<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
---------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from_______________________________to_____________
Commission file number 001-4802
--------
Becton, Dickinson and Company
-----------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-0760120
- ---------------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1 Becton Drive Franklin Lakes, New Jersey 07417-1880
----------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(201) 847-6800
----------------------------------------------------
(Registrant's telephone number, including area code)
N/A
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X. No ____.
-
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class of Common Stock Shares Outstanding as of April 30, 2000
--------------------- ---------------------------------------
Common stock, par value $1.00 252,428,019
<PAGE>
BECTON, DICKINSON AND COMPANY
FORM 10-Q
For the quarterly period ended March 31, 2000
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION Page Number
- ------- --------------------- -----------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets .................... 3
Condensed Consolidated Statements of Income .............. 4
Condensed Consolidated Statements of Cash Flows .......... 5
Notes to Condensed Consolidated Financial Statements ..... 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk.. 14
Part II. OTHER INFORMATION
- -------- -----------------
Item 1 Legal Proceedings .......................................... 15
Item 2 Changes in Securities and Use of Proceeds .................. 16
Item 3 Defaults Upon Senior Securities ............................ 16
Item 4 Submission of Matters to a Vote of Security Holders......... 16
Item 5 Other Information .......................................... 17
Item 6 Exhibits and Reports on Form 8-K ........................... 17
Signature .......................................................... 19
Exhibits .......................................................... 20
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
Thousands of Dollars
<TABLE>
<CAPTION>
March 31, September 30,
Assets 2000 1999
- ------ -------------- --------------
(Unaudited)
Current Assets:
<S> <C> <C>
Cash and equivalents $ 65,064 $ 59,932
Short-term investments 11,310 4,660
Trade receivables, net 768,874 812,544
Inventories (Note 2):
Materials 170,724 160,332
Work in process 107,695 94,627
Finished products 407,082 387,574
-------------- -----------------
685,501 642,533
Prepaid expenses, deferred taxes and other 177,481 164,056
-------------- -----------------
Total Current Assets 1,708,230 1,683,725
Property, plant and equipment 3,038,348 2,932,804
Less allowances for depreciation and amortization 1,551,828 1,501,655
-------------- -----------------
1,486,520 1,431,149
Goodwill, Net 514,228 526,942
Core and Developed Technology, Net 318,900 329,460
Other Intangibles, Net 171,276 178,285
Other 331,546 287,397
-----------------
--------------
Total Assets $ 4,530,700 $ 4,436,958
============== =================
Liabilities and Shareholders' Equity
- ------------------------------------
Current Liabilities:
Short-term debt $ 729,721 $ 631,254
Payables and accrued expenses 734,913 698,068
-------------- -----------------
Total Current Liabilities 1,464,634 1,329,322
Long-Term Debt 819,927 954,169
Long-Term Employee Benefit Obligations 327,613 344,068
Deferred Income Taxes and Other 44,121 40,711
Commitments and Contingencies - -
Shareholders' Equity:
Preferred stock 45,066 46,717
Common stock 332,662 332,662
Capital in excess of par value 62,208 44,626
Retained earnings 2,686,022 2,539,020
Unearned ESOP compensation (20,856) (20,310)
Deferred compensation 6,463 5,949
Shares in treasury - at cost (988,364) (997,333)
Accumulated other comprehensive income (248,796) (182,643)
-------------- -----------------
Total Shareholders' Equity 1,874,405 1,768,688
-------------- -----------------
Total Liabilities and Shareholders' Equity $4,530,700 $ 4,436,958
============== =================
</TABLE>
See notes to condensed consolidated financial statements
3
<PAGE>
BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Thousands of Dollars, Except Per-share Data
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
--------------------------------- -----------------------------------
2000 1999 2000 1999
---------------- --------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Revenues $ 925,132 $ 873,964 $ 1,784,296 $ 1,642,930
Cost of products sold 473,987 429,260 923,938 814,970
Selling and administrative 244,063 233,004 477,901 456,120
Research and development 57,175 67,251 110,918 116,561
-------------- ------------- -------------- ---------------
Total Operating Costs and Expenses 775,225 729,515 1,512,757 1,387,651
-------------- ------------- -------------- ---------------
Operating Income 149,907 144,449 271,539 255,279
Interest expense, net (21,199) (18,758) (42,756) (36,629)
Other income, net 36,399 1,460 38,073 2,485
-------------- ------------- -------------- ---------------
Income Before Income Taxes 165,107 127,151 266,856 221,135
Income tax provision 45,936 37,037 72,391 54,863
-------------- ------------- -------------- ---------------
Net Income $ 119,171 $ 90,114 $ 194,465 $ 166,272
============== ============= ============== ===============
Earnings Per Share:
Basic $ .47 $ .36 $ .77 $ .66
============== ============= ============== ===============
Diluted $ .45 $ .34 $ .74 $ .63
============== ============= ============== ===============
Dividends Per Common Share $ .0925 $ .085 $ .185 $ .17
============== ============= ============== ===============
</TABLE>
See notes to condensed consolidated financial statements
4
<PAGE>
BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Thousands of Dollars
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
------------------------------------------
2000 1999
-------------- -----------------
Operating Activities
<S> <C> <C>
Net income $ 194,465 $ 166,272
Adjustments to net income to derive net cash
provided by operating activities:
Depreciation and amortization 141,469 128,484
Gain on sale of investment (33,159) -
Purchased in-process research and development - 16,800
Change in working capital (24,949) (204,207)
Other, net (10,577) 17,708
-------------- -----------------
Net Cash Provided by Operating Activities 267,249 125,057
-------------- -----------------
Investing Activities
Capital expenditures (165,621) (132,855)
Acquisitions of businesses, net of cash acquired (21,573) (153,247)
Change in investments, net 34,876 (18,159)
Capitalized software (28,603) (28,863)
Other, net (15,206) (30,683)
-------------- -----------------
Net Cash Used for Investing Activities (196,127) (363,807)
-------------- -----------------
Financing Activities
Change in short-term debt (7,247) 371,349
Proceeds of long-term debt - 185
Payments of long-term debt (29,941) (108,395)
Issuance of common stock from treasury 19,338 15,383
Dividends paid (47,196) (43,163)
-------------- -----------------
Net Cash (Used for) Provided by Financing Activities (65,046) 235,359
-------------- -----------------
Effect of exchange rate changes on cash and equivalents (944) (6,005)
-------------- -----------------
Net increase (decrease) in cash and equivalents 5,132 (9,396)
Opening Cash and Equivalents 59,932 83,251
-------------- -----------------
Closing Cash and Equivalents $ 65,064 $ 73,855
============== =================
</TABLE>
See notes to condensed consolidated financial statements
5
<PAGE>
BECTON, DICKINSON AND COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Dollar and Share Amounts in Thousands, Except Per-share Data
March 31, 2000
Note 1 - Basis of Presentation
- ------------------------------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, in the opinion of
the management of the Company, include all adjustments which are of a normal
recurring nature, necessary for a fair presentation of financial position and
the results of operations and cash flows for the periods presented. However,
the financial statements do not include all information and footnotes required
for a presentation in accordance with generally accepted accounting principles.
These condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and the notes thereto included or
incorporated by reference in the Company's 1999 Annual Report on Form 10-K. The
results of operations for the interim periods are not necessarily indicative of
the results of operations to be expected for the full year. Prior year
information has been reclassified to conform to current year presentation.
Note 2 - Inventory Valuation
- ----------------------------
An actual valuation of inventory under the LIFO method can be made only at the
end of each fiscal year based on the inventory levels and costs at that time.
Accordingly, interim LIFO calculations are based on management's estimates of
expected year-end inventory levels and costs.
Note 3 - Comprehensive Income
- -----------------------------
Comprehensive income for the Company includes the following:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
----------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
Net income $ 119,171 $ 90,114 $ 194,465 $ 166,272
Other Comprehensive Income,
Net of Tax
Foreign currency translation
adjustments (39,033) (72,785) (77,718) (79,667)
Unrealized (loss) gain on
investments, net of
amounts realized (1,503) 2,482 11,565 (4,251)
--------------- --------------- --------------- ---------------
Comprehensive Income $ 78,635 $ 19,811 $ 128,312 $ 82,354
=============== =============== =============== ===============
</TABLE>
6
<PAGE>
During the second quarter of fiscal 2000, the Company sold portions of an
investment for a net gain of approximately $33,000 before taxes. The proceeds
from these sales were approximately $38,000. The cost of this investment was
determined based upon the specific identification method. The amount of
unrealized gains or losses on investments in comprehensive income has been
adjusted to reflect the realized gains included in net income for investments
sold during the year.
Note 4 - Earnings per Share
- ---------------------------
The following table sets forth the computations of basic and diluted earnings
per share:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
----------------------------------- -----------------------------------
<S> <C> <C> <C> <C>
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
Net income $ 119,171 $ 90,114 $ 194,465 $ 166,272
Preferred stock dividends (732) (785) (1,478) (1,576)
--------------- --------------- --------------- ---------------
Income available to
common shareholders (A) 118,439 89,329 192,987 164,696
Preferred stock dividends - using
"if converted" method 732 785 1,478 1,576
Additional ESOP contribution -
using "if converted" method (165) (201) (339) (405)
--------------- --------------- --------------- ---------------
Income available to common
shareholders after assumed
conversions (B) $ 119,006 $ 89,913 $ 194,126 $ 165,867
=============== =============== =============== ===============
Average common shares
outstanding (C) 252,055 249,276 251,690 248,793
Dilutive stock equivalents from
stock plans 6,432 10,308 6,407 11,291
Shares issuable upon conversion
of preferred stock 4,889 5,230 4,889 5,230
--------------- --------------- --------------- ---------------
Average common and common
equivalent shares outstanding -
assuming dilution (D) 263,376 264,814 262,986 265,314
=============== =============== =============== ===============
Basic earnings per share (A/C) $ .47 $ .36 $ .77 $ .66
=============== =============== =============== ===============
Diluted earnings per share (B/D) $ .45 $ .34 $ .74 $ .63
=============== =============== =============== ===============
</TABLE>
7
<PAGE>
Note 5 - Contingencies
- ----------------------
The Company is involved, both as a plaintiff and a defendant, in various legal
proceedings which arise in the ordinary course of business, including product
liability and environmental matters. In the opinion of the Company, the results
of these matters, individually and in the aggregate, are not expected to have a
material impact on its results of operations, financial condition or cash flows.
Note 6 - Segment Data
- ---------------------
The Company's organizational structure is based upon its three principal
business segments: BD Medical Systems, BD Biosciences, and BD Preanalytical
Solutions. The Company evaluates performance based upon operating income.
Segment operating income represents revenues reduced by product costs and
operating expenses.
Financial information for the Company's segments is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
---------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C>
2000 1999 2000 1999
------------------ ------------------ ------------------ ------------------
Revenues
- --------
Medical Systems $ 489,329 $ 483,779 $ 951,935 $ 908,944
Biosciences 296,317 262,325 560,733 485,604
Preanalytical Solutions 139,486 127,860 271,628 248,382
----------------- ------------------ ------------------ ------------------
Total Revenues (A) $ 925,132 $ 873,964 $ 1,784,296 $ 1,642,930
================= ================== ================== ==================
</TABLE>
<TABLE>
<CAPTION>
Segment Operating Income
- ------------------------
<S> <C> <C> <C> <C>
Medical Systems $ 95,487 $ 100,505 $ 190,188 $ 181,331
Biosciences 46,763 28,490 72,074 57,947
Preanalytical Solutions 34,679 32,091 61,987 60,220
----------------- ------------------ ------------------- -----------------
Total Segment Operating
Income 176,929 161,086 324,249 299,498
Unallocated Expenses (B) (11,822) (33,935) (57,393) (78,363)
----------------- ------------------ ------------------- -----------------
Income Before
Income Taxes $ 165,107 $ 127,151 $ 266,856 $ 221,135
================= ================== =================== =================
</TABLE>
(A) Intersegment revenues are not material.
(B) Includes interest, net, foreign exchange, and corporate expenses.
