<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
WHITMAN CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
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paid previously. Identify the previous filing by registration statement
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<PAGE>
[LOGO]
Whitman Corporation
3501 Algonquin Road
Rolling Meadows,
Illinois 60008
Bruce S. Chelberg
Chairman and
Chief Executive
Officer
March 23, 2000
Dear Shareholder:
We are pleased to invite you to attend the 2000 Annual
Meeting of Shareholders of Whitman Corporation, to be held on
May 4, 2000 at 10:30 a.m., local time, in the Hotel du Pont,
Christina Room, 11(th) and Market Streets, Wilmington,
Delaware.
The formal notice of the meeting follows on the next page.
Enclosed with this proxy statement are your proxy card, a
postage-paid envelope to return your proxy card and a copy of
our Annual Report for 1999.
In order to complete arrangements for the meeting, we
would like to know in advance how many shareholders expect to
attend. If you plan to attend, please check the box provided
on the proxy card.
Your vote is important, regardless of the size of your
holdings. Even if you plan to attend the meeting, please
complete, sign and date the enclosed proxy card and return it
in the accompanying envelope. Instructions regarding voting
are contained on the proxy card. If you attend the meeting and
prefer to vote in person, you may do so. PROMPT RETURN OF YOUR
PROXY WILL SAVE THE EXPENSE OF SENDING YOU A SECOND PROXY.
We look forward to seeing you at the meeting.
/s/ Bruce S. Chelberg
Chairman and Chief Executive
Officer
<PAGE>
Notice of Annual Meeting of Shareholders of
WHITMAN CORPORATION
Date: May 4, 2000
Time: 10:30 a.m. local time
Place: Hotel du Pont
Christina Room
11(th) and Market Streets
Wilmington, Delaware
Purposes:
- To elect ten directors;
- To approve the Whitman Corporation 2000 Stock Incentive Plan; and
- To act upon such other matters as may properly come before the meeting.
The close of business on March 6, 2000, has been fixed as the record date
for determination of shareholders entitled to notice of and to vote at the
meeting. A complete list of the shareholders entitled to vote at the meeting
will be open to the examination of any shareholders, for any purpose germane to
the meeting, during ordinary business hours, during the ten days prior to the
meeting at Richards, Layton & Finger, P.A., One Rodney Square, Wilmington,
Delaware.
Please vote your shares as promptly as possible. Even if you plan to attend
the meeting please complete, sign and date the enclosed proxy card and return it
in the accompanying envelope. If you attend the meeting, you may vote your
shares in person if you wish.
By Order of the Board of Directors
Steven R. Andrews
Corporate Secretary
Rolling Meadows, Illinois
March 23, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Notice of 2000 Annual Meeting of Shareholders of Whitman
Corporation
Whitman Corporation......................................... 1
The Annual Meeting.......................................... 1
Voting Instructions......................................... 1
Proposal 1: Election of Directors........................... 3
Our Board of Directors and Committees....................... 8
Director Compensation....................................... 9
Our Largest Shareholders.................................... 9
Shares Held by Our Directors and Executive Officers......... 10
Section 16(a) Beneficial Ownership Reporting Compliance..... 10
Executive Compensation...................................... 11
Report of Management Resources and Compensation Committee on
Executive Compensation.................................... 14
Shareholder Return Performance Graph........................ 16
Certain Relationships and Related Transactions.............. 16
Proposal 2: Approval of Whitman Corporation 2000 Stock
Incentive Plan............................................ 18
Independent Public Accountants.............................. 24
Whitman's Form 10-K......................................... 24
Shareholder Proposals for the 2001 Annual Meeting........... 24
Other Matters............................................... 24
Exhibit A--Whitman Corporation 2000 Stock Incentive Plan.... A-1
</TABLE>
<PAGE>
WHITMAN CORPORATION
3501 Algonquin Road, Rolling Meadows, Illinois 60008
Proxy Statement
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 4, 2000
WHITMAN CORPORATION
We are engaged in the production and distribution of Pepsi-Cola brand
products and a variety of other non-alcoholic beverage products through our
principal operating subsidiary, Pepsi-Cola General Bottlers, Inc. ("Pepsi
General"). Pepsi General is one of the world's largest franchised Pepsi-Cola
bottlers, accounting for about 17% of all Pepsi-Cola products sold in the United
States.
In May 1999, our shareholders approved the merger of the former Whitman
Corporation into a wholly owned subsidiary of PepsiCo, Inc. ("PepsiCo").
Following the Merger, the PepsiCo subsidiary changed its name to "Whitman
Corporation," and the shareholders of the former Whitman Corporation became the
owners of approximately 61% of the common stock of the "new" Whitman and PepsiCo
became the owner of approximately 39% of the common stock. At the same time, we
became a substantially larger company, with several additional Pepsi-Cola
franchises in the central portions of the United States and international
Pepsi-Cola franchises in the Czech and Slovak Republics, Hungary and Poland.
Our principal executive offices are located at 3501 Algonquin Road, Rolling
Meadows, Illinois 60008, and our telephone number is (847) 818-5000.
THE ANNUAL MEETING
ATTENDING THE ANNUAL MEETING
Our meeting will be held on May 4, 2000 at 10:30 a.m., in the Hotel du Pont,
Christina Room, 11(th) and Market Streets, Wilmington, Delaware.
THIS PROXY STATEMENT
We sent you these proxy materials because our Board of Directors is
soliciting your proxy to vote your shares at the meeting. If you own Whitman
common stock in more than one account, such as individually and also jointly
with your spouse, you may receive more than one set of these proxy materials.
On March 23, 2000, we began mailing these proxy materials to all
shareholders of record at the close of business on March 6, 2000 (the "record
date"). On the record date there were 137,580,262 shares outstanding and
approximately 14,241 holders of record.
QUORUM REQUIREMENT
A quorum is necessary to hold a valid meeting. The attendance by proxy or in
person of holders of fifty-one percent of the shares entitled to vote at the
meeting will constitute a quorum to hold the meeting. Abstentions and broker
non-votes are counted as present for establishing a quorum. A broker non-vote
occurs when a broker votes on some matter on the proxy card but not on others
because the broker does not have the authority to do so.
VOTING INSTRUCTIONS
You are entitled to one vote for each share of common stock that you own as
of the close of business on the record date. Please carefully read the
instructions below on how to vote your shares. Because the
1
<PAGE>
instructions vary depending on how you hold your shares, it is important that
you follow the instructions that apply to your particular situation.
IF YOUR SHARES ARE HELD IN YOUR NAME.
VOTING BY PROXY. Even if you plan to attend the meeting, you can vote by
mail before the meeting by signing, dating and mailing the enclosed proxy card.
VOTING IN PERSON AT THE MEETING. If you plan to attend the meeting, you can
vote in person. In order to vote at the meeting, you will need to bring your
share certificates or other evidence of your share ownership with you to the
meeting.
REVOKING YOUR PROXY. As long as your shares are registered in your name,
you may revoke your proxy at any time before it is exercised. There are several
ways you can do this:
- by filing a written notice of revocation with our Corporate Secretary;
- by duly signing and delivering another proxy that bears a later date; or
- by attending the meeting and voting in person.
IF YOUR SHARES ARE HELD IN "STREET NAME".
VOTING BY PROXY. If your shares are registered in the name of your broker
or nominee, you will receive instructions from the holder of record that you
must follow in order for your shares to be voted.
VOTING IN PERSON AT THE MEETING. If you plan to attend the meeting and vote
in person, you should contact your broker or nominee to obtain a broker's proxy
card and bring it and your account statement or other evidence of your share
ownership with you to the meeting.
REVOKING YOUR PROXY. If your shares are held in street name, you must
contact your broker to revoke your proxy.
VOTING RULES
By giving us your proxy, you authorize the individuals named on the proxy
card to vote your shares in the manner you indicate at the meeting or any
adjournments thereof. With respect to the election of nominees for director, you
may:
- vote "for" the election of the nominees for director named in this proxy
statement;
- "withhold" authority to vote for all of the nominees; or
- "withhold" authority to vote for one or more of the nominees and vote
"for" the remaining nominee(s).
If a quorum is present at the meeting, the nominees receiving the greatest
number of votes will be elected to serve as directors. Because of this rule,
non-voted shares and shares whose votes are withheld will not affect the outcome
of the election of directors and withholding authority to vote for a particular
nominee will not prevent that nominee from being elected.
With respect to the proposal to approve the Whitman Corporation 2000 Stock
Incentive Plan, you may:
- vote "for" the approval of the plan;
- vote "against" the approval of the plan; or
- "abstain" from voting on the proposal.
If a quorum is present at the meeting, the affirmative vote of a majority of
the total votes cast on this proposal will be required to approve the plan.
Non-voted shares and shares whose votes are withheld will not be included in the
number of votes cast.
2
<PAGE>
If you sign and return your proxy card with no votes marked, your shares
will be voted as follows:
- "for" the election of all nominees for director named in this proxy
statement; and
- "for" the approval of the Whitman Corporation 2000 Stock Incentive Plan.
We actively solicit proxy participation. We will bear the cost of soliciting
proxies. In addition to this notice by mail, we request and encourage brokers,
custodians, nominees and others to supply proxy materials to shareholders, and
we will reimburse them for their expenses. Our officers and employees may, by
letter, telephone, electronic mail, or in person, make additional requests for
the return of proxies, although we do not reimburse our own employees for
soliciting proxies. In addition, we have hired Georgeson Shareholder
Communications, Inc. for $9,000 plus associated costs and expenses to assist in
the solicitation.
TABULATING THE VOTE
Whitman has a policy that all proxies, ballots and votes tabulated at a
meeting of shareholders are confidential, and the votes will not be revealed to
any Whitman employee or anyone else, other than to the non-employee tabulator of
votes or an independent election inspector, except (1) as necessary to meet
applicable legal requirements or (2) in the event a proxy solicitation in
opposition to the election of the Board of Directors is filed with the
Securities and Exchange Commission. Representatives of EquiServe, the Company's
stock transfer agent, will tabulate votes and act as inspectors of election at
the meeting.
3
<PAGE>
PROPOSAL 1: ELECTION OF DIRECTORS
Our directors are elected each year at the annual meeting by our
shareholders. We do not have a classified Board of Directors. Ten directors will
be elected at this year's meeting. Each director's term lasts until the 2001
Annual Meeting of Shareholders and until he or she is succeeded by another
qualified director who has been elected. On May 20, 1999, Whitman entered into a
shareholder agreement with PepsiCo. Pursuant to the shareholder agreement,
Messrs. Sharpe and von der Heyden, whose biographies appear below, were named as
directors of Whitman following the merger, in addition to the nine members of
the Board of the former Whitman Corporation. All the nominees are currently
directors of Whitman. Charles S. Locke, a director since 1991, is retiring on
the date of the 2000 Annual Meeting and will not be replaced.
If a nominee is unavailable for election, the proxy holders may vote for
another nominee proposed by the Board or the Board may reduce the number of
directors to be elected at the meeting. Set forth below is information furnished
with respect to each nominee for election as a director.
HERBERT M. BAUM DIRECTOR SINCE 1995
President and Chief Operating Officer
Hasbro, Inc.
[PHOTO1]
Mr. Baum, 63, is President and Chief Operating Officer
of Hasbro, Inc. Prior to joining Hasbro in 1999, Mr. Baum
was employed by Quaker State Corporation as its Chairman and
Chief Executive Officer from 1993 to 1999. Prior to joining
Quaker State, Mr. Baum was employed by Campbell Soup Company
from 1978
to 1993, where he served in various positions, most recently
as Executive Vice President and President, Campbell
North/South America. Mr. Baum also serves as a director of Hasbro, Inc., Dial
Corporation, Meredith Corporation, Fleming Companies, Inc. and Midas, Inc., a
corporation which we spun off to shareholders in January, 1998. He is past
chairman of the Association of National Advertisers, as well as a member of the
Board of Directors of the American Marketing Association. Mr. Baum earned his BA
degree in Business Administration from Drake University in 1958.
BRUCE S. CHELBERG DIRECTOR SINCE 1988
Chairman and Chief Executive Officer
Whitman Corporation
[PHOTO2]
Mr. Chelberg, 65, received his BS degree from the
University of Illinois in 1956 and an LLB degree from the
University of Illinois College of Law in 1958. From 1958 to
1981 he was employed by Trans Union Corporation, where he
attained the position of President and Chief Operating
Officer and served as a
director. Mr. Chelberg joined us in 1982 as our Senior Vice
President-International. After holding a number of other positions, he became
our Executive Vice President in 1985 and our Chairman and Chief Executive
Officer in 1992. Mr. Chelberg is also a director of First Midwest
Bancorp, Inc., Northfield Laboratories Inc. and Snap-On Incorporated. He is also
a member of the Illinois State Bar Association.
4
<PAGE>
RICHARD G. CLINE DIRECTOR SINCE 1987
Retired Chairman and
Chief Executive Officer
Nicor Inc. and Chairman of
Hussman International, Inc.
[PHOTO3]
Mr. Cline, 65, served as President and Chief Operating
Officer of Nicor Inc. beginning in 1985, and became Chairman
of the Board and Chief Executive
Officer in 1986. He retired as Chief Executive officer in
May, 1995 and continued to serve as Chairman until his
retirement from the company at the end of 1995. Nicor is engaged in natural gas
distribution and containerized liner shipping. For the previous 22 years,
Mr. Cline was an executive of Jewel Companies, Inc., becoming Chairman,
President and Chief Executive Officer in 1984. Currently, Mr. Cline is Chairman
of the Board of Hussmann International, Inc., a corporation which we spun off to
shareholders in January, 1998. He is also Chairman of Hawthorne
Investors, Inc., a private management advisory and investment firm he founded in
1996. Additionally, he is a director of Kmart Corporation and Ryerson
Tull, Inc., a trustee of The Northern Institutional Funds, and is a past
chairman of the Federal Reserve Bank of Chicago. Mr. Cline is a 1957 graduate of
the University of Illinois, and he is a director and past president of the
University of Illinois Foundation.
