receive cash or Common Stock,
as determined by the Committee, equal to the difference between the option
price and the fair market value of the Common Stock on the date of surrender.
4. Termination of Employment. Unless otherwise provided by the Committee,
the following rules will apply to all options granted under the 1998 Plan.
Options granted under the 1998 Plan expire immediately if an employee is
terminated for cause. In the event of a voluntary or involuntary termination
without cause, options may be exercised for a period of three months following
the date of termination. In the event of an employee's death within such
three-month period, the employee's estate may exercise the options for the
number of shares exercisable at the date of termination within one year after
death but in no event beyond the expiration dates of the options. Options
outstanding at the time an employee retires under any Company retirement plan
or becomes disabled shall be exercisable for the total number of shares
subject to the options (regardless of the number of shares for which the
options were exercisable at the date of termination) and otherwise remain in
full force and effect, except that in the case of disability, the options are
only exercisable for a period of three years after the date of termination
(but in no event after the expiration dates of the options). If an employee
dies, whether before or after such retirement or disability, the employee's
estate may exercise the options for the total number of shares subject to the
options (regardless of the number of shares for which the options were
exercisable at the time of death) for up to three years after death, but in no
event beyond the expiration date of the options.
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<PAGE>
5. Forfeiture. The Committee has the authority to include in the terms of
any stock options granted under the 1998 Plan provisions for the forfeiture of
the stock options if following termination of employment, the optionee
violates any agreement of non-competition or confidentiality with the Company
or if the Committee determines that the optionee committed acts and/or
omissions which would have been the basis for termination of the optionee's
employment for cause had such acts or omissions been discovered prior to the
termination of the optionee's employment.
6. Income Tax Consequences. Under present law, the federal income tax
treatment of stock options under the 1998 Plan is generally as follows:
Incentive Stock Options. For regular U.S. income tax purposes, an optionee
will not realize taxable income upon either the grant of an incentive stock
option or its exercise if the optionee has been an employee of the Company or
a subsidiary at all times from the date of grant to a date not more than three
months before the date of exercise. An optionee may instead, under certain
circumstances, have an alternative minimum tax to pay as a result of an
exercise of an incentive stock option.
If the shares acquired upon exercise of an incentive stock option are not
disposed of by the optionee within two years from the date of grant or within
one year from the date of exercise, any gain realized upon a subsequent sale
of the shares will be taxable as a capital gain. In that case, the Company
will not be entitled to a deduction in connection with the grant or the
exercise of the option or the subsequent disposition of the shares by the
optionee.
If the optionee disposes of the shares within two years from the date of
grant or within one year from the date of exercise, the optionee will realize
ordinary income in an amount equal to the excess of the fair market value of
the shares at the date of exercise (or the amount realized at disposition, if
less) over the option price, and the Company will be allowed a corresponding
deduction. If the amount realized on the disposition exceeds the fair market
value of the shares at the date of exercise, the gain on disposition in excess
of the amount treated as ordinary income will be taxable as a capital gain.
Nonqualified Stock Options. An optionee will not realize U.S. income upon
the grant of a nonqualified stock option. Upon the exercise of a nonqualified
stock option, an optionee will be required to recognize ordinary income in an
amount equal to the excess of the fair market value at the date of exercise
over the option price, and the Company will be entitled to a corresponding
deduction. Upon a subsequent sale of the stock, any amount realized in excess
of such fair market value will be taxable as a capital gain. The Committee is
authorized under the 1998 Plan to establish procedures to permit optionees to
defer the receipt of shares upon exercise of a nonqualified stock option for a
specified period of time or until a specified future event.
Stock Appreciation Rights. Stock appreciation rights will not result in U.S.
taxable income upon grant. Upon exercise, the optionee will realize ordinary
income in the amount equal to the cash and/or fair market value of any shares
received and the Company is entitled to a corresponding deduction.
Individual states and foreign and local tax authorities also may tax stock
options granted under the 1998 Plan.
7. Amendments. The Board of Directors may amend the 1998 Plan at any time,
but may not, without prior shareholder approval, increase the aggregate number
of shares that may be issued thereunder. In addition, pursuant to the terms of
the 1998 Plan, officers of the Company are authorized to amend the 1998 Plan
to the extent necessary to comply with, and/or to qualify the 1998 Plan under,
the applicable securities, tax and employee benefit laws of any foreign
jurisdiction.
