<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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
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, 1998
Dear Fellow 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 9, 1999, 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 to you 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.
Your vote is important. I encourage you to vote, complete and mail the
enclosed proxy/voting instruction card in the return envelope that is provided,
so that your shares will be represented and voted at the meeting even if you
cannot attend. If you do return your proxy card by mail, you still may attend
the Annual Meeting and vote in person.
Thank you for your continued interest in Becton Dickinson.
Sincerely,
/s/ Clateo Catellini
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 9, 1999, at the offices of the Company,
1 Becton Drive, Building II, Franklin Lakes, New Jersey, to consider and act
upon the following proposals:
1.The election of directors;
2.The approval of the selection of independent auditors;
3.A shareholder proposal relating to cumulative voting; and
4.Such other business as may properly come before the meeting.
Shares represented by properly executed proxies that are 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
that are not limited to the contrary will be voted in favor of the election as
directors of the persons nominated in the accompanying Proxy Statement, for
proposal 2 and on other matters as recommended by the Board.
It is desirable that as large a proportion as possible of the shareholders'
interest be represented at the meeting. Therefore, please sign and return the
enclosed proxy/voting instruction card in the accompanying addressed envelope
so that your shares will be represented.
Only shareholders of record at the close of business on December 14, 1998
will be entitled to vote at this meeting.
By order of the Board of Directors,
/s/ Bridget M. Healy
Bridget M. Healy
Vice President and Secretary
Dated: December 22, 1998
<PAGE>
PROXY STATEMENT
----------------
1999 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 9, 1999
----------------
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 9, 1999, 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, 1998.
At the close of business on December 14, 1998, the record date fixed by the
Board for determining shareholders entitled to notice of and to vote at the
meeting, there were 248,563,468 shares of the Company's Common Stock (the
"Common Stock") outstanding, each entitled to one vote. In addition, on
December 14, 1998, there were 824,809 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 Direct Stock Purchase Plan for shareholders of
Becton, Dickinson and Company administered by First Chicago Trust
1
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Company of New York and, in addition, shares of Common Stock and ESOP
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 3 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.
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 Thompson Investor Relations, a firm that monitors institutional
share ownership, as of November 30, 1998, Oppenheimer & Co., L.P., 1 World
Financial Center, New York, New York 10281, was the beneficial owner of
26,273,187 shares of Common Stock, constituting 10.6% of the then outstanding
Common Stock. As of November 30, 1998, Fidelity Management & Research Company
(FMR), 82 Devonshire Street, Boston, Massachusetts 02109, was the beneficial
owner of 28,934,256 shares of Common Stock, constituting 11.7% 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, 1998, 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 3.1% of the Common
Stock, including shares which may be acquired by them within 60 days.
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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............................. 27,630 0
Henry P. Becton, Jr. ...................... 213,772(3) 0
Clateo Castellini.......................... 165,692 1,789,664
Albert J. Costello......................... 8,700 0
Gerald M. Edelman.......................... 10,013 0
John W. Galiardo........................... 195,052 1,195,016
Richard W. Hanselman....................... 20,066 0
Edward J. Ludwig........................... 23,156 430,696
Walter M. Miller........................... 87,232(4) 941,648
Frank A. Olson............................. 68,193 0
James E. Perrella.......................... 11,834 0
Gloria M. Shatto........................... 16,724 0
Alfred Sommer.............................. 474 0
Raymond S. Troubh.......................... 97,804(5) 0
Margaretha af Ugglas....................... 5,448 0
Kenneth R. Weisshaar....................... 26,475 385,928
All Directors and Executive Officers as a
group (25 persons), including those named
above..................................... 1,105,011 6,644,312
</TABLE>
- --------
* The Common Stock was split two-for-one, resulting in the distribution on
August 20, 1998 of one additional share of Common Stock for each share owned
by shareholders of record as of August 10, 1998.
(1) Includes Common Stock allocated to individual accounts under the Savings
Incentive Plan (the "SIP") as follows: Mr. Castellini, 10,963 shares, Mr.