8
<PAGE>
Note 7 - Special Charges
- ------------------------
The Company recorded special charges in fiscal 1999 and 1998 associated with two
restructuring programs, primarily designed to improve the Company's cost
structure, refocus certain businesses, and write down impaired assets. A
summary of the special charge accrual activity during the first six months of
fiscal 2000 follows:
Severance Restructuring Other
-------------- ------------- ------------
Accrual Balances at
September 30, 1999 $ 13,100 $ 9,250 $ 6,100
Payments (3,500) (5,000) (1,700)
-------------- -------------- ------------
Accrual Balances at
March 31, 2000 $ 9,600 $ 4,250 $ 4,400
============== ============== ============
The 1998 restructuring plan included charges associated with the restructuring
of certain manufacturing operations. As of March 31, 2000, approximately 100
positions have been eliminated, and the Company expects that an additional 150
people will be affected by this plan, upon the closure of a U.S. surgical blade
plant scheduled for the first half of fiscal year 2002. The remaining 1998
restructuring accruals related to this closure consist primarily of severance.
Note 8 - Acquisition Reserves
- -----------------------------
During fiscal year 1997, the Company acquired Difco Laboratories Incorporated
("Difco"). The assumed liabilities for the Difco acquisition included
approximately $17,500 for severance and other exit costs associated with the
closing of certain Difco facilities. As of March 31, 2000, approximately $3,700
of these reserves remained. The Company expects to substantially utilize these
remaining reserves over the next three months.
Note 9 - Product Recall
- -----------------------
On February 23, 2000, the Company announced that it was voluntarily recalling
certain manufacturing lots of the BD Insyte(R) AutoGuard(TM) shielded IV
catheter after receiving reports of localized skin irritation following product
use. The actual percentage of products for which the Company received reports
was less than .01 percent of such products used. While there have been no
confirmed reports of serious problems or complications, the Company decided to
voluntarily recall this product in order to minimize additional concerns. The
Company has since adjusted its Insyte AutoGuard manufacturing process to address
the problem, and shipments of this product resumed at the beginning of the third
quarter.
In the current quarter, the Company recorded recall costs of approximately
$13,000, which consisted primarily of costs associated with product returns,
disposal of the affected product, and other direct recall costs. These recall
costs were reported in cost of products sold.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
- -------------
Recent Developments
- -------------------
During the second quarter of fiscal 2000, we sold portions of an investment for
a net gain of approximately $33 million before taxes. The proceeds from these
sales were approximately $38 million. The cost of this investment was determined
based upon the specific identification method.
On February 23, 2000, we announced that we were voluntarily recalling certain
manufacturing lots of the BD Insyte(R) AutoGuard(TM) shielded IV catheter after
receiving reports of localized skin irritation following product use. The
actual percentage of products for which we received reports was less than .01
percent of such products used. While there have been no confirmed reports of
serious problems or complications, we decided to voluntarily recall this product
in order to minimize additional concerns. We have since adjusted our Insyte
AutoGuard manufacturing process to address the problem, and shipments of this
product resumed at the beginning of the third quarter. In the second quarter,
we recorded recall costs of approximately $13 million, which consisted primarily
of costs associated with product returns, disposal of the affected product, and
other direct recall costs. These recall costs were reported in cost of products
sold. The recall modestly affected second quarter revenues in the BD Medical
Systems segment due to the product being temporarily unavailable. We do not
expect revenues for the balance of the year to be further affected by this
recall.
Results of Operations
- ---------------------
Second quarter revenues exceeded prior year revenues by 6%. Revenues for the
six months increased $141 million or 9% from last year. Revenue growth was
unfavorably affected by the strengthened dollar against the Euro as compared to
the prior year. The impact of foreign currency translation reduced revenues by
an estimated $18 million and $29 million for the three and six month periods,
respectively. Revenues for the quarter were modestly affected by the voluntary
product recall and the shifting of purchases by customers into the first quarter
in anticipation of potential Year 2000 disruptions.
<TABLE>
<CAPTION>
Three Months Ended March 31, Six Months Ended March 31,
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Segment Revenues
(Dollars in millions) 2000 1999 % Change 2000 1999 % Change
==============================================================================================================
Medical Systems
- ---------------
United States $232 $227 3 $439 $419 5
International 257 257 - 513 490 5
- --------------------------------------------------------------------------------------------------------------
Total $489 $484 1 $952 $909 5
==============================================================================================================
Biosciences
- -----------
United States $171 $142 20 $322 $266 21
International 125 120 4 239 220 9
- --------------------------------------------------------------------------------------------------------------
Total $296 $262 13 $561 $486 16
==============================================================================================================
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Segment Revenues Three Months Ended March 31, Six Months Ended March 31,
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(Dollars in millions) 2000 1999 % Change 2000 1999 % Change
==============================================================================================================
Preanalytical Solutions
- -----------------------
United States $78 $69 13 $148 $133 11
International 61 59 4 124 115 7
- --------------------------------------------------------------------------------------------------------------
Total $139 $128 9 $272 $248 9
==============================================================================================================
Total Revenues
- --------------
United States $482 $438 10 $908 $817 11
International 443 436 2 876 826 6
- --------------------------------------------------------------------------------------------------------------
Total $925 $874 6 $1,784 $1,643 9
==============================================================================================================
</TABLE>
Recent acquisitions, primarily in the United States, added about $20 million to
BD Biosciences ("Biosciences") revenues and about $9 million to BD Medical
Systems ("Medical") revenues for the quarter. Medical segment revenues increased
4% for the quarter after excluding the estimated unfavorable impact of foreign
currency translation. Such revenues were reduced by the shifting of purchases,
primarily in Europe, into the first quarter, in anticipation of potential
disruptions related to the Year 2000, the impact of the product recall, and the
absence of revenues from divested home health care products. Biosciences
revenues, which increased 14% for the quarter after excluding the estimated
unfavorable impact of foreign currency translation, reflected strong growth in
flow cytometry products. BD Preanalytical ("Preanalytical") revenues increased
12% for the quarter after excluding the estimated unfavorable impact of foreign
currency translation. Worldwide revenues for the Medical and Preanalytical
segments reflected good growth in sales of advanced protection devices.
International revenues grew approximately 6% for the quarter after excluding the
unfavorable impact of foreign currency translation.
Medical segment operating income decreased 5% from the prior year's quarter
primarily due to the factors discussed above. Biosciences segment operating
income for the quarter grew 7%, excluding last year's purchased in-process
research and development charge, primarily due to revenue growth. Amortization
associated with 1999 acquisitions for this segment also affected the growth
rate. Preanalytical segment operating income increased 8% from the prior
year's quarter reflecting the increase in sales growth in advanced protection
devices. (See Note 6 in "Notes to Condensed Consolidated Financial Statements"
for additional segment income information.)
Reported gross profit margin was 48.8% for the quarter and 48.2% for the six
months. Excluding the product recall costs, gross profit margin would have been
50.2% for the quarter and 49% for the six months, compared with last year's
ratios of 50.9% and 50.4%, respectively. This decline reflects a less
profitable mix of products sold and higher costs associated with the scale up of
production of advanced protection devices.
Selling and administrative expense was 26.4% of revenues for the quarter and
26.8% for the six months compared with the prior year's ratios of 26.7% and
27.8%, respectively. The improvement in the ratio reflects savings achieved
through spending controls and productivity improvements.
11
<PAGE>
Investment in research and development was 6.2% of revenues for both the quarter
and six months. Excluding a $15 million charge for purchased in-process
research and development associated with an acquisition completed during the
second quarter of fiscal 1999, last year's ratios were 5.9% for the quarter and
6.2% for the six months.
Operating income increased 4% and 6% for the quarter and six months,
respectively. Operating margin was 16.2% for the quarter and 15.2% for the six
months. Excluding the product recall costs and last year's in-process research
and development charge, operating margin for the quarter and six months would
have been 17.6% and 16%, respectively, compared with last year's ratios of 18.3%
and 16.5%, respectively. This decline primarily reflects the decrease in gross
profit margin, as discussed earlier.
Net interest expense was $6 million higher for the six months compared with the
prior year, due to additional borrowings to fund prior year acquisitions. Other
income, net was $35 million higher for the quarter and $36 million higher for
the six months compared with the prior year, primarily due to the gain on the
sale of an investment in the second quarter.
The income tax rate was 27.8% for the quarter and 27.1% for the six months and
reflected the higher rate on the gain on investment sale as well as the
product recall costs. The prior year's second quarter rate of 29.1% reflected
the lack of a tax benefit associated with the in-process research and
development charge. Excluding these items, the second quarter rate would have
been 26% for both years.
Net income of $119 million and diluted earnings per share of $.45 increased 32%
over the prior year, reflecting the items discussed above.
Financial Condition
- -------------------
During the first six months of 2000, cash provided by operating activities was
$267 million compared with $125 million during the first six months of last
year. This improvement reflects lower build-up of inventories and lower trade
receivable balances compared with the prior year's second quarter as well as
more stringent cash management policies. Capital expenditures during the first
six months were $166 million compared with last year's amount of $133 million.
We expect capital spending for fiscal 2000 to be about $375 million, reflecting
increased investment in additional manufacturing capacity for advanced
protection devices. Capitalized software represents expenditures associated
with our enterprise-wide business systems upgrade program.
Trade receivables of $769 million decreased $44 million from fiscal year-end
levels primarily from increased collection activity. Inventory levels increased
$43 million since fiscal year-end primarily due to the building of inventory
needed for the acceleration of revenues over the third and fourth quarters.
As of March 31, 2000, total debt of $1.5 billion represented 45.1% of total
capital (shareholders' equity, net non-current deferred income tax liabilities,
and debt), down from 45.4% a year ago. Because of our strong credit rating, we
believe we have the capacity to arrange additional borrowings should the need
arise.
12
<PAGE>
Year 2000 Update
- ----------------
We designed and implemented a company-wide Year 2000 plan to ensure that
our computer equipment and software and devices with date-sensitive embedded
technology would be Year 2000-compliant. In other words, we sought to ensure
that our equipment and software and these devices would be able to distinguish
between the year 1900 and the year 2000 and would function properly with respect
to all dates, whether in the twentieth or twenty-first centuries.
Based upon our identification, assessment, remediation and testing efforts, we
believe we have completed all modifications to and replacements of our computer
equipment and software that were necessary to avoid any potential Year 2000-
related disruptions or malfunctions that had been identified. We have not
experienced any major disruptions to our business nor are we aware of any
significant Year 2000-related disruptions impacting our customers or suppliers.
As of March 31, 2000, we incurred approximately $17 million in total costs
related to our Year 2000 project, which was funded through operating cash flows.
We do not anticipate any additional significant costs related to our plan. None
of our other information technology projects have been delayed or deferred as a
result of the implementation of the plan.
Adoption of New Accounting Standards
- ------------------------------------
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This Statement requires that all
derivatives be recorded in the balance sheet as either an asset or liability
measured at fair value and that changes in fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. In June 1999, the
FASB issued SFAS No. 137, which deferred the effective date of SFAS No. 133. As
a result, we will be adopting the provisions of this Statement no later than our
first quarter of fiscal 2001. We are in the process of evaluating this
Statement and have not yet determined the future impact on our consolidated
financial statements.
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements". This SAB provides the SEC's views in applying generally accepted
accounting principles to selected revenue recognition issues. We are required
to adopt the provisions of this SAB no later than our first quarter of fiscal
2001. We are in the process of evaluating this SAB and have not yet determined
the future impact on our consolidated financial statements.
Forward-Looking Statements
- --------------------------
This interim report on Form 10-Q may contain certain forward looking statements
(as defined under Federal securities laws) regarding the performance for Becton,
Dickinson and Company ("BD"), including future revenues, products and income,
which are based upon current expectations of BD and involve a number of business
risks and uncertainties. Actual results could vary materially from anticipated
results described in any forward-looking statement. Factors that could cause
actual results to vary materially include, but are not limited to, competitive
factors, changes in regional, national or foreign
13
<PAGE>
economic conditions, changes in interest or foreign currency exchange rates,
delays in product introductions, litigation, the effects of Year 2000-related
issues, and changes in health care or other governmental regulation, as well as
other factors discussed herein and in other of BD's filings with the Securities
and Exchange Commission.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
-----------------------------------------------------------
There have been no material changes in information reported since the
fiscal year ended September 30, 1999.
14
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings.