THE FOREGOING SUMMARY OF THE 1998 PLAN IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE PROVISIONS OF THE 1998 PLAN, A COPY OF WHICH IS ATTACHED AS
EXHIBIT A TO THIS PROXY STATEMENT.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 3.
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<PAGE>
SHAREHOLDER PROPOSAL
PROPOSAL 4.
PROPOSAL ON CUMULATIVE VOTING
Mrs. Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Avenue N.W.,
Suite 215, Washington, D.C. 20037, owner of 400 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 of such votes for a single candidate, or any
two or more of them as he or she may see fit."
REASONS: "Many states have mandatory cumulative voting, so
do National Banks."
"In addition, many corporations have adopted cumulative
voting."
"Last year, the owners of 27,088,965 shares, representing
approximately 30.6% of shares voting, voted FOR this
proposal."
"If you AGREE, please mark your proxy FOR this resolution."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL 4.
Our shareholders have rejected this and similar proposals each time they
have been presented and the Board of Directors continues to believe it would
not be in the best interests of Becton Dickinson or its shareholders to adopt
this proposal.
Our Directors regard their constituency to be all the shareholders.
Directors are nominated by the Committee on Directors, which consists of
independent Directors only, based on the experience, competencies and personal
qualities they bring to Becton Dickinson. Each Director now is elected by a
plurality of the votes cast at the annual meeting and shares the common
objective of advancing the best interests of all shareholders rather than
those of any particular group. In contrast to this approach, cumulative voting
would permit the election of a Director by a relatively small group of
shareholders. A Director elected through cumulative voting is more likely to
represent the special interests of the particular shareholders who elected him
or her, at the expense of the interests of the shareholders as a whole. This
could introduce factionalism, dissuade qualified persons from serving on the
Board, and hamper the ability of the Board to work together in the best
interests of all shareholders.
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.
Accordingly, the Board recommends a vote against this proposal.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Shareholder proposals for the 1999 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 24, 1998, for inclusion in the
proxy statement and form of proxy.
*****
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<PAGE>
EXHIBIT A
BECTON, DICKINSON AND COMPANY
1998 STOCK OPTION PLAN
SECTION 1. PURPOSE
The purpose of this Plan is to provide an additional incentive to employees
of Becton, Dickinson and Company and its subsidiaries to achieve long-range
goals, to aid in attracting and retaining employees of outstanding ability,
and to closely align their interests with those of shareholders.
SECTION 2. DEFINITIONS
Unless the context clearly indicates otherwise, the following terms, when
used in this Plan, shall have the meanings set forth in this Section 2.
(a) "Board" shall mean the Board of Directors of Becton, Dickinson and
Company.
(b) "Broker" shall mean a registered broker-dealer designated by the
Company.
(c) "Cashless Exercise" shall mean a method of exercising a Nonqualified
Stock Option under which a Grantee, in lieu of payment of the option price
in cash, by check or by delivery of shares of Stock, delivers to the Broker
irrevocable instructions to sell the shares of Stock acquired upon such
exercise and, immediately upon receipt of the proceeds from this sale, to
deliver to the Company the option price and any withholding taxes.
(d) "Change in Control" shall be deemed to have occurred if, over the
initial opposition of the then-incumbent Board (whether or not such Board
ultimately acquiesces therein), (i) any person or group of persons shall
acquire, directly or indirectly, stock of the Company having at least 25%
of the combined voting power of the Company's then-outstanding securities,
or (ii) any shareholder or group of shareholders shall elect a majority of
the members of the Board.
(e) "Code" shall mean the Internal Revenue Code of 1986 as it may be
amended from time to time.
(f) "Committee" shall mean the Compensation and Benefits Committee of the
Board or such other committee as may be designated by the Board.
(g) "Company" shall mean Becton, Dickinson and Company.
(h) "Date of Exercise" shall mean the earlier of the date on which
written notice of exercise, together with payment in full, if applicable,
is received at the office of the Secretary of the Company or the date on
which such notice and payment are mailed to the Secretary of the Company at
its principal office by certified or registered mail, or, in the case of
the Cashless Exercise of a Nonqualified Stock Option, the Date of Exercise
shall mean the date the Broker executes the Grantee's sell order with
respect to the underlying shares of Stock.
