<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
BORDEN, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
BORDEN, INC.
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Not Applicable
(2) Aggregate number of securities to which transaction applies:
Not Applicable
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:
Not Applicable
(4) Proposed maximum aggregate value of transaction:
Not Applicable
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
Not Applicable
(2) Form, schedule or registration statement no.:
Not Applicable
(3) Filing party:
Not Applicable
(4) Date filed:
Not Applicable
<PAGE> 2
BORDEN, INC.
180 EAST BROAD STREET, COLUMBUS, OHIO 43215
April 8, 1994
TO OUR BORDEN SHAREHOLDERS:
The Annual Meeting of Shareholders of Borden, Inc. will be held on Friday,
May 20, 1994 in Morristown, New Jersey. Details with respect to the meeting
itself, nominees for Directors and the proposals to be considered at the meeting
are presented in the Notice of Meeting and Proxy Statement on the following
pages.
In addition to the Annual Meeting formalities, we plan to report to the
shareholders generally on the Company and its operations, and will also be
pleased to answer shareholders' questions relating to the Company. A report on
the Annual Meeting will be mailed to our shareholders with the June dividend
check.
We urge you to attend this meeting in person. If this is not feasible for
you, we urge you to be represented by proxy. For this purpose, please sign the
enclosed proxy card and mail it promptly in the envelope which is provided for
your convenience.
On behalf of your Borden Board of Directors and management, it is our
pleasure to express our appreciation for your support during 1993 and also for
your continued demonstration of loyalty to Borden products.
Cordially,
[sig cut]
FRANK J. TASCO
Chairman of the Board
[sig cut]
ERVIN R. SHAMES
President and
Chief Executive Officer
<PAGE> 3
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Notice is hereby given that the Annual Meeting of Shareholders of Borden,
Inc., a New Jersey corporation, will be held on Friday, May 20, 1994, at 11:00
A.M. at the Governor Morris Hotel, 2 Whippany Road, Morristown, New Jersey
07960, for the following purposes:
(a) election of eight Directors of the Company;
(b) ratification of selection of independent auditors; and
(c) transaction of such other business, including proposals to adopt
new stock option and management incentive plans, as may properly
come before the meeting.
Only shareholders of record at the close of business on April 6, 1994, will
be entitled to vote at the meeting notwithstanding any subsequent transfer of
stock.
If you do not plan to be present in person, please complete and sign the
enclosed form of proxy and return it promptly in the enclosed permit-stamped
envelope addressed to the Company's proxy tabulator, The Bank of New York.
PAUL J. JOSENHANS
Secretary
180 East Broad Street
Columbus, Ohio 43215
April 8, 1994
<PAGE> 4
BORDEN, INC.
180 EAST BROAD STREET
COLUMBUS, OHIO 43215
PROXY STATEMENT
APRIL 8, 1994
- - --------------------------------------------------------------------------------
SOLICITATION OF PROXIES
The enclosed proxy is solicited by the Board of Directors of the Company. If you
do not expect to attend the meeting in person, please return your executed proxy
in the enclosed envelope and the shares represented thereby will be voted in
accordance with your wishes.
It is the general policy of the Company that all shareholder proxies, ballots
and voting materials that identify the particular vote of a shareholder will be
held confidential and not be disclosed to the Company except where required by
law or as expressly requested by the shareholder. So as not to impair
communications of shareholders to the Company, proxies or other written
materials that contain shareholder comments will be forwarded to the Company.
Vote tabulators and inspectors of election shall be independent and shall not be
employees of the Company. In the event of a contested proxy solicitation, the
Company may suspend this policy if the opposing party does not agree to
equivalent confidentiality provisions.
REVOCATION OF PROXY
If, after sending in your proxy, you desire to revoke your proxy for any reason,
you may do so by notifying the Secretary of the Company in writing of such
revocation or by properly executing and timely submitting a later-dated proxy at
any time prior to the voting of the proxy at the meeting, or by attending the
meeting and voting by written ballot.
RECORD DATE
Shareholders of record at the close of business on April 6, 1994 will be
entitled to vote at the meeting.
VOTING SECURITIES
On December 31, 1993, there were 141,358,035 shares of Common Stock and 6,989
shares of Preferred Stock, Series "B", of the Company which constituted all of
its outstanding voting securities. Each share as of the record date is entitled
to one vote.
ACTIONS TO BE TAKEN
UNDER THE PROXY
Unless otherwise directed by the giver of the proxy, your shares will be voted
by the Proxy Committee named on the Proxy Card as follows:
(a) for the election of eight Directors;
(b) for ratification of the selection of Price Waterhouse as the Company's
independent auditors;
(c) for the adoption of the following compensation plans:
1. 1994 Stock Option Plan
2. 1994 Management Incentive Plan
(d) on such other business as may properly come before the meeting, in
accordance with the judgment of the Proxy Committee.
1
<PAGE> 5
A majority of the outstanding shares entitled to vote must be represented in
person or by proxy at the meeting in order to constitute a quorum for the
transaction of business.
Shares underlying a proxy marked "abstain" on a matter will be considered to be
represented at the meeting for quorum purposes.
Shares registered in the names of brokers or other "street name" nominees for
which proxies are voted on some but not all matters would be considered to be
present at the meeting for quorum purposes, but will be considered to be voted
only as to those matters actually voted, and will not be considered for any
purpose as to the matters with respect to which a beneficial holder has not
provided voting instructions and the nominee has not been permitted to cast a
vote by law or by New York Stock Exchange regulations (commonly referred to as
"broker non-votes").
The affirmative vote of a majority of the votes cast is required for adoption of
each of the proposals referred to in (a) through (c) above. However, to qualify
each of the Plans proposed in (c) above so that grants of stock or options to
executive officers of the Company under the Plans will be "exempt transactions"
pursuant to SEC Rule 16b-3, the affirmative votes of holders of a majority of
the shares present or represented and entitled to vote is required.
For the election of Directors and the ratification of the selection of the
Company's independent auditors, abstentions and broker non-votes shall be
treated as present at the meeting, but will not be treated as votes cast. Thus
for such purposes, abstentions and broker non-votes will have no effect on the
outcome of the vote.
For approval of the Stock Option Plan and the Management Incentive Plan,
abstentions will be treated as shares present and entitled to vote and therefore
will have the effect of a "no" vote while broker non-votes are not considered
shares entitled to vote and, therefore, will have no effect on the outcome of
the vote.
2
<PAGE> 6
ELECTION OF DIRECTORS
The By-Laws provide for the annual election of a Board of eight Directors. The
names of eight nominees for election as Directors are being submitted for
consideration by the shareholders. All of the nominees are presently Directors
and all have been elected by the shareholders at prior meetings, except for Dean
Sexton who was elected by the directors in February 1994, and Mr. Shames who was
elected by the directors in June 1993. The proxies solicited herein will be
voted for these eight nominees unless otherwise directed.
Should any nominee named herein for election as a Director become unavailable
for any reason, it is intended that your shares will be voted for the election
in his or her stead of such other person or persons as the Board may recommend.
Each of the nominees has consented to serve if elected.
- - --------------------------------------------------------------------------------
<TABLE>
<S> <C>
FREDERICK E. HENNIG
Age--61
Director since 1990
President and Chief Operating Officer of Woolworth
Corporation, formerly F.W. Woolworth Co. (retail
merchandising), since 1987. He is a Director of Woolworth and
is a member of the Canadian-American Committee of the National
Planning Association. He is a member of the Committee on
Officers' Compensation and of the Executive, Audit and
Nominating Committees of the Borden Board.