-----------------
We are involved, both as a plaintiff and a defendant, in various legal
proceedings which arise in the ordinary course of business, including
product liability and environmental matters.
Latex Cases
-----------
As described more fully in our 1999 Annual Report on Form 10-K, we,
along with a number of other manufacturers, have been named as a
defendant in approximately 365 product liability lawsuits related to
natural rubber latex that have been filed in various state and Federal
courts. Cases pending in Federal court are being coordinated under the
matter In re Latex Gloves Products Liability Litigation (MDL Docket No.
1148) in Philadelphia, and analogous procedures have been implemented in
the state courts of California, Pennsylvania and New Jersey. We are
vigorously defending these lawsuits.
Needle-Stick Cases
------------------
Also as discussed in our 1999 Annual Report on Form 10-K, we have been
named as a defendant in eleven product liability lawsuits relating to
health care workers who allegedly sustained accidental needle sticks,
but have not become infected with any disease. Another manufacturer and
several medical product distributors also have been named as defendants
in most of these cases. The cases have been filed on behalf of an
unspecified number of health care workers in eleven different states
seeking class action certification under the laws of these states.
On January 13, 2000, in the matter of Usrey v. Becton, Dickinson and
Company, et al. (Case No. 342-173329-98, Tarrant County District Court),
filed in Texas court on April 9, 1998, the Court signed an order
conditionally granting plaintiffs' motion for class certification on
behalf of certain Texas health care workers, subject to modification and
alteration under Texas procedural law. Under Texas law, the order is
subject to an immediate appeal, and any trial in the matter is stayed
pending appeal. An appeal from the order was filed on February 1, 2000
and we will otherwise continue to vigorously defend this matter.
On January 13, 2000, in the matter of Benner v. Becton, Dickinson and
Company, et al., originally filed on June 1, 1999 in Supreme Court of
the State of New York (Case No. 99-111372) and removed to federal court
on July 1, 1999 (No. 99 Civ. 4785, United States District Court,
Southern District of New York), the Court granted our motion to dismiss
the plaintiff's complaint for failure to state a cause of action. The
Benner matter was an action seeking class action certification on behalf
of certain New York health care workers alleging that syringes and other
medical devices were defectively designed. The Court dismissed the
complaint without prejudice, giving the plaintiff twenty-one days within
which to file an amended complaint, which has been stayed subject to
further court order.
On March 9, 2000, in the matter of Brown v. Becton, Dickinson and
Company, et al. (Case No. 9811-3474, Court of Common Pleas of
Philadelphia County), filed in Pennsylvania Court on May 7, 1999, the
Court signed an order granting our preliminary objections and dismissing
plaintiff's claims. The Brown matter was an action seeking class action
certification on behalf of certain Pennsylvania health care workers
alleging that syringes and other medical
15
<PAGE>
devices were defectively designed. The Court dismissed plaintiff's
strict liability claims with prejudice, and dismissed plaintiff's
negligence claim with leave to replead within twenty days. On March 29,
2000, Plaintiff Christine McGeehan filed a complaint against the Company
under the same case number. Plaintiff Harriet Brown is not named in this
complaint. We intend to vigorously defend this matter.
To date no other class has been certified in these cases. Generally,
these actions allege that health care workers have sustained needle
sticks using hollow-bore needle devices manufactured by us and, as a
result, require medical testing, counseling and/or treatment.
Summary
-------
In our opinion, the outcome of the above matters, individually and in
the aggregate, are not expected to have a material effect on our results
of operations, financial condition or cash flows.
Item 2. Changes in Securities and Use of Proceeds.
------------------------------------------
Not applicable.
Item 3. Defaults Upon Senior Securities.
--------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
a.) Our Annual Meeting of Shareholders was held on February 8, 2000.
c.)i. A management proposal for the election of five directors, each for
three-year terms, was voted upon as follows:
Votes Votes
Nominee For Withheld
------- --- --------
Harry N. Beaty, M.D 223,942,838 2,387,851
Clateo Castellini 223,646,261 2,684,428
Edward J. Ludwig 223,971,706 2,358,983
Frank A. Olson 223,911,107 2,419,582
Willard J. Overlock, Jr 223,968,933 2,361,756
ii.) A management proposal to approve the selection of Ernst & Young, LLP as
independent auditors for the fiscal year 2000 was voted upon. 224,855,321
shares were voted for the proposal, 735,773 shares were voted against,
and 739,595 shares abstained.
16
<PAGE>
iii.) A shareholder proposal requesting the Board of Directors take
the necessary steps to provide for cumulative voting in the
election of directors was voted upon. 64,608,705 shares were
voted for the proposal, 117,533,508 shares were voted against
and 18,950,630 shares abstained.
Item 5. Other Information.
------------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
a) Exhibits
3 (b) - By-Laws, as amended and restated as of March 28, 2000.
4 (e) (i) - Amended and Restated Rights Agreement, dated as of
March 28, 2000, between Becton, Dickinson and Company
and First Chicago Trust Company of New York, as Rights
Agent, including the form of Rights Certificate as
Exhibit A and the Summary of Rights to Purchase
Preferred Stock as Exhibit B (the "Amended and
Restated Rights Agreement").
4 (e) (ii) - Amendment No. 1 to the Amended and Restated Rights
Agreement, dated as of April 24, 2000.
10 (b) (i) - Form of Employment Agreement providing for certain
payments to Executive Officers in the event of a
discharge or significant change in such officers'
respective duties after a change of control of the
registrant.
10 (b)(ii) - Form of Employment Agreement providing for certain
payments to Corporate Officers in the event of a
discharge or significant change in such officer's
respective duties after a change of control of the
registrant.
10 (o) - Non-Employee Directors 2000 Stock Option Plan.
27 Financial Data Schedule.
b) Reports on Form 8-K
During the three-month period ended March 31, 2000, we filed three
Current Reports on Form 8-K:
(i) In a report dated January 13, 2000, we updated the status
of two of our product liability lawsuits.
17
<PAGE>
(ii) In a report dated January 20, 2000, we announced our
results for the quarter ended December 31, 1999.
(iii) In a report dated February 23, 2000, we announced our
voluntary recall of certain manufacturing lots of the BD
Insyte (R) Autoguard (TM) shielded IV catheter.
18
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Becton, Dickinson and Company
-----------------------------
(Registrant)
Date May 12, 2000
--------------
/s/ Richard M. Hyne
----------------------------
Richard M. Hyne
Vice President and Controller
(Principal Financial and Accounting Officer)
19
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Number Description Method of Filing
- ------- ----------- ----------------
3 (b) By-Laws, as amended and restated as of Incorporated by reference
March 28, 2000 to Exhibit 3 (b) to the
registrant's Report on
Form 8-K filed on April
20, 2000.
4 (e) (i) Amended and Restated Rights Incorporated by reference
Agreement, dated as of November 28, to Exhibit 1 to the
1995 and Amended and Restated Amendment to a
as of March 28, 2000, between Becton, Registration Statement
Dickinson and Company and First Chicago filed by the registrant on
Trust Company of New York, as April 18, 2000 on Form
Rights Agent, including the form 8-A/A.
of Rights Certificate as Exhibit
A and the Summary of Rights to
Purchase Preferred Stock as
Exhibit B (the "Amended and
Restated Rights Agreement").
4 (e) (ii) Amendment No. 1 dated as of Incorporated by reference
April 24, 2000, to the Amended and to Exhibit1 to the
Restated Rights Agreement. Amendment to a
Registration Statement
filed by the Registrant
on May 12, 2000 on
Form 8-A/A.
10 (b) (i) Form of Employment Agreement Filed with this report.
providing for certain payments to
Executive Officers in the event
of a discharge or significant
change in such officers'
respective duties after a change
of control of the registrant.
10 (b) (ii) Form of Employment Agreement Filed with this report.
providing for certain payments to
Corporate Officers in the event
of a discharge or significant
change in such officers'
respective duties after a change
of control of the registrant.
10 (o) Non-Employee Directors 2000 Stock Filed with this report.
Option Plan.
27 Financial Data Schedule Filed with this report
20
<PAGE>
Exhibit 10(b)(i)
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of the 24th day of April, 2000 (this "Agreement"),
by and between Becton, Dickinson and Company, a New Jersey corporation (the
"Company"), and (name) (the "Executive").
WHEREAS, the Board of Directors of the Company (the "Board"), has
determined that it is in the best interests of the Company and its shareholders
to assure that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined herein). The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the current Company and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
that ensure that the compensation and benefits expectations of the Executive
will be satisfied and that are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
Section 1. Certain Definitions. (a) "Effective Date" means the first
-------------------
date during the Change of Control Period (as defined herein) on which a Change
of Control occurs. Notwithstanding anything in this Agreement to the contrary,
if a Change of Control occurs and if the Executive's employment with the Company
is terminated prior to the date on which the Change of Control occurs, and if it
is reasonably demonstrated by the Executive that such termination of employment
(1) was at the request of a third party that has taken steps reasonably
calculated to effect a Change of Control or (2) otherwise arose in connection
with or anticipation of a Change of Control, then "Effective Date" means the
date immediately prior to the date of such termination of employment.
(b) "Change of Control Period" means the period commencing on the date
hereof and ending on the third anniversary of the date hereof; provided,
however, that, commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual anniversary
thereof, the "Renewal Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to terminate three years
from such Renewal Date, unless, at least 60 days prior to the Renewal Date, the
Company shall give notice to the Executive that the Change of Control Period
shall not be so extended.
(c) "Affiliated Company" means any company controlled by, controlling
or under common control with the Company.
(d) "Change of Control" means:
(1) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of
either (A) the then-outstanding shares of common
<PAGE>
stock of the Company (the "Outstanding Company Common Stock") or (B) the
combined voting power of the then-outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that, for purposes of this
Section 1(d), the following acquisitions shall not constitute a Change of
Control: (i) any acquisition directly from the Company, (ii) any acquisition by
the Company, (iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any affiliated company, (iv)
any acquisition by any corporation pursuant to a transaction that complies with
Sections 1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C), or (v) any acquisition that the
Board determines, in good faith, was inadvertent, if the acquiring Person
divests as promptly as practicable a sufficient amount of the Outstanding
Company Common Stock and/or the Outstanding Company Voting Securities, as
applicable, to reverse such acquisition of 25% or more thereof.
(2) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board.
(3) Consummation of a reorganization, merger, consolidation or sale or
other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (A) all or substantially all of the individuals and entities that
were the beneficial owners of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 60% of the
then-outstanding shares of common stock and the combined voting power of the
then-outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation that, as a result of
such transaction, owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership immediately prior to such Business
Combination of the Outstanding Company Common Stock and the Outstanding Company
Voting Securities, as the case may be, (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 25% or more of,
respectively, the then-outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then- outstanding voting securities of such corporation, except to the extent
that such ownership existed prior to the Business Combination, and (C) at least
a majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement or of the action of the Board
providing for such Business Combination; or
2
<PAGE>
(4) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
Section 2. Employment Period. The Company hereby agrees to continue
-----------------
the Executive in its employ, subject to the terms and conditions of this
Agreement, for the period commencing on the Effective Date and ending on the
third anniversary of the Effective Date (the "Employment Period"). The
Employment Period shall terminate upon the Executive's termination of employment
for any reason.
Section 3. Terms of Employment. (a) Position and Duties. (1) During
------------------- -------------------
the Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the 120-day period
immediately preceding the Effective Date and (B) the Executive's services shall
be performed at the office where the Executive was employed immediately
preceding the Effective Date or at any other location less than 35 miles from
such office.
(2) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period, it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that, to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation. (1) Base Salary. During the Employment Period, the
------------ -----------
Executive shall receive an annual base salary (the "Annual Base Salary") at an
annual rate at least equal to 12 times the highest monthly base salary paid or
payable, including any base salary that has been earned but deferred, to the
Executive by the Company and the Affiliated Companies in respect of the 12-month
period immediately preceding the month in which the Effective Date occurs. The
Annual Base Salary shall be paid at such intervals as the Company pays executive
salaries generally. During the Employment Period, the Annual Base Salary shall
be reviewed at least annually, beginning no more than 12 months after the last
salary increase awarded to the Executive prior to the Effective Date. Any
increase in the Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. The Annual Base Salary shall
not be reduced after any such increase and the term "Annual Base Salary" shall
refer to the Annual Base Salary as so increased.