(i) "Employee" shall mean any employee, including any officer, of the
Company or any of its Subsidiaries.
(j) "Fair Market Value" shall mean for any day the mean of the highest
and lowest selling prices of the Stock as reported on the Composite Tape
for securities traded on the New York Stock Exchange.
(k) "Grantee" shall mean an Employee granted a Stock Option and shall
also mean, to the extent contemplated and permitted by the Plan, executors,
administrators, successors and transferees of the Grantee.
(l) "Granting Date" shall mean the date on which the Committee authorizes
the issuance of a Stock Option for a specified number of shares of Stock to
a specified Employee.
(m) "Plan" shall mean the Becton, Dickinson and Company 1998 Stock Option
Plan as set forth herein and amended from time to time.
(n) "Stock" shall mean the Common Stock, par value $1.00 per share, of
the Company.
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(o) "Stock Appreciation Right" shall mean a right granted pursuant to the
Plan to receive Stock, cash, or a combination thereof, upon the surrender
of the right to purchase all or part of the shares of Stock covered by a
Stock Option.
(p) "Stock Option" shall mean an Incentive or Nonqualified Stock Option
granted pursuant to the Plan to purchase shares of Stock.
(q) "Subsidiary" shall mean any subsidiary corporation as defined in
Section 424 of the Code.
SECTION 3. SHARES OF STOCK SUBJECT TO THE PLAN
Subject to adjustment pursuant to Section 9 hereof, 5,000,000 shares of
Stock shall be reserved for issuance upon the exercise of Stock Options
granted pursuant to this Plan. Shares delivered under the Plan may be
authorized and unissued shares or issued shares held by the Company in its
treasury. If any Stock Options expire or terminate without having been
exercised, the shares of Stock covered by such Stock Options shall become
available again for the grant of Stock Options hereunder. Similarly, if any
Stock Options are surrendered for cash pursuant to the provisions of Section
7, the shares of Stock covered by such Stock Options shall also become
available again for the grant of Stock Options hereunder. Shares of Stock
covered by Stock Options surrendered for Stock pursuant to Section 7, however,
shall not become available again for the grant of Stock Options hereunder.
SECTION 4. ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Committee. Subject to the
express provisions of the Plan, the Committee shall have authority to
interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to it, to grant Stock Options and determine the terms and
provisions of such grants, and to make all other determinations necessary
or advisable for the administration of the Plan.
(b) It is intended that the Plan and any transaction hereunder meet all
of the requirements of Rule 16b-3 promulgated by the Securities and
Exchange Commission, as such rule is currently in effect or as hereafter
modified or amended, and all other applicable laws. If any provision of the
Plan or any transaction would disqualify the Plan or such transaction
under, or would not comply with, Rule 16b-3 or other applicable laws, such
provision or transaction shall be construed or deemed amended to conform to
Rule 16b-3 or such other applicable laws or otherwise shall be deemed to be
null and void, in each case to the extent permitted by law and deemed
advisable by the Committee.
(c) Any controversy or claim arising out of or related to this Plan shall
be determined unilaterally by and at the sole discretion of the Committee.
SECTION 5. GRANTING OF STOCK OPTIONS
(a) Only Employees shall be eligible to receive Stock Options under the
Plan. Directors of the Company who are not also Employees shall not be
eligible for Stock Options.
(b) The purchase price of each share of Stock subject to an Incentive
Stock Option or a Nonqualified Stock Option shall be at least 100% of the
Fair Market Value of a share of the Stock on the Granting Date.
(c) The Committee shall determine and designate from time to time those
Employees who are to be granted Stock Options and whether the particular
Stock Options are to be Incentive Stock Options or Nonqualified Stock
Options, and shall also specify the number of shares covered by and the
exercise price per share of each Stock Option.
(d) The aggregate Fair Market Value (determined at the time the option is
granted) of the Stock with respect to which Incentive Stock Options are
exercisable for the first time by any individual during any calendar year
(under all such plans of the individual's employer corporation and its
parent and subsidiary corporations) shall not exceed $100,000.
(e) A Stock Option shall be exercisable during such period or periods and
in such installments as shall be fixed by the Committee at the time the
Stock Option is granted or in any amendment thereto; but each Stock Option
shall expire not later than ten years from the Granting Date.