WILBERT J. LEMELLE
Age--62
Director since 1987
President, Phelps-Stokes Fund (educational foundation) since
June 1990. He was President of Mercy College from 1985 to
1990. He is a former Ambassador to Kenya and to The
Seychelles. He is a Director of the Council of American
Ambassadors, the Carnegie Endowment for International Peace,
the Chase Manhattan Metro North Advisory Board, and the Public
Broadcast Service (PBS). He is also a Trustee of the Woodrow
Wilson Foundation and a member of the Council on Foreign
Relations. He is Chairman of the Audit Committee and a member
of the Executive and Nominating Committees and of the
Committee on Officers' Compensation of the Borden Board.
ROBERT P. LUCIANO
Age--60
Director since 1989
Chairman of the Board and Chief Executive Officer of
Schering-Plough Corporation (pharmaceuticals and consumer
products) since January 1984. He joined Schering-Plough in
July 1978 and has been Executive Vice President
(pharmaceutical operations), President and Chief Operating
Officer, and President and Chief Executive Officer. He is a
Director of Schering-Plough Corporation, C. R. Bard, Inc.,
AlliedSignal Inc. and Merrill Lynch & Co., Inc. He is Chairman
of the Nominating Committee and a member of the Audit and
Executive Committees and of the Committee on Officers'
Compensation of the Borden Board.
</TABLE>
- - --------------------------------------------------------------------------------
3
<PAGE> 7
- - --------------------------------------------------------------------------------
<TABLE>
<S> <C>
H. BARCLAY MORLEY
Age--64
Director since 1992
Former Chairman of the Board and Chief Executive Officer of
Stauffer Chemical Company. He was its Chief Executive Officer
from 1974 to 1985. He joined Stauffer in 1962 and has been an
Executive Vice President, President and Chief Operating
Officer and a Director of that Company. He is a Director of
Schering-Plough Corporation, Champion International
Corporation, American Maize-Products Company and The Bank of
New York Company, Inc. He is Chairman of the Committee on
Officers' Compensation and a member of the Executive,
Nominating and Pension Committees of the Borden Board.
JOHN E. SEXTON
Age--51
Elected in 1994
Dean, New York University School of Law since 1988. He began
teaching at New York University School of Law in 1981,
becoming a Professor of Law in 1984, specializing in the area
of Civil Procedure, Constitutional Law and Religion and Law.
He is presently serving as a Special Master in connection with
the Love Canal litigation and the Drexel Burnham litigation,
and is on the American Arbitration Association's Panel of
Neutral Arbitrators for Complex Cases. He is Director of the
Fund for Modern Courts and a member of the Board of Trustees
of the New York University Law Center Foundation.
ERVIN R. SHAMES
Age--53
Director since 1993
President and Chief Operating Officer of the Company since
June 28, 1993 and Chief Executive Officer since December 9,
1993. He was President and Chief Executive Officer of the
Stride Rite Corporation from June 1990 to June 1993 and
Chairman of the Board from June 1992 to June 1993. From
November 1989 until June 1990, he was Chairman of the Board,
President and Chief Executive Officer of the Kendall Corpora-
tion. Prior to that, he held the office of President of Kraft
USA from February 1989 to August 1989 and was President and
Chief Executive Officer of General Foods USA from 1986 to
January 1989. He is also a Director of First Brands
Corporation. He is a member of the Executive and Pension
Committees of the Borden Board.
</TABLE>
- - --------------------------------------------------------------------------------
4
<PAGE> 8
- - --------------------------------------------------------------------------------
<TABLE>
<S> <C>
PATRICIA CARRY STEWART
Age--65
Director since 1976
Retired Vice President, the Edna McConnell Clark Foundation
(charitable foundation). Director of Bankers Trust Company,
Continental Corporation and Melville Corporation. She is also
Vice Chair of the Board of Trustees of Cornell University, a
member of the Cornell University Medical College Board of
Overseers and a Director Emeritus of the Investor
Responsibility Research Center. She is also a member of the
Council on Foreign Relations and a director of the Community
Foundation for Palm Beach and Martin Counties. She is Chair of
the Pension Committee and a member of the Executive, Audit and
Nominating Committees of the Borden Board.
FRANK J. TASCO
Age--66
Chairman since December 1993 and a
Director since 1988
Chairman of the Board of the Company since December 9, 1993.
He was Chairman and Chief Executive Officer of Marsh &
McLennan Companies, Inc. (insurance/reinsurance broking,
consulting, investment management) from 1986 until his
retirement in May 1992. Chairman of the Executive Committee of
the Marsh & McLennan Board since May 1992. He was elected
President and Chief Operating Officer in 1984. He is also a
Director of The Travelers, Inc. (formerly Primerica
Corporation) and the New York Telephone Company, Chairman of
the Phoenix House Foundation and a Trustee of New York
University. He is Chairman of the Executive Committee and a
member of the Pension Committee of the Borden Board.
</TABLE>
- - --------------------------------------------------------------------------------
5
<PAGE> 9
OWNERSHIP BY MANAGEMENT
OF EQUITY SECURITIES
There is shown below, as reported to the Company, information as of March 4,
1994, as to beneficial ownership of equity securities of the Company, for each
Director, for each Named Executive Officer and for all Directors and Executive
Officers as a group.
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
COMMON
STOCK(1)
BENEFICIALLY PER CENT
NAME OWNED(2) OWNED(4)
- - ------------------------- --------- --------
<S> <C> <C>
DIRECTORS
Frederick E. Hennig..... 4,486(3)
Wilbert J. LeMelle...... 987(3)
Robert P. Luciano....... 1,000
H. Barclay Morley....... 1,000
John E. Sexton.......... 100
Ervin R. Shames......... 30,100
Patricia Carry
Stewart............... 1,200
Frank J. Tasco.......... 13,025(3)
NAMED EXECUTIVE OFFICERS
Anthony S. D'Amato...... 583,606
Lawrence O. Doza........ 181,836
Jon G. Hettinger........ 155,549
Allan L. Miller......... 216,608
Joseph M. Saggese....... 145,976
George J. Waydo......... 182,162
ALL DIRECTORS & EXECUTIVE
OFFICERS AS A GROUP (17) 1,659,489 1.2%
</TABLE>
- - ---------------
(1) None of the Directors or Executive Officers held any Series B Preferred
Stock as of December 31, 1993.
(2) Includes deferred shares earned pursuant to the Management Incentive Plan,
shares held in the Retirement Savings Plan (RSP), Directors' deferred
compensation share equivalents, shares under the Executives Supplemental
Pension Plan (ESPP) and also shares allocated under the Employees Stock
Ownership Plan (ESOP). Shares in the RSP will be voted in the same
proportion as the shares allocated to employees are voted by employees in
the ESOP. Also includes 30,000 shares of restricted stock granted to Mr.
Shames under the 1994 Stock Option Plan contingent upon shareholder
approval. Also includes shares that can be acquired within 60 days, pursuant
to outstanding employee stock options, which total 513,000 shares for A. S.
D'Amato, 125,700 shares for L. O. Doza, 151,200 shares for J. G. Hettinger,
140,100 shares for A. L. Miller, 117,200 shares for J. M. Saggese, 152,500
shares for G.J. Waydo, and 1,282,800 shares for all Directors and Executive
Officers as a group.
(3) Member of Dividend Reinvestment Plan.
(4) The percentage owned has been indicated where the percentage exceeds 1.0%
and has been determined, pursuant to Rule 13d-3 under the Securities and
Exchange Act, by dividing the number of shares owned by the number of shares
of common stock of the Company outstanding as of December 31, 1993.
PERSONNEL AND FUNCTIONS OF BOARD
COMMITTEES
The By-Laws provide for five committees of the Board of Directors, namely, the
Executive, Audit, Nominating and Pension Committees and the Committee on
Officers' Compensation.
The Executive Committee consists of F. J. Tasco, Chairman, E. R. Shames and
five non-employee Directors.