Galiardo, 17,824 shares, Mr. Ludwig, 13,912 shares, Mr. Miller, 9,994
shares, Mr. Weisshaar, 1,905 shares, and all Directors and Executive
Officers as a group, 97,285 shares. Also includes Common Stock allocated
to individual accounts under the Salary and Bonus Deferral Plan as
follows: all Executive Officers as a group, 2,651 shares, and Common Stock
allocated to individual accounts under the 1996 Directors' Deferral Plan
as follows: Dr. Beaty, 19,630 shares, Mr. Becton, 12,835 shares, Mr.
Castellini, 5,539 shares, Mr. Costello, 4,700 shares, Dr. Edelman, 3,009
shares, Mr. Galiardo, 1,618 shares, Mr. Hanselman, 4,066 shares, Mr.
Olson, 48,193 shares, Mr. Perella, 8,234 shares, Dr. Shatto, 8,076 shares,
Dr. Sommer, 474 shares, Mr. Troubh, 9,804 shares, Ms. af Ugglas, 1,448
shares and all Directors, as a group, 127,626 shares.
(2) Consists of Stock Options available for exercise.
(3) Includes 156,560 shares held by trusts of which Mr. Becton is a co-trustee
with shared investment and voting power and 52,000 shares held by a
corporation owned by one of such trusts. Does not include 31,600 shares
owned by Mr. Becton's spouse, 1,600 shares owned by a daughter, 101,390
shares held in trusts for the benefit of his children or 90,000 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 1,070 shares owned by Mr. Miller's children, or 23,920
shares owned by his spouse, as to each of which he disclaims beneficial
ownership.
(5) Does not include 40,000 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............................................... 381(1)
John W. Galiardo................................................ 487(1)
Edward J. Ludwig................................................ 373(1)
Walter M. Miller................................................ 495(1)
Kenneth R. Weisshaar............................................ 381(1)
All Directors and Executive Officers as a group (25 persons).... 4,654(1)
State Street Bank and Trust Company............................. 828,168(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
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, 1997 through September 30, 1998, all of its
executive officers and directors were in compliance with the disclosure
requirements of Section 16(a), except that disclosure of one gift of shares by
Henry P. Becton, Jr., a director of the Company, and one gift of shares
received by a trust for the benefit of his children, as well as a gift of
shares by Mr. Walter M. Miller, an executive officer of the Company, 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, 1998, 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
Albert J. Costello who attended 73 percent of such meetings.
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, Richard W. Hanselman, Gloria M.
Shatto, 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 once during the
year, are Gerald M. Edelman, Chairman, Harry N. Beaty, Frank A. Olson, Alfred
Sommer, 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,
Frank A. Olson, James E. Perrella and Raymond S. Troubh.
The Committee on Directors recommends candidates for election as directors
to the Board. It also reviews and makes recommendations concerning the
composition, organization and function of the Board and its committees, as
well as the performance and compensation of directors. The members of this
Committee, which met three times during the year, are Richard W. Hanselman,
Chairman, Henry P. Becton, Jr., James E. Perrella, Alfred Sommer and Raymond
S. Troubh.
Any shareholder may recommend nominees for director to the Committee on
Directors by writing to the Secretary of the Company. Submissions should
include the full name and address and a statement of the qualifications of the
proposed nominee.
4
<PAGE>
DIRECTORS' COMPENSATION
Each director who is not employed by the Company 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 non-employee 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 14, 1998, these guidelines represent approximately 5,835 shares, and
all but two of the Company's non-employee directors already own sufficient
shares to comply with the guidelines.
BOARD EVALUATION
Like the year before, in fiscal 1998 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.
6. The Board reviews senior management development and compensation and
considers the correlation between compensation levels and Company
performance.
5
<PAGE>
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.
This year the Board also adopted the recommendation of the Committee on
Directors to assess the performance of the individual directors standing for
re-election to the Board at the next annual meeting of shareholders, and to
consider the impact of any change in the principal occupations of these
directors during their prior terms of service.