PIERRE S. DU PONT DIRECTOR SINCE 1990
Richards, Layton & Finger, P.A.
[PHOTO4]
Governor du Pont, 65, is a director in the law firm of
Richards, Layton & Finger, P.A., Wilmington, Delaware. A
1956 graduate of Princeton University, he served in the U.S.
Navy from 1957-1960 and received his law degree from Harvard
University in 1963. After six years in business with E.I. du
Pont de
Nemours & Co., Inc., he entered politics in 1968, serving in
the Delaware House of Representatives (1968-1970), as a
member of the U.S. House of Representatives (1971-1977), and
as Governor of the State of Delaware (1977-1985). He is a trustee of The
Northwestern Mutual Life Insurance Company. Governor du Pont served as Chairman
of the Hudson Institute in 1985-1986 and currently serves as Policy Chairman of
the National Center for Policy Analysis.
ARCHIE R. DYKES DIRECTOR SINCE 1985
Chairman
Capital City Holdings Inc.
[PHOTO5]
Dr. Dykes, 69, is Chairman of Capital City
Holdings Inc., Nashville, Tennessee, a venture capital
organization. Dr. Dykes served as Chairman and Chief
Executive Officer of the Security Benefit Group of Companies
from 1980 through 1987. He served as Chancellor of the
University of Kansas from 1973 to
1980. Before that he was Chancellor of the University of
Tennessee. Dr. Dykes is a director of the Fleming
Companies, Inc., Hussmann International, Inc., Midas, Inc. and the Employment
Corporation. He is also a member of the Board of Trustees of the Kansas
University Endowment Association and the William Allen White Foundation. He
formerly served as Vice Chairman of the Commission on the Operation of the
United States Senate and as a member of the Executive Committee of the
Association of American Universities.
5
<PAGE>
CHARLES W. GAILLARD DIRECTOR SINCE 1997
Retired President
General Mills, Inc.
[PHOTO6]
Mr. Gaillard, 59, spent his entire professional career
with General Mills, Inc., joining the company in 1966. He
served in various management positions, becoming Executive
Vice President in 1989. From 1989 to 1993, he was Chief
Executive Officer of an international joint venture with
Nestle, S.A. He was
elected Vice Chairman and a director of General Mills in
1994 and President in 1995, and also served as a director of
the company until retiring in 1999. Mr. Gaillard also serves as a director of
the US Can Corp. and The Valspar Corporation.
JAROBIN GILBERT, JR. DIRECTOR SINCE 1994
President and Chief Executive Officer
DBSS Group, Inc.
[PHOTO7]
Mr. Gilbert, 54, is President and Chief Executive
Officer of DBSS Group, Inc., a management, planning and
international trade advisory firm. The firm provides trade
advisory services, trade consulting and participates in
negotiations. He is also a director of Midas, Inc. and the
Venator Group. Mr. Gilbert
also serves on the Board of Directors of the American
Council on Germany and the Valley Agency for Youth. He is a
permanent member of the Council on Foreign Relations.
VICTORIA B. JACKSON DIRECTOR SINCE 1994
Former President and
Chief Executive Officer
DSS/ProDiesel, Inc.
[PHOTO8]
Ms. Jackson, 45, received her BBA degree from Belmont
University in 1977 and an MBA degree from Vanderbilt
University in 1981. Following graduation from college, she
joined DSS/ProDiesel, a diesel parts remanufacturing and
distribution company based in Nashville, Tennessee, and
subsequently served as its President and Chief Executive
Officer until February of 1999. Ms. Jackson is also a director of Hussmann
International, Inc., AmSouth Bancorporation and Meritor Automotive. She has
previously served as Chairman of Tennessee's Alcohol and Beverage Commission, as
a director of the Association of Diesel Specialists and as a member of the Board
of Directors of the Federal Reserve Bank of Atlanta.
6
<PAGE>
ROBERT F. SHARPE, JR. DIRECTOR SINCE 1999
Senior Vice President, Public Affairs
and General Counsel
PepsiCo, Inc.
[PHOTO9]
Mr. Sharpe, 48, is Senior Vice President, Public Affairs
and General Counsel of PepsiCo. Mr. Sharpe joined PepsiCo as
Senior Vice President, General Counsel in January 1998.
Mr. Sharpe was Senior Vice President and General Counsel
of RJR Nabisco Holdings Corp. from 1996 until he joined
PepsiCo. He was previously Vice President, Tyco
International Ltd. from 1994 to 1996 and Vice President, Assistant General
Counsel and Secretary of RJR Nabisco Holdings Corp. and RJR Nabisco, Inc. from
1989 to 1994. Mr. Sharpe is also a director of The Pepsi Bottling Group, Inc.
KARL M. VON DER HEYDEN DIRECTOR SINCE 1999
Vice Chairman
PepsiCo, Inc.
[PHOTO10]
Mr. von der Heyden, 63, is Vice Chairman of the Board of
Directors of PepsiCo, a position he has held since 1996.
Mr. von der Heyden also served as Chief Financial Officer of
PepsiCo until March 1998. Mr. von der Heyden was previously
Co-Chairman and Chief Executive Officer of RJR
Nabisco, Inc. from
March through May 1993, and was Executive Vice President and
Chief Financial Officer of RJR Nabisco, Inc. from 1989 to
1993. He served as President and Chief Executive Officer of Metallgesellschaft
Corp. from 1993 to 1994. Mr. von der Heyden also serves on the Board of
Directors of Federated Department Stores, Inc., AstraZeneca PLC, and The Pepsi
Bottling Group, Inc.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR ALL OF THE
NOMINEES.
7
<PAGE>
OUR BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors represents the interests of our shareholders as a
whole and is responsible for directing the management of the business and
affairs of Whitman, as provided by Delaware law. The Board of Directors held 8
meetings in 1999. In addition to meetings of the full Board, directors also
attended Committee meetings. Each director attended at least 75% of all of the
meetings of the Board of Directors and of those Committees on which he or she
served. The Board of Directors has standing executive, audit, management
resources and compensation, and finance and pension committees and has a
committee on directors. The following table shows the membership of these
committees:
<TABLE>
MANAGEMENT
RESOURCES AND FINANCE AND COMMITTEE ON
NAME EXECUTIVE AUDIT ** COMPENSATION PENSION DIRECTORS
<S> <C> <C> <C> <C> <C>
Herbert M. Baum X X X
Bruce S. Chelberg X* X
Richard G. Cline X X* X
Pierre S. du Pont X* X
Archie R. Dykes X X*
Charles W. Gaillard X X
Jarobin Gilbert, Jr. X X
Victoria B. Jackson X X
Robert F. Sharpe, Jr. X
Karl M. von der Heyden X X
</TABLE>
* Denotes Committee Chairman.
** Charles S. Locke, who is retiring on May 4, 2000, is the current Chairman
of the Audit Committee.
The EXECUTIVE COMMITTEE is constituted by the Board of Directors to act in
lieu of the Board of Directors and between meetings of the Board of Directors.
During 1999, the Executive Committee held no meetings.
The AUDIT COMMITTEE reviews our annual financial statements included in our
Annual Report on Form 10-K and the audit report we receive from our independent
certified public accountants, and discusses any findings in the audit report.
The Audit Committee also recommends the selection of our independent certified
public accounting firm each year and reviews audit and any non-audit fees we pay
to the certified public accountants. The Audit Committee also reviews audit
reports of the Internal Audit function, and the Internal Audit function
regularly attends Audit Committee meetings and gives reports to and answers
inquiries from the Audit Committee as required. The Audit Committee reports its
findings and recommendations to the Board for appropriate action. During 1999,
the Audit Committee held 2 meetings.
The MANAGEMENT RESOURCES AND COMPENSATION COMMITTEE, which held 6 meetings
in 1999, is primarily responsible for each of the following activities:
- supervising our compensation policies;
- management evaluation and succession planning;
- administering our Management Incentive Compensation Plan and Stock
Incentive Plan;
- reviewing salaries on authority delegated by the Board;
- approving salary adjustments except those of the Chairman of the Board and
the Chief Executive Officer;
8
<PAGE>
- approving significant changes in salaried employee benefits; and
- recommending to the Board such other forms of remuneration as it deems
appropriate.
The FINANCE AND PENSION COMMITTEE supervises our financial affairs and
receives and reviews reports of the Management Committee for our pension plans.
The Board has delegated to the Finance and Pension Committee and certain
officers its authority to approve financing arrangements involving the borrowing
of up to $100 million in any one transaction. The Finance and Pension Committee
periodically reports to the Board on action taken to approve financing
transactions in excess of $25 million. During 1999, the Finance and Pension
Committee held 2 meetings.
The COMMITTEE ON DIRECTORS is responsible for presenting nominations of
prospective Board members to the Board and to consider other matters pertaining
to Board membership, such as meeting dates, retirement policy and compensation
of outside directors. In November 1999, Mr. Chelberg announced to the Board that
he plans to retire at the end of 2000, and the Board appointed the Committee on
Directors to serve as a search committee to find a replacement for
Mr. Chelberg. During 1999, the Committee on Directors held 2 meetings. In
carrying out its responsibilities relative to finding the best qualified persons
to serve as directors, the Committee on Directors will consider nominees
recommended by other directors, shareholders and management who present for
evaluation by the Committee on Directors appropriate data with respect to the
suggested candidate, consisting of age, business experience, educational
background, current directorships, involvement in legal proceedings during the
last five years which are material to evaluation of the integrity of the
candidate, and an indication of the willingness of the candidate to serve as a
director. Each recommendation should be sent to the attention of the Secretary,
Whitman Corporation, prior to December 1 of each year. Shareholder nominees for
director may also be presented pursuant to our bylaws as described in this proxy
statement under "Shareholder Proposals for the 2001 Annual Meeting."
DIRECTOR COMPENSATION
Directors who are Whitman employees receive no fees for their services as
director. Outside directors receive an annual retainer of $24,000, plus $1,000
for each meeting of the Board and $1,000 for each meeting of a committee of the
Board of Directors he or she attends. The Chairman of each committee of the
Board receives an additional $5,000 annual retainer. In 1999, outside directors
also received a supplemental retainer consisting of 625 shares of our common
stock, plus the equivalent fair market value of such shares in cash.
OUR LARGEST SHAREHOLDERS
The following table sets forth information, as of February 25, 2000, with
respect to the beneficial ownership of our common stock of each person who, to
our knowledge, beneficially owned more than five percent of our common stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES
AND NATURE OF PERCENT
NAME AND ADDRESS BENEFICIAL OWNERSHIP OF CLASS
---------------- -------------------- --------
<S> <C> <C>
PepsiCo, Inc.(a)....................... 54,794,115 39.6%
700 Anderson Hill Road
Purchase, NY 10577
</TABLE>
- ------------------------
(a) PepsiCo acquired 54,000,000 of these shares in connection with the
transaction with PepsiCo described on page 1 of this proxy statement.
9
<PAGE>
SHARES HELD BY OUR DIRECTORS AND EXECUTIVE OFFICERS
The table below lists the beneficial ownership of shares of our common
stock, as of February 25, 2000, by each director and nominee for director, by
each executive officer named below, and by all directors and executive officers
as a group. Except as identified below, the named individual or family members
had sole voting and investment power with respect to the listed shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
NAME OR IDENTITY OF GROUP OWNERSHIP (A) OF CLASS
------------------------- ----------------- --------
<S> <C> <C>
Herbert M. Baum....................... 4,000 *
Bruce S. Chelberg..................... 1,093,106 0.8%
Richard G. Cline...................... 7,250 *
Pierre S. du Pont..................... 4,800 *
Archie R. Dykes....................... 7,609 *
Charles W. Gaillard................... 3,500 *
Jarobin Gilbert, Jr................... 1,550 *
Victoria B. Jackson................... 3,600 *
Robert F. Sharpe, Jr.(c).............. 54,797,105 39.6%
Karl M. von der Heyden(c)............. 54,805,065 39.6%
Charles H. Connolly................... 175,570 *
Martin M. Ellen....................... 99,200 *
Lawrence J. Pilon..................... 260,502 *
Larry D. Young........................ 199,014 *
All Directors and Executive
Officers as a Group (15 persons)..... 56,667,756(b)(c) 41.0%
</TABLE>
- ------------------------
*Less than 1%.
(a) Includes shares which the named director or executive officer has the right
to acquire within 60 days after February 25, 2000, through exercise of stock
options, as follows: Mr. Chelberg, 793,788 shares; Mr. Connolly, 142,826
shares; Mr. Ellen, 92,200 shares; Mr. Pilon, 247,375 shares; Mr. Young,
184,982 shares.
(b) The number of shares of our common stock shown as beneficially owned by all
directors and executive officers as a group includes 1,461,171 shares which
directors and executive officers have the right to acquire within 60 days
after February 25, 2000, through the exercise of stock options, no shares
subject to possible forfeiture under outstanding restricted stock awards,
and 11,069 shares representing the vested beneficial interest of such
persons under our Retirement Savings Plan.
(c) Messrs. Sharpe and von der Heyden disclaim beneficial ownership of the
54,794,115 shares of common stock owned by PepsiCo. See "Our Largest
Shareholders."
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our directors
and executive officers, as well as persons who own more than ten percent of our
common stock, to file reports of ownership and changes in ownership of our
common stock with the Securities and Exchange Commission and the New York Stock
Exchange. We have procedures in place to assist our directors and executive
officers in preparing and filing these reports on a timely basis. Based solely
on our review of the forms furnished to us, upon our records and other
information, we believe that all required reports were timely filed during the
past year.