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(f) The Committee shall have the authority to grant both transferable
Stock Options and nontransferable Stock Options, and to amend outstanding
nontransferable Stock Options to provide for transferability. Each
nontransferable Stock Option shall provide by its terms that it is not
transferable otherwise than by will or the laws of descent and distribution
and is exercisable, during the Grantee's lifetime, only by the Grantee.
Each transferable Stock Option may provide for such limitations on
transferability and exercisability as the Committee may designate at the
time a Stock Option is granted or is otherwise amended to provide for
transferability. Subject to the foregoing, a permitted transferee shall be
entitled to exercise a Stock Option at such times and to the extent that
the Stock Option would otherwise be exercisable by the Grantee, or by the
Grantee's executors, administrators and successors pursuant to Section 8.
(g) The Committee may establish procedures whereby Employees may elect to
defer the receipt of shares upon exercise of any Nonqualified Stock Option,
for a specified period of time or until a specified future event.
(h) Stock Options may be granted to an Employee who has previously
received Stock Options or other options whether such prior Stock Options or
other options are still outstanding, have previously been exercised or
surrendered in whole or in part.
(i) Subject to adjustment pursuant to Section 9, the aggregate number of
shares of Stock subject to Stock Options granted to an Employee under the
Plan during any calendar year shall not exceed 200,000 shares.
SECTION 6. EXERCISE OF STOCK OPTIONS
Except as otherwise provided with respect to the Cashless Exercise of a
Nonqualified Stock Option, the Grantee shall pay the option price in full on
the Date of Exercise of a Stock Option in cash, by check, or by delivery of
full shares of Stock of the Company, duly endorsed for transfer to the Company
with signature guaranteed, or by any combination thereof. Stock will be
accepted at its Fair Market Value on the Date of Exercise. The Board or
Committee may cause a legend to be placed prominently on certificates
representing Stock issued pursuant to this Plan in order to give notice of the
transferability restrictions and other obligations imposed by this Section
and/or as imposed by Section 5.
SECTION 7. STOCK APPRECIATION RIGHTS
(a) The Committee may grant Stock Appreciation Rights in connection with
any Stock Option.
(b) Stock Appreciation Rights shall be exercisable at such times and to
the extent that the related Stock Option shall be exercisable, unless the
Committee specifies a more restrictive period.
(c) Upon the exercise of a Stock Appreciation Right, the Grantee shall
surrender the related Stock Option or a portion thereof and shall be
entitled to receive payment of an amount determined by multiplying the
number of shares as to which option rights are surrendered by the
difference obtained by subtracting the exercise price per share of the
related Stock Option from the Fair Market Value of a share of Stock on the
Date of Exercise of the Stock Appreciation Right.
(d) Payment of the amount determined under Section 7(c) shall be made in
Stock, in cash, or partly in cash and partly in Stock as the Committee
shall determine in its sole discretion.
SECTION 8. TERMINATION OF EMPLOYMENT
Except as otherwise provided by the Committee at the time the option is
granted or in any amendment thereto, if a Grantee ceases to be an Employee,
then:
(a) if termination is for cause, all Stock Options held by the Grantee
shall be canceled as of the date of termination;
(b) if termination of employment is voluntary or involuntary without
cause, the Grantee may exercise each Stock Option held by him within three
months after such termination (but not after the expiration date of the
option) to the extent of the number of shares subject to the Stock Option
which were purchasable pursuant to its terms at the date of termination;
provided, however, if the Grantee should die within three months after such
termination, each Stock Option held by the Grantee may be exercised by the
Grantee's estate, or by any person
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who acquires the right to exercise by reason of the Grantee's death, at any
time within a period of one year after death (but not after the expiration
date of the option) to the extent of the number of shares subject to the
Stock Option which were purchasable pursuant to its terms at the date of
termination;
(c) subject to the provisions of Section 8(d), if termination is by
reason of retirement at a time when the Grantee is entitled to the current
receipt of benefits under any retirement plan maintained by the Company or
any Subsidiary, or by reason of disability, each Stock Option held by the
Grantee shall, at the date of retirement or disability, become exercisable
to the extent of the total number of shares subject to the Stock Option,
irrespective of the number of shares which would otherwise have been
purchasable pursuant to the terms of the Stock Option at the date of
retirement or disability, and shall otherwise remain in full force and
effect in accordance with its terms; provided, however, that in the case of
termination by reason of disability, each Stock Option shall only be
exercisable within a period of three years after the date of disability
(but not after the expiration date of the option);
(d) if termination is by reason of the death of the Grantee, or if the
Grantee dies after retirement or disability as referred to in Section 8(c),
each Stock Option held by the Grantee may be exercised by the Grantee's
estate, or by any person who acquires the right to exercise the option by
reason of the Grantee's death, at any time within a period of three years
after death (but not after the expiration date of the option) to the extent
of the total number of shares subject to the Stock Option, irrespective of
the number of shares which would have otherwise been purchasable pursuant
to the terms of the Stock Option at the date of death.