The Committee on Directors conducted the individual evaluations against
criteria designed to measure performance in five critical areas:
1. Personal Characteristics
2. Core Competencies
3. Independence
4. Level of Commitment
5. Board and Company Considerations
Upon completion of the individual director evaluation process, the Committee
on Directors reported to the full Board its conclusions and recommendations
for nominations to the Board.
6
<PAGE>
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 Raymond S. Troubh for one year only until the 2000 Annual Meeting
and until his successor has been elected and qualified. The Board's nomination
of Mr. Troubh is being made as a one-time exception to 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.
Troubh was 72 in May, 1998. The Board also proposes the election of Albert J.
Costello, James E. Perella, Gloria M. Shatto and Alfred Sommer to serve for
three years until the 2002 Annual Meeting and in each case until their
successors have been elected and have qualified. Dr. Sommer was elected to his
present term by the Board effective May 19, 1998. Messrs. Costello, Perella,
and Troubh and Dr. Shatto are incumbent directors who were elected to their
present terms by the shareholders.
NOMINEE FOR DIRECTOR--TERM TO EXPIRE 2000
[PHOTO] Raymond S. Troubh, 72, 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 ARIAD
Pharmaceuticals, Inc., Diamond Offshore Drilling, Inc.,
Foundation Health Systems, Inc., General American Investors
Company, Olsten Corporation, Starwood Hotel & Resorts, Triarc
Companies, Inc., and WHX Corporation.
NOMINEES FOR DIRECTOR--TERM TO EXPIRE 2002
[PHOTO] Albert J. Costello, 63, has been a director since 1996. He is
Chairman of the Board, of W.R. Grace & Co., a global supplier
of packaging and speciality chemicals. Mr. Costello previously
was President and Chief Executive Officer as well. Prior to
joining W.R. Grace & Co., Mr. Costello 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.
[PHOTO] James E. Perrella, 63, 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 Milacron Inc. and Rio Algom Limited.
7
<PAGE>
[PHOTO] Gloria M. Shatto, 67, has been a director since 1986. She is
President Emerita and Professor of Economics at Berry College.
Dr. Shatto is a member of the Board of Trustees of Rice
University and is also a director of Georgia Power Co.,
Southern Company and Texas Instruments Incorporated.
[PHOTO] Alfred Sommer, 56, has been a director since May 1998. He is
Dean of the Johns Hopkins School of Hygiene and Public Health,
and Professor of Ophthalmology, Epidemiology and International
Health. Dr. Sommer was founding Director of the Dana Center
for Preventive Ophthalmology at Johns Hopkins, which focuses
on clinical epidemiology and public health aspects of
blindness prevention and child health.
CONTINUING DIRECTORS
The directors listed below were elected by the shareholders to terms
expiring in 2000 and 2001, respectively, and will continue to serve.
TERMS TO EXPIRE 2000
[PHOTO] Harry N. Beaty, M.D., 66, has been a director since 1985. He
is Emeritus Dean of the Northwestern University Medical School
and Chairman of the Board and President of the Northwestern
Medical Faculty Foundation. Dr. Beaty is a specialist in
internal medicine and a subspecialist in infectious diseases.
[PHOTO] Clateo Castellini, 63, 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 Bestfoods.
8
<PAGE>
[PHOTO] John W. Galiardo, 64, has been a director, Vice Chairman of
the Board and General Counsel since 1994. Prior thereto he
served as Vice President and General Counsel. Mr. Galiardo is
Chairman of the Health Industry Manufacturers Association and
is also a director of New Jersey Manufacturers Insurance Co.,
Inc. and VISX, Incorporated.
[PHOTO] Richard W. Hanselman, 71, 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., Bradford Funds, Inc., Foundation Health
Systems Inc. and Gryphon Holdings Inc.
[PHOTO] Frank A. Olson, 66, 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 also is a
director of Amerada Hess, Fund American Enterprises and The
Hertz Corporation.
TERMS TO EXPIRE 2001
[PHOTO] Henry P. Becton, Jr., 55, 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).
9
<PAGE>
[PHOTO] Gerald M. Edelman, M.D., Ph.D., 69, 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.
[PHOTO] Margaretha af Ugglas, 59, 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.