The By-Laws provide that the Executive Committee may undertake those general
or special duties assigned to it by the Board subject to the laws of the State
of New Jersey which prohibit its amending By-Laws, electing or appointing
Directors, removing Officers or Directors, submitting matters for shareholder
approval, or amending or repealing resolutions previously adopted by the Board
which by their terms are amendable or repealable only by the Board. The
Committee may exercise the powers of the Board in its absence when time is of
the essence. The Executive Committee did not meet in 1993.
The Audit Committee consists of four non-employee Directors. The Audit
Committee met three times in 1993.
This Committee reviews management's selection of an accounting firm to conduct
the annual audit of the Company's financial statements, reviews audit reports
and recommendations, reviews the scope and adequacy of the internal auditing
program and, from time to time, reports its findings to the Board.
In connection with its examination of the consolidated financial statements
for the year ended December 31, 1993, Price Waterhouse reviewed unaudited
quarterly financial information, examined
6
<PAGE> 10
the separate financial statements of certain foreign subsidiaries, and reviewed
various reports filed with the Securities and Exchange Commission. In addition
to these audit-related services, Price Waterhouse examined the financial
statements of the Company's pension and welfare plans and furnished various
other services, including income tax and management consulting services.
The Nominating Committee consists of five non-employee Directors. Created in
November 1993, the Committee met in February 1994 to review and propose nominees
for election as directors.
The Committee reviews and determines the qualifications of potential
Directors, makes recommendations with respect to the composition of the Board,
recommends candidates to fill vacancies on the Board and proposes a slate of
nominees for election as Directors at each Annual Meeting of Shareholders. The
Committee will consider candidates recommended by shareholders. If a shareholder
wishes to nominate a candidate to stand for election as a Director at the 1995
Annual Meeting, such nomination should be submitted to the Secretary of the
Company, along with a description of the candidate's qualifications and relevant
biographical data. The By-Laws provide that such a nomination must be in writing
and received by the Secretary between February 20 and March 21, 1995.
The Committee on Officers' Compensation consists of four non-employee
Directors. The Committee met seven times in 1993.
The Committee considers salaries for Officers of the Company, administers the
Management Incentive Plan and the Stock Option Plan, and reviews incentive
compensation plans and related subjects.
The Pension Committee consists of F. J. Tasco, E. R. Shames and two
nonemployee Directors. This Committee met three times in 1993.
The Pension Committee administers the Employees Retirement Income Plan, the
retirement savings plans and the Employees Stock Ownership Plan (ESOP), and
oversees the investment of various related funds.
COMPENSATION OF DIRECTORS
Each Director who is not currently an employee of the Company is paid a retainer
of $28,000 per annum. Every non-employee Director is paid a meeting fee of
$1,000 for attendance at each meeting of the Board of Directors. Directors may
defer their compensation, in the form of deferred share equivalents, or cash
with interest, until retirement from the Board. The Company assumes the payment
of premiums for group life insurance in the amount of $100,000 for each
non-employee Director, the cost of which in 1993 was $4,048 in the aggregate.
From December 9, 1993, the Company retained Mr. Tasco as Chairman of the
Board, with fixed compensation, in addition to the foregoing compensation as a
Director, at the rate of $100,000 per quarter.
The Company had an agreement with Mr. R. J. Ventres, a former Chairman and
Chief Executive Officer, retaining him as a consultant and as Chairman of the
Executive Committee from March 1992 until April 1995, with fixed compensation at
the rate of $250,000 per annum and limited benefits. Upon his resignation as a
Director as of December 31, 1993, such agreement was amended to terminate such
compensation at the end of April 1994.
The Board met thirteen times in 1993. Any Officer of the Company who is also a
Director does not receive any compensation for service on the Board of
Directors.
The Board functions in part through its committees. The non-employee members
of each of these committees are paid a meeting fee of $1,000 for each committee
meeting attended. In addition, a committee chairman who is also a non-employee
is paid an annual retainer of $1,000. Excluding Dr. Theodore Cooper, a Director
who died in April 1993 after an illness, average Director attendance at Board
and committee meetings in 1993 was approximately 98%; and no Director's
attendance was below 90%. The committees of the Board held a total of thirteen
meetings during 1993.
Current Directors who are not employees of the Company are also provided upon
retirement and attaining age 70 with annual benefits through a funded grantor
trust equal to their final annual retainer if they served in at least three plan
years. Such benefits continue for up to fifteen years. Retired Directors are
also invited to attend up to two Board meetings a year. If they attend, they are
paid the usual Directors' meeting fees. These benefits do not apply to Mr.
Ventres or Mr. D'Amato.
7
<PAGE> 11
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation of all individuals serving during the last completed fiscal year as
the Company's Chief Executive Officer, the four other most highly compensated
Executive Officers as of December 31, 1993 and one additional former Executive
Officer of the Company (the "Named Executive Officers") for the periods
indicated.
- - --------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------------
PAYOUTS
---------
ANNUAL COMPENSATION AWARDS LONG TERM
----------------------------------- -------------------------- INCENTIVE
OTHER RESTRICTED SECURITIES PLAN ALL OTHER
ANNUAL STOCK UNDERLYING (LTIP) (9)
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) OPTIONS/LSARS PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- - --------------------------------------------------------------------------------------------------------------------------
E. R. Shames 1993 306,818 200,000(2) 9,065 555,000(3) 200,000 NONE 86,486(4)
President & Chief
Executive Officer (1)
J. M. Saggese 1993 364,000 NONE 2,991 NONE 14,000 NONE (5) 35,761
Executive Vice 1992 325,000 40,000 2,274 NONE 14,000 NONE (6) 40,281
President & President, 1991 325,000 130,663 3,889 NONE 14,000 54,167 (7) 34,363
Packaging & Industrial
Products Division
G. J. Waydo 1993 352,000 NONE 5,489 NONE 14,000 NONE (5) 44,566
Vice President 1992 335,000 NONE 5,297 NONE 14,000 NONE (6) 63,774
1991 335,000 184,295 3,365 NONE 14,000 61,905 (7) 52,607
L. O. Doza 1993 351,000 NONE 442 NONE 10,500 NONE (5) 40,482
Former Senior Vice 1992 328,000 NONE 2,648 NONE 10,500 NONE (6) 58,718
President & Chief 1991 328,000 136,202 3,537 NONE 10,500 46,429 (7) 49,462
Financial Officer (7A)
A. L. Miller 1993 345,000 NONE 2,869 NONE 10,500 NONE (5) 42,559
Senior Vice President 1992 322,000 NONE 3,337 NONE 10,500 NONE (6) 56,269
& Chief Administrative 1991 322,000 133,114 3,504 NONE 10,500 46,429 (7) 51,213
Officer
A. S. D'Amato 1993 777,173 NONE 11,097 175,006(8) 75,000 NONE (5) 4,422,120(11)
Former Chairman & 1992 725,000 NONE 10,222 NONE NONE NONE (6) 93,570
Chief Executive 1991 600,000 277,950 8,260 NONE 300,000 92,857 (7) 66,688
Officer(10)
J. G. Hettinger 1993 370,000(12) NONE 4,049 NONE 15,000 NONE (5) 298,794(13)
Former Executive Vice 1992 352,000 NONE 2,517 NONE 15,000 NONE (6) 67,309
President & President, 1991 352,000 187,455 1,499 NONE 15,000 61,905 (7) 55,763
Grocery Products
Division
</TABLE>
- - ---------------
(1) E. R. Shames became President & Chief Operating Officer 6/28/93 and was
appointed Chief Executive Officer 12/9/93. Compensation shown above is for
all services rendered in all capacities during 1993.
(2) Bonus guaranteed per employment contract.