3
<PAGE>
(2) Annual Bonus. In addition to the Annual Base Salary, the Executive
shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (the "Annual Bonus") in cash at least equal to the Recent Annual
Bonus. "Recent Annual Bonus" shall mean the Executive's highest bonus earned
under the Company's 1997 Management Incentive Plan, or any comparable bonus
under any predecessor or successor plan, for the last three full fiscal years
prior to the Effective Date (or for such lesser number of full fiscal years
prior to the Effective Date for which the Executive was eligible to earn such a
bonus, and annualized in the case of any bonus earned for a partial fiscal
year). Notwithstanding the foregoing, the "Recent Annual Bonus" shall mean the
amount determined by multiplying (i) the Executive's target annual bonus
percentage in effect for the fiscal year in which the Effective Date occurs
times (ii) the Annual Base Salary, if that amount is higher than the amount
determined pursuant to the preceding sentence, or if the Executive has not been
eligible to earn such a bonus for any period prior to the Effective Date. Each
such Annual Bonus shall be paid no later than the end of the third month of the
fiscal year next following the fiscal year for which the Annual Bonus is
awarded, unless the Executive shall elect to defer the receipt of such Annual
Bonus.
(3) Incentive, Savings and Retirement Plans. During the Employment
---------------------------------------
Period, the Executive shall be entitled to participate in all cash incentive,
equity incentive, savings and retirement plans, practices, policies, and
programs applicable generally to other peer executives of the Company and the
Affiliated Companies, but in no event shall such plans, practices, policies and
programs provide the Executive with incentive opportunities (measured with
respect to both regular and special incentive opportunities, to the extent, if
any, that such distinction is applicable), savings opportunities and retirement
benefit opportunities, in each case, less favorable, in the aggregate, than the
most favorable of those provided by the Company and the Affiliated Companies for
the Executive under such plans, practices, policies and programs as in effect at
any time during the 120-day period immediately preceding the Effective Date or,
if more favorable to the Executive, those provided generally at any time after
the Effective Date to other peer executives of the Company and the Affiliated
Companies.
(4) Welfare Benefit Plans. During the Employment Period, the Executive
---------------------
and/or the Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and the Affiliated
Companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other peer
executives of the Company and the Affiliated Companies, but in no event shall
such plans, practices, policies and programs provide the Executive with benefits
that are less favorable, in the aggregate, than the most favorable of such
plans, practices, policies and programs in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and the Affiliated
Companies.
(5) Expenses. During the Employment Period, the Executive shall be
--------
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the most favorable policies, practices and
procedures of the Company and the Affiliated Companies in effect for the
Executive at any time during the 120-day period
4
<PAGE>
immediately preceding the Effective Date or, if more favorable to the Executive,
as in effect generally at any time thereafter with respect to other peer
executives of the Company and the Affiliated Companies.
(6) Fringe Benefits. During the Employment Period, the Executive shall
---------------
be entitled to fringe benefits, including, without limitation, tax and financial
planning services and, if applicable, payment of club dues and use of an
automobile and payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company and the
Affiliated Companies in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and the Affiliated Companies.
(7) Office and Support Staff. During the Employment Period, the
------------------------
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to secretarial and other assistance, at
least equal to the most favorable of the foregoing provided to the Executive by
the Company and the Affiliated Companies at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
as provided generally at any time thereafter with respect to other peer
executives of the Company and the Affiliated Companies.
(8) Vacation. During the Employment Period, the Executive shall be
--------
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and the Affiliated Companies as in effect
for the Executive at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer executives of the
Company and the Affiliated Companies.
Section 4. Termination of Employment. (a) Death or Disability. The
------------------------- -------------------
Executive's employment shall terminate automatically if the Executive dies
during the Employment Period. If the Company determines in good faith that the
Disability (as defined herein) of the Executive has occurred during the
Employment Period (pursuant to the definition of "Disability"), it may give to
the Executive written notice in accordance with Section 11(b) of its intention
to terminate the Executive's employment. In such event, the Executive's
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Executive (the "Disability Effective Date"),
provided that, within the 30 days after such receipt, the Executive shall not
have returned to full-time performance of the Executive's duties. "Disability"
means the absence of the Executive from the Executive's duties with the Company
on a full-time basis for 180 consecutive business days as a result of incapacity
due to mental or physical illness that is determined to be total and permanent
by a physician selected by the Company or its insurers and acceptable to the
Executive or the Executive's legal representative.
(b) Cause. The Company may terminate the Executive's employment during
-----
the Employment Period for Cause. "Cause" means:
5
<PAGE>
(1) the willful and continued failure of the Executive to
perform substantially the Executive's duties (as contemplated by
Section 3(a)(1)(A)) with the Company or any Affiliated Company (other
than any such failure resulting from incapacity due to physical or
mental illness or following the Executive's delivery of a Notice of
Termination for Good Reason), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company that specifically identifies the
manner in which the Board or the Chief Executive Officer of the
Company believes that the Executive has not substantially performed
the Executive's duties, or
(2) the willful engaging by the Executive in illegal conduct
or gross misconduct that is materially and demonstrably injurious to
the Company.
For purposes of this Section 4(b), no act, or failure to act, on the part of the
Executive shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer of
the Company or a senior officer of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests of the
Company. The cessation of employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board (excluding the Executive,
if the Executive is a member of the Board) at a meeting of the Board called and
held for such purpose (after reasonable notice is provided to the Executive and
the Executive is given an opportunity, together with counsel for the Executive,
to be heard before the Board), finding that, in the good faith opinion of the
Board, the Executive is guilty of the conduct described in Section 4(b)(1) or
4(b)(2), and specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be
-----------
terminated by the Executive for Good Reason or by the Executive voluntarily
without Good Reason. "Good Reason" means:
(1) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position (including
status, offices, titles and reporting requirements), authority, duties
or responsibilities as contemplated by Section 3(a), or any other
diminution in such position, authority, duties or responsibilities
(whether or not occurring solely as a result of the Company's ceasing
to be a publicly traded entity), excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith
and that is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(2) any failure by the Company to comply with any of the
provisions of Section 3(b), other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and that is remedied by
the Company promptly after receipt of notice thereof given by the
Executive;
6
<PAGE>
(3) the Company's requiring the Executive (i) to be based at
any office or location other than as provided in Section 3(a)(1)(B),
(ii) to be based at a location other than the principal executive
offices of the Company if the Executive was employed at such location
immediately preceding the Effective Date, or (iii) to travel on
Company business to a substantially greater extent than required
immediately prior to the Effective Date;
(4) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this
Agreement; or
(5) any failure by the Company to comply with and satisfy
Section 10(c).
For purposes of this Section 4(c), any good faith
determination of Good Reason made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination by the Company
---------------------
for Cause, or by the Executive for Good Reason, shall be communicated by Notice
of Termination to the other party hereto given in accordance with Section 11(b).
"Notice of Termination" means a written notice that (1) indicates the specific
termination provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated, and (3) if the Date of Termination (as defined herein)
is other than the date of receipt of such notice, specifies the Date of
Termination (which Date of Termination shall be not more than 30 days after the
giving of such notice). The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance that contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's respective rights hereunder.
(e) Date of Termination. "Date of Termination" means (1) if
-------------------
the Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified in the Notice of Termination, (which date shall not be
more than 30 days after the giving of such notice), as the case may be, (2) if
the Executive's employment is terminated by the Company other than for Cause or
Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination, and (3) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
Section 5. Obligations of the Company upon Termination. (a)
-------------------------------------------
Good Reason; Other Than for Cause, Death or Disability. If, during the
- ------------------------------------------------------
Employment Period, the Company terminates the Executive's employment other than
for Cause or Disability or the Executive terminates employment for Good Reason:
(1) the Company shall pay to the Executive, in a lump sum in
cash within 30 days after the Date of Termination, the aggregate of
the following amounts:
7
<PAGE>
(A) the sum of (i) the Executive's Annual Base Salary
through the Date of Termination to the extent not theretofore paid,
(ii) the product of (x) the higher of (I) the Recent Annual Bonus and
(II) the Annual Bonus paid or payable, including any bonus or portion
thereof that has been earned but deferred (and annualized for any
fiscal year consisting of less than 12 full months or during which the
Executive was employed for less than 12 full months), for the most
recently completed fiscal year during the Employment Period, if any
(such higher amount, the "Highest Annual Bonus") and (y) a fraction,
the numerator of which is the number of days in the current fiscal
year through the Date of Termination and the denominator of which is
365, and (iii) any accrued vacation pay, in each case, to the extent
not theretofore paid (the sum of the amounts described in subclauses
(i), (ii) and (iii), the "Accrued Obligations");
(B) the amount equal to the product of (i) three and (ii)
the sum of (x) the Executive's Annual Base Salary and (y) the Highest
Annual Bonus; and
(C) an amount equal to the excess of (i) the actuarial
equivalent of the benefit under the Company's qualified defined
benefit retirement plan (the "Retirement Plan") (utilizing actuarial
assumptions no less favorable to the Executive than those in effect
under the Retirement Plan immediately prior to the Effective Date) and
any excess or supplemental retirement plan in which the Executive
participates (collectively, the "SERP") that the Executive would
receive if the Executive's employment continued for three years after
the Date of Termination, assuming for this purpose that all accrued
benefits are fully vested and assuming that the Executive's
compensation in each of the three years is that required by Sections
3(b)(1) and 3(b)(2), over (ii) the actuarial equivalent of the
Executive's actual benefit (paid or payable), if any, under the
Retirement Plan and the SERP as of the Date of Termination;
(2) for three years after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the appropriate plan, program,
practice or policy, the Company shall continue welfare benefits to the Executive
and/or the Executive's family at least equal to those that would have been
provided to them in accordance with the plans, programs, practices and policies
described in Section 3(b)(4) if the Executive's employment had not been
terminated or, if more favorable to the Executive, as in effect generally at any
time thereafter with respect to other peer executives of the Company and the
Affiliated Companies and their families, provided, however, that, if the
Executive becomes reemployed with another employer and is eligible to receive
medical or other welfare benefits under another employer provided plan, the
medical and other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of eligibility. For
purposes of determining eligibility (but not the time of commencement of
benefits) of the Executive for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive shall be considered to have
remained employed until three years after the Date of Termination and to have
retired on the last day of such period;
8
<PAGE>
(3) the Company shall, at its sole expense as incurred,
provide the Executive with outplacement services the scope and
provider of which shall be selected by the Executive in the
Executive's sole discretion provided, that the cost of such
outplacement shall not exceed 30% of the sum of the Executive's Annual
Base Salary and Highest Annual Bonus; and
(4) to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Executive any other amounts
or benefits required to be paid or provided or that the Executive is
eligible to receive under any plan, program, policy or practice or
contract or agreement of the Company and the Affiliated Companies
(such other amounts and benefits, the "Other Benefits").
(b) Death. If the Executive's employment is terminated by reason of
-----
the Executive's death during the Employment Period, the Company shall provide
the Executive's estate or beneficiaries with the Accrued Obligations and the
timely payment or delivery of the Other Benefits, and shall have no other
severance obligations under this Agreement. The Accrued Obligations shall be
paid to the Executive's estate or beneficiary, as applicable, in a lump sum in
cash within 30 days of the Date of Termination. With respect to the provision of
the Other Benefits, the term "Other Benefits" as utilized in this Section 5(b)
shall include, without limitation, and the Executive's estate and/or
beneficiaries shall be entitled to receive, benefits at least equal to the most
favorable benefits provided by the Company and the Affiliated Companies to the
estates and beneficiaries of peer executives of the Company and the Affiliated
Companies under such plans, programs, practices and policies relating to death
benefits, if any, as in effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive's estate and/or the
Executive's beneficiaries, as in effect on the date of the Executive's death
with respect to other peer executives of the Company and the Affiliated
Companies and their beneficiaries.