10
<PAGE>
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION AND BENEFITS COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation and Benefits Committee of the Board (the "Committee")
reviews the overall compensation program for the Company's corporate officers,
determines and administers the compensation of the executive officers of the
Company, including the individuals named in the Summary Compensation Table,
and oversees the administration of employee benefits and benefit plans for the
Company and its subsidiaries. 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").
OVERVIEW
The Company's executive compensation program is designed 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-term strategic goals and growth in total shareholder value. The total
compensation package is designed to attract and retain management talent
critical to the long-term success of the Company, to motivate these
individuals 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. The key compensation
objectives of the Company are:
. To provide competitive total compensation relative to the compensation
offered for positions of equivalent responsibility by a group of high
quality healthcare institutions with which the Company competes for
management talent, as well as the selected peer group of companies that
have been used in preparing the Performance Graph set forth on page 19
hereof (collectively, the "Comparator Group").
. To include significant equity-based compensation 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 of
their base salaries, and discourages the disposition of Common Stock
acquired through any equity-based Company plan.
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
market place, 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
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
11
<PAGE>
equivalent positions. Those surveys, as well as related data analyses, are
conducted by external compensation consultants. Based upon these factors, the
executive officer's salaries were reviewed and adjusted in 1998.
ANNUAL INCENTIVES
The Company's 1997 Management Incentive Plan (the "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 1998, 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 revenue growth through
new products, acquisitions 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 to determine overall incentive
funds and individual incentive amounts.
STOCK OPTIONS
The Committee grants stock options broadly and deeply throughout the
organization, and thus provides additional incentives 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 market place, 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
which was adopted by the Committee in September 1997.
The Senior Executive Option Policy is an indexed stock option program,
intended to compensate executive officers for both absolute and relative
growth in shareholder value, as well as the achievement of certain internal
financial and strategic goals. The program is intended to focus management on
the long-term creation of shareholder value by linking incentive compensation
to quantifiable measures that drive shareholder value creation over time.
Beginning with fiscal year 1998, the Company's total shareholder return (TSR)
has been measured against that of the selected peer group of companies listed
on page 19 (the "Peer Group"). Internal measures of performance include the
achievement of certain earnings and strategic goals, including improved EVA(R)
and Company revenue growth. The number of stock options targeted for grant
under the Senior Executive Option Policy is determined based (i) three
quarters on the Company's annualized, cumulative TSR over a three year period
commencing October 1, 1997 relative to that of the Peer Group over the same
three year period and (ii) one quarter on the Company's EVA(R) and revenue
growth over such three-year period. As applied, "relative" performance under
the indexed stock option plan results in an option exerciseable at the fair
market value on the date of grant for a reduced number of shares when
performance is below the Peer Group TSR or short of the established financial
and strategic goals, and for an increased number of shares when Company
performance exceeds the Peer Group TSR or the established internal financial
and strategic goals.
- --------
EVA(R) is a registered trademark of Stern Stewart & Co.
12
<PAGE>
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.
On January 26, 1998, the Committee awarded the first grant under the 1998
Senior Executive Option Policy to approximately 50 participants, including the
executive officers. All participants received grants in the target amounts to
commence the new program. Grants will be indexed pursuant to the established
performance measures described above beginning in January 1999.
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 1998 compensation was set by the Committee,
applying the objectives 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
1998. This review considered a number of criteria, including growth in the
Company's earnings per share, EVA(R) and revenue, continued improvements in
productivity, and technology development and innovation.
Mr. Castellini's base salary was increased to $900,000 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 1998, the Committee authorized an annual incentive payment of $900,000
for Mr. Castellini.
In January 1998 Mr. Castellini received an award of 270,000 stock options in
accordance with the Senior Executive Option Policy.
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.
1998 COMPENSATION ACTIONS: OTHER EXECUTIVE OFFICERS
The other executive officers, including the named executives (as defined
below), received salary increases that averaged 7.12%, which included merit
increases as well as a number of promotion and market adjustments. The
Committee authorized annual incentive awards for the executive officers that
ranged from 88% to 152% of target. The executive officers received stock
options at the targeted amounts under the Senior Executive Option Policy
during 1998.