(3) Under his employment contract, Mr. Shames was awarded a total of 30,000
shares of restricted stock which vests 25% annually, or 7,500 shares for
each completed year of employment, beginning July 1, 1994. Dividends are to
be paid on this stock. At 12/31/93, Mr. Shames had a total of 30,000 shares
of restricted stock valued at $510,000.
(4) In addition to compensation in footnote 9, includes $60,000 in legal fees
associated with his employment contract.
(5) No payments were made for the period 1991-1993.
(6) No payments were made for the period 1990-1992.
(7) Amounts paid for the period 1989-1991.
(7A) Mr. Doza retired effective 3/1/94.
(8) In January 1993 Mr. D'Amato was awarded a total of 6,350 shares of
restricted stock which vested on 12/9/93. At 12/31/93 the stock was valued
at $107,950.
8
<PAGE> 12
(9) All other compensation consists of the following:
<TABLE>
<CAPTION>
EXECUTIVE FAMILY MATCHING
SURVIVOR CONTRIBUTIONS CAPITAL
PROTECTION PLAN (RSP AND ESP) ACCUMULATION
YEAR (A) (B) ACCOUNT (C) TOTAL
---- ----------------- ---------------- ------------- -------
<S> <C> <C> <C> <C> <C>
E. R. Shames 1993 13,219 11,167 2,100 26,486
J. M. Saggese 1993 16,122 15,439 4,200 35,761
1992 13,299 22,782 4,200 40,281
1991 11,106 19,057 4,200 34,363
G. J. Waydo 1993 21,495 18,871 4,200 44,566
1992 23,223 36,351 4,200 63,774
1991 17,995 30,412 4,200 52,607
L. O. Doza 1993 17,464 18,818 4,200 40,482
1992 22,024 32,494 4,200 58,718
1991 17,316 27,946 4,200 49,462
A. L. Miller 1993 19,863 18,496 4,200 42,559
1992 20,211 31,858 4,200 56,269
1991 19,162 27,851 4,200 51,213
A. S. D'Amato 1993 31,374 31,593 4,200 67,167
1992 39,223 50,147 4,200 93,570
1991 26,368 36,120 4,200 66,688
J. G. Hettinger 1993 8,541 19,836 1,750 30,127
1992 25,347 37,762 4,200 67,309
1991 19,661 31,902 4,200 55,763
</TABLE>
(a) The Executive Family Survivor Protection Plan provides for a benefit of
2% of annual earnings each year (base pay and short-term incentive
bonus) payable at termination, company provided death benefit of one
times earnings and the cost of providing a preretirement annuity to a
surviving spouse or dependent children upon death of the executive as
an employee.
(b) RSP and ESP refer to the Company's Retirement Savings Plan and
executive supplemental benefit plans, respectively.
(c) The Capital Accumulation Account provides a benefit of $350 per month
payable at termination in lieu of certain previously provided medical
benefits.
(10) Mr. D'Amato ceased to be CEO effective 12/9/93.
(11) Includes $757,000 paid incident to termination in consideration for waiving
certain rights under employment agreement, including the right to options
on 100,000 shares of stock; $67,167 as noted in footnote #9; and a total of
$3,597,953 consisting of post-termination salary payable through 10/31/97,
secretarial services of up to $30,000 per year for two years, and $35,777
in legal fees associated with Mr. D'Amato's termination arrangement. In
addition, he is entitled to active employee benefits through 10/31/97 and
certain miscellaneous transition expenses. All of the foregoing future
payments are contingent upon his continued compliance with the terms of his
employment agreement.
(12) Mr. Hettinger resigned position effective 3/1/93. Of the $370,000 shown as
salary, $308,333 represents post-termination salary paid in 1993.
(13) Includes $30,127 as noted in footnote #9 and $268,667 of post-termination
salary and outplacement-related expenses payable through 8/31/94 contingent
upon his continued compliance with the terms of his employment agreement.
This amount will be reduced if Mr. Hettinger commences other employment
after 5/31/94 but before 9/1/94. Mr. Hettinger will continue to receive
certain employee benefits described on page 13 which are not currently
quantifiable.
- - --------------------------------------------------------------------------------
9
<PAGE> 13
The following table provides information on option/LSAR grants during 1993 to
the Named Executive Officers.
- - --------------------------------------------------------------------------------
OPTION/LSAR GRANTS IN LAST FISCAL YEAR
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- - ---------------------------------------------------------------------------------
# OF POTENTIAL REALIZABLE VALUE AT
SECURITIES % OF TOTAL ASSUMED ANNUAL RATES OF STOCK
UNDERLYING OPTIONS/LSARS PRICE APPRECIATION FOR OPTION TERM
OPTIONS/LSAR'S GRANTED TO EXERCISE OR (2)
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION
NAME (#) (1) FISCAL YEAR ($/SHARE) DATE @ 5% ($) @ 10% ($)
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
E. R. Shames 200,000 36.8% 17.75 09/27/2003 2,232,000 5,658,000
J. M. Saggese 14,000 2.6% 27.56 01/25/2003 242,620 614,880
G. J. Waydo 14,000 2.6% 27.56 04/30/1994(3) 242,620 614,880
L. O. Doza 10,500 1.9% 27.56 02/27/1999(4) 98,385 223,230
A. L. Miller 10,500 1.9% 27.56 01/25/2003 181,965 461,160
A. S. D'Amato 75,000 13.8% 27.56 10/31/2002 1,299,750 3,294,000
J. G. Hettinger 15,000 2.8% 27.56 05/31/1994(3) 259,950 658,800
</TABLE>
- - --------------------------------------------------------------------------------
(1) Under the company's stock option plan, options have been granted at an
exercise price of 100 percent of fair market value. The options are
exercisable one year from date of grant and over a period of not more than
ten years from the date of grant. Limited stock appreciation rights or
LSAR's (rights exercisable only in the event of a change of control) attach
to the stock options granted to executive officers. Executive officers were
also granted cash-only units, in corresponding numbers and exercise price,
exercisable within six months from date of grant after a change in control
with provisions to prevent duplication of benefits.
(2) These amounts represent assumed rates of appreciation only. Actual gains, if
any, on stock option exercises and common stock holdings will be dependent
on overall market conditions and on the future performance of the company
and its common stock. There can be no assurance that the amounts reflected
in this table will be achieved.
(3) Unless employment is extended under the terms of their termination
arrangements.
(4) Contingent on agreement on separation terms.
- - --------------------------------------------------------------------------------
The following table provides information on option/LSAR exercises during 1993
by the Named Executive Officers and the value of their unexercised options/LSARS
at December 31, 1993.
- - --------------------------------------------------------------------------------
AGGREGATED OPTION/LSAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION/LSAR VALUES
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
# OF SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS/LSARS AT OPTIONS/LSARS AT FISCAL
SHARES FISCAL YEAR END(1) YEAR END ($) (2)
ACQUIRED ON VALUE
EXERCISE REALIZED -------------------------- --------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
E. R. Shames 0 N/A 0 200,000 0 0
J. M. Saggese 0 N/A 112,800 14,000 131,990 0
G. J. Waydo 0 N/A 138,500 14,000 0 0
L. O. Doza 0 N/A 115,200 10,500 0 0
A. L. Miller 0 N/A 139,200 10,500 61,094 0
A. S. D'Amato 0 N/A 513,000 0 0 0
J. G. Hettinger 0 N/A 136,200 15,000 0 0
- - ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the number of options held at year end which can and cannot be
exercised.
(2) Represents the total gain which would be realized if all options for which
the year end stock price was greater than the exercise price were exercised.
Based on market value of $17.00 on 12/31/93.
- - --------------------------------------------------------------------------------
10
<PAGE> 14
The following table provides information on long-term incentive plan awards
made in 1993 to the Named Executive Officers.