(c) Disability. If the Executive's employment is terminated by reason
----------
of the Executive's Disability during the Employment Period, the Company shall
provide the Executive with the Accrued Obligations and the timely payment or
delivery of the Other Benefits, and shall have no other severance obligations
under this Agreement. The Accrued Obligations shall be paid to the Executive in
a lump sum in cash within 30 days of the Date of Termination. With respect to
the provision of the Other Benefits, the term "Other Benefits" as utilized in
this Section 6(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable of those generally provided by the Company and the
Affiliated Companies to disabled executives and/or their families in accordance
with such plans, programs, practices and policies relating to disability, if
any, as in effect generally with respect to other peer executives and their
families at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter generally with respect to other peer
executives of the Company and the Affiliated Companies and their families.
(d) Cause; Other Than for Good Reason. If the Executive's employment
---------------------------------
is terminated for Cause during the Employment Period, the Company shall provide
to the Executive (1) the Executive's Annual Base Salary through the Date of
Termination, (2) the
9
<PAGE>
amount of any compensation previously deferred by the Executive, and (3) the
Other Benefits, in each case, to the extent theretofore unpaid, and shall have
no other severance obligations under this Agreement. If the Executive
voluntarily terminates employment during the Employment Period, excluding a
termination for Good Reason, the Company shall provide to the Executive the
Accrued Obligations and the timely payment or delivery of the Other Benefits,
and shall have no other severance obligations under this Agreement. In such
case, all the Accrued Obligations shall be paid to the Executive in a lump sum
in cash within 30 days of the Date of Termination.
Section 6. Non-exclusivity of Rights. Nothing in this Agreement shall
-------------------------
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or the Affiliated Companies
and for which the Executive may qualify, nor, subject to Section 11(f), shall
anything herein limit or otherwise affect such rights as the Executive may have
under any other contract or agreement with the Company or the Affiliated
Companies. Amounts that are vested benefits or that the Executive is otherwise
entitled to receive under any plan, policy, practice or program of or any
contract or agreement with the Company or the Affiliated Companies at or
subsequent to the Date of Termination shall be payable in accordance with such
plan, policy, practice or program or contract or agreement, except as explicitly
modified by this Agreement. Notwithstanding the foregoing, if the Executive
receives payments and benefits pursuant to Section 5(a) of this Agreement, the
Executive shall not be entitled to any severance pay or benefits under any
severance plan, program or policy of the Company and the Affiliated Companies,
unless otherwise specifically provided therein in a specific reference to this
Agreement.
Section 7. Full Settlement. The Company's obligation to make the
---------------
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense, or other claim, right or action that the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement, and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred (within 10 days following the Company's
receipt of an invoice from the Executive), to the full extent permitted by law,
all legal fees and expenses that the Executive may reasonably incur as a result
of any contest (regardless of the outcome thereof) by the Company, the Executive
or others of the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof (including
as a result of any contest by the Executive about the amount of any payment
pursuant to this Agreement), plus, in each case, interest on any delayed payment
at the applicable federal rate provided for in Section 7872(f)(2)(A) of the
Internal Revenue Code of 1986, as amended (the "Code").
Section 8. Certain Additional Payments by the Company.
------------------------------------------
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any Payment
would be subject to the Excise Tax, then the Executive shall be entitled to
receive an additional payment (the "Gross-Up Payment") in an amount such that,
after payment by the Executive of all taxes (and any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes
10
<PAGE>
(and any interest and penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
Notwithstanding the foregoing provisions of this Section 8(a), if it shall be
determined that the Executive is entitled to the Gross-Up Payment, but that the
Parachute Value of all Payments do not exceed 110% of the Safe Harbor Amount,
then no Gross-Up Payment shall be made to the Executive and the amounts payable
under this Agreement shall be reduced so that the Parachute Value of all
Payments, in the aggregate, equals the Safe Harbor Amount. The reduction of the
amounts payable hereunder, if applicable, shall be made by first reducing the
payments under Section 5(a)(i)(B), unless an alternative method of reduction is
elected by the Executive, and in any event shall be made in such a manner as to
maximize the Value of all Payments actually made to the Executive. For purposes
of reducing the Payments to the Safe Harbor Amount, only amounts payable under
this Agreement (and no other Payments) shall be reduced. If the reduction of the
amount payable under this Agreement would not result in a reduction of the
Parachute Value of all Payments to the Safe Harbor Amount, no amounts payable
under the Agreement shall be reduced pursuant to this Section 8(a). The
Company's obligation to make Gross-Up Payments under this Section 8 shall not be
conditioned upon the Executive's termination of employment.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether and when a Gross-Up
Payment is required, the amount of such Gross-Up Payment and the assumptions to
be utilized in arriving at such determination, shall be made by Ernst & Young,
LLP, or such other nationally recognized certified public accounting firm as may
be designated by the Executive (the "Accounting Firm"). The Accounting Firm
shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the receipt of notice from the Executive
that there has been a Payment or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change of Control, the
Executive may appoint another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 8, shall be paid by the Company to the Executive within
5 days of the receipt of the Accounting Firm's determination. Any determination
by the Accounting Firm shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments that will not have been made by the Company
should have been made (the "Underpayment"), consistent with the calculations
required to be made hereunder. In the event the Company exhausts its remedies
pursuant to Section 8(c) and the Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid
by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable, but no later than 10 business days after the Executive is informed
in writing of such claim. The Executive shall apprise the Company of the nature
of such claim and the date on which such claim is requested
11
<PAGE>
to be paid. The Executive shall not pay such claim prior to the expiration of
the 30-day period following the date on which the Executive gives such notice to
the Company (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that the Company desires to
contest such claim, the Executive shall:
(1) give the Company any information reasonably requested by
the Company relating to such claim,
(2) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the
Company,
(3) cooperate with the Company in good faith in order
effectively to contest such claim, and
(4) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest, and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties) imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this Section 8(c),
the Company shall control all proceedings taken in connection with such contest,
and, at its sole discretion, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the applicable taxing
authority in respect of such claim and may, at its sole discretion, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that, if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis, and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties) imposed with respect to such
advance or with respect to any imputed income in connection with such advance;
and provided, further, that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which the Gross-Up Payment would be payable hereunder,
and the Executive shall be entitled to settle or contest, as the case may be,
any other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 8(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the
12
<PAGE>
requirements of Section 8(c)) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 8(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
(e) Notwithstanding any other provision of this Section 8, the Company
may, in its sole discretion, withhold and pay over to the Internal Revenue
Service or any other applicable taxing authority, for the benefit of the
Executive, all or any portion of the Gross-Up Payment, and the Executive hereby
consents to such withholding.
(f) Definitions. The following terms shall have the following meanings
for purposes of this Section 8.
(i) "Excise Tax" shall mean the excise tax imposed by Section 4999 of
the Code, together with any interest or penalties imposed with respect to such
excise tax.
(ii) The "Net After-Tax Amount" of a Payment shall mean the Value of a
Payment net of all taxes imposed on the Executive with respect thereto under
Sections 1 and 4999 of the Code and applicable state and local law, determined
by applying the highest marginal rates that are expected to apply to the
Executive's taxable income for the taxable year in which the Payment is made.
(iii) "Parachute Value" of a Payment shall mean the present value as
of the date of the change of control for purposes of Section 280G of the Code of
the portion of such Payment that constitutes a "parachute payment" under Section
280G(b)(2), as determined by the Accounting Firm for purposes of determining
whether and to what extent the Excise Tax will apply to such Payment.
(iv) A "Payment" shall mean any payment or distribution in the nature
of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for
the benefit of the Executive, whether paid or payable pursuant to this Agreement
or otherwise.
(v) The "Safe Harbor Amount" means the maximum Parachute Value of all
Payments that the Executive can receive without any Payments being subject to
the Excise Tax.
(vi) "Value" of a Payment shall mean the economic present value of a
Payment as of the date of the change of control for purposes of Section 280G of
the Code, as determined by the Accounting Firm using the discount rate required
by Section 280G(d)(4) of the Code.
Section 9. Confidential Information. The Executive shall hold in a
------------------------
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or the Affiliated
Companies, and their respective businesses, which information, knowledge or data
shall have been obtained by the Executive during the Executive's employment by
the Company or the Affiliated Companies and which
13
<PAGE>
information, knowledge or data shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those persons designated by the Company. In no event shall an asserted
violation of the provisions of this Section 9 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement.
Section 10. Successors. (a) This Agreement is personal to the
----------
Executive, and, without the prior written consent of the Company, shall not be
assignable by the Executive other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns. Except as provided in Section 10(c),
without the prior written consent of the Executive this Agreement shall not be
assignable by the Company.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. "Company" means the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid that assumes and agrees to
perform this Agreement by operation of law or otherwise.
Section 11. Miscellaneous. (a) This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New Jersey, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified other than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
14
<PAGE>
if to the Executive:
--------------------
(name)
(address)
if to the Company:
Becton, Dickinson and Company
1 Becton Drive
Franklin Lakes, NJ 07417-1880
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such United States federal, state or local or foreign taxes as shall
be required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver
of such provision or right or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section 1(a), prior to the Effective Date, the Executive's
employment may be terminated by either the Executive or the Company at any time
prior to the Effective Date, in which case the Executive shall have no further
rights under this Agreement. From and after the Effective Date, except as
specifically provided herein, this Agreement shall supersede any other agreement
between the parties with respect to the subject matter hereof.
15
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from the Board, the Company has caused
these presents to be executed in its name on its behalf, all as of the day and
year first above written.
--------------------------------
(name)
BECTON, DICKINSON AND COMPANY
By
---------------------------------
Bridget M. Healy
Vice President and Secretary
16
<PAGE>
Exhibit 10(b)(ii)
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of the 24th day of April, 2000 (this "Agreement"),
by and between Becton, Dickinson and Company, a New Jersey corporation (the
"Company"), and (name) (the "Executive").
WHEREAS, the Board of Directors of the Company (the "Board"), has
determined that it is in the best interests of the Company and its shareholders
to assure that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined herein). The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the current Company and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
that ensure that the compensation and benefits expectations of the Executive
will be satisfied and that are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
Section 1. Certain Definitions. (a) "Effective Date" means the first
-------------------
date during the Change of Control Period (as defined herein) on which a Change
of Control occurs. Notwithstanding anything in this Agreement to the contrary,
if a Change of Control occurs and if the Executive's employment with the Company
is terminated prior to the date on which the Change of Control occurs, and if it
is reasonably demonstrated by the Executive that such termination of employment
(1) was at the request of a third party that has taken steps reasonably
calculated to effect a Change of Control or (2) otherwise arose in connection
with or anticipation of a Change of Control, then "Effective Date" means the
date immediately prior to the date of such termination of employment.
(b) "Change of Control Period" means the period commencing on the date
hereof and ending on the third anniversary of the date hereof; provided,
however, that, commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual anniversary
thereof, the "Renewal Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to terminate three years
from such Renewal Date, unless, at least 60 days prior to the Renewal Date, the
Company shall give notice to the Executive that the Change of Control Period
shall not be so extended.
(c) "Affiliated Company" means any company controlled by, controlling
or under common control with the Company.
(d) "Change of Control" means:
(1) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of
either (A) the then-outstanding shares of common
<PAGE>
stock of the Company (the "Outstanding Company Common Stock") or (B) the
combined voting power of the then-outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that, for purposes of this
Section 1(d), the following acquisitions shall not constitute a Change of
Control: (i) any acquisition directly from the Company, (ii) any acquisition by
the Company, (iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any affiliated company, (iv)
any acquisition by any corporation pursuant to a transaction that complies with
Sections 1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C), or (v) any acquisition that the
Board determines, in good faith, was inadvertent, if the acquiring Person
divests as promptly as practicable a sufficient amount of the Outstanding
Company Common Stock and/or the Outstanding Company Voting Securities, as
applicable, to reverse such acquisition of 25% or more thereof.
(2) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board.