SECTION 9. ADJUSTMENTS
In the event of any merger, consolidation, reorganization, recapitalization,
stock dividend, stock split or other change in the corporate structure or
capitalization affecting the Stock, there shall be an appropriate adjustment
made by the Board in the number and kind of shares that may be granted in the
aggregate and to individual Employees under the Plan, the number and kind of
shares subject to each outstanding Stock Option and Stock Appreciation Right,
and the option prices.
No exercise of conversion rights with respect to the shares of the Company's
Series B ESOP Convertible Preferred Stock shall call for any adjustment under
this Section 9.
SECTION 10. TENDER OFFER; CHANGE IN CONTROL
A Stock Option shall become immediately exercisable to the extent of the
total number of shares subject to the option in the event of (i) a tender
offer by a person or persons other than the Company for all or any part of the
outstanding Stock if, upon consummation of the purchases contemplated, the
offeror or offerors would own, beneficially or of record, an aggregate of more
than 25% of the outstanding Stock, or (ii) a Change in Control of the Company.
SECTION 11. FORFEITURE
The Committee shall have the authority to include in the terms of any Stock
Option grant provisions for the forfeiture of the Stock Option (a) if the
Grantee violates any agreement of non-competition with the Company or any
Subsidiary or non-disclosure of confidential information of the Company or any
Subsidiary, or (b) if the Committee determines that the Grantee committed acts
and/or omissions which would have been the basis for a termination of the
Grantee's employment for cause had such acts or omissions been discovered
prior to termination of the Grantee's employment.
SECTION 12. GENERAL PROVISIONS
(a) Each Stock Option shall be evidenced by a written instrument
containing such terms and conditions, not inconsistent with this Plan, as
the Committee shall approve.
(b) The granting of a Stock Option in any year shall not give the Grantee
any right to similar grants in future years or any right to be retained in
the employ of the Company or any Subsidiary or interfere in any way with
the right of the Company or such Subsidiary to terminate an Employee's
employment at any time.
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(c) Notwithstanding any other provision of the Plan, the Company shall
not be required to issue or deliver any certificate or certificates for
shares of Stock under the Plan prior to fulfillment of all of the following
conditions:
(i) The listing, or approval for listing upon notice of issuance, of
such shares on the New York Stock Exchange;
(ii) Any registration or other qualification of such shares under any
state or federal law or regulation, or the maintaining in effect of any
such registration or other qualification which the Committee may, in its
discretion upon the advice of counsel, deem necessary or advisable; and
(iii) The obtaining of any other consent, approval or permit from any
state or federal governmental agency which the Committee may, in its
discretion upon the advice of counsel, determine to be necessary or
advisable.
(d) The Company shall have the right to deduct from any payment or
distribution under the Plan any federal, state or local taxes of any kind
required by law to be withheld with respect to such payments or to take
such other action as may be necessary to satisfy all obligations for the
payment of such taxes. In case distributions are made in shares of Stock,
the Company shall have the right to retain the value of sufficient shares
to equal the amount of tax to be withheld for such distributions or require
a recipient to pay the Company for any such taxes required to be withheld
on such terms and conditions prescribed by the Committee.
SECTION 13. AMENDMENT AND TERMINATION
(a) The Plan shall terminate on November 25, 2007 and no Stock Option
shall be granted hereunder after that date, provided that the Board may
terminate the Plan at any time prior thereto.
(b) The Board may amend the Plan at any time without notice, provided
however, that the Board may not, without prior approval by the
shareholders, increase the maximum number of shares for which options may
be granted (except as contemplated by the provisions of Section 9).