- - --------------------------------------------------------------------------------
LONG-TERM INCENTIVE PLANS-AWARDS IN LAST FISCAL YEAR
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERFORMANCE OR
OTHER ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF SHARES, PERIOD UNTIL NON-STOCK PRICE-BASED PLANS(2)
UNITS, OR OTHER MATURATION OR -----------------------------------------
NAME RIGHTS(#)(1) PAYOUT THRESHOLD TARGET
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
E. R. Shames 3,000 1993-1995 $120,000 $300,000
J. M. Saggese 1,500 1993-1995 60,000 150,000
G. J. Waydo(3) 1,500 1993-1995 0 0
L. O. Doza(3) 1,150 1993-1995 0 0
A. L. Miller 1,150 1993-1995 46,000 115,000
A. S. D'Amato(3) 6,000 1993-1995 0 0
J. G. Hettinger(3) 1,500 1993-1995 0 0
- - -----------------------------------------------------------------------------------------------------------------
<CAPTION>
NAME MAXIMUM
- - -------------------------------------------------------------
<S> <C>
E. R. Shames $405,000
J. M. Saggese 202,500
G. J. Waydo(3) 0
L. O. Doza(3) 0
A. L. Miller 155,250
A. S. D'Amato(3) 0
J. G. Hettinger(3) 0
- - --------------------------------------------------------------------------------
</TABLE>
(1) 1 Unit = $100.
(2) 1993-1995 long-term award payouts are based on earnings-per-share (EPS)
improvement over the base year (1992). The target amount will be earned if
100% of target EPS improvement is achieved; the threshold amount if 73% is
achieved; and the maximum amount, if 120% is achieved. 1/4 of award is
allocated for each year (1993, 1994, and 1995), in which EPS improvement is
achieved over base year (1992), and 1/4 of award is allocated for three year
average improvement over base year (1992).
(3) While awards were made to Messrs. D'Amato, Doza, Hettinger, and Waydo, they
are no longer eligible for any compensation under the Long-Term Incentive
Plan.
- - --------------------------------------------------------------------------------
RETIREMENT BENEFITS
The Borden Employees Retirement Income Plan (Plan) for salaried employees was
amended as of January 1, 1987 to provide benefit credits of 3% of earnings which
are less than the Social Security wage base for the year plus 6% of earnings in
excess of the wage base and an additional 1.5% and 3% respectively for certain
older employees. Earnings include annual incentive awards paid currently but
exclude any long-term incentive awards. Benefits for service through December
31, 1986 are based on the Plan formula then in effect, and have been converted
to opening balances under the Plan. Both opening balances and benefit credits
receive interest credits at one-year Treasury Bill rates until the participant
commences receiving benefit payments. For the year 1993, the interest rate was
3.68%.
At the time the Plan was amended as of January 1, 1983, there was added to the
Company's retirement program a grandfathering of benefits for then key employees
including Executive Officers as of January 1, 1983 that, generally speaking,
provided for the payment of any shortfall if the sum of (a) the pension actually
payable on retirement under the Plan (and any excess or supplemental plans),
together with (b) the amount (converted to a pension equivalent) attributable to
Company contributions that would be standing to the employee's credit at
retirement under the Company's Retirement Savings Plan if the employee had
contributed to the maximum permitted rate (subject to Company matching) after
December 31, 1983 until retirement, does not equal or exceed the sum of (c) the
retirement income calculated on the basis of the pre-amendment ERIP pension
formula (with certain adjustments), and (d) the amount (converted to a pension
equivalent) attributable to Company contributions that would be standing to the
employee's credit at retirement had the Company's Retirement Savings Plan as in
effect on January 1, 1983 remained unchanged and had the Company's contributions
after December 31, 1983 been equal to 3.3% of compensation. The projected
pension figures for A.S. D'Amato, L.O. Doza, J.G. Hettinger, A.L. Miller and
J.M. Saggese appearing at the end of this section include the effect of the
foregoing grandfathering.
The Plan contains transitional provisions for employees who met certain age
and service requirements at January 1, 1987. The transitional minimum benefit is
a final average pay benefit for service prior to 1988 plus a career average pay
benefit based on each year's earnings for years 1988 through 1996 (1% of each
year's earnings up to the
11
<PAGE> 15
Social Security wage base plus 1 1/2% of excess). Benefits vest on a graded
five-year schedule for employees hired prior to July 1, 1990. Benefits vest
after completion of five years of employment for employees hired on or after
July 1, 1990.
The Company has a supplemental plan which will provide those benefits which
are otherwise produced by application of the Plan formula, but which, under
Section 415 or Section 401(a)(17) of the Internal Revenue Code, are not
permitted to be paid through a qualified plan and its related trust. Such an
arrangement is specifically provided for under the law.
Since no payments will be made from the Plan on account of deferred incentive
compensation awards or certain other deferred compensation, the Company will pay
a supplemental pension to employees who defer such annual amounts in the same
amounts realizable as if the deferred amounts had been paid currently.
The total projected annual benefits payable under the formulas of the Plan at
age 65 (67 for Mr. D'Amato), without regard to the Section 415 or 401(a)(17)
limit and recognizing supplemental pensions as described above, are as follows
for the Named Executive Officers of the Company: A. S. D'Amato -- $551,118, L.O.
Doza -- $96,440 (assuming accrual of benefits through 2/28/94), J. G. Hettinger
- - -- $85,092 (assuming accrual of benefits through 5/31/94), A. L. Miller --
$167,285, J. M. Saggese -- $209,043, E. R. Shames -- $108,833 (not including a
supplemental pension benefit payable under his employment agreement beginning at
age 65 of $100,000 annually continuing for the number of years of completed
service), and G.J. Waydo -- $72,840 (assuming accrual of benefits through
4/30/94).
EMPLOYMENT, TERMINATION AND
CHANGE-IN-CONTROL ARRANGEMENTS
The Company has had an employment agreement with Mr. D'Amato since December 1990
when he became President and Chief Operating Officer of the Company ("COO"). The
agreement has been amended several times, including at the time of his promotion
to Chief Executive Officer ("CEO"), upon the hiring of Mr. Shames as President
and COO and upon the termination of Mr. D'Amato's employment with the Company.
As amended, the agreement provides for certain payments and benefits upon
termination by the Company other than for cause through October 31, 1997. Upon
Mr. D'Amato's termination in December 1993 payments to him of $900,000 annually
commenced pursuant to the existing agreement. The payments are subject to his
compliance with an agreement not to engage in competition with the Company or
solicit customers or employees of the Company and to assist and cooperate with
the Company, upon request, with matters within his special knowledge or
competence. In December, Mr. D'Amato received a payment of $757,000 in
consideration for waiving certain rights, including a right to the grant of
options on 100,000 shares of stock. The agreement also provides for the
immediate vesting of 6,350 shares of restricted stock that were to vest on
January 25, 1996, options on 75,000 shares at $27.56 that were to vest on
January 1, 1994, and options on 180,000 shares at $32.06 that were to vest
60,000 shares per year on September 1, 1994, 1995 and 1996. In addition, all
existing options may be exercised up to five years after the term of the
agreement, but in no event after their scheduled expiration dates.