(3) Consummation of a reorganization, merger, consolidation or sale or
other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (A) all or substantially all of the individuals and entities that
were the beneficial owners of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 60% of the
then-outstanding shares of common stock and the combined voting power of the
then-outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation that, as a result of
such transaction, owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership immediately prior to such Business
Combination of the Outstanding Company Common Stock and the Outstanding Company
Voting Securities, as the case may be, (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 25% or more of,
respectively, the then-outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then- outstanding voting securities of such corporation, except to the extent
that such ownership existed prior to the Business Combination, and (C) at least
a majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement or of the action of the Board
providing for such Business Combination; or
2
<PAGE>
(4) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
Section 2. Employment Period. The Company hereby agrees to continue
-----------------
the Executive in its employ, subject to the terms and conditions of this
Agreement, for the period commencing on the Effective Date and ending on the
third anniversary of the Effective Date (the "Employment Period"). The
Employment Period shall terminate upon the Executive's termination of employment
for any reason.
Section 3. Terms of Employment. (a) Position and Duties. (1) During
------------------- -------------------
the Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the 120-day period
immediately preceding the Effective Date and (B) the Executive's services shall
be performed at the office where the Executive was employed immediately
preceding the Effective Date or at any other location less than 35 miles from
such office.
(2) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period, it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that, to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation. (1) Base Salary. During the Employment Period, the
------------ -----------
Executive shall receive an annual base salary (the "Annual Base Salary") at an
annual rate at least equal to 12 times the highest monthly base salary paid or
payable, including any base salary that has been earned but deferred, to the
Executive by the Company and the Affiliated Companies in respect of the 12-month
period immediately preceding the month in which the Effective Date occurs. The
Annual Base Salary shall be paid at such intervals as the Company pays executive
salaries generally. During the Employment Period, the Annual Base Salary shall
be reviewed at least annually, beginning no more than 12 months after the last
salary increase awarded to the Executive prior to the Effective Date. Any
increase in the Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. The Annual Base Salary shall
not be reduced after any such increase and the term "Annual Base Salary" shall
refer to the Annual Base Salary as so increased.
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(2) Annual Bonus. In addition to the Annual Base Salary, the Executive
------------
shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (the "Annual Bonus") in cash at least equal to the Recent Annual
Bonus. "Recent Annual Bonus" shall mean the Executive's highest bonus earned
under the Company's 1997 Management Incentive Plan, or any comparable bonus
under any predecessor or successor plan, for the last three full fiscal years
prior to the Effective Date (or for such lesser number of full fiscal years
prior to the Effective Date for which the Executive was eligible to earn such a
bonus, and annualized in the case of any bonus earned for a partial fiscal
year). Notwithstanding the foregoing, the "Recent Annual Bonus" shall mean the
amount determined by multiplying (i) the Executive's target annual bonus
percentage in effect for the fiscal year in which the Effective Date occurs
times (ii) the Annual Base Salary, if that amount is higher than the amount
determined pursuant to the preceding sentence, or if the Executive has not been
eligible to earn such a bonus for any period prior to the Effective Date. Each
such Annual Bonus shall be paid no later than the end of the third month of the
fiscal year next following the fiscal year for which the Annual Bonus is
awarded, unless the Executive shall elect to defer the receipt of such Annual
Bonus.
(3) Incentive, Savings and Retirement Plans. During the Employment
---------------------------------------
Period, the Executive shall be entitled to participate in all cash incentive,
equity incentive, savings and retirement plans, practices, policies, and
programs applicable generally to other peer executives of the Company and the
Affiliated Companies, but in no event shall such plans, practices, policies and
programs provide the Executive with incentive opportunities (measured with
respect to both regular and special incentive opportunities, to the extent, if
any, that such distinction is applicable), savings opportunities and retirement
benefit opportunities, in each case, less favorable, in the aggregate, than the
most favorable of those provided by the Company and the Affiliated Companies for
the Executive under such plans, practices, policies and programs as in effect at
any time during the 120-day period immediately preceding the Effective Date or,
if more favorable to the Executive, those provided generally at any time after
the Effective Date to other peer executives of the Company and the Affiliated
Companies.
(4) Welfare Benefit Plans. During the Employment Period, the Executive
---------------------
and/or the Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and the Affiliated
Companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other peer
executives of the Company and the Affiliated Companies, but in no event shall
such plans, practices, policies and programs provide the Executive with benefits
that are less favorable, in the aggregate, than the most favorable of such
plans, practices, policies and programs in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and the Affiliated
Companies.
(5) Expenses. During the Employment Period, the Executive shall be
--------
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the most favorable policies, practices and
procedures of the Company and the Affiliated Companies in effect for the
Executive at any time during the 120-day period
4
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immediately preceding the Effective Date or, if more favorable to the Executive,
as in effect generally at any time thereafter with respect to other peer
executives of the Company and the Affiliated Companies.
(6) Fringe Benefits. During the Employment Period, the Executive shall
---------------
be entitled to fringe benefits, including, without limitation, tax and financial
planning services and, if applicable, payment of club dues and use of an
automobile and payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company and the
Affiliated Companies in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and the Affiliated Companies.
(7) Office and Support Staff. During the Employment Period, the
------------------------
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to secretarial and other assistance, at
least equal to the most favorable of the foregoing provided to the Executive by
the Company and the Affiliated Companies at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
as provided generally at any time thereafter with respect to other peer
executives of the Company and the Affiliated Companies.
(8) Vacation. During the Employment Period, the Executive shall be
--------
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and the Affiliated Companies as in effect
for the Executive at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer executives of the
Company and the Affiliated Companies.
Section 4. Termination of Employment. (a) Death or Disability. The
------------------------- -------------------
Executive's employment shall terminate automatically if the Executive dies
during the Employment Period. If the Company determines in good faith that the
Disability (as defined herein) of the Executive has occurred during the
Employment Period (pursuant to the definition of "Disability"), it may give to
the Executive written notice in accordance with Section 11(b) of its intention
to terminate the Executive's employment. In such event, the Executive's
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Executive (the "Disability Effective Date"),
provided that, within the 30 days after such receipt, the Executive shall not
have returned to full-time performance of the Executive's duties. "Disability"
means the absence of the Executive from the Executive's duties with the Company
on a full-time basis for 180 consecutive business days as a result of incapacity
due to mental or physical illness that is determined to be total and permanent
by a physician selected by the Company or its insurers and acceptable to the
Executive or the Executive's legal representative.
(b) Cause. The Company may terminate the Executive's employment during
-----
the Employment Period for Cause. "Cause" means:
5
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(1) the willful and continued failure of the Executive to
perform substantially the Executive's duties (as contemplated by
Section 3(a)(1)(A)) with the Company or any Affiliated Company (other
than any such failure resulting from incapacity due to physical or
mental illness or following the Executive's delivery of a Notice of
Termination for Good Reason), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company that specifically identifies the
manner in which the Board or the Chief Executive Officer of the
Company believes that the Executive has not substantially performed
the Executive's duties, or
(2) the willful engaging by the Executive in illegal conduct
or gross misconduct that is materially and demonstrably injurious to
the Company.
For purposes of this Section 4(b), no act, or failure to act, on the part of the
Executive shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer of
the Company or a senior officer of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests of the
Company. The cessation of employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board (excluding the Executive,
if the Executive is a member of the Board) at a meeting of the Board called and
held for such purpose (after reasonable notice is provided to the Executive and
the Executive is given an opportunity, together with counsel for the Executive,
to be heard before the Board), finding that, in the good faith opinion of the
Board, the Executive is guilty of the conduct described in Section 4(b)(1) or
4(b)(2), and specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated by the
-----------
Executive for Good Reason or by the Executive voluntarily without Good Reason.
"Good Reason" means:
(1) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position (including
status, offices, titles and reporting requirements), authority, duties
or responsibilities as contemplated by Section 3(a), or any other
diminution in such position, authority, duties or responsibilities
(whether or not occurring solely as a result of the Company's ceasing
to be a publicly traded entity), excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith
and that is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(2) any failure by the Company to comply with any of the
provisions of Section 3(b), other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and that is remedied by
the Company promptly after receipt of notice thereof given by the
Executive;
6
<PAGE>
(3) the Company's requiring the Executive (i) to be based at
any office or location other than as provided in Section 3(a)(1)(B),
(ii) to be based at a location other than the principal executive
offices of the Company if the Executive was employed at such location
immediately preceding the Effective Date, or (iii) to travel on
Company business to a substantially greater extent than required
immediately prior to the Effective Date;
(4) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this
Agreement; or
(5) any failure by the Company to comply with and satisfy
Section 10(c). For purposes of this Section 4(c), any good faith
determination of Good Reason made by the Executive shall be
conclusive.
(d) Notice of Termination. Any termination by the Company for Cause,
---------------------
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 11(b).
"Notice of Termination" means a written notice that (1) indicates the specific
termination provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated, and (3) if the Date of Termination (as defined herein)
is other than the date of receipt of such notice, specifies the Date of
Termination (which Date of Termination shall be not more than 30 days after the
giving of such notice). The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance that contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's respective rights hereunder.
(e) Date of Termination. "Date of Termination" means (1) if the
-------------------
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified in the Notice of Termination, (which date shall not be
more than 30 days after the giving of such notice), as the case may be, (2) if
the Executive's employment is terminated by the Company other than for Cause or
Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination, and (3) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
Section 5. Obligations of the Company upon Termination. (a) Good
------------------------------------------- ----
Reason; Other Than for Cause, Death or Disability. If, during the Employment
- -------------------------------------------------
Period, the Company terminates the Executive's employment other than for Cause
or Disability or the Executive terminates employment for Good Reason:
(1) the Company shall pay to the Executive, in a lump sum in
cash within 30 days after the Date of Termination, the aggregate of
the following amounts:
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(A) the sum of (i) the Executive's Annual Base Salary
through the Date of Termination to the extent not theretofore paid,
(ii) the product of (x) the higher of (I) the Recent Annual Bonus and
(II) the Annual Bonus paid or payable, including any bonus or portion
thereof that has been earned but deferred (and annualized for any
fiscal year consisting of less than 12 full months or during which the
Executive was employed for less than 12 full months), for the most
recently completed fiscal year during the Employment Period, if any
(such higher amount, the "Highest Annual Bonus") and (y) a fraction,
the numerator of which is the number of days in the current fiscal
year through the Date of Termination and the denominator of which is
365, and (iii) any accrued vacation pay, in each case, to the extent
not theretofore paid (the sum of the amounts described in subclauses
(i), (ii) and (iii), the "Accrued Obligations");
(B) the amount equal to the product of (i) two and (ii) the
sum of (x) the Executive's Annual Base Salary and (y) the Highest
Annual Bonus; and
(C) an amount equal to the excess of (i) the actuarial
equivalent of the benefit under the Company's qualified defined
benefit retirement plan (the "Retirement Plan") (utilizing actuarial
assumptions no less favorable to the Executive than those in effect
under the Retirement Plan immediately prior to the Effective Date) and
any excess or supplemental retirement plan in which the Executive
participates (collectively, the "SERP") that the Executive would
receive if the Executive's employment continued for two years after
the Date of Termination, assuming for this purpose that all accrued
benefits are fully vested and assuming that the Executive's
compensation in each of the three years is that required by Sections
3(b)(1) and 3(b)(2), over (ii) the actuarial equivalent of the
Executive's actual benefit (paid or payable), if any, under the
Retirement Plan and the SERP as of the Date of Termination;
(2) for two years after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the appropriate plan, program,
practice or policy, the Company shall continue welfare benefits to the Executive
and/or the Executive's family at least equal to those that would have been
provided to them in accordance with the plans, programs, practices and policies
described in Section 3(b)(4) if the Executive's employment had not been
terminated or, if more favorable to the Executive, as in effect generally at any
time thereafter with respect to other peer executives of the Company and the
Affiliated Companies and their families, provided, however, that, if the
Executive becomes reemployed with another employer and is eligible to receive
medical or other welfare benefits under another employer provided plan, the
medical and other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of eligibility. For
purposes of determining eligibility (but not the time of commencement of
benefits) of the Executive for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive shall be considered to have
remained employed until three years after the Date of Termination and to have
retired on the last day of such period;
8
<PAGE>
(3) the Company shall, at its sole expense as incurred,
provide the Executive with outplacement services the scope and
provider of which shall be selected by the Executive in the
Executive's sole discretion provided, that the cost of such
outplacement shall not exceed 30% of the sum of the Executive's Annual
Base Salary and Highest Annual Bonus; and
(4) to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Executive any other amounts
or benefits required to be paid or provided or that the Executive is
eligible to receive under any plan, program, policy or practice or
contract or agreement of the Company and the Affiliated Companies
(such other amounts and benefits, the "Other Benefits").