10
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The table below shows the compensation for each of our five most highly
compensated executive officers for services in all capacities to Whitman and its
subsidiaries during fiscal years 1997, 1998 and 1999. Compensation, as reflected
in this table and the tables which follow, is presented on the basis of rules of
the Securities and Exchange Commission and does not, in the case of certain
stock-based awards or accruals, necessarily represent the amount of compensation
realized or which may be realized in the future.
<TABLE>
<CAPTION>
LONG TERM ALL OTHER
ANNUAL COMPENSATION COMPENSATION COMPENSATION
---------------------------------------------------- ------------------------------ -------------
AWARDS
------------------------------
SECURITIES
UNDERLYING
OTHER ANNUAL RESTRICTED STOCK OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($) AWARDS ($)(A) (#) ($)(B)
- --------------------------- -------- ---------- --------- ---------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Bruce S. Chelberg 1999 750,000 562,500 71,244 383,900 79,354
Chairman and Chief 1998 750,000 450,000 26,155 -- 1,348,732
Executive Officer 1997 725,000 280,000 28,894 716,875 215,563 113,906
Charles H. Connolly 1999 263,000 157,800 32,477 75,000 8,746
Vice President-- 1998 259,000 120,000 27,554 -- 263,868
Corporate Affairs and 1997 250,000 58,000 22,680 92,233 42,092 22,586
Investor Relations
Martin M. Ellen (c) 1999 280,000 180,000 105,123 96,600 22,600
Senior Vice 1998 65,000 115,000 4,650 60,000 3,900
President and Chief
Financial Officer
Lawrence J. Pilon 1999 260,000 165,000 47,930 85,300 596,361
Senior Vice President 1998 260,000 145,000 16,496 100,000 848,077
--Administration 1997 254,167 66,000 13,066 159,563 47,832 35,506
Larry D. Young (c) 1999 375,000 240,000 34,798 116,100 30,185
President and 1998 276,667 150,000 8,193 90,000 23,307
Chief Operating
Operating Officer
</TABLE>
- ------------------------
(a) No shares of restricted stock were outstanding at January 1, 2000.
(b) The amounts shown for All Other Compensation are amounts accrued under a
nonqualified retirement plan, together with (1) the 1999 values of premiums
we paid or the imputed annual income for an executive split dollar life
insurance program established July 1, 1996, to replace benefits formerly
provided under Whitman's group program, in the amount of $7,354 for
Mr. Chelberg, $8,746 for Mr. Connolly, $1,061 for Mr. Pilon and $560 for
Mr. Young, and (2) a payment to Mr. Pilon in 1999 of $571,000 under the
terms of his Change in Control Agreement (see "Termination Benefits" on page
15).
(c) Mr. Young became Executive Vice President and Chief Operating Officer of
Pepsi General in May, 1998, and President and Chief Operating Officer of
Whitman Corporation on February 18, 2000. Mr. Ellen became Senior Vice
President and Chief Financial Officer of Whitman Corporation in October,
1998.
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<PAGE>
OPTION GRANTS IN FISCAL 1999
The following table gives more information on stock options granted in 1999
to the executive officers named in the summary compensation table under our
Stock Incentive Plan. No stock appreciation rights were granted.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN OR BASE EXPIRATION
NAME GRANTED (#)(A) 1999 (%) PRICE ($/SH) DATE GRANT DATE VALUE ($)(B)
---- -------------- ------------- ------------ ---------- -----------------------
<S> <C> <C> <C> <C> <C>
Bruce S. Chelberg.......... 383,900 10.2521 22.625 1/25/09 2,560,276
Charles H. Connolly........ 75,000 2.0029 22.625 1/25/09 500,184
Martin M. Ellen............ 96,600 2.5797 22.625 1/25/09 644,237
Lawrence J. Pilon.......... 85,300 2.2779 22.625 1/25/09 568,876
Larry D. Young............. 116,100 3.1005 22.625 1/25/09 774,285
</TABLE>
- ------------------------
(a) All options were granted at a price equal to 100% of the fair market value
of our common stock at date of each grant. Options become exercisable as to
one-third on the first anniversary of the date of grant, two-thirds on the
second anniversary, and in full on the third anniversary.
(b) The grant date values were determined using the Black-Scholes option pricing
model, using the following assumptions: expected volatility of 27.2%,
risk-free interest rate of 4.7%, dividend yield of 1.0% and a 5 year
expected life.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table shows the number and value of unexercised stock options
for the executive officers named in the summary compensation table during fiscal
1999. No options were exercised by such officers in 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS HELD AT IN-THE-MONEY OPTIONS AT
JANUARY 1, 2000 (#) JANUARY 1, 2000 ($)(A)
NAME ---------------------------------- ----------------------------------
---- EXERCISABLE / UNEXERCISABLE EXERCISABLE / UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
---------------------------------- ----------------------------------
Bruce S. Chelberg....................................... 665,822 383,900 748,233 0
Charles H. Connolly..................................... 117,826 75,000 80,061 0
Martin M. Ellen......................................... 60,000 96,600 0 0
Lawrence J. Pilon....................................... 218,942 85,300 37,461 0
Larry D. Young.......................................... 146,282 116,100 26,734 0
</TABLE>
- ------------------------
(a) Based on the closing price of our common stock $13.4375 on December 31,
1999, as reported for New York Stock Exchange Composite Transactions.
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<PAGE>
PENSION PLANS
We maintain qualified, defined benefit pension plans and nonqualified
retirement plans paying benefits in optional forms elected by our employees
based upon percentage multipliers which are applied to covered compensation and
credited service. The benefit formula provides a normal retirement benefit of 1%
of covered compensation for each year of credited service (excluding 1989-1991),
up to a maximum of 20 years. Special minimum benefits based on credited service
accrued through December 31, 1988, and covered compensation at retirement are
also included.
The following table reflects future benefits, payable as life annuities upon
retirement, in terms of a range of amounts determined under the benefit formula
mentioned above, at representative periods of credited service.
ANNUAL PENSION
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE (B)
COVERED -------------------------------------------
COMPENSATION (A) 5 10 15 20 OR MORE
---------------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
$ 400,000 ........................ $ 20,000 $ 40,000 $ 60,000 $ 80,000
600,000 ........................ 30,000 60,000 90,000 120,000
800,000 ........................ 40,000 80,000 120,000 160,000
1,000,000 ........................ 50,000 100,000 150,000 200,000
1,200,000 ........................ 60,000 120,000 180,000 240,000
</TABLE>
- ------------------------
(a) Covered compensation includes salary and bonus, as shown in the summary
compensation table, averaged over the five consecutive years in which such
compensation is the highest.
(b) As of January 1, 2000, the executive officers named in the summary
compensation table had the following years of credited service:
Mr. Chelberg, 17 years; Mr. Connolly, 17 years; Mr. Ellen, 1 year;
Mr. Pilon, 6 years; and Mr. Young, 15 years.
TERMINATION BENEFITS
In 1995, we entered into amended Change in Control Agreements with
Messrs. Chelberg, Connolly, Pilon and certain other officers. These change in
control agreements, originally adopted in 1985 and amended and updated from time
to time thereafter, were a result of a determination by the Board of Directors
that it was important and in the best interests of Whitman and its shareholders
to ensure that, in the event of a possible change in control of Whitman, the
stability and continuity of management would continue unimpaired, free of the
distractions incident to any such change in control. A revised form of Change in
Control Agreement was entered into with Mr. Young and certain other officers in
1997.
For purposes of these change in control agreements, a "change in control"
includes (i) a consolidation or merger of the Company in which the Company is
not the continuing or surviving corporation or pursuant to which shares of our
common stock would be converted into cash, securities or other property, other
than a transaction in which the proportionate ownership of our common stock and
the surviving corporation remains substantially unchanged; (ii) a shareholder
approved plan or proposal for our liquidation; (iii) the acquisition by any
person of 25% or more of our voting securities; (iv) over a two-year period,
persons who are our directors cease to constitute a majority of our Board of
Directors, unless the new directors were approved by a two-thirds vote of the
continuing directors; or (v), for certain officers, the sale or other
disposition of a majority of the stock or of all or substantially all of the
assets of one of our significant subsidiaries in one or more transactions. The
spin-offs of Hussman International, Inc and Midas, Inc. in January, 1998
constituted a change in control of the Company for purposes of the Agreements
held by Messrs. Chelberg, Pilon and Connolly, but not for purposes of the
Agreement held by Mr. Young. Mr. Pilon received a partial payment of the
compensation payable to him under the terms of his Agreement in 1998 and, as
noted in the Summary Compensation Table, an additional payment in 1999, while
agreeing to remain with the Company for a transition period following the
spin-offs. Messrs. Chelberg and Connolly also received a partial payment of the
compensation payable to them under the terms of their agreements in 1998, which
are recorded under "All Other Compensation" in the
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<PAGE>
Summary Compensation Table, and received additional amounts due under those
agreements in January, 2000. In January, 2000, Messrs. Chelberg, Connolly and
Pilon also entered into agreements with the Company to continue their employment
through an extended transition period ending on or about December 31, 2000, in
their current positions and at their current levels of compensation.
Benefits are payable under these change in control agreements only if a
change in control has occurred and within three years thereafter the officer's
employment is terminated involuntarily without cause or voluntarily by the
officer for reasons such as demotion, relocation, loss of benefits or other
changes. The principal benefits to be provided to officers under these change in
control agreements are:
- a lump sum payment equal to three years' compensation (base salary and
incentive compensation); and
- continued participation in our employee benefit programs or equivalent
benefits for three years following termination.
These change in control agreements provide that if separation payments
thereunder, either alone or together with payments under any other plan of ours,
would constitute a "parachute payment" as defined in the Federal Internal
Revenue Code and subject the officer to the excise tax imposed by Section 4999
of the Internal Revenue Code of 1986, we will pay such tax and any taxes on such
payment.
These change in control agreements are not employment agreements, and do not
impair our right to terminate the employment of the officer with or without
cause prior to a change in control, or, absent a potential or pending change in
control, the right of the officer to voluntarily terminate his or her
employment. The PepsiCo transaction described on page 1 constituted a change in
control for purposes of the definition set forth in the agreements held by
Messrs. Young and Ellen, but the other conditions for payment under these
officers' agreements have not been met.
REPORT OF MANAGEMENT RESOURCES AND COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION
The Management Resources and Compensation Committee of our Board of
Directors consists of five non-employee directors. Our general responsibilities
are described on page 8 of this proxy statement.
INTRODUCTION
Most of our compensation programs and executive compensation plans have been
in effect for many years. As the Management Resources and Compensation
Committee, we authorize and evaluate programs and, where appropriate, establish
relevant performance criteria. In 1992, we established formal guidelines
aligning executive compensation targets with expected performance results.
However, while we believe that formula-driven plans can contribute to the
profitable growth of Whitman and consistent improvement in returns to
shareholders, it is also appropriate to exercise judgment with respect to an
individual executive's compensation to encourage and reward performance.
Actual and potential awards under Whitman's programs and plans, as well as
performance criteria, vary in proportion to each executive officer's
accountability with respect to policy making and execution. Our salary policies
and executive compensation plans are expressly constituted to encourage and
reinforce individual and collective performance, leading to increased
shareholder value. Our programs also seek to align short and long-term executive
compensation opportunities with the interests of shareholders. The short term
incentive plan focuses on continuous improvement in annual financial
performance. The long term program is designed to reward above average returns
to shareholders through stock appreciation and dividend growth.
With the assistance of executive compensation consultants, we periodically
assess the consistency of Whitman's executive compensation programs with our
guidelines, Whitman's business strategy and general market practices.
SALARIES
We determine base salaries and salary bands for all salaried employees of
Whitman and Pepsi General, including the executive officers named in the Summary
Compensation Table, based on the results of periodic market surveys. We do not
base actual salary bands exclusively on a formula and companies are
14
<PAGE>
not grouped to assess comparability according to narrowly defined criteria. We
derive salary bands from the skills and responsibilities required by a position,
the averages of salary levels of hundreds of comparable positions and comparable
companies, and from information in numerous databases generated by outside
consultants. Numerous criteria such as financial performance, revenues and
position responsibilities affect comparability. In determining the salaries for
all salaried and executive positions at Whitman and Pepsi General, we analyze
many databases and combinations of databases containing information on similar
companies. These databases may or may not include the companies included in the
S&P Mid-Cap 400 Index, which is used in the performance graph to reflect
shareholder return.
Generally, we evaluate the performance of each executive officer annually
and we base salary adjustments on various factors including personal
performance, current position in the relevant salary band and comparable company
data. Accordingly, we do not have a general policy to set salaries of executive
officers at any specific level within the salary band for their particular
position. We approve salary actions for approximately 13 key corporate and
operating company officers. In the case of Mr. Chelberg, by agreement with the
Company, and in view of the recent transactions involving the Company, his
salary has been frozen since July, 1997, and will remain so until his
anticipated retirement at the end of the year 2000.
MANAGEMENT INCENTIVE COMPENSATION PLAN
The executive officers named in the Summary Compensation Table, together
with approximately 87 additional executives and managers of Whitman and Pepsi
General, participate in the Management Incentive Compensation Plan. Target
amounts payable under this plan are established annually and are proportionate
to each participant's accountability for Whitman's business plans. The actual
value of compensation these executives earn under this plan is based primarily
on a formula which relates the target amounts and objectives we establish to
corporate and subsidiary financial results and, except for Mr. Chelberg,
individual performance objectives. For Whitman and Pepsi General executives, the
financial performance measures are earnings before interest, income taxes,
depreciation and amortization (EBITDA) and operating income (generally exceeded
in 1999). The percentage of the target amount related to attainment of financial
objectives is 100% for Mr. Chelberg, and 75% for the other executive officers
named in the Summary Compensation Table, with the balance related to individual
performance objectives.