The Company also has had an employment agreement with Mr. Shames since June
1993 when he was hired as President and COO. The original terms were based in
part upon the need to compensate him for his forfeiture of substantial monetary
and other benefits he would have been entitled to had he remained as CEO of his
previous employer. Changes in the agreement were approved as a result of his
promotion to CEO in December 1993. The agreement now provides for a base salary
of $800,000; a guaranteed annual incentive for 1993 of $200,000; 30,000 shares
of restricted stock, one quarter of which vest each year over the next four
years, beginning July 1, 1994; a 200,000 share option grant at market in 1993;
and an option grant at market for 150,000 shares consisting of a 100,000 share
option originally promised for 1994 and accelerating a 50,000 share option
originally promised for 1995. In addition, the agreement provides for grants at
market on July 1, 1994 and January 2, 1995, of performance vesting options on
250,000 shares each grant, which can be exercised only after one year from the
date of grant and only after an average stock price of $21.50 and $25.00
respectively is maintained for 20 consecutive trading days. The restricted stock
and option grants are contingent upon shareholder approval of the 1994 Stock
Option Plan and, in the event such Plan is not approved by shareholders, the
agreement provides Mr. Shames with the economic equivalent of stock awards,
other than the performance vesting options. The agreement further provides that,
if Mr. Shames
12
<PAGE> 16
purchases stock at any one time prior to February 22, 1995, he shall receive
options to purchase two-times the number of shares purchased at the purchase
price, up to a maximum of 100,000 option shares. Finally, the agreement provides
a supplemental pension benefit beginning at age 65 of $100,000 annually,
continuing for the number of years of completed service, and for payment, upon
termination by the Company other than for cause, of a minimum annual
compensation of $950,000 for three years following such termination.
The Company has a salary continuance arrangement (the "CORE Arrangement") with
a number of key employees and Executive Officers including Messrs. Shames,
Saggese, and Miller ("CORE members"), which provides for the payment of one year
of base salary if employment is terminated without cause. As of December 31,
1993, there were twenty-four CORE members. In the event that any individual or
group acquires 15% of the stock of the Company and holds it for 30 days, the
CORE Arrangements are extended to a period of between two and three years,
generally based on age and length of service. In the event a CORE member is
terminated without cause following any such extension, the CORE Arrangement
provides for the continuance of salary, bonus and other compensation and
benefits. Payments thereunder could be reduced or eliminated by compensation
earned from other specified employment. Arrangements have also been made for
payment by the Company, upon certain conditions of the legal expenses of these
employees if they are required to enforce the provisions of their CORE
Arrangement. If any excise tax (under Sec. 4999 of the Internal Revenue Code) is
imposed in respect of payments under the CORE Arrangement or Mr. D'Amato's
employment agreement, the Company will pay to such Officers an amount that will
net the Officers the same sum as they would have retained if the excise tax did
not apply. An offset provision in Mr. Shames' employment agreement prevents any
duplication of payments under his employment agreement with payments under his
CORE Arrangement.
Mr. Hettinger, a CORE member and Executive Officer of the Company since 1985,
resigned effective March 1, 1993. Pursuant to a termination agreement with the
Company which supersedes his CORE Arrangement, he will receive payments equal to
his base salary through May 31, 1994 and thereafter, until the earlier of his
commencement of other employment or September 1, 1994. The agreement extended
certain perquisites, provides for reimbursement of certain outplacement-related
expenses, and extends certain medical, life insurance, pension and other
employee benefits, all subject to Mr. Hettinger's compliance with an agreement
not to compete. Mr. Waydo, also a CORE member and Executive Officer since 1985,
has a termination arrangement with the Company which supersedes his CORE
Arrangement and provides him with employment by the Company through April 30,
1994, subject to extension by mutual agreement. The agreement provides for the
continuation of his base salary through April, 1995, the extension of certain
perquisites, reimbursement of certain outplacement-related expenses and the
option to extend health insurance or convert to a private insurance plan, all
subject to his compliance with an agreement not to compete. Mr. Doza, a CORE
member and Executive Officer since 1977, retired effective March 1, 1994. The
Company is currently discussing a separation arrangement with him.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION*
Overall Policy
Under the direction of the Committee on Officers' Compensation, the Company's
executive compensation program is designed to be closely linked to corporate
performance and returns to shareholders. Within this goal, compensation strategy
and specific compensation plans tie a significant portion of executive
compensation to the success of the Company and to appreciation of the Company's
stock price. The objectives of this strategy are to link executive and
shareholder interest through equity based plans, to motivate executives to
achieve the goals inherent in the Company's business strategy, to provide a
compensation package that permits the recognition of individual contributions
and achievements as well as overall business results, and to attract and retain
outstanding executive talent. Within this overall policy, the Committee
recognizes the importance of targeting compensation practices and levels of
compensation competitive at about the median level of other major public
companies with revenues in the same general range as the Company. This
comparator group is provided by an independent compensation consultant
periodically and usually contains some companies that are
- - ---------------
* Note: This report is not incorporated by reference in any prior or future
Securities and Exchange Act Filings, directly or by reference to the
incorporation of proxy statements of the Company, unless such filing
specifically incorporates this report.
13
<PAGE> 17
in the S&P Food and Chemical Indices used in the performance graph following
this report. The comparator group of companies are from a cross section of
general industry and the Committee believes it is an appropriate benchmark to
use for compensation practice comparisons.
The Committee on Officers' Compensation in 1993 was comprised of five
independent directors, free from interlocking relationships or other conflicts
of interest. The Committee establishes salaries for Executive Officers of the
Company and others and administers the Company's incentive compensation and
stock option plans. In its deliberations, the Committee may take into account
the recommendations of appropriate Company officials and/or independent
professional compensation consultants.
Base Salaries
Salaries for Executive Officers are determined periodically by evaluating the
performance of the individuals reviewed, their contributions to the performance
of the Company and particular business units, their responsibilities, experience
and potential, and by taking into consideration their period of service at
current salary. In considering salary increases, the Corporation's overall
financial performance and certain non-financial indicators of corporate
performance are taken into account. Measures of financial performance may
include, but are not limited to, earnings-per-share, stock price, revenue
growth, and cash flow. Non-financial indicators can include among other things
strategic developments for which an executive officer has responsibility (such
as improved market share or cash flow generation) or managerial performance
(such as succession planning, resource allocation or social responsibility).
Factors consistent with the Company's overall compensation policy and strategy
described in the first paragraph under the caption "Overall Policy" may also be
considered. No relative weights or mathematical formulae are applied to these
financial or nonfinancial factors. The Committee may consider some factors more
important in a given year than others; or some factors more important with
respect to a particular position or individual. In addition, compensation
practices for the comparator companies described above are obtained from various
industry surveys and are considered by the Committee. The Committee believes
that the Company's base salaries for Executive Officers in 1993 on the average
compare to the median level of base salaries of the comparator group of
companies. While not the only factor, the financial performance of companies in
the S&P Food and Chemical indexes, as compared to the Company's performance, is
considered in determining whether to increase base salary levels.
In 1993, Executive Officers received base salary increases because salaries
had not been increased for two years due to the overall financial performance of
the Company. The increases were based upon subjective determinations with
respect to non-financial indicators as described above as well as factors
including budget performance, individual performance in relationship to the
executive's responsibilities and operational performance of operations under the
executive's control.
Annual Bonus
The Company's annual bonus program has been intended to focus attention on
annual business results measured by return on average capital investment and/or
financial results, as applicable. Financial results are primarily income
related. Divisions or business units have specific assigned objectives for a
given year, such as objectives relating to the Company's restructuring goals,
and/or other factors. Depending upon the objectives of the Company, these may
vary from year to year and from business unit to business unit. Individual
performance measures similarly are not static and may be assigned from year to
year by appropriate supervisional levels. Under the plan in effect for 1993, the
corporation had to achieve a specific level of performance before any individual
awards could be paid to officers. In particular, bonuses were to be paid from a
fund of 2% of pretax income above a 10% return on capital, as defined in the
plan. To the extent that individual and Company performance exceeded plan,
bonuses could be increased up to a predetermined maximum. At the discretion of
the Committee, awards could be adjusted based upon individual, business unit or
Company performance. Additionally, special awards could be approved for
exemplary performance.
In 1993, neither the Company nor the Named Executive Officers met their
threshold performance goals and no special awards or bonuses were paid to them,
except the bonus guaranteed to Mr. Shames upon hiring under his employment
agreement.