(b) Death. If the Executive's employment is terminated by reason of
-----
the Executive's death during the Employment Period, the Company shall provide
the Executive's estate or beneficiaries with the Accrued Obligations and the
timely payment or delivery of the Other Benefits, and shall have no other
severance obligations under this Agreement. The Accrued Obligations shall be
paid to the Executive's estate or beneficiary, as applicable, in a lump sum in
cash within 30 days of the Date of Termination. With respect to the provision of
the Other Benefits, the term "Other Benefits" as utilized in this Section 5(b)
shall include, without limitation, and the Executive's estate and/or
beneficiaries shall be entitled to receive, benefits at least equal to the most
favorable benefits provided by the Company and the Affiliated Companies to the
estates and beneficiaries of peer executives of the Company and the Affiliated
Companies under such plans, programs, practices and policies relating to death
benefits, if any, as in effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive's estate and/or the
Executive's beneficiaries, as in effect on the date of the Executive's death
with respect to other peer executives of the Company and the Affiliated
Companies and their beneficiaries.
(c) Disability. If the Executive's employment is terminated by reason
----------
of the Executive's Disability during the Employment Period, the Company shall
provide the Executive with the Accrued Obligations and the timely payment or
delivery of the Other Benefits, and shall have no other severance obligations
under this Agreement. The Accrued Obligations shall be paid to the Executive in
a lump sum in cash within 30 days of the Date of Termination. With respect to
the provision of the Other Benefits, the term "Other Benefits" as utilized in
this Section 6(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable of those generally provided by the Company and the
Affiliated Companies to disabled executives and/or their families in accordance
with such plans, programs, practices and policies relating to disability, if
any, as in effect generally with respect to other peer executives and their
families at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter generally with respect to other peer
executives of the Company and the Affiliated Companies and their families.
(d) Cause; Other Than for Good Reason. If the Executive's employment
---------------------------------
is terminated for Cause during the Employment Period, the Company shall provide
to the Executive (1) the Executive's Annual Base Salary through the Date of
Termination, (2) the
9
<PAGE>
amount of any compensation previously deferred by the Executive, and (3) the
Other Benefits, in each case, to the extent theretofore unpaid, and shall have
no other severance obligations under this Agreement. If the Executive
voluntarily terminates employment during the Employment Period, excluding a
termination for Good Reason, the Company shall provide to the Executive the
Accrued Obligations and the timely payment or delivery of the Other Benefits,
and shall have no other severance obligations under this Agreement. In such
case, all the Accrued Obligations shall be paid to the Executive in a lump sum
in cash within 30 days of the Date of Termination.
Section 6. Non-exclusivity of Rights. Nothing in this Agreement shall
-------------------------
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or the Affiliated Companies
and for which the Executive may qualify, nor, subject to Section 11(f), shall
anything herein limit or otherwise affect such rights as the Executive may have
under any other contract or agreement with the Company or the Affiliated
Companies. Amounts that are vested benefits or that the Executive is otherwise
entitled to receive under any plan, policy, practice or program of or any
contract or agreement with the Company or the Affiliated Companies at or
subsequent to the Date of Termination shall be payable in accordance with such
plan, policy, practice or program or contract or agreement, except as explicitly
modified by this Agreement. Notwithstanding the foregoing, if the Executive
receives payments and benefits pursuant to Section 5(a) of this Agreement, the
Executive shall not be entitled to any severance pay or benefits under any
severance plan, program or policy of the Company and the Affiliated Companies,
unless otherwise specifically provided therein in a specific reference to this
Agreement.
Section 7. Full Settlement. The Company's obligation to make the
---------------
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense, or other claim, right or action that the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement, and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred (within 10 days following the Company's
receipt of an invoice from the Executive), to the full extent permitted by law,
all legal fees and expenses that the Executive may reasonably incur as a result
of any contest (regardless of the outcome thereof) by the Company, the Executive
or others of the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof (including
as a result of any contest by the Executive about the amount of any payment
pursuant to this Agreement), plus, in each case, interest on any delayed payment
at the applicable federal rate provided for in Section 7872(f)(2)(A) of the
Internal Revenue Code of 1986, as amended (the "Code").
Section 8. Certain Additional Payments by the Company.
------------------------------------------
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any Payment
would be subject to the Excise Tax, then the Executive shall be entitled to
receive an additional payment (the "Gross-Up Payment") in an amount such that,
after payment by the Executive of all taxes (and any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes
10
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(and any interest and penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
Notwithstanding the foregoing provisions of this Section 8(a), if it shall be
determined that the Executive is entitled to the Gross-Up Payment, but that the
Parachute Value of all Payments do not exceed 110% of the Safe Harbor Amount,
then no Gross-Up Payment shall be made to the Executive and the amounts payable
under this Agreement shall be reduced so that the Parachute Value of all
Payments, in the aggregate, equals the Safe Harbor Amount. The reduction of the
amounts payable hereunder, if applicable, shall be made by first reducing the
payments under Section 5(a)(i)(B), unless an alternative method of reduction is
elected by the Executive, and in any event shall be made in such a manner as to
maximize the Value of all Payments actually made to the Executive. For purposes
of reducing the Payments to the Safe Harbor Amount, only amounts payable under
this Agreement (and no other Payments) shall be reduced. If the reduction of the
amount payable under this Agreement would not result in a reduction of the
Parachute Value of all Payments to the Safe Harbor Amount, no amounts payable
under the Agreement shall be reduced pursuant to this Section 8(a). The
Company's obligation to make Gross-Up Payments under this Section 8 shall not be
conditioned upon the Executive's termination of employment.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether and when a Gross-Up
Payment is required, the amount of such Gross-Up Payment and the assumptions to
be utilized in arriving at such determination, shall be made by Ernst & Young,
LLP, or such other nationally recognized certified public accounting firm as may
be designated by the Executive (the "Accounting Firm"). The Accounting Firm
shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the receipt of notice from the Executive
that there has been a Payment or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change of Control, the
Executive may appoint another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 8, shall be paid by the Company to the Executive within
5 days of the receipt of the Accounting Firm's determination. Any determination
by the Accounting Firm shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments that will not have been made by the Company
should have been made (the "Underpayment"), consistent with the calculations
required to be made hereunder. In the event the Company exhausts its remedies
pursuant to Section 8(c) and the Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid
by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable, but no later than 10 business days after the Executive is informed
in writing of such claim. The Executive shall apprise the Company of the nature
of such claim and the date on which such claim is requested
11
<PAGE>
to be paid. The Executive shall not pay such claim prior to the expiration of
the 30-day period following the date on which the Executive gives such notice to
the Company (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that the Company desires to
contest such claim, the Executive shall:
(1) give the Company any information reasonably requested by
the Company relating to such claim,
(2) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the
Company,
(3) cooperate with the Company in good faith in order
effectively to contest such claim, and
(4) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest, and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties) imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this Section 8(c),
the Company shall control all proceedings taken in connection with such contest,
and, at its sole discretion, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the applicable taxing
authority in respect of such claim and may, at its sole discretion, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that, if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis, and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties) imposed with respect to such
advance or with respect to any imputed income in connection with such advance;
and provided, further, that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which the Gross-Up Payment would be payable hereunder,
and the Executive shall be entitled to settle or contest, as the case may be,
any other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 8(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the
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<PAGE>
requirements of Section 8(c)) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 8(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
(e) Notwithstanding any other provision of this Section 8, the Company
may, in its sole discretion, withhold and pay over to the Internal Revenue
Service or any other applicable taxing authority, for the benefit of the
Executive, all or any portion of the Gross-Up Payment, and the Executive hereby
consents to such withholding.
(f) Definitions. The following terms shall have the following meanings
for purposes of this Section 8.
(i) "Excise Tax" shall mean the excise tax imposed by Section 4999 of
the Code, together with any interest or penalties imposed with respect to such
excise tax.
(ii) The "Net After-Tax Amount" of a Payment shall mean the Value of a
Payment net of all taxes imposed on the Executive with respect thereto under
Sections 1 and 4999 of the Code and applicable state and local law, determined
by applying the highest marginal rates that are expected to apply to the
Executive's taxable income for the taxable year in which the Payment is made.
(iii) "Parachute Value" of a Payment shall mean the present value as
of the date of the change of control for purposes of Section 280G of the Code of
the portion of such Payment that constitutes a "parachute payment" under Section
280G(b)(2), as determined by the Accounting Firm for purposes of determining
whether and to what extent the Excise Tax will apply to such Payment.
(iv) A "Payment" shall mean any payment or distribution in the nature
of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for
the benefit of the Executive, whether paid or payable pursuant to this Agreement
or otherwise.
(v) The "Safe Harbor Amount" means the maximum Parachute Value of all
Payments that the Executive can receive without any Payments being subject to
the Excise Tax.
(vi) "Value" of a Payment shall mean the economic present value of a
Payment as of the date of the change of control for purposes of Section 280G of
the Code, as determined by the Accounting Firm using the discount rate required
by Section 280G(d)(4) of the Code.
Section 9. Confidential Information. The Executive shall hold in a
------------------------
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or the Affiliated
Companies, and their respective businesses, which information, knowledge or data
shall have been obtained by the Executive during the Executive's employment by
the Company or the Affiliated Companies and which
13
<PAGE>
information, knowledge or data shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those persons designated by the Company. In no event shall an asserted
violation of the provisions of this Section 9 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement.
Section 10. Successors. (a) This Agreement is personal to the
----------
Executive, and, without the prior written consent of the Company, shall not be
assignable by the Executive other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns. Except as provided in Section 10(c),
without the prior written consent of the Executive this Agreement shall not be
assignable by the Company.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. "Company" means the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid that assumes and agrees to
perform this Agreement by operation of law or otherwise.
Section 11. Miscellaneous. (a) This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New Jersey, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified other than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
14
<PAGE>
if to the Executive:
--------------------
(name)
(address)
if to the Company:
Becton, Dickinson and Company
1 Becton Drive
Franklin Lakes, NJ 07417-1880
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such United States federal, state or local or foreign taxes as shall
be required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver
of such provision or right or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section 1(a), prior to the Effective Date, the Executive's
employment may be terminated by either the Executive or the Company at any time
prior to the Effective Date, in which case the Executive shall have no further
rights under this Agreement. From and after the Effective Date, except as
specifically provided herein, this Agreement shall supersede any other agreement
between the parties with respect to the subject matter hereof.
15
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from the Board, the Company has caused
these presents to be executed in its name on its behalf, all as of the day and
year first above written.
---------------------------------
(name)
BECTON, DICKINSON AND COMPANY
By
------------------------------------
Bridget M. Healy
Vice President and Secretary
16
<PAGE>
BECTON, DICKINSON AND COMPANY
NON-EMPLOYEE DIRECTORS 2000 STOCK OPTION PLAN
---------------------------------------------
SECTION 1. PURPOSE
------------------
The purpose of the Becton, Dickinson and Company Non-Employee
Directors 2000 Stock Option Plan is to attract and retain qualified
persons who are not employees of Becton, Dickinson and Company ("BD" or
the "Company") or any of its subsidiaries or affiliates for service as
members of the Board of Directors of the Company, by providing such
members with an interest in the Company's success and progress and
closely aligning the directors' interests with those of the
shareholders, through the grant to them of non-qualified stock options
to purchase shares of the Company's common stock, par value $1.00 per
share.
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 BD.
(b) "Broker" shall mean a registered broker-dealer designated
by the Company.
(c) "Cashless Exercise" shall mean a method of exercising a
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 some or
all of the shares of Stock acquired upon such exercise and,
immediately upon receipt of the proceeds from this sale, to
deliver to the Company the related option price and any related
withholding taxes.