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
13
<PAGE>
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
FRANK A. OLSON
JAMES E. PERRELLA
RAYMOND S. TROUBH
14
<PAGE>
COMPENSATION OF NAMED EXECUTIVES
GENERAL
The following table shows, for the fiscal years ended September 30, 1996,
1997 and 1998, respectively, compensation provided by the Company to each of
the named executives in all capacities in which they served.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION AWARDS COMPENSATION
------------------------------ ---------------------
SECURITIES
RESTRICTED UNDERLYING
NAME AND FISCAL STOCK OPTIONS/ ALL OTHER
PRINCIPAL POSITION YEAR SALARY(A) BONUS(A) AWARDS(B) SARS COMPENSATION(C)
- ------------------ ------- ---------- ---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Clateo Castellini....... 1998 $ 846,875 $ 900,000 0 270,000 $106,861
Chairman, President and 1997 771,875 825,000 0 438,686 106,861
Chief Executive Officer 1996 679,167 675,000 0 613,664 99,274
John W. Galiardo........ 1998 465,833 300,000 0 110,000 15,662
Vice Chairman and 1997 447,250 330,000 0 292,458 15,662
General Counsel 1996 429,958 300,000 0 375,016 15,362
Edward J. Ludwig........ 1998 331,667 220,000 0 50,000 4,800
Executive Vice President 1997 300,000 205,000 0 207,216 4,800
1996 258,750 150,000 0 199,500 19,500
Walter M. Miller........ 1998 353,000 200,000 0 50,000 12,280
Senior Vice President - 1997 346,000 200,000 0 182,786 12,280
Strategy and Development 1996 336,833 185,000 0 238,648 11,980
Kenneth R. Weisshaar.... 1998 316,667 200,000 0 50,000 4,800
Senior Vice President - 1997 300,000 190,000 0 207,216 4,800
Finance and Chief
Financial Officer 1996 261,500 150,000 0 199,500 19,500
</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 the 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 39,912 39,912 $1,641,381
John W. Galiardo............... 0 37,008 37,008 1,521,954
Edward J. Ludwig............... 1,040 9,840 10,880 447,440
Walter M. Miller............... 0 26,816 26,816 1,102,808
Kenneth R. Weisshaar........... 1,500 11,308 12,808 526,729
</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. 9,840 shares for Mr. Ludwig (90% of
his total holdings) and 11,308 shares for Mr. Weisshaar (88% 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 $41.125, the September 30, 1998 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.
15
<PAGE>
(C) 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 1998, 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 1998 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 1998 under the 1995
Stock Option Plan through the Senior Executive Option Policy described above.
OPTION/SAR GRANTS IN FISCAL YEAR 1998
<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....... 270,000 5.6% $29.3438 1/26/08 $ 2,538,000
John W. Galiardo........ 110,000 2.3% 29.3438 1/26/08 1,034,000
Edward J. Ludwig........ 50,000 1.0% 29.3438 1/26/08 470,000
Walter M. Miller........ 50,000 1.0% 29.3438 1/26/08 470,000
Kenneth R. Weisshaar.... 50,000 1.0% 29.3438 1/26/08 470,000
--------- ----- -------- ------- -----------
TOTAL................... 530,000 10.9% $29.3438 1/26/08 $ 4,982,000
All Optionees........... 4,843,750 100.0% $ 29.64 Various $45,531,250
</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 Statement of Financial Accounting
Standards ("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 26, 1998 GRANT
Dividend Yield: 1.28%
Volatility: 24.4%
Risk-free Rate of Return: 5.55%
Expected Exercise Period: 6 years
16
<PAGE>
STOCK OPTION EXERCISES
The following table contains information relating to the exercise of stock
options by the named executives in fiscal 1998, as well as the number and
value of their unexercised options as of September 30, 1998.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 1998 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....... 208,000 $7,012,012 1,789,644/708,641 $48,927,665/$10,638,055
John W. Galiardo........ 156,000 4,907,597 1,195,016/402,458 32,131,535/6,066,653
Edward J. Ludwig........ 4,800 152,974 430,696/257,216 11,131,958/3,969,271
Walter M. Miller........ 43,000 1,424,076 941,648/232,786 26,833,363/3,570,756
Kenneth R. Weisshaar.... 70,772 2,270,627 385,928/257,216 9,704,912/3,969,271
</TABLE>
- --------
(A) The value of unexercised options represents the difference between the
closing price of the Company's Common Stock on September 30, 1998
($41.125) 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).