LONG TERM PERFORMANCE COMPENSATION PROGRAM
The Long Term Performance Compensation Program was designed to establish
performance criteria for awarding restricted stock and stock options to
Whitman's executives, including those named in the Summary Compensation Table,
under Whitman's Stock Incentive Plan. We based the value of compensation
available through this long term program on target amounts (expressed in
dollars) that will be earned by participants if Whitman's cumulative total
return to shareholders over multiple-year measuring periods is at the 60th
percentile of the S&P Mid-Cap 400. Values range from 50% of the target amount
for performance equal to the average performance of the S&P Mid-Cap 400 to a
maximum of 200% of the target amount for performance at the 75th percentile or
above.
Performance cycles under this long term program currently are 12 consecutive
month-end measurements of total shareholder returns going back to the spin-offs
of Midas, Inc. and Hussman International, Inc. (January 31, 1998). The month-end
measurements are then averaged to calculate performance for the entire year. The
shareholder returns for such performance cycles are not comparable to the
comparative returns reflected in the performance graphs.
Following the performance measurement period ending December 31, 1998 (for
the eleven month-end periods since January 31, 1998), shareholder return for the
period relative to the S&P Mid-Cap 400 resulted in awards valued at 200% of
target. Award values were converted into stock options for 13 senior executives
and an additional 34 executives. These stock options vest over a three-year
period and have ten-year terms.
TAX LAW CHANGES IN DEDUCTIBILITY
Section 162(m) of the Internal Revenue Code limits the deductibility of
compensation paid or accrued by Whitman to the five most highly compensated
employees in excess of $1 million, unless certain forms of
15
<PAGE>
compensation meet certain performance or other criteria mandated by law. The
criteria for preserving compensation deductibility are quite complex and could
limit the effectiveness of one or more of Whitman's compensation programs or
overall compensation strategy if strictly applied.
Mr. Chelberg deferred portions of his 1997 and 1998 compensation, but none
of his 1999 compensation. We anticipate that most of the compensation
Mr. Chelberg receives and all of the compensation received by the other
executive officers named in the summary compensation table will be deductible
for tax purposes. Under the applicable rules, we estimate that approximately
$200,000 of Mr. Chelberg's compensation for 1999 will be non-deductible. We have
not made any determination with respect to Whitman's total compensation program
as it may be affected by changes in these tax laws for future years.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The names of each person who serves as a member of the Management Resources
and Compensation Committee are set forth in the table on page 8 of this proxy
statement. There are no compensation committee interlocks.
Richard G. Cline, Chairman
Herbert M. Baum
Archie R. Dykes
Jarobin Gilbert, Jr.
Robert F. Sharpe, Jr.
SHAREHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a graph which compares the cumulative total shareholder
return on our common stock to the Standard & Poor's MidCap 400 Index and to a
Peer Group consisting of two companies which are U.S.-based anchor bottlers, The
Pepsi Bottling Group, Inc. ("PBG") and Coca-Cola Enterprises, Inc. ("CCE"). The
comparison covers the period from the date of the PepsiCo transaction described
on page 1 of this proxy statement (May 20, 1999) to December 31, 1999.
COMPARISON OF CUMULATIVE RETURNS SINCE MAY 20, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CUMULATIVE VALUE
<S> <C> <C> <C> <C>
Whitman PBG CCE MidCap400
5-20-99 $100.00 $100.00 $100.00 $100.00
12-31-99 $75.06 $72.84 $57.79 $110.85
</TABLE>
Shareholder return in the above graph assumes reinvestment of all dividends.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
STOCK OWNERSHIP AND DIRECTOR RELATIONSHIPS WITH PEPSICO
At February 25, 2000, PepsiCo's ownership represented 39.6% of Whitman's
outstanding common stock. In addition, two directors of Whitman, Robert F.
Sharpe, Jr. and Karl M. von der Heyden, are executive officers of PepsiCo. See
"Proposal 1: Election of Directors".
16
<PAGE>
AGREEMENTS AND TRANSACTIONS WITH PEPSICO
Whitman and PepsiCo have entered into transactions and agreements with one
another incident to their respective businesses, and Whitman and PepsiCo are
expected to enter into material transactions and agreements from time to time in
the future.
Material agreements and transactions between Whitman and PepsiCo during 1999
are described below.
BOTTLING AGREEMENTS AND PURCHASES OF CONCENTRATES AND FINISHED PRODUCTS.
Whitman purchases concentrates from PepsiCo and manufactures, packages,
distributes and sells carbonated and non-carbonated beverages under various
bottling agreements with PepsiCo. These agreements give Whitman the right to
manufacture, package, sell and distribute beverage products of PepsiCo in both
bottles and cans and fountain syrup in specified territories. These agreements
include a master bottling agreement for beverages bearing the "Pepsi-Cola" and
"Pepsi" trademarks, including Diet Pepsi and Pepsi One in the United States. The
agreements also include a bottling and distribution agreement for non-cola
products in the United States, a master fountain syrup agreement and an allied
brands fountain agreement for fountain syrup in the United States, and an
international bottling agreement and an international allied brand bottling
agreement similar to the fountain agreement for countries outside the United
States. These agreements provide PepsiCo with the ability to set prices of
concentrates, as well as the terms of payment and other terms and conditions
under which Whitman purchases such concentrates. In addition, Whitman bottles
water under the "Aquafina" trademark pursuant to an agreement with PepsiCo,
which provides for payment of a royalty fee to PepsiCo. Whitman also purchases
finished beverage products from PepsiCo and certain of its affiliates, including
tea, concentrate and finished beverage products from a Pepsi/Lipton partnership,
as well as finished beverage products from a PepsiCo/Starbucks partnership.
During 1999, total payments by Whitman to PepsiCo for concentrates,
royalties and finished beverage products were approximately $385 million.
WHITMAN MANUFACTURING AND NATIONAL ACCOUNT SERVICES. Whitman provides
manufacturing services to PepsiCo in connection with the production of certain
finished beverage products, and also provides certain manufacturing, delivery
and equipment maintenance services to PepsiCo's national account customers. In
1999, PepsiCo paid Whitman approximately $2 million in connection with these
services.
SHARED SERVICES. PepsiCo provides various services to Whitman in territories
recently acquired from PepsiCo pursuant to a shared services agreement,
including procurement of raw materials, processing of accounts payable and
credit and collection, certain payroll tax services and information technology
maintenance. In 1999, Whitman paid approximately $4 million to PepsiCo for
shared services.
MARKETING AND OTHER SUPPORT ARRANGEMENTS. PepsiCo provides Whitman with
various forms of marketing support. The level of this support is negotiated
annually and can be increased or decreased at the discretion of PepsiCo. This
marketing support is intended to cover a variety of programs and initiatives,
including direct marketplace support (including point-of-sale materials),
capital equipment funding and shared media and advertising support. In 1999,
PepsiCo paid approximately $84 million to Whitman for direct marketing support
funding.
TRANSACTIONS WITH BOTTLERS IN WHICH PEPSICO HOLDS AN EQUITY INTEREST.
Whitman sold finished beverage products to other bottlers, including The Pepsi
Bottling Group, Inc. ("PBG"), a bottler in which PepsiCo owns an equity
interest. These sales occurred in instances where the proximity of Whitman's
production facilities to the other bottlers' markets or lack of manufacturing
capability, as well as other economic considerations, made it more efficient or
desirable for the other bottlers to buy finished product from Whitman. In 1999,
Whitman's sales to other bottlers, including those in which PepsiCo owns an
equity interest, were approximately $35 million. Whitman's purchases from such
other bottlers in 1999 were not material.
PBG also provides certain administrative support services to Whitman. In
1999, Whitman paid PBG approximately $1 million for these services.
17
<PAGE>
PROPOSAL 2: APPROVAL OF WHITMAN CORPORATION 2000 STOCK INCENTIVE PLAN
The Board of Directors is proposing for stockholder approval the Whitman
Corporation 2000 Stock Incentive Plan (the "2000 Plan"). The Board of Directors
recommends the approval of the 2000 Plan to replace the Whitman Corporation
Revised Stock Incentive Plan, which was originally adopted in 1982. The primary
purposes of the 2000 Plan are:
- to promote the interests of Whitman and its stockholders by strengthening
Whitman's ability to attract and retain highly competent individuals to
serve as directors, officers and other key employees;
- to provide a means to encourage stock ownership and proprietary interest
by directors, officers and key employees in Whitman; and
- to provide additional incentive and reward opportunities to directors,
officers and other key employees.
Under the 2000 Plan, Whitman may grant stock options, stock appreciation
rights ("SARs"), restricted stock or performance awards, as discussed in greater
detail below. Awards may be granted singly, in combination or in tandem and may
be evidenced by an agreement that sets forth the terms, conditions and
limitations of such award. Exhibit A to this Proxy Statement contains the
complete text of the 2000 Plan which is summarized below.
The Management Resources and Compensation Committee of the Board has
determined that approximately 1 million shares will be issued under the 2000
Plan in May 2000, following shareholder approval. On March 6, 2000 the closing
sale price of Common Stock for New York Stock Exchange Composite Transactions
was $11.1875 per share.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them FOR approval of the 2000 Plan. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR APPROVAL OF THE WHITMAN CORPORATION 2000 STOCK INCENTIVE
PLAN.
DESCRIPTION OF THE 2000 PLAN
ELIGIBILITY. Stock options (with or without SARs), restricted stock and
performance awards may be granted only to persons who are, or who are expected
to become, officers, directors or other key employees of Whitman or any of its
subsidiaries within the meaning of Section 424(f) of the Internal Revenue Code
of 1986, as amended. As of March 6, 2000, approximately 150 directors, officers
and other key employees were eligible to participate in the 2000 Plan.
ADMINISTRATION. The 2000 Plan will be administered by the Management
Resources and Compensation Committee of the Board of Directors, a subcommittee
thereof, or such other committee as may be appointed by the Board of Directors.
The committee administering the 2000 Plan will consist of at least two members
who may be "non-employee directors" within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934 and who are "outside directors" within the
meaning of Section 162(m) of the Internal Revenue Code.
The 2000 Plan is intended to provide participants with stock-based incentive
compensation that is not subject to the deduction limitations under
Section 162(m) of the Internal Revenue Code. Section 162(m) generally limits to
$1 million the amount that a publicly held corporation is allowed each year to
deduct for the compensation paid to each of its chief executive officer and its
four most highly compensated executive officers other than the chief executive
officer. However, "qualified performance-based compensation" is not subject to
the $1 million deduction limit. To qualify as qualified performance-based
compensation, the following requirements must be satisfied:
- the performance goals must be determined by a committee consisting solely
of two or more "outside directors;"
18
<PAGE>
- the material terms under which the compensation is to be paid, including
the performance goals, must be approved by the corporation's stockholders;
and
- if applicable, the committee must certify that the applicable performance
goals were satisfied before payment of any performance-based compensation
is made.
As noted above, the committee administering the 2000 Plan will consist
solely of "outside directors" for purposes of Section 162(m). As a result, and
based on regulations issued by the United States Department of the Treasury,
certain compensation under the 2000 Plan, such as that payable with respect to
stock options and SARs, is not expected to be subject to the $1 million
deduction limit. However, other compensation payable under the 2000 Plan, such
as restricted stock awards which are not subject to a performance condition for
vesting, may be subject to the limit.
Subject to the provisions of the 2000 Plan, the committee will have broad
authority to administer and interpret the 2000 Plan as it deems necessary and
appropriate. This authority includes, but is not limited to, selecting award
recipients, establishing award terms and conditions, adopting procedures and
regulations governing awards, and making all other determinations necessary or
advisable for the administration of the 2000 Plan.
AVAILABLE SHARES. The 2000 Plan authorizes the issuance of up to eight
million shares of Whitman's common stock. The number of available shares will be
reduced by the number of shares which become subject to awards which may be paid
in part or solely in shares. If an outstanding award expires or terminates
unexercised or is canceled or forfeited or shares are withheld or delivered to
pay the purchase price of shares or to satisfy withholding taxes, then the
shares subject to such expired, terminated, unexercised, canceled or forfeited
portion of such award, or the shares so withheld or delivered, will again be
available under the 2000 Plan. The maximum number of shares with respect to
which stock options, SARs, restricted stock or performance awards may be granted
during any calendar year to any person is one million.
In the event of a stock dividend, spin-off, split-up, recapitalization,
merger, consolidation, combination or exchange of shares or similar event, the
aggregate number and class of shares available under the 2000 Plan, the number
and class of shares subject to awards, and the maximum number of shares which
may be granted to any person will be appropriately adjusted by the committee
administering the 2000 Plan.
CHANGE IN CONTROL. The 2000 Plan defines a "change in control" as the
occurrence of any of the following events:
- subject to certain exceptions, the acquisition by any person or entity
other than PepsiCo of 25% or more of either the outstanding shares of
Whitman's common stock or the combined voting power of all of Whitman's
then outstanding securities;
- subject to certain exceptions, the acquisition by PepsiCo of 49% or more
of either the outstanding shares of common stock or the combined voting
power of all of Whitman's then outstanding securities;
- individuals who on February 18, 2000 constitute the Board of Directors,
and any new director whose nomination for election or election is
recommended or approved by a majority of the directors who were directors
on February 18, 2000 or whose nomination or election was previously so
recommended or approved, cease to constitute a majority of the Board of
Directors;
- the consummation of a reorganization, merger or consolidation of Whitman
or the sale or disposition of all or substantially all of its property and
assets (unless Whitman's stockholders receive 66 2/3% or more of either
the outstanding common stock or the voting power of the resulting entity,
there are no new 25% stockholders and Whitman directors constitute at
least a majority of the board of the resulting entity); or
- the liquidation or dissolution of Whitman.
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Except as described in the next paragraph, in the event of a change in
control of Whitman, participants are entitled to certain accelerated cash
payments. Participants will receive from Whitman an amount in cash equal to the
difference between the fair market value of the shares covered by their stock
options on the date of the change in control and the exercise price.