(d) "Change in Control" shall mean (1) the acquisition by any
individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule l3d-3 promulgated under the
Exchange Act) of 25% or more of either (A) the then-outstanding
shares of common stock of the Company (the "Outstanding Company
Common Stock") or (B) the combined voting power of the
then-outstanding voting securities of the Company entitled to
vote generally in the election of directors (the "Outstanding
Company Voting Securities"); PROVIDED, HOWEVER, that, for
purposes of this Section 2(d), the following acquisitions shall
not constitute a Change of Control: (i) any acquisition directly
from the Company, (ii) any acquisition by the
<PAGE>
Company, or (iii) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any
affiliated company, (iv) any acquisition by any corporation
pursuant to a transaction that complies with Sections 2(d)(3)(A),
2(d)(3)(B) and 2(d)(3)(C), or (v) any acquisition that the Board
determines, in good faith, was inadvertent, if the acquiring
Person divests as promptly as practicable a sufficient amount of
the Outstanding Company Common Stock and/or the Outstanding
Company Voting Securities, as applicable, to reverse such
acquisition of 25% or more thereof.
(2) Individuals who, as of April 24, 2000, constitute the
Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to April 24, 2000 whose
election, or nomination for election as a director by the
Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board.
(3) Consummation of a reorganization, merger, consolidation or
sale or other disposition of all or substantially all of the
assets of the Company (a "Business Combination"), in each case,
unless, following such Business Combination, (A) all or
substantially all of the individuals and entities that were the
beneficial owners of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
more than 60% of the then-outstanding shares of common stock and
the combined voting power of the then-outstanding voting
securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from
such Business Combination (including, without limitation, a
corporation that, as a result of such transaction, owns the
Company or all or substantially all of the Company's assets
either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership immediately
prior to such Business Combination of the Outstanding Company
Common Stock and the Outstanding Company Voting Securities, as
the case may be, (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit
plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns,
directly or indirectly, 25% or more of, respectively, the
then-outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting
power of the then-outstanding voting securities of such
corporation, except to the extent that such ownership existed
prior to the Business Combination, and (C) at least a majority of
the members of the board of directors of the corporation
resulting from such Business Combination were members of the
Incumbent Board at the time of the execution
2
<PAGE>
of the initial agreement or of the action of the Board providing
for such Business Combination; or
(4) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(e) "Committee" shall mean the Corporate Governance Committee
of the Board or such other committee as may be designated by the
Board, excluding, in each instance, any member of the Committee
who is an employee or former employee of the Company who shall
recuse him or herself from all deliberations, determinations and
other actions undertaken by the Committee in connection with,
relating to or arising under this Plan.
(f) "Company" shall mean BD.
(g) "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 agent designated
for such purposes by the Secretary of the Company or, in the case
of the Cashless Exercise of a 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.
(h) "Director" shall mean any continuing non-employee member
of the Company's Board of Directors.
(i) "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.
(j) "Grantee" shall mean any Board member granted a Stock
Option hereunder and shall also mean, to the extent contemplated
and permitted by the Plan, executors, administrators, successors
and transferees of the Grantee.
(k) "Granting Date" shall mean the date in each calendar year
of the Annual Meeting of Shareholders of the Company.
(1) "Plan" shall mean the Becton, Dickinson and Company
Non-Employee Directors 2000 Stock Option Plan as set forth herein
and amended from time to time.
(m) "Stock" shall mean the Common Stock, par value $1.00 per
share, of the Company.
(n) "Stock Option" shall mean a Nonqualified Stock Option
granted pursuant to the Plan to purchase shares of Stock.
3
<PAGE>
SECTION 3. SHARES OF STOCK SUBJECT TO THE PLAN
-----------------------------------------------
Subject to adjustment pursuant to Section 9, 1,000,000 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.
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 determine entitlement to Stock
Options, to determine eligibility for grants of Stock Options, and
to make all other determinations necessary or advisable for the
administration and operation of the Plan.
(b) It is intended that the Plan and any transaction hereunder
meet all of the requirements of Rule l6b-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 l6b-3 or other applicable laws, such provision
or transaction shall be construed or deemed amended to conform to
Rule l6b-3 or such other applicable laws in each case to the
extent permitted by law and deemed advisable by the Board.
(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. The Committee may obtain such advice
or assistance as it deems appropriate from persons not serving on
the Committee.
SECTION 5. ELIGIBILITY AND GRANTS
---------------------------------
To be eligible to participate in the Plan, a director must not be
an employee of the Company or of any of its subsidiaries or affiliates.
On the date in each calendar year of the Annual Meeting of
Shareholders of the Company, each eligible director elected at or
continuing to serve after such Annual Meeting shall be granted stock
options to purchase such number of shares of stock as shall be
determined by the Committee, based on the Fair Market Value of a share
of stock on the business day immediately preceding such date, to have a
monetary value of $35,000, which determination shall be made by
application of the Black Scholes ratio used by the Compensation and
Benefits Committee of the Board to calculate the expected
4
<PAGE>
value of the then most recent annual stock option grants made to the
executive officers of the Company, PROVIDED, HOWEVER, that such
--------- -------
monetary value of $35,000 may be increased or decreased by the Board,
upon recommendation by the Committee, in January of each year, to
reflect the competitive environment with respect to director
compensation. Each grant of options shall be evidenced by a written
notice duly executed and delivered by the Corporate Secretary of the
Company to the Grantee.
SECTION 6. GRANTING OF STOCK OPTIONS
------------------------------------
(a) OPTION PRICE. Subject to adjustment as provided in Section
------------
9, the purchase price of each share of Stock subject to a Stock
Option shall be 100% of the fair Market Value of a share of the
Stock on the Granting Date, PROVIDED, HOWEVER, that such purchase
-------- -------
price shall be increased if, and in the same proportion as, the
option purchase price of the then most recent annual Stock Option
grants made to the executive officers of the Company exceeded the
Fair Market Value of a share of stock on the date such Stock
Options were granted to them.
(b) TERM OF OPTIONS. Each Stock Option granted under the Plan
---------------
shall have a term of ten years from its date of grant, subject to
earlier termination as provided in Section 8; PROVIDED, HOWEVER,
-------- -------
that the term of any Stock Option granted under the Plan shall be
shortened if, and by the same amount of time as, the term of the
then most recent annual Stock Options granted to the executive
officers of the Company was less than ten years from their date of
grant.
(c) VESTING OF STOCK OPTIONS. Each Stock Option shall become
------------------------
50% exercisable after two years from its date of grant and 100%
exercisable after three years from its date of grant (the "Vesting
Terms"), subject to adjustment as provided in Sections 8 and 10,
and subject to further adjustment, if and to the extent that, the
terms pursuant to which the then most recent annual Stock Options
granted to the executive officers of the Company become
exercisable differ from the Vesting Terms.
(d) TRANSFERABILITY. Upon grant, each 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, except to the
same extent as otherwise permitted under the terms of the then
most recent annual Stock Options granted to the executive officers
of the Company. 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(c).
(e) DEFERRAL OF RECEIPT OF SHARES. The Committee may establish
-----------------------------
procedures whereby Directors may elect to defer the receipt of
shares upon exercise of any Stock Option, for a specified period
of time or until a specified future event.
5
<PAGE>
(f) OTHER STOCK OPTIONS. Stock Options may be granted to a
-------------------
Director who has previously received Stock Options whether such
prior Stock Options are still outstanding, have previously been
exercised or surrendered in whole or in part.
SECTION 7. EXERCISE OF STOCK OPTIONS
------------------------------------
Except as otherwise provided with respect to the Cashless Exercise
of a 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 6.
SECTION 8. COMPLETION OF DIRECTORSHIP
-------------------------------------
Except as otherwise provided by the Board at the time the Stock
Option is granted or in any amendment thereto, if a Grantee ceases to
be a Director, then:
(a) in the event of a resignation or a termination of the
service of a Grantee from the Board for any reason other than
death, disability or retirement as contemplated under sub-sections
(b) and (c) below, the Grantee may exercise each Stock Option held
by him or her within three months after such termination (but not
after the expiration date of the Stock 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 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 Stock 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; and
PROVIDED FURTHER, that the Board may, in its discretion, cause the
-------- -------
Stock Options of such Grantee to become exercisable, and/or to
remain exercisable, for a period of time subsequent to such
resignation or termination, but in no event may the Stock Options
remain exercisable after the tenth anniversary of their date of
grant.
(b) subject to the provisions of Section 8(c), if termination
of Board service is (x) by reason of retirement from the Board (i)
by a Grantee who has served on the Board for five full years or
more and has attained the age of sixty, or (ii) by a Grantee
entitled to the current receipt of benefits wider any retirement
plan maintained by the Company or any subsidiary thereof, or (y)
by reason of disability, each Stock Option held by the Grantee
shall, at the date of retirement or
6
<PAGE>
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);
(c) if termination of Board service is by reason of the death
of the Grantee, or if the Grantee dies after retirement or
disability as referred to in Section 8(b), 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 Stock 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
Stock 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, rights offering, liquidation, stock dividend, stock
split or other change in the corporate structure or capitalization
affecting the Stock, the number and kind of shares that may be granted
in the aggregate and to individual Directors under the Plan, the number
and kind of shares subject to each outstanding Stock Option and the
option prices under outstanding Stock Options, shall be adjusted
automatically to prevent dilution or enlargement of rights, and the
Board shall cause such automatic adjustment to be given effect.
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 Stock 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. GENERAL PROVISIONS
------------------------------
(a) Each Stock Option shall be evidenced by a written
instrument containing the terms and conditions set forth herein
and such other terms and conditions, not inconsistent with this
Plan, as the Committee shall approve.
7
<PAGE>
(b) Nothing in this Plan shall be deemed to create any
obligation on the part of the Board to nominate any director for
re-election by the Company's shareholders.
(c) Notwithstanding any other provision of the Plan, the
Company shall not be required to issue or deliver any shares of
Stock under the Plan if the issuance or delivery of such shares
shall constitute a violation of any provision of applicable law or
of any applicable rule or regulation of any governmental authority
or national securities exchange, and the issuance or delivery of
any shares of Stock upon the exercise of Stock Options may be
postponed by the Company for such period as may be required to
fulfill 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
deliveries or 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
deliveries or distributions or to require a recipient to pay the
Company in cash, in shares of stock previously owned by the
Grantee, or a combination of cash and such shares of stock, for
any such taxes required to be withheld on such terms and
conditions prescribed by the Committee, prior to the issuance or
delivery of any stock upon the exercise of Stock Options.
SECTION 12. AMENDMENT AND TERMINATION
-------------------------------------
(a) The Plan shall terminate on February 8, 2010 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, from time to time, amend the Plan or any
part thereof at anytime upon notice to the Committee.
8
<PAGE>
(c) In addition, the Board 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 and/or qualify the
Plan under applicable securities, tax or employee benefit laws and
regulations (including any amendment deemed necessary to ensure
that the Company may comply with any regulatory requirement
referred to in Section 11).
(d) Subject to Section 12(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 13. GOVERNING LAW
-------------------------
This Plan and the Stock Options granted hereunder shall be
governed by, and construed and interpreted in accordance with, the
applicable laws of the United States of America and of the State of New
Jersey.
SECTION 14. EFFECTIVE DATE
--------------------------
The Plan shall become effective February 8, 2000 upon its approval
by the Board hereunder. The Stock Options granted on such date shall be
granted subject to satisfaction by the Company of all applicable legal
and regulatory requirements and the exercise of such Stock Options
shall be expressly subject to the fulfillment of the conditions set
forth in Section 11(c) above.
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Consolidated Financial Statements and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 65,064
<SECURITIES> 11,310
<RECEIVABLES> 768,874
<ALLOWANCES> 0<F1>
<INVENTORY> 685,501
<CURRENT-ASSETS> 1,708,230
<PP&E> 3,038,348
<DEPRECIATION> 1,551,828
<TOTAL-ASSETS> 4,530,700
<CURRENT-LIABILITIES> 1,464,634
<BONDS> 819,927
0
45,066
<COMMON> 332,662
<OTHER-SE> 1,496,677
<TOTAL-LIABILITY-AND-EQUITY> 4,530,700
<SALES> 1,784,296
<TOTAL-REVENUES> 1,784,296
<CGS> 923,938
<TOTAL-COSTS> 923,938
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 44,543
<INCOME-PRETAX> 266,856
<INCOME-TAX> 72,391
<INCOME-CONTINUING> 194,465
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 194,465
<EPS-BASIC> 0.77
<EPS-DILUTED> 0.74
<FN>
<F1>These items are consolidated only at year-end
</FN>
</TABLE>