Long-Term Compensation
Long-term compensation is currently composed of three parts, namely long-term
incentive compensation, restricted stock and stock options. The Com-
14
<PAGE> 18
pany has generally followed a historical grant pattern with respect to its
long-term program based upon the number of options or dollar value of incentive
compensation allocated to each job position in past years. This pattern is
periodically reviewed against the dollar value of long-term compensation
allocations for Executive Officers of companies in the comparator group
described above for competitiveness and adjusted if necessary. The Committee
exercises its judgment on a year-to-year basis to determine whether any persons
should be added or deleted from the list of participants. The Committee believes
that the long-term compensation allocated to Executive Officers in 1993
generally compares to the median level of that of the comparator company group.
However, whether the allocations granted ever result in actual payment of
compensation depends upon the financial performance of the Company.
The long-term incentive is intended to focus attention on improving
earnings-per-share (EPS) over a multi-year period. At the beginning of each
multi-year period, participants are allocated an amount (or "award") based on a
historical pattern for each job position. At the end of the multi-year period,
if EPS targets are achieved, standard awards are paid. To the extent that goals
are not met or are exceeded, payments decrease or increase. A new cycle begins
each year.
The Company did not meet its performance goals for the 1991 to 1993 cycle.
Accordingly, no long-term incentive payments were made to any Executive Officers
with respect to such cycle.
Restricted stock has been granted in limited situations. Only two grants have
been made which are reflected in the Summary Compensation Table and discussed in
the CEO Compensation Section below.
The Company's stock option program is designed to develop a parallel interest
between key employees and shareholders, to focus attention on stock values and
to develop Company ownership, promote employee loyalty and reward long-term
business success.
Stock option grants made to Executive Officers in January 1993 generally
followed the historical grant pattern but also took into account each
individual's period of service, individual performance and overall compensation.
The 1993 grants were made as incentives to Executive Officers generally in lieu
of potential future payments under the long-term incentive plan.
CEO Compensation
In January 1993, the Committee increased then Chairman and Chief Executive
Officer (CEO) D'Amato's compensation package based upon consultation with
external consultants and taking into consideration the salary of the previous
CEO, median salaries of CEOs of companies in the comparator companies group, and
the efforts Mr. D'Amato was making to restructure the Company. The package
included an annual base salary of $825,000, an award of 6,350 shares of
restricted stock which were to vest after three years, at which time the
Company's restructuring program was to have been substantially completed, and
the grant of a stock option for 75,000 shares as an incentive to performance.
Mr. D'Amato received no annual or long-term bonus as the Company did not reach
its performance goals as described above.
In June 1993, when Mr. Shames was hired as President and Chief Operating
Officer of the Company, in order to maintain an equitable relationship between
the employment agreements of Messrs. D'Amato and Shames, the Committee committed
to grant Mr. D'Amato additional options on 100,000 shares at the next regularly
scheduled grant date. This stock option was never granted and the commitment was
honored in the form of a cash payment upon termination which is reflected as
part of the amount shown in the All Other Compensation column of the Summary
Compensation Table. In December 1993, Mr. Shames replaced Mr. D'Amato as CEO of
the Company and Mr. Shames' base salary was increased to $800,000 as a result of
his promotion based upon consultation with external consultants and taking into
consideration median salaries of CEOs of companies in the comparator companies
group. In addition, incentive opportunities for 1994 and multiyear cycles were
increased to reflect the promotion.
Policy on Qualifying Compensation under OBRA
Two proposals for shareholder consideration are contained in this current
proxy statement which affect executive compensation, namely the 1994 Stock
Option Plan and the 1994 Management Incentive Plan. It is the Committee's
policy, as far as practicable, to structure executive compensation to ensure its
tax deductibility by the Company by compliance with the requirements of the
Internal Revenue Code. The Management Incentive Plan and the 1994 Stock Option
Plan are designed to facilitate this compliance.
15
<PAGE> 19
Conclusion
In summary, the levels of compensation, as indicated in the compensation
tables, reflect that a significant portion of the Company's executive
compensation is at risk subject to individual and corporate performance and
stock price appreciation.
By: The Committee on Officers' Compensation
Frank J. Tasco, Chairman, and Frederick E. Hennig, Robert P. Luciano, Wilbert J.
LeMelle, and H. Barclay Morley*, Members, as of December 31, 1993.
- - ---------------
*Mr. Morley became Chairman of the Committee on January 1, 1994.
- - --------------------------------------------------------------------------------
The following graph provides a comparison with the stated indices of the
yearly percentage change in the Company's cumulative total shareholder return on
its common stock for a five-year period, as required by the Rules of the U.S.
Securities and Exchange Commission. All dividends are assumed to have been
reinvested over the respective periods. The Company's common stock is included
in the Standard & Poor's (S&P) Food Index. Since a relatively significant
proportion of net income is derived from the Company's Packaging and Industrial
Products Division -- Domestic & International, with chemical related product
lines, the S&P Chemical Index is also indicated for illustrative purposes.
FIVE YEAR CUMULATIVE TOTAL RETURNS
BORDEN, INC. AND THE S&P 500 STOCK, S&P FOOD AND S&P CHEMICAL INDICES
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Borden S&P 500 S&P Food S&P Chemical
<S> <C> <C> <C> <C>
1988 100.0 100.0 100.0 100.0
1989 119.2 131.6 136.4 129.1
1990 106.9 127.5 146.9 109.7
1991 120.7 166.1 214.2 143.0
1992 110.2 178.7 214.2 156.6
1993 68.3 196.7 196.0 175.2
</TABLE>
- - ---------------
Note: The above graph is not incorporated in any prior or future Securities and
Exchange Act filings, directly or by reference to the incorporation of
proxy statements of the Company, unless such filing specifically
incorporates the graph.
- - --------------------------------------------------------------------------------
RATIFICATION OF THE SELECTION OF AUDITORS
The Board of Directors, on the recommendation of the Audit Committee, proposes
that the shareholders ratify the selection of Price Waterhouse as independent
auditors of the Company for the fiscal year 1994.
In the event that this proposal does not receive the necessary vote for
adoption, the Board of Directors of the Company will consider whether to appoint
other independent public accountants as auditors.
Representatives of the independent auditors are expected to be present at the
meeting and to be
16
<PAGE> 20
available to respond to appropriate questions. They will be given the
opportunity to make a statement if they desire to do so.
The Board of Directors recommends a vote FOR the ratification of the selection
of Price Waterhouse as independent auditors for 1994.
APPROVAL OF THE 1994 STOCK OPTION PLAN
The Board of Directors is recommending to the shareholders that they approve the
1994 Stock Option Plan (hereafter referred to as the 1994 Plan or the Plan)
which is essentially a renewal with the changes described below, of the 1984
Stock Option Plan as amended which received the approval of shareholders on
April 22, 1988 (the "Amended 1984 Plan"). Most of the 9,700,00 shares of Borden
common stock that were authorized for use in connection with the Amended 1984
Plan were made subject to option prior to April 30, 1993, when authority to
grant options under the Amended 1984 Plan expired, and the Board considers it
desirable that such plan be renewed, with the changes described below, to permit
the Company to continue granting options, stock appreciation rights and
restricted stock grants to its key employees and thus enable the Company to
attract and retain key employees.
The following description of the principal features of the 1994 Plan is
subject to and qualified by reference to the actual provisions of the Plan set
forth in Exhibit "A" hereof.
The Board has designated the Committee on Officers' Compensation (the
Committee) to administer, interpret and construe the Plan. The Committee is
composed of non-employee directors who are not eligible to be participants under
the Plan. This Committee administered the Amended 1984 Plan.