Notwithstanding the preceding sentence, the committee administering the 2000
Plan will have the discretion to provide for the substitution of shares of
Whitman common stock subject to the option a number and a class of securities of
the entity effecting the change in control with an appropriate change in the
purchase price per security. Participants who hold restricted stock will receive
from Whitman an amount in cash equal to the fair market value (less the purchase
price, if any) on the date of the change in control of the restricted stock.
Participants who hold performance awards for which the applicable performance
period (as described below) has not expired will receive from Whitman a pro
rated amount in cash. Participants who hold performance awards which have been
earned but not yet paid are entitled to receive an amount in cash equal to the
value of the performance awards.
Notwithstanding the prior paragraph, in the event of a change in control
involving a reorganization, merger or consolidation of Whitman or other
disposition of all or substantially all of the assets of Whitman or a
liquidation or dissolution of Whitman, and in connection with which the holders
of common stock receive publicly traded shares of common stock:
- each stock option and SAR will be exercisable in full;
- the restriction period (as described below) applicable to any award of
restricted stock will lapse and any other restrictions, terms or
conditions will lapse and be deemed to be satisfied at the maximum value
or level;
- the performance measures applicable to any performance award will be
deemed to be satisfied at the maximum value; and
- there will be substituted for each share of common stock remaining
available under the 2000 Plan, whether or not then subject to an
outstanding award, the number and class of shares into which each
outstanding share of common stock is converted pursuant to such change in
control. In the event of any such substitution, the purchase price per
share in the case of any award will be appropriately adjusted by the
committee administering the 2000 Plan.
EFFECTIVE DATE, TERMINATION AND AMENDMENTS. If approved by the
stockholders, the 2000 Plan will become effective as of February 18, 2000, and
will terminate when shares are no longer available for the grant, exercise or
settlement of awards, unless terminated earlier by the Board of Directors. The
Board of Directors may amend the 2000 Plan at any time, except that stockholder
approval is required to increase the maximum number of shares available under
the 2000 Plan or effect any change inconsistent with Section 422 of the Internal
Revenue Code.
STOCK OPTIONS. A stock option represents the right to purchase a specified
number of shares of common stock during a specified period as determined by the
committee. The committee may grant incentive stock options and nonqualified
options (with or without SARs) to persons who are, or who are expected to
become, eligible officers, key employees or directors. An incentive stock option
may not be granted to any person who is not an employee of Whitman or any parent
or subsidiary.
The purchase price per share under each stock option is determined by the
committee, except that the purchase price per share upon exercise of an
incentive option may not be less than 100% of the fair market value of Whitman's
common stock. The period during which a stock option may be exercised is
determined by the committee, except that no incentive stock option may be
exercised later than ten years after its date of grant. A stock option may be
exercised by giving written notice to Whitman specifying the number of shares to
be purchased. The purchase price may be paid in cash or by delivery of
previously owned whole shares of common stock valued at their fair market value
on the date of exercise.
In general, unless the option agreement provides otherwise or the Committee
determines otherwise, in the event of the termination of employment or service
of a participant holding a stock option, each stock
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option will be exercisable only to the extent exercisable at the date of such
termination and may thereafter be exercised at any time within a period ranging
from three months to one year after such termination, and in no event after the
date on which such stock option would otherwise terminate, except that:
- in the event of termination by reason of retirement or death, each
nonqualified option will be fully exercisable at any time up to and
including the date on which the nonqualified option would otherwise
terminate; and
- in the event of termination for cause or which is voluntary on the part of
the participant without Whitman's written consent, each stock option held
by such participant will terminate.
STOCK APPRECIATION RIGHTS. An SAR represents a right to receive a payment,
in cash, shares of common stock or a combination, equal to the excess of the
fair market value of a specified number of shares of common stock on the date
the SAR is exercised over the fair market value of such shares on the date the
SAR was granted. The committee may grant an SAR (concurrently with the grant of
the stock option or, in the case of a nonqualified option which is not intended
to be qualified performance-based compensation under Section 162(m) of the
Internal Revenue Code, subsequent to such grant) to any person who is granted a
stock option. An SAR may be exercised:
- by giving written notice to Whitman specifying the number of SARs which
are being exercised; and
- by surrendering to Whitman any stock options which are canceled by reason
of the exercise of the SAR.
RESTRICTED STOCK AWARDS. Restricted stock awards are grants of common
stock, the vesting of which is subject to a restriction period established by
the committee. During the restriction period, Whitman retains custody of the
shares subject to each grant, but a participant who holds restricted stock has
the right (unless otherwise provided in the restricted stock agreement) to vote
such shares and to receive dividends thereon. During the restriction period, the
participant may not sell, pledge or dispose of the shares. A participant who
holds restricted stock will forfeit his or her shares of restricted stock if:
- the participant breaches a restriction or the terms and conditions
established by the committee; or
- except as may otherwise be determined by the committee, the participant
fails to remain continuously in the employ or service of Whitman or a
subsidiary at all times during the restriction period.
PERFORMANCE AWARDS. The 2000 Plan authorizes the grant of performance
awards under which a performance period is established by the committee at the
time of grant. Each performance award is assigned a maximum value which is
contingent upon future performance of Whitman or a subsidiary, division or
department over the performance period. Performance measures are determined by
the committee prior to the beginning of each performance period but may be
subject to later revisions to reflect significant, unforeseen events or changes
as the committee deems appropriate.
After a performance period, a participant who holds a performance award is
entitled to receive payment of an amount, not exceeding the maximum assigned
value, based on the achievement of the performance measures, as determined by
the committee. Payment of performance awards may be made wholly in cash, wholly
in shares or a combination thereof, in lump sum or in installments, and subject
to such vesting and other terms and conditions as determined by the committee.
In the case of a performance award intended to be qualified performance-based
compensation under Section 162(m) of the Internal Revenue Code, no payment may
be made until the committee certifies in writing that the performance measures
have been achieved.
A performance award will terminate if the participant holding such award
does not remain continuously in the employ or service of Whitman or a subsidiary
at all times during the performance period, except as may otherwise be
determined by the committee. In the event that a participant ceases to be an
employee or director after the performance period but prior to full payment of
the performance award, payment will be made in accordance with terms established
by the committee. A participant who holds a
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performance award which is payable in installments of common stock may not sell,
pledge or dispose of such common stock until the installments become due.
PERFORMANCE GOALS. The vesting or payment of performance awards and certain
restricted stock awards will be subject to the satisfaction of certain
performance goals. The performance goals applicable to a particular award will
be determined by the committee at the time of grant. At present, no performance
goals have been designated by the committee. Performance goals may be one or
more of the following: stock price, the attainment by a share of common stock of
a specified fair market value for a specified period of time, capitalization,
earnings per share, growth in stock price, growth in market value, return to
stockholders (including or excluding dividends), return on equity, earnings,
earnings per share, economic value added, revenues, net income, operating
income, return on assets, return on capital, return on sales, market share, cash
flow measures or cost reduction goals, or any combination of the foregoing. If
the performance goal or goals applicable to a particular award are satisfied,
the amount of compensation would be determined as follows:
- in the case of a performance award, the amount of compensation would equal
the fair market value of any shares delivered and the amount of cash paid;
and
- in the case of a restricted stock award that is subject to one or more
performance goals, the amount of compensation would equal the number of
shares subject to such award multiplied by the value of a share of common
stock on the date the award vests.
FEDERAL TAX CONSEQUENCES. The following is a brief summary of certain U.S.
federal income tax consequences generally arising with respect to awards under
the 2000 Plan.
A participant will not recognize taxable income at the time a stock option
is granted and Whitman will not be entitled to a tax deduction at that time. A
participant will recognize compensation taxable as ordinary income (and subject
to income tax withholding for an employee) upon exercise of a nonqualified
option equal to the excess of the fair market value of the shares purchased over
their exercise price, and Whitman will be entitled to a corresponding deduction.
A participant will not recognize income (except for purposes of the alternative
minimum tax) upon exercise of an incentive stock option. If the shares acquired
by exercise of an incentive stock option are held for the longer of two years
from the date the incentive stock option was granted and one year from the date
it was exercised, any gain or loss arising from a subsequent disposition of such
shares will be taxed as long-term capital gain or loss, and Whitman will not be
entitled to any deduction. If, however, a participant disposes of such shares
within the above-described period, then in the year of the disposition the
participant will recognize compensation taxable as ordinary income and Whitman
will be entitled to a corresponding deduction, equal to the excess of the lesser
of:
- the amount realized upon such disposition over the exercise price; or
- the fair market value of such shares on the date of exercise over the
exercise price.
A participant will not recognize taxable income at the time SARs are granted
and Whitman will not be entitled to a tax deduction at that time. Upon exercise
of an SAR, the participant will recognize compensation taxable as ordinary
income (and subject to income tax withholding for an employee) in an amount
equal to the fair market value of any shares delivered and the amount of cash
paid by Whitman. This amount is deductible by Whitman as compensation expense.
A participant will not recognize taxable income at the time restricted stock
is granted and Whitman will not be entitled to a tax deduction at that time,
unless the participant makes an election to be taxed at the time of grant. If
the participant does not make such election, the participant will recognize
compensation taxable as ordinary income (and subject to income tax withholding
for an employee) at the time the restrictions lapse in an amount equal to the
excess of the fair market value of the shares at such time over the amount, if
any, paid for the shares. The amount of ordinary income recognized by making the
above-described election or upon the lapse of restrictions is deductible by
Whitman, except to the extent the deduction limits of Section 162(m) of the
Internal Revenue Code apply. In addition, a participant receiving
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dividends with respect to restricted stock for which the above-described
election has not been made and prior to the time the restrictions lapse will
recognize compensation taxable as ordinary income (and subject to income tax
withholding for an employee), rather then dividend income, in an amount equal to
the dividends paid, and Whitman will be entitled to a corresponding deduction,
except to the extent the deduction limit of Section 162(m) applies.
A participant will not recognize taxable income at the time performance
awards are granted and Whitman will not be entitled to a tax deduction at that
time. Upon the settlement of performance awards, the participant will recognize
compensation taxable as ordinary income (and subject to income tax withholding
for an employee) in an amount equal to the fair market value of any shares
delivered and the amount of cash paid by Whitman. This amount is deductible by
Whitman, except to the extent the deduction limit of Section 162(m) applies.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE APPROVAL
OF THE WHITMAN CORPORATION 2000 STOCK INCENTIVE PLAN.
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INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee has recommended, and the Board of Directors has
reappointed, the firm of KPMG LLP as independent certified public accountants to
audit our financial statements for fiscal year 2000. Representatives of KPMG
LLP, who have been our auditors for many years, are expected to be present at
the meeting and they will have the opportunity to make a statement if they
desire to do so. In addition, they are expected to be available to respond to
appropriate questions.
WHITMAN'S FORM 10-K
We will send a copy of our Annual Report on Form 10-K for the fiscal year
ended January 1, 2000, as filed with the Securities and Exchange Commission, to
any shareholder without charge, upon written request to Whitman Corporation,
attention Corporate Secretary, 3501 Algonquin Road, Rolling Meadows, Illinois
60008.
SHAREHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
Whitman's bylaws provide that in order for a shareholder to nominate a
candidate for election as a director at an annual meeting of shareholders or
propose business for consideration at such meeting, the shareholder must
generally notify Whitman in writing at the principal executive office of Whitman
not later than the close of business the 60(th) day nor earlier than the 90(th)
day prior to the meeting. The 2001 annual meeting is currently expected to be
held on May 3, 2001. Accordingly, a shareholder nomination or proposal intended
to be considered at the 2001 annual meeting must be received by the Corporate
Secretary on or after February 1, 2001, and on or prior to March 3, 2001.
Proposals should be mailed to the Corporate Secretary, Whitman Corporation, 3501
Algonquin Road, Rolling Meadows, Illinois 60008. A copy of our bylaws may be
obtained from the Corporate Secretary, by written request to the same address.
In addition, if you wish to have your proposal considered for inclusion in
our 2001 proxy statement, we must receive your proposal on or before
November 23, 2000.
OTHER MATTERS
The Board of Directors does not know of any other matter that will be
presented at the annual meeting other than the proposals discussed in this proxy
statement. Under our bylaws, generally no business besides the proposals in this
proxy statement may be transacted at the meeting. However, if any other matter
properly comes before the meeting, your proxies will act on such matter in their
discretion.
By Order of the Board of Directors
[SIG]
Steven R. Andrews
CORPORATE SECRETARY
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EXHIBIT A
WHITMAN CORPORATION 2000 STOCK INCENTIVE PLAN
<PAGE>
WHITMAN CORPORATION
2000 STOCK INCENTIVE PLAN
(APPROVED FEBRUARY 18, 2000 BY BOARD OF DIRECTORS)
1. DEFINITIONS
The following definitions shall be applicable throughout this Plan:
(a) "Code" shall mean the Internal Revenue Code of 1986, as the same may be
amended from time to time. Reference in the Plan to any section of the
Code shall be deemed to include any amendments or successor provision to
such section and any regulations under such section.
(b) "Committee" shall mean the Committee selected by the Board of Directors
as provided in Paragraph 4, consisting of two or more members of the
Board of Directors, each of whom may be (i) a "Non-Employee Director"
within the meaning of Rule 16b-3 under the Exchange Act, and (ii) an
"outside director" within the meaning of Section 162(m) of the Code.
(c) "Common Stock" shall mean common stock of the Corporation, $.01 par
value.
(d) "Corporation" shall mean Whitman Corporation, a Delaware corporation.
(e) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(f) "Holder" shall mean an individual who has been granted an Option,
Restricted Stock Award or Performance Award.
(g) "Option" shall mean any option granted under the Plan for the purchase
of Common Stock.