(c) The proper officers of the Company shall have the authority to amend
the Plan at any time without notice to the extent necessary to comply with
all applicable laws and regulations of any jurisdiction outside of the
United States of America and/or qualify the Plan under applicable
securities, tax and employee benefit laws and regulations of any such
jurisdiction.
(d) Subject to Section 13 (c), no termination or amendment of the Plan
may, without the consent of a Grantee to whom a Stock Option shall
theretofore have been granted, adversely affect the rights of such Grantee
under such Stock Option.
SECTION 14. GOVERNING LAW
The Plan shall be governed by, and construed and interpreted in accordance
with, the laws of the United States of America and applicable state law.
SECTION 15. EFFECTIVE DATE AND SHAREHOLDERS' APPROVAL
The Plan shall become effective November 25, 1997 upon its approval by the
Board, subject to approval or ratification by the affirmative votes of the
holders of a majority of the securities of the Company present, or
represented, and entitled to vote thereon at the next Annual Meeting of
Shareholders of the Company or any adjournment or postponement thereof. The
Committee may grant Stock Options, the exercise of which shall be expressly
subject to the condition that the Plan shall have been approved or ratified by
the shareholders of the Company.
A-5
<PAGE>
DIRECTIONS TO
BECTON, DICKINSON AND COMPANY
FROM WESTERN NJ FROM TAPPAN ZEE BRIDGE
Over Tappan Zee onto New York Thruway
Route 80 East to Route 287 North, to (287 West). Take Thruway to Exit 15
Route 208 South. Once on Route 208, (Route 287 & 17 South)--to Exit 59
stay in extreme right lane to BECTON (208 South/Franklin Lakes). Stay in
DICKINSON entrance ramp. extreme right lane, Follow Route 208
South for 1 mile. Entrance to BECTON
DICKINSON on right.
[MAP]
FROM NEWARK AIRPORT FROM LAGUARDIA AIRPORT
Grand Central Parkway West (follow
Interstate 95 North to Exit 16W signs for George Washington Bridge)
(Route 3). Take Route 3 West to Route to Tri-Boro Bridge. Over Bridge onto
17 North, then Route 17 North to Major Deegan Expressway North.
Route 4 West, to Route 208 North. Proceed to Cross Bronx Expressway,
Proceed about 8 miles on Route 208 over the GW Bridge, onto Route 4
North to BECTON DICKINSON entrance West, to Route 208 North. Proceed
ramp. about 8 miles on Route 208 to BECTON
DICKINSON entrance ramp.
PARKING WILL BE AVAILABLE
LOGO
<PAGE>
PROXY/VOTING INSTRUCTION CARD
BECTON, DICKINSON AND COMPANY
Proxy Solicited on Behalf of the Board of Directors for
Annual Meeting on February 10, 1998
The undersigned hereby appoints Clateo Castellini, John W. Galiardo and Bridget
M. Healy, 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 10, 1998, 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 1996 Directors' Deferral Plan ("DDP"), 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 DDP, 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 2000 Term to Expire 2001
Richard W. Hanselman Margaretha af Ugglas
Henry P. Becton, Jr.
Gerald M. Edelman
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
<PAGE>
[X] Please mark your When OK TO Print- Remove ALL Red Items 1508
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
Proposals 2 and 3 and AGAINST Proposal 4.
The Board of Directors recommends a vote FOR Proposals 1, 2 and 3.
- ------------------------------------------------------------------
FOR WITHHELD
--- --------
[ ] [ ]
1. Election of
Directors.
(see reverse)
For, except vote withheld from the following nominee(s):
- --------------------------------------------------------------
FOR AGAINST ABSTAIN
--- ------- -------
[ ] [ ] [ ]
2. Approval of independent auditors.
FOR AGAINST ABSTAIN
--- ------- -------
[ ] [ ] [ ]
3. Approval of 1998 Stock
Option Plan.
- ------------------------------------------------
The Board of Directors recommends a vote AGAINST
Proposal 4.
- ------------------------------------------------
FOR AGAINST ABSTAIN
--- ------- -------
[ ] [ ] [ ]
4. Cumulative
voting.
If this box is checked, this card [ ]
NO TEXT PRINT IN THIS does NOT constitute voting instructions
ADDRESS AREA 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