17
<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>
MAXIMUM YEARS OF CREDITED SERVICE
AVERAGE --------------------------------------------------------------
COMPENSATION 10 15 20 25 30 35 40
- ------------ -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 200,000 $ 28,535 $ 42,802 $ 50,070 $ 71,337 $ 85,605 $ 99,872 $114,140
300,000 43,535 65,302 87,070 108,837 130,605 152,372 174,140
400,000 58,535 87,802 117,070 146,337 175,605 204,872 234,140
500,000 73,535 110,302 147,070 183,837 220,605 257,372 294,140
600,000 88,535 132,802 177,070 221,337 265,605 309,872 354,140
700,000 103,535 155,302 207,070 258,837 310,605 362,372 414,140
800,000 118,535 177,802 237,070 296,337 355,605 414,872 474,140
900,000 133,535 200,302 267,070 333,837 400,605 467,372 534,140
1,000,000 148,535 222,802 297,070 371,337 445,605 519,872 594,140
1,100,000 163,535 245,302 327,070 408,837 490,605 572,372 654,140
1,200,000 178,535 267,802 357,070 446,337 535,605 624,872 714,140
1,300,000 193,535 290,302 387,070 483,837 580,605 677,372 774,140
1,400,000 208,535 312,802 417,070 521,337 625,605 729,872 834,140
</TABLE>
Covered Compensation includes all components of each named executive's
Annual Compensation as set forth in the Summary Compensation Table on page 15
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,
1998, and Covered Compensation for the calendar year ending December 31, 1998,
are 20 years and $1,765,625 for Mr. Castellini, 21 years and $770,833 for Mr.
Galiardo, 19 years and $585,055 for Mr. Ludwig, 18 years and $555,500 for Mr.
Miller, and 10 years and $572,184 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 subsequent employer, would be continued for life. Had
Messrs. Castellini, Galiardo and Miller been terminated on September 30, 1998
following a change in control, they would have been entitled to cash payments
of $2,758,333, $1,503,500 and $1,089,906, respectively.
In the event of termination other than for cause or for good reason within
three years following a change in control, each of the three named executives
would be entitled to all of the pension benefits which he would have earned
had he remained an employee until age 65. If any termination payments to a
named executive pursuant to his agreement should be subject to the excise tax
imposed by Section 4999 of the Code (the "Excise Tax"), the Company would
reimburse him in an amount such that he would retain the same amount, net of
all taxes, that he would have retained had the Excise Tax not been in effect.
18
<PAGE>
PERFORMANCE COMPARISON
The following graph presents a comparison of cumulative total return to
shareholders for the five-year period ended September 30, 1998, for the
Company, the S&P 500 Index, and 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, 1993 and is compared to the cumulative total return of the S&P
500 Index and the weighted, average performance of the Peer Group over the
same period with a like amount invested.
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 the
Company's practice introduced in 1998 to measure relative Company performance
against that of the Peer Group when determining the size of option grants
under the 1998 Senior Executive Option Policy.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG BECTON DICKINSON & COMPANY, THE S&P 500 INDEX,
AND A SELECTED PEER GROUP
[GRAPH APPEARS HERE]
BECTON DICKINSON & COMPANY PEER GROUP S & P 500
__________________________ __________ _________
3/93
6/93
9/93 100 100 100
12/93 95.51 109.91 102.32
3/94 100.68 97.07 98.44
6/94 110.28 105.32 98.85
9/94 130.74 118.07 103.69
12/94 130.61 124.56 103.67
3/95 148.18 139.29 113.76
6/95 159.68 155.35 124.62
9/95 172.97 175.02 134.53
12/95 206.96 195.99 142.63
3/96 226.55 206.87 150.29
6/96 222.66 219.29 157.03
9/96 246.23 238.03 161.89
12/96 242.1 243.18 175.38
3/97 251.83 254.51 180.08
6/97 284.06 327.68 211.52
9/97 269.33 321.78 227.37
12/97 282.06 359.48 233.89
3/98 384.83 425.68 266.52
6/98 439.78 460.23 275.32
9/98 466.87 454.98 247.93
12/98
3/99
19
<PAGE>
PROPOSAL 2.