(h) "Performance Award" shall mean an award of Common Stock or cash granted
under the Performance Award provisions of the Plan.
(i) "Performance Measures" shall mean the criteria and objectives,
established by the Committee, which shall be satisfied or met during the
applicable performance period as a condition to (i) the receipt of an
Option or SAR, (ii) the exercisability of all or a portion of an Option
or SAR, (iii) the vesting of shares of Common Stock subject to a
Restricted Stock Award or (iv) the receipt of shares of Common Stock
and/or cash with respect to a Performance Award. Such criteria and
objectives may include one or more of the following: stock price, the
attainment by a share of Common Stock of a specified fair market value
for a specified period of time, capitalization, earnings per share,
growth in stock price, growth in market value, return to stockholders
(including or excluding dividends), return on equity, earnings, earnings
per share, economic value added, revenues, net income, operating income,
return on assets, return on capital, return on sales, market share, cash
flow measures or cost reduction goals, or any combination of the
foregoing. If the Committee desires that compensation payable pursuant to
any award under the Plan be qualified performance-based compensation
under Section 162(m) of the Code and the rules and regulations
thereunder, the Performance Measures (i) shall be established by the
Committee no later than 90 days after the first day of the performance
period (or such other time permitted under Section 162(m) of the Code)
and (ii) shall satisfy all other applicable requirements imposed under
Treasury Regulations promulgated under Section 162(m) of the Code,
including the requirement that such Performance Measures be stated in
terms of an objective formula or standard. The Performance Measures
determined by the Committee shall be established prior to the beginning
of each performance period but, except as necessary to qualify a
Performance Award as "performance-based compensation" under
Section 162(m) of the Code and the rules and regulations thereunder, may
be subject to such later revisions to reflect significant, unforeseen
events or changes, as the Committee shall deem appropriate.
(j) "Plan" shall mean the Corporation's 2000 Stock Incentive Plan, as
amended from time to time.
(k) "Restricted Stock Award" shall mean an award of Common Stock granted
under the Restricted Stock Award provisions of the Plan.
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(l) "Retirement" shall mean cessation of active employment or service with
the Corporation or a subsidiary pursuant to the Corporation's retirement
policies and programs.
(m) "SAR" shall mean a stock appreciation right which is issued in tandem
with, or by reference to, an Option, which entitles the Holder thereof to
receive, upon exercise of such SAR and surrender for cancellation of all
or a portion of such Option, shares of Common Stock, cash or a
combination thereof with an aggregate value equal to the excess of the
fair market value of one share of Common Stock on the date of exercise
over the purchase price specified in such Option, multiplied by the
number of shares of Common Stock subject to such Option, or portion
thereof, which is surrendered.
2. PURPOSE
It is the purpose of the Plan to provide a means through which the
Corporation may attract able persons to enter its employ and the employ of its
subsidiaries, to serve as directors and to provide a means whereby those persons
upon whom the responsibilities of the successful administration and management
of the Corporation or its subsidiaries rest, and whose present and potential
contributions to the welfare of the Corporation or its subsidiaries are of
importance, can acquire and maintain stock ownership. Such persons should thus
have a greater than ordinary concern for the welfare of the Corporation and/or
its subsidiaries and would be expected to strengthen and maintain a desire to
remain in the employ or service of the Corporation or its subsidiaries. It is a
further purpose of the Plan to provide such persons with additional incentive
and reward opportunities designed to enhance the profitable growth of the
Corporation. So that the maximum incentive can be provided each participant in
the Plan by granting such participant an Option or award best suited to such
participant's circumstances, the Plan provides for granting "incentive stock
options" (as defined in Section 422 of the Code) and nonqualified stock options
(with or without SARs), Restricted Stock Awards and Performance Awards, or any
combination of the foregoing.
3. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall be submitted to the stockholders of the Corporation for
approval and, if approved by the affirmative vote of a majority of the shares of
Common Stock present in person or represented by proxy at the 2000 annual
meeting of stockholders, shall become effective on the date of approval by the
Board of Directors. The Plan shall remain in effect until all Options granted
under the Plan have been exercised, all restrictions imposed upon Restricted
Stock Awards have been eliminated and all Performance Awards have been
satisfied.
4. ADMINISTRATION
The members of the Committee shall be selected by the Board of Directors to
administer the Plan. A majority of the Committee shall constitute a quorum.
Subject to the express provisions of the Plan, the Committee shall have
authority, in its discretion, to determine the individuals to receive Options
(with or without SARs), Restricted Stock Awards and Performance Awards, the time
or times when they shall receive them, whether an "incentive stock option" under
Section 422 of the Code or nonqualified option shall be granted, the number of
shares to be subject to each Option and Restricted Stock Award and the value of
each Performance Award. In making such determinations the Committee shall take
into account the nature of the services rendered by each individual, such
individual's present and potential contribution to the Corporation's success,
and such other factors as the Committee shall deem relevant.
The Committee shall have such additional powers as are delegated to it by
the other provisions of the Plan and, subject to the express provisions of the
Plan, to construe the respective Option, Restricted Stock Award and Performance
Award agreements and the Plan, to prescribe, amend and rescind rules and
regulations relating to the Plan and to determine the terms, restrictions and
provisions of the Option, Restricted Stock Award and Performance Award
agreements (which need not be identical) including such terms, restrictions,
Performance Measures and provisions as shall be requisite in the judgment of the
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Committee to cause certain Options to qualify as "incentive stock options" under
Section 422 of the Code, and to make all other determinations necessary or
advisable for administering the Plan. The Committee may, in its sole discretion
and for any reason at any time, subject to the requirements imposed under
Section 162(m) of the Code and regulations promulgated thereunder in the case of
an award intended to be qualified performance-based compensation, take action
such that (i) any or all outstanding Options shall become exercisable in part or
in full, (ii) all or some of the restrictions applicable to any outstanding
Restricted Stock Award shall lapse and (iii) all or a portion of any outstanding
Performance Award shall be satisfied. The Committee may correct any defect or
supply any omission or reconcile any inconsistency in the Plan or in any Option,
Restricted Stock Award or Performance Award agreement in the manner and to the
extent it shall deem expedient to carry it into effect, and it shall be the sole
and final judge of such expediency. The determinations of the Committee on
matters referred to in this Paragraph 4 shall be conclusive.
The Committee shall act by majority action at a meeting, except that action
permitted to be taken at a meeting may be taken without a meeting if written
consent thereto is given by all members of the Committee.
5. GRANTS OF OPTIONS, RESTRICTED STOCK AWARDS AND PERFORMANCE AWARDS; SHARES
SUBJECT TO THE PLAN
The Committee may from time to time grant both "incentive stock options"
under Section 422 of the Code and nonqualified options to purchase shares of
Common Stock (with or without SARs), Restricted Stock Awards and Performance
Awards to one or more officers, key employees or directors (or persons expected
to become officers, key employees or directors) determined by it to be eligible
for participation in accordance with the provisions of Paragraph 6 and providing
for the issuance of such number of shares and, in the case of Performance
Awards, having such value as in the discretion of the Committee may be fitting
and proper. Subject to Paragraph 10, not more than 8,000,000 shares of Common
Stock shall be available under the Plan upon exercise of Options or SARs or
pursuant to Restricted Stock Awards or Performance Awards granted under the
Plan. Performance Awards which may be exercised or paid only in cash shall not
affect the number of shares of Common Stock available for issuance under the
Plan.
The Common Stock to be offered under the Plan pursuant to Options, SARS,
Restricted Stock Awards and Performance Awards may be Common Stock previously
issued and outstanding and reacquired by the Corporation or newly issued shares.
The number of shares of Common Stock available under the Plan shall be
reduced by the sum of the aggregate number of shares of Common Stock which
become subject to outstanding Options, Restricted Stock Awards and outstanding
Performance Awards which may be paid in part or solely in shares of Common
Stock. To the extent (i) that an outstanding Option expires or terminates
unexercised or is canceled or forfeited (other than in connection with the
exercise of an SAR for Common Stock as set forth in the immediately following
sentence) or (ii) that an outstanding Restricted Stock Award or outstanding
Performance Award which may be paid in part or solely in shares of Common Stock
expires or terminates without vesting or is canceled or forfeited or (iii)
shares of Common Stock are withheld or delivered pursuant to the provisions on
Share Withholding set forth in Paragraph 11 (A), then the shares of Common Stock
subject to such expired, terminated, unexercised, canceled or forfeited portion
of such Option, Restricted Stock Award or Performance Award, or the shares of
Common Stock so withheld or delivered, shall again be available under the Plan.
In the event all or a portion of an SAR is exercised, the number of shares of
Common Stock subject to the related Option (or portion thereof) shall again be
available under the Plan, except to the extent that shares of Common Stock were
actually issued upon exercise of the SAR.
To the extent necessary for an award hereunder to be qualified
performance-based compensation under Section 162(m) of the Code and the rules
and regulations thereunder, the maximum number of shares of Common Stock with
respect to which Options, SARs, Restricted Stock Awards or Performance Awards or
a combination thereof may be granted during any calendar year to any person
shall be 1,000,000 subject to adjustment as provided in Paragraph 10. Grants of
Options, Restricted Stock Awards or Performance Awards that are canceled shall
count toward the maximum stated in the preceding sentence.
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6. ELIGIBILITY
Options, Restricted Stock Awards and Performance Awards may be granted only
to persons who, at the time of the grant or award, are officers, other key
employees or directors of the Corporation or any of its present and future
subsidiaries within the meaning of Section 424(f) of the Code (herein called
subsidiaries) or such persons expected to become such officers, key employees or
directors. Options, Restricted Stock Awards or Performance Awards, or any
combination thereof, may be granted on one or more occasions to the same person.
A person who has received or is eligible to receive options to purchase stock of
any subsidiary of the Corporation or incentive awards from any subsidiary of the
Corporation will not, by reason thereof, be ineligible to receive Options,
Restricted Stock Awards or Performance Awards under the Plan unless prohibited
by the plan of such subsidiary.
Nothing in the Plan or any Option, Restricted Stock Award or Performance
Award agreement shall be construed to constitute or be evidence of an agreement
or understanding, expressed or implied, on the part of the Corporation or its
subsidiaries to employ any person for any specific period of time.
7. OPTIONS AND SARS
(A) Number of Shares. The Committee may, in its discretion, grant Options
to such eligible persons as may be selected by the Committee. The Committee
may, in its discretion, establish Performance Measures which shall be
satisfied or met as a condition to the grant of an Option. With respect to
each Option, the Committee shall determine the number of shares subject to
the Option and the manner and the time of exercise of such Option. The
Committee shall make such other determinations which in its discretion are
fitting and proper.
(B) Stock Option Agreement. Each Option shall be evidenced by a stock
option agreement in such form containing such provisions not inconsistent
with the provisions of the Plan as the Committee from time to time shall
approve, including, without limitation, provisions to qualify certain
Options as "incentive stock options" under Section 422 of the Code. An
incentive stock option may not be granted to any person who is not an
employee of the Corporation or any parent or subsidiary (as defined in
Section 424 of the Code). Each incentive stock option shall be granted
within ten years of the earlier of the date the Plan is adopted by the
Corporation's Board of Directors and the date the Plan is approved by the
stockholders of the Corporation. To the extent that the aggregate fair
market value (determined as of the date of grant) of shares of Common Stock
with respect to which Options designated as incentive stock options are
exercisable for the first time by a person during any calendar year exceeds
the amount (currently $100,000) established by the Code, such Options shall
be deemed to be nonqualified stock options.
(C) Option Price and Term of Option. The purchase price per share of the
Common Stock under each Option shall be determined by the Committee;
provided, however, that such purchase price shall not be less than 100% of
the fair market value of the Common Stock at the date such Option is
granted; provided, further, that if an incentive stock option shall be
granted to any person who, at the time such Option is granted, owns capital
stock of the Corporation possessing more than ten percent of the total
combined voting power of all classes of capital stock of the Corporation (or
of any parent or subsidiary of the Corporation) (a "Ten Percent Holder"),
such purchase price shall be the price (currently 110% of fair market value)
required by the Code in order to constitute an incentive stock option.
The period during which an Option may be exercised shall be determined
by the Committee; provided, however, that no incentive stock option shall be
exercised later than ten years after its date of grant; provided further,
that if an incentive stock option shall be granted to a Ten Percent Holder,
such option shall not be exercised later than five years after its date of
grant. The Committee may, in its discretion, establish Performance Measures
which shall be satisfied or met as a condition to the exercisability of all
or a portion of an Option. The Committee shall determine whether an Option
shall become exercisable in cumulative or non-cumulative installments and in
part or in full at any
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time. An exercisable Option, or portion thereof, may be exercised only with
respect to whole shares of Common Stock.
(D) Payment. An Option may be exercised by giving written notice to the
Corporation specifying the number of shares of Common Stock to be purchased
and accompanied by payment of the purchase price in full (or arrangement
made for such payment to the Corporation's satisfaction). As set forth in
the agreement evidencing the Option, the purchase price may be paid (a) in
cash or (b) by delivery (either actual delivery or by attestation procedures
established by the Corporation) of previously-owned whole shares of Common
Stock (for which the holder has good title, free and clear of all liens and
encumbrances and which such holder either (i) has held for at least six
months or (ii) has purchased on the open market) valued at their fair market
value on the date of exercise. If applicable, a person exercising an Option
shall surrender to the Corporation any SARs which are canceled by reason of
the exercise of such Option.
(E) Termination of Employment or Service or Death of Holder. In the
event of any termination of the employment or service of a Holder with the
Corporation or one of its subsidiaries, other than by reason of death or, in
the case of a Holder of a nonqualified option, Retirement, the Holder may
(unless otherwise provided in the Option agreement) exercise each Option
held by such Holder at any time within three months (or one year if the
Holder is permanently and totally disabled within the meaning of Section
22(e)(3) of the Code) after such termination of employment or service, but
only if and to the extent such Option is exercisable at the date of such
termination of employment or service, and in no event after the date on
which such Option would otherwise terminate; provided, however, that if such
termination of employment or service is for cause or voluntary on the part
of the Holder without the written consent of the Corporation, any Option
held by such Holder under the Plan shall terminate unless otherwise provided
in the Option agreement.
In the event of the termination of employment or service of a Holder of
a nonqualified option by reason of Retirement, then each nonqualified option
held by the Holder shall be fully exercisable, and, subject to the following
paragraph, such nonqualified option shall be exercisable by the Holder at
any time up to and including (but not after) the date on which the
nonqualified option would otherwise terminate (unless otherwise provided in
the Option agreement).
Unless otherwise provided in the Option agreement, in the event of the
death of a Holder (i) while employed by or providing service to the
Corporation or one of its subsidiaries or after Retirement, (ii) within
three months after termination of the Holder's employment, other than a
termination by reason of death, Retirement or permanent and total disability
within the meaning of Section 22(e)(3) of the Code, or (iii) within one year
after termination of the Holder's employment by reason of such disability,
then each Option held by such Holder may be exercised by the legatees of the
Holder under his last will, or by his personal representatives or
distributees, at any time within a period of nine months after the Holder's
death, but only if and to the extent such Option is exercisable at the date
of death (unless death occurs while the Holder is employed by or providing
service to the Corporation or one of its subsidiaries, in which case each
Option held by the Holder shall be fully exercisable), and in no event after
the date on which such Option would otherwise terminate.
(F) Privileges of the Holder as Stockholder. The Holder shall be
entitled to all the privileges and rights of a stockholder with respect only
to such shares of Common Stock as have been actually purchased under the
Option and registered in the Holder's name.
(G) SARs. The Committee may, in its sole discretion, grant an SAR
(concurrently with the grant of the Option or, in the case of a nonqualified
option which is not intended to be qualified performance-based compensation
under Section 162(m) of the Code and the rules and regulations thereunder,
subsequent to such grant) to any Holder of any Option granted under the Plan
(or such Holder's legatees, personal representatives or distributees then
entitled to exercise such Option). The Committee may, in its discretion,
establish Performance Measures which shall be satisfied or met as a
condition to the grant of an SAR or to the exercisability of all or a
portion of an SAR. An SAR may be exercised (i) by giving written notice to
the Corporation specifying the number of SARs which are
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being exercised and (ii) by surrendering to the Corporation any Options
which are canceled by reason of the exercise of the SAR. An SAR shall be
exercisable upon such additional terms and conditions as may from time to
time be prescribed by the Committee. No fractional share shall be issued
upon the exercise of any SAR.
(H) Non-Transferability. Unless otherwise specified in the agreement
evidencing an Option or SAR, no Option or SAR hereunder shall be
transferable other than by will or the laws of descent and distribution or
pursuant to beneficiary designation procedures approved by the Corporation.
Except to the extent permitted by the foregoing sentence, each Option or SAR
may be exercised during the Holder's lifetime only by the Holder or the
Holder's legal representative or similar person. Except as permitted by the
second preceding sentence, no Option or SAR hereunder shall be sold,
transferred, assigned, pledged, hypothecated, encumbered or otherwise
disposed of (whether by operation of law or otherwise) or be subject to
execution, attachment or similar process. Upon any attempt to so sell,
transfer, assign, pledge, hypothecate, encumber or otherwise dispose of any
Option or SAR hereunder, such Option or SAR and all rights thereunder shall
immediately become null and void.
8. RESTRICTED STOCK AWARDS
(A) Restriction Period to Be Established by the Committee. At the time of
the making of a Restricted Stock Award, the Committee shall establish a
period of time (the "Restriction Period") applicable to such award. The
Committee may establish different Restriction Periods from time to time and
each Restricted Stock Award may have a different Restriction Period, in the
discretion of the Committee. The Committee may, in its discretion, establish
Performance Measures which shall be satisfied or met during the Restriction
Period as a condition to the vesting of all or a portion of the shares of
Common Stock subject to a Restricted Stock Award and for the forfeiture of
all or a portion of such shares if such Performance Measures shall not be
satisfied or met during the Restriction Period. Notwithstanding anything
contained herein to the contrary, in the case of a Restricted Stock Award
intended to be qualified performance-based compensation under Section 162(m)
and the rules and regulations thereunder, shares of Common Stock subject
thereto shall not be vested until the Committee certifies in writing that
the applicable Performance Measures for the performance period have in fact
been achieved.
(B) Other Terms and Conditions. Common Stock, when awarded pursuant to a
Restricted Stock Award, shall be represented by a stock certificate or
book-entry credits registered in the name of the Holder who receives the
Restricted Stock Award or a nominee for the benefit of the Holder. The
Holder shall have the right to receive dividends (or the cash equivalent
thereof) during the Restriction Period and shall also have the right to vote
such Common Stock and all other stockholder rights (in each case unless
otherwise provided in the agreement evidencing the Restricted Stock Award),
with the exception that (i) the Holder shall not be entitled to delivery of
the stock certificate (or the removal of restrictions in the Corporation's
books and records) until the Restriction Period established by the Committee
pursuant to Paragraph 8(A) shall have expired or lapsed, (ii) the
Corporation shall retain custody of the stock certificate during the
Restriction Period, (iii) the Holder may not sell, transfer, pledge,
exchange, hypothecate or dispose of such Common Stock during the Restriction
Period, and (iv) a breach of restriction or breach of terms and conditions
established by the Committee pursuant to the Restricted Stock Award shall
cause a forfeiture of the Restricted Stock Award. If requested by the
Corporation, a Holder of a Restricted Stock Award shall deposit with the
Corporation stock powers or other instruments of assignment (including a
power of attorney), each endorsed in blank with a guarantee of signature if
deemed necessary or appropriate by the Corporation, which would permit
transfer to the Corporation of all or a portion of the shares of Common
Stock subject to the Restricted Stock Award in the event such award is
forfeited in whole or in part. A distribution with respect to shares of
Common Stock, other than a distribution in cash, shall be subject to the
same restrictions as the shares of Common Stock with respect to which such
distribution was made, unless otherwise determined by the Committee. The
Committee may, in addition, prescribe additional restrictions, terms or
conditions upon or to the Restricted Stock Award in the manner
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prescribed by Paragraph 4. The Committee may, in its sole discretion, also
establish rules pertaining to the Restricted Stock Award in the event of
termination of employment or service (by Retirement, disability, death or
otherwise) of a Holder of such award prior to the expiration of the
Restriction Period.
(C) Restricted Stock Award Agreement. Each Restricted Stock Award shall
be evidenced by an agreement in such form and containing such provisions not
inconsistent with the provisions of the Plan as the Committee from time to
time shall approve.
(D) Payment for Restricted Stock. Restricted Stock Awards may be made by
the Committee whereby the Holder receives Common Stock subject to those
terms, conditions and restrictions established by the Committee but is not
required to make any payment for said Common Stock. The Committee may also
establish terms as to each Holder whereby such Holder, as a condition to the
Restricted Stock Award, is required to pay, in cash or other consideration,
all (or any lesser amount than all) of the fair market value of the Common
Stock, determined as of the date the Restricted Stock Award is made.
(E) Termination of Employment or Service or Death of Holder. A
Restricted Stock Award shall terminate for all purposes if the Holder does
not remain continuously in the employ or service of the Corporation or a
subsidiary at all times during the applicable Restriction Period, except as
may otherwise be determined by the Committee.
9. PERFORMANCE AWARDS
(A) Performance Period. The Committee shall establish with respect to
each Performance Award a performance period over which performance shall be
measured. The performance period shall be established at the time of such
award.
(B) Performance Awards. Each Performance Award shall have a maximum
value established by the Committee at the time of such award.
(C) Performance Measures. Performance Awards shall be awarded to an
eligible person contingent upon future performance of the Corporation and/or
the Corporation's subsidiary, division or department in which such person is
employed over the performance period. The Committee shall establish the
Performance Measures applicable to such performance.
(D) Award Criteria. In determining the value of Performance Awards, the
Committee shall take into account an eligible person's responsibility level,
performance, potential, cash compensation level, unexercised stock options,
other incentive awards and such other considerations as it deems
appropriate. Notwithstanding the preceding sentence, to the extent necessary
for a Performance Award payable in cash to be qualified performance-based
compensation under Section 162(m) of the Code and the rules and regulations
thereunder, the maximum amount that may be paid under all such Performance
Awards to anyone person during any period of three calendar years shall be
$10,000,000.
(E) Payment. Following the end of each performance period, the Holder of
each Performance Award shall be entitled to receive payment of an amount,
not exceeding the maximum value of the Performance Award, based on the
achievement of the Performance Measures for such performance period, as
determined by the Committee. Payment of Performance Awards may be made
wholly in cash, wholly in shares of Common Stock or a combination thereof,
all at the discretion of the Committee. Payment shall be made in a lump sum
or in installments, and shall be subject to such vesting and other terms and
conditions as may be prescribed by the Committee for such purpose.
Notwithstanding anything contained herein to the contrary, in the case of a
Performance Award intended to be qualified performance-based compensation
under Section 162(m) and the rules and regulations thereunder, no payment
shall be made under any such Performance Award until the Committee certifies
in writing that the Performance Measures for the performance period have in
fact been achieved.
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(F) Termination of Employment or Service or Death of Holder. A
Performance Award shall terminate for all purposes if the Holder does not
remain continuously in the employ or service of the Corporation or a
subsidiary at all times during the applicable performance period, except as
may otherwise be determined by the Committee.
In the event that a Holder of a Performance Award ceases to be an
employee or director of the Corporation following the end of the applicable
performance period but prior to full payment according to the terms of the
Performance Award, payment shall be made in accordance with terms
established by the Committee for the payment of such Performance Award.
(G) Other Terms and Conditions. When a Performance Award is payable in
installments in Common Stock, if determined by the Committee, one or more
stock certificates or book-entry credits registered in the name of the
Holder representing shares of Common Stock which would have been issuable to
the Holder of the Performance Award if such payment had been made in full on
the day following the end of the applicable performance period may be
registered in the name of such Holder, and during the period until such
installment becomes due such Holder shall have the right to receive
dividends (or the cash equivalent thereof) and shall also have the right to
vote such Common Stock and all other stockholder rights (in each case unless
otherwise provided in the agreement evidencing the Performance Award), with
the exception that (i) the Holder shall not be entitled to delivery of any
stock certificate until the installment payable in shares becomes due,
(ii) the Corporation shall retain custody of any stock certificates until
such time and (iii) the Holder may not sell, transfer, pledge, exchange,
hypothecate or dispose of such Common Stock until such time. A distribution
with respect to shares of Common Stock payable in installments which has not
become due, other than a distribution in cash, shall be subject to the same
restrictions as the shares of Common Stock with respect to which such
distribution was made, unless otherwise determined by the Committee.
(H) Performance Award Agreements. Each Performance Award shall be
evidenced by an agreement in such form and containing such provisions not
inconsistent with the provisions of the Plan as the Committee from time to
time shall approve.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CHANGE IN CONTROL
(A) Notwithstanding any other provision of the Plan, (i) the number and
class of securities or other consideration subject to any Option or to be
delivered pursuant to any Restricted Stock Award or Performance Award and
(ii) the Option or Restricted Stock Award price shall be appropriately
adjusted by the Committee, whose determination shall be conclusive, in the
event of a stock split, stock dividend, spin-off, split-up,
recapitalization, merger, consolidation, combination or exchange of shares,
or the like. In such event, the maximum number and class of securities
available under the Plan, and the number and class of securities subject to
Options, SARs, Restricted Stock Awards or Performance Awards, shall be
appropriately adjusted by the Committee, whose determination shall be
conclusive.
(B) (i) In the event of a "change in control" (as hereinafter defined)
pursuant to subparagraph (C)(i) or (ii) below, or in the event of a change
in control pursuant to subparagraph (C)(iii) or (iv) below in connection
with which the holders of Common Stock receive consideration other than
shares of common stock that are registered under Section 12 of the Exchange
Act:
(1) (x) each Option granted under the Plan shall be exercisable in
full, (y) each Holder of an Option shall receive from the Corporation
within 60 days after the change in control, in exchange for the surrender
of the Option or any portion thereof to the extent the Option is then
exercisable in accordance with clause (x), an amount in cash equal to the
difference between the fair market value (as determined by the Committee)
on the date of the change in control of the Common Stock covered by the
Option or portion thereof which is so surrendered and the purchase price
of such Common Stock under the Option and (z) each SAR shall be
surrendered by the Holder thereof and shall be canceled simultaneously
with the cancellation of the related Option, provided, however, that the
Committee shall have the discretion to provide that there
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shall be substituted for such shares of Common Stock subject to an
outstanding Option a number and a class of securities of the entity
effecting the change in control such that the purchase price per security
shall be appropriately adjusted by the Committee (whose determination
shall be conclusive), such adjustments to be made without any increase in
the aggregate purchase price;
(2) each Holder of a Restricted Stock Award shall receive from the
Corporation within 60 days after the change in control, in exchange for
the surrender of the Restricted Stock Award, an amount in cash equal to
the difference between the fair market value (as determined by the
Committee) on the date of the change in control of the Common Stock
subject to the Restricted Stock Award and the purchase price, if any, of
such Common Stock;
(3) each Holder of a Performance Award for which the performance
period has not expired shall receive from the Corporation within 60 days
after the change in control, in exchange for the surrender of the
Performance Award, an amount in cash equal to the product of the value of
the Performance Award and a fraction, the numerator of which is the
number of whole months which have elapsed from the beginning of the
performance period to the date of the change in control, and the
denominator of which is the number of whole months in the performance
period; and
(4) each Holder of a Performance Award that has been earned but not
yet paid shall receive an amount in cash equal to the value of the
Performance Award.