SELECTION OF INDEPENDENT AUDITORS
The Board of Directors, pursuant to the recommendation of the Audit
Committee, has selected Ernst & Young LLP to audit the accounts of the Company
and its subsidiaries for the fiscal year ending September 30, 1999. 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.
SHAREHOLDER PROPOSAL
PROPOSAL 3.
PROPOSAL ON CUMULATIVE VOTING
Mrs. Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Avenue N.W.,
Suite 215, Washington, D.C. 20037, owner of 800 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 47,894,038 shares, representing
approximately 25.5% of the votes cast, voted FOR this
proposal."
"If you AGREE, please mark your proxy FOR this resolution."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL 3.
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. Cumulative voting interferes with
the continuing mission of the Committee on Directors to develop a balanced
Board comprised of persons with the broad range of knowledge and experience
needed to best perform its function. At present, each Director 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.
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.
Accordingly, the Board recommends a vote against this proposal.
20
<PAGE>
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Any proposal that a shareholder wishes to submit for inclusion in the
Company's Proxy Statement and proxy card for the 2000 Annual Meeting of
Shareholders ("1999-2000 Proxy Statement") pursuant to SEC Rule 14a-8 must be
received by the Company no later than August 24, 1999. In addition, notice of
any proposal that a shareholder wishes to propose for consideration at the
2000 Annual Meeting of Shareholders, but does not seek to include in the
Company's 1999-2000 Proxy Statement pursuant to Rule 14a-8, must be delivered
to the Company no later than November 7, 1999, if the proposing shareholder
wishes for the Company to describe the nature of the proposal in the 1999-2000
Proxy Statement as a condition to exercising its discretionary authority to
vote proxies on the proposal. Any shareholder proposals or notices submitted
to the Company in connection with the 2000 Annual Meeting of Shareholders
should be addressed to: Corporate Secretary, Becton, Dickinson and Company, 1
Becton Drive, Franklin Lakes, New Jersey 07417.
21
<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
<PAGE>
PROXY/VOTING INSTRUCTION CARD
BECTON, DICKINSON AND COMPANY
Proxy Solicited on Behalf of the Board of Directors for
Annual Meeting on February 9, 1999
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 9, 1999, 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 2002
Raymond S. Troubh Albert J. Costello Gloria M. Shatto
James E. Perrella Alfred Sommer
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>
1508
[X] Please mark your votes as in this example.
This Proxy when properly executed will be voted in the manner directed herein.
If no direction is made, this proxy will be voted FOR election of Directors, FOR
Proposal 2 and AGAINST Proposal 3.
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR Proposals 1 and 2.
- --------------------------------------------------------------------------------
1. Election of Directors. (see reverse)
FOR WITHHELD
[_] [_]
For, except vote withheld from the following nominee(s):
- -------------------------------------------------------
2. Approval of independent auditors.
FOR AGAINST ABSTAIN
[_] [_] [_]
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote AGAINST Proposal 3.
- --------------------------------------------------------------------------------
3. Cumulative voting.
FOR AGAINST ABSTAIN
[_] [_] [_]
- -----------------------
NO TEXT PRINT IN THIS
ADDRESS AREA
- -----------------------
If this box is checked, this card does NOT constitute voting instructions to the
Trustee with respect to unallocated/unvoted SIP shares. [_]
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
Signature for all shares (OTHER THAN unallocated/unvoted SIP shares if the
box immediately above is checked):
- ------------------------------------------------
- ------------------------------------------------
SIGNATURE(S) DATE