(ii) Notwithstanding any other provision of the Plan or any agreement
relating to an Option, Restricted Stock Award or Performance Award, in the
event of a change in control pursuant to subparagraph (C)(iii) or
(iv) below in connection with which the holders of Common Stock receive
shares of common stock that are registered under Section 12 of the Exchange
Act:
(1) each Option and SAR granted under the Plan shall be exercisable
in full;
(2) the Restriction Period applicable to any outstanding Restricted
Stock Award shall lapse and, if applicable, any other restrictions, terms
or conditions shall lapse and/or be deemed to be satisfied at the maximum
value or level;
(3) the Performance Measures applicable to any outstanding
Performance Award shall be deemed to be satisfied at the maximum value;
and
(4) there shall be substituted for each share of Common Stock
remaining available under the Plan, whether or not then subject to an
outstanding Option (and SAR), Restricted Stock Award or Performance
Award, the number and class of shares into which each outstanding share
of Common Stock shall be converted pursuant to such change in control. In
the event of any such substitution, the purchase price per share in the
case of an Option or Restricted Stock Award shall be appropriately
adjusted by the Committee (whose determination shall be conclusive), such
adjustments to be made without any increase in the aggregate purchase
price.
(C) For purposes of this paragraph, the term "change in control" shall
mean:
(i) the acquisition by any individual, entity or group (a "Person"),
including any "person" within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act, of beneficial ownership within the meaning
of Rule 13d-3 promulgated under the Exchange Act, of cumulatively, 25% or
more of either (x) the then outstanding shares of common stock of the
Corporation (the "Outstanding Common Stock") or (y) the combined voting
power of the then outstanding securities of the Corporation entitled to
vote generally in the election of directors (the "Outstanding Voting
Securities"); excluding, however, the following: (1) any acquisition
directly from the Corporation (excluding any acquisition resulting from
the exercise of an exercise, conversion or exchange privilege unless the
security being so exercised, converted or exchanged was acquired directly
from the Corporation), (2) any acquisition by the Corporation, (3) any
acquisition by an employee benefit plan (or related trust) sponsored or
maintained by the Corporation or any corporation controlled by the
Corporation; (4) any acquisition by any corporation pursuant to a
transaction which complies with clauses (1), (2) and (3) of clause
(iii) in this definition of change
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in control; or (5) any acquisition by PepsiCo, Inc., a North Carolina
corporation, or any affiliate thereof (collectively, "PepsiCo"), provided
that following such acquisition, PepsiCo does not own more than 49% of
the Outstanding Common Stock or Outstanding Voting Securities;
(ii) individuals who, as of the effective date of the Plan, constitute
the Board of Directors of the Corporation (the "Incumbent Board") cease
for any reason to constitute at least a majority of such Board; provided,
however, that any individual who becomes a director of the Corporation
subsequent to such effective date whose election, or nomination for
election by the Corporation's stockholders, was approved by the vote of
at least a majority of the directors then comprising the Incumbent Board
shall be deemed a member of the Incumbent Board; and provided further,
that any individual who was initially elected as a director of the
Corporation as a result of an actual or threatened solicitation by a
person or group for the purpose of opposing a solicitation by any other
person or group with respect to the election or removal of directors or
any other actual or threatened solicitation of proxies or consents by or
on behalf of any Person other than the Board of Directors shall not be
deemed a member of the Incumbent Board;
(iii) the consummation of a reorganization, merger or consolidation of
the Corporation or sale or other disposition of all or substantially all
of the assets of the Corporation (a "Corporate Transaction"); excluding,
however, a Corporate Transaction pursuant to which (1) all or
substantially all of the individuals or entities who are the beneficial
owners, respectively, of the Outstanding Common Stock and the Outstanding
Voting Securities immediately prior to such Corporate Transaction will
beneficially own, directly or indirectly, more than 66 2/3% of,
respectively, the outstanding shares of common stock, and the combined
voting power of the outstanding securities entitled to vote generally in
the election of directors, as the case may be, of the corporation
resulting from such Corporate Transaction (including, without limitation,
a corporation which as a result of such transaction owns the Corporation
or all or substantially all of the Corporation's assets either directly
or indirectly) in substantially the same proportions relative to each
other as their ownership, immediately prior to such Corporate
Transaction, of the Outstanding Common Stock and the Outstanding Voting
Securities, as the case may be, (2) no Person (other than: the
Corporation; any employee benefit plan (or related trust) sponsored or
maintained by the Corporation or any corporation controlled by the
Corporation; the corporation resulting from such Corporate Transaction;
and any Person which beneficially owned, immediately prior to such
Corporate Transaction, directly or indirectly, 25% or more of the
Outstanding Common Stock or the Outstanding Voting Securities, as the
case may be) will beneficially own, directly or indirectly, 25% or more
of, respectively, the outstanding shares of common stock of the
corporation resulting from such Corporate Transaction or the combined
voting power of the outstanding securities of such corporation entitled
to vote generally in the election of directors and (3) individuals who
were members of the Incumbent Board will constitute at least a majority
of the members of the board of directors of the corporation resulting
from such Corporate Transaction; or
(iv) the consummation of a plan of complete liquidation or dissolution
of the Corporation.
(D) With respect to any Holder of an Option or SAR who is subject to
Section 16 of the Exchange Act, (i) notwithstanding the exercise periods set
forth in Paragraph 7(E) or as set forth pursuant to Paragraph 7(E) in any
agreement evidencing such Option or SAR and (ii) notwithstanding the
expiration date of the term of such Option or SAR, in the event the
Corporation is involved in a business combination which is intended to be
treated as a pooling of interests for financial accounting purposes (a
"Pooling Transaction") or pursuant to which such Holder receives a
substitute option to purchase securities of any entity, including an entity
directly or indirectly acquiring the Corporation, then each Option or SAR
(or option or stock appreciation right in substitution thereof) held by such
Holder shall be exercisable to the extent set forth in the agreement
evidencing such Option or SAR until and including the latest of (x) the
expiration date of the term of the Option or SAR or, in the event of such
Holder's termination of employment or service, the date determined pursuant
to Paragraph 7(E), (y) the date which is six months and ten business days
after the consummation of such
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business combination and (z) the date which is ten business days after the
date of expiration of any period during which such Holder may not dispose of
a security issued in the Pooling Transaction in order for the Pooling
Transaction to be accounted for as a pooling of interests.
11. WITHHOLDING TAXES
(A) If provided in the agreement evidencing an Option, SAR, Restricted
Stock Award or Performance Award, the Holder thereof may elect, by written
notice to the Corporation at the office of the Corporation designated for
that purpose, to pay through withholding by the Corporation all or a portion
of the estimated federal, state, local and other taxes arising from (1) the
exercise of an Option or SAR and (2) the vesting or distribution of shares
of Common Stock pursuant to a Restricted Stock Award or Performance Award
(a) by having the Corporation withhold shares of Common Stock or (b) by
delivering previously-owned shares (collectively, "Share Withholding"), in
each case being such number of shares of Common Stock as shall have a fair
market value equal to the amount of taxes required to be withheld, rounded
up to the nearest whole share; provided, however, that such shares of Common
Stock may not have a fair market value in excess of the amount determined by
applying the minimum statutory withholding rate.
(B) A Share Withholding election shall be subject to disapproval by the
Corporation.
(C) If the date as of which the amount of tax to be withheld is
determined (the "Tax Date") is deferred until after the exercise of an
Option or SAR, the expiration of the Restriction Period applicable to a
Restricted Stock Award or the payment of a Performance Award, and if the
Holder elects Share Withholding, the Corporation may issue to the Holder the
full number of shares of Common Stock, if any, resulting from such exercise,
expiration or payment and the Holder shall be unconditionally obligated to
deliver to the Corporation on the Tax Date such number of shares of Common
Stock as shall have an aggregate fair market value equal to the amount to be
withheld on the Tax Date, rounded up to the nearest whole share.
(D) The fair market value of shares of Common Stock used for payment of
taxes, as provided in this Paragraph 11, shall be the mean sale price per
share, as reported for New York Stock Exchange Composite Transactions, on
the Tax Date.
12. TERMINATION OF PLAN
The Plan may be terminated at any time by the Board of Directors, except
with respect to any Options, SARs, Restricted Stock Awards or Performance Awards
outstanding. The Corporation reserves the right to restrict, in whole or in
part, the exercise of any Options or SARs or the delivery of Common Stock
pursuant to any Restricted Stock Awards or Performance Awards granted under the
Plan until such time as,
(A) any legal requirements or regulations have been met relating to the
issuance of the shares covered thereby or to their registration under the
Securities Act of 1933 or to any applicable State laws; and
(B) satisfactory assurances are received that the shares when issued will
be duly listed on the New York Stock Exchange, Inc.
13. AMENDMENT OF THE PLAN
The Board of Directors may amend the Plan; provided, however, that without
the approval of the stockholders the Board of Directors may not amend the Plan,
subject to Paragraph 10, to (a) increase the maximum number of shares which may
be issued on exercise of Options or SARs or pursuant to Restricted Stock Awards
or Performance Awards granted under the Plan or (b) effect any change
inconsistent with Section 422 of the Code.
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14. EFFECT OF THE PLAN
Neither the adoption of the Plan nor any action of the Board of Directors or
the Committee shall be deemed to give any person any right to be granted any
Option, a right to a Restricted Stock Award or a right to a Performance Award or
any rights hereunder except as may be evidenced by an Option agreement, Stock
Award agreement or Performance Award agreement, duly executed on behalf of the
Corporation, and then only to the extent and on the terms and conditions
expressly set forth therein.
15. GOVERNING LAW
The Plan, each Option, Restricted Stock Award and Performance Award and the
related agreement, and all determinations made and actions taken pursuant
thereto, to the extent not otherwise governed by the Code or the laws of the
United States, shall be governed by the laws of the State of Delaware and
construed in accordance therewith without giving effect to principles of
conflicts of laws.
16. FOREIGN EMPLOYEES
Without amending the Plan, the Committee may grant awards to eligible
persons who are foreign nationals on such terms and conditions different from
those specified in the Plan as may in the judgment of the Committee be necessary
or desirable to foster and promote achievement of the purposes of the Plan and,
in furtherance of such purposes the Committee may make such modifications,
amendments, procedures, subplans and the like as may be necessary or advisable
to comply with provisions of laws in other countries or jurisdictions in which
the Company or its subsidiaries operates or has employees.
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/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO DIRECTION TO THE CONTRARY IS MADE, THIS PROXY WILL BE VOTED FOR
ELECTION OF DIRECTORS AND FOR THE APPROVAL OF THE WHITMAN CORPORATION 2000
STOCK INCENTIVE PLAN.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF DIRECTORS AND FOR
ITEM 2.
FOR WITHHELD
Item 1. Election of
Directors / / / /
(see
reverse).
For, except vote withheld from the following:
- ------------------------
FOR AGAINST ABSTAIN
Item 2. Proposal to
approve the Whitman / / / / / /
Corporation 2000
Stock Incentive
Plan
SPECIAL ACTION
Change of Address/ / /
Comments
Discontinue Annual Report / /
Mailing for this Account
Will attend Annual Meeting / /
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. JOINT
OWNERS SHOULD EACH SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE
AS SUCH.
- ------------------------------------------------------------
2000
- ------------------------------------------------------------
SIGNATURE(S) DATE
- ------------------------------------------------------------------------------
FOLD AND DETACH HERE
WHITMAN CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
THURSDAY, MAY 4, 2000, AT 10:30 A.M. EST
HOTEL DU PONT
11TH AND MARKET STREETS
WILMINGTON, DELAWARE
<PAGE>
P R O X Y
WHITMAN CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR THE ANNUAL MEETING OF SHAREHOLDERS--MAY 4, 2000
The undersigned hereby constitutes and appoints Bruce S. Chelberg, Martin M.
Ellen and Steven R. Andrews, and each of them, his true and lawful agents and
proxies with full power of substitution in each, to represent the undersigned
at the Annual Meeting of Shareholders of Whitman Corporation to be held in
the Hotel du Pont, Christina Room, 11th and Market Streets, Wilmington,
Delaware at 10:30 a.m. EST on Thursday May 4, 2000 and at any adjournments
thereof, on all matters coming before said meeting.
Election of Directors, Nominees. (Change of Address/Comments)
------------------------------
Herbert M. Baum, Bruce S. Chelberg, Richard ------------------------------
G. Cline, Pierre S. du Pont, Archie R. Dykes, ------------------------------
Charles W. Gaillard, Jarobin Gilbert, Jr., (If you have written in the
Victoria B. Jackson, Robert F. Sharpe, Jr. above space, please mark the
Karl M. von der Heyden corresponding Box on the
reverse side of this card.)
This Proxy also serves as a voting instruction card to the Trustee for
shares, if any, held in the trust for the Company's Retirement Savings Plan.
SHAREHOLDERS ARE REQUESTED TO MARK, DATE AND SIGN THIS PROXY ON THE REVERSE
SIDE, AND TO RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS
REQUIRED.
SEE REVERSE
SIDE
- ------------------------------------------------------------------------------
FOLD AND DETACH HERE
THIS PROXY SHOULD BE MAILED IN THE ENCLOSED ADDRESSED ENVELOPE (NO
POSTAGE REQUIRED IF MAILED IN THE UNITED STATES). TO ASSURE THE NECESSARY
REPRESENTATION AT THE ANNUAl MEETING, PLEASE DATE AND SIGN THIS PROXY AND
MAIL IT IN THE ENCLOSED ENVELOPE. PLEASE MAIL YOUR PROXY EVEN THOUGH YOU PLAN
TO ATTEND THE ANNUAL MEETING. IF YOU VOTE IN PERSON AT THE ANNUAL MEETING,
YOUR PROXY WILL NOT BE USED.