The stock to be authorized for issuance under the Plan will be 6,000,000
shares of the common stock of the Company, representing approximately 4.2% of
the common stock outstanding on December 31, 1993, subject to adjustments for
stock dividends, stock splits, reorganizations, etc. No more than 1,000,000 of
the authorized shares may be granted in the form of restricted stock, nor may
one individual be granted an aggregate of more than 1,400,000 options under this
Plan. The Amended 1984 Plan had no limitation on the aggregate number of options
granted to an individual or granted as restricted stock. Shares made subject to
any option which terminates, is cancelled or expires unexercised or which has
been granted as restricted stock and forfeited may be made subject to a new
option or restricted stock grant without again being counted against the maximum
number of shares authorized under the Plan.
The option price would be the fair market value of Borden common stock on the
day the option is granted, defined as the mean between the highest and lowest
selling prices on that day as reported on the consolidated trading network. Such
mean was $17.12 on December 31, 1993. Unlike the Amended 1984 Plan, the Plan
authorizes the Committee to provide for an exercise price that varies during the
term of the option provided, however, that the exercise price may not ever be
less than the fair market value on the day the option is granted as described in
the first sentence of this paragraph.
Options that are granted under the Plan may not be exercised until the grantee
completes at least 12 months of continuous employment with the Company after the
date of grant of the option, the only exceptions being that the options may be
made exercisable during that period by action of the Committee if death,
disability, "Retirement" or a "Change in Control" (as such terms are defined in
the Plan) should occur prior to completion by the employee of 12 months of
continuous employment after the option is granted.1 Since the grant date could
vary during a month depending upon the date of the Committee's meeting, the Plan
provides that the Committee may start the 12-month period as of the first day of
the month of the grant regardless of what date in the month the Committee meets
to make the grants.
Generally speaking, unexercised options terminate after employment ceases but
may be exercisable by the optionee for the term of the option after Retirement,
as defined in the Plan, and up to two years after the commencement of
disability, and by the heirs, executors or administrators of an optionee who
dies while employed or while the option is exercisable following Retirement or
commencement of disability up to one year after his death. The Amended 1984 Plan
will be deemed further
- - ---------------
1 Allowing key employees, including current management, to exercise their
options upon a "Change in Control" during the 12 months after the grant of
such options has the effect of protecting grantees from the loss of such
rights merely because of a change in control, as contrasted with termination
for cause, resignation, or separation from employment with the Company for
other reasons.
17
<PAGE> 21
amended to include the provision regarding the exercise of options for the term
of the option after Retirement and shareholder approval of the Plan will
constitute such amendment of the Amended 1984 Plan. The Plan also provides that,
at or anytime after the grant of an option, the Committee may provide that, if
an optionee is terminated without cause within two years after a Change in
Control of the Company takes place, he may exercise his options and stock
appreciation rights granted under the Plan during a period of 90 days following
his termination.
No options may be granted under the Plan after April 30, 1999. The Plan will
continue in effect and may be amended in accordance with its terms after April
30, 1999 with respect to options granted prior to such date.
The Plan authorizes the grant of options qualifying as "incentive stock
options" under Section 422 of the Internal Revenue Code of 1986, as amended (the
Code), as well as of options not qualifying as incentive stock options. The Plan
provides that all shares authorized under the Plan may be issued or transferred
upon exercise of incentive stock options and authorizes the Committee, in its
sole discretion, to grant any options as incentive stock options or as options
not qualifying as incentive stock options. The Plan also incorporates provisions
necessary under the Code to qualify options under the Plan as incentive stock
options, including a provision limiting the aggregate fair market value of the
stock for which incentive stock options may be granted to any employee in any
year, determined as of the times options are granted, to $100,000. The Plan also
permits an individual who has been granted incentive stock options in a calendar
year to be granted, in addition, options not qualifying as incentive stock
options whether or not the number of incentive stock options granted was for the
maximum annual statutory amount permitted.
Options granted under the Plan may be exercisable for up to ten years after
the date of grant.
The Plan authorizes the Committee to permit the holder of any option granted
under the Plan to pay all or any part of the purchase price of the shares
subject to the option either in cash or in shares of Borden common stock having
equivalent market value. Any shares that may be used to pay the purchase price
of an option under the Plan would be valued, for purposes of determining the
extent to which the purchase price has been paid thereby, at the mean between
the highest and lowest selling prices for Borden common stock on the date of
exercise of the option as reported on the consolidated trading network.
The foregoing provision of the Plan that permits the option price to be paid
in shares of Company common stock contemplates that an optionee who exercises
part of an option by delivering cash or shares of Borden common stock in payment
of the option price may be permitted to apply automatically the shares acquired
on such exercise to satisfy the option price for an additional portion of the
option and to repeat the process automatically until the option has been
exercised in full. At present, it is not contemplated that shares will be
permitted to be used to exercise options unless such shares have been held by
the optionee for a minimum period of time prior to exercise such as six months.
Unlike the Amended 1984 Plan, the Plan authorizes the Committee to provide
replacement options either at the time of the grant of an option or
subsequently. Replacement options are the grant of an option equal to the number
of shares surrendered in the exercise of an option. Replacement options become
exercisable in the event the purchased shares are held for a minimum period of
time established by the Committee and are subject to such other terms and
conditions as the Committee may determine. The Plan provides that the Amended
1984 Plan will be deemed further amended to include the provisions for
replacement options and shareholder approval of the Plan will constitute
approval of such amendment of the Amended 1984 Plan.
The use of shares to pay the option price of options and the grant of
replacement options will not increase the number of shares available for the
grant of options under the Plan or the number of shares subject to options
heretofore granted under the Amended 1984 Plan.
Options to purchase a total of 4,196,108 shares with a market value of
$71,333,836 as of December 31, 1993 were outstanding under the Amended 1984 Plan
as of that date.
The Plan permits the Committee to authorize an optionee, under specified
conditions, to pay the withholding tax due on exercise of an option granted
under the Plan by authorizing the Company to withhold a number of shares to be
received on the exercise having a value on the date of payment equal to the
amount to be withheld.
18
<PAGE> 22
The Plan provides that the determination of the key employees to whom options
are to be granted and the number of shares of stock subject to each option shall
be made by, or only in accordance with the recommendation of the Committee. The
Plan expressly authorizes the Committee to determine the times when options
shall be granted and when they may be exercised, to prescribe, amend and rescind
rules and regulations of general application relating to the Plan, to determine
the terms and conditions of options and provisions with reference to approved
leaves of absence, and to make all other determinations necessary or advisable
for the administration of the Plan. The Plan states expressly that
determinations of the Committee under the Plan shall be final, conclusive and
binding on the Company and its shareholders and on all employees eligible to
participate in the Plan.
The Plan authorizes the grant of stock appreciation rights which permit the
holder of an option, in lieu of exercising the option, to receive a number of
shares of the Company's common stock, or cash, or a combination of stock and
cash, equal to the excess of the "fair market value" of the stock subject to
option at the time stock appreciation rights are exercised over the option
price. "Fair market value" for this purpose is defined in the Plan as the mean
between the highest and lowest selling prices for Borden common stock on the
date of exercise of the rights as reported on the consolidated trading network.
However, the Plan specifically authorizes the Committee to establish a uniform
"fair market value" for this purpose that would apply to any stock appreciation
rights which are exercised by Company officers or directors during certain
designated periods, irrespective of the market price of Company stock on the
particular day during such period on which such rights are exercised. This
authority has been included in the Plan in order to eliminate arbitrary
differences in the appreciation payable with respect to stock appreciation
rights exercised for cash by Company officers and directors who, under
applicable regulations, may exercise such rights for cash only during certain
limited periods designated by the Securities and Exchange Commission. At
present, such periods consist for four ten-day "window periods" each year
following publication of quarterly or annual Company earnings data and a
thirty-day period following extraordinary events such as those constituting a
Change in Control as defined in the Plan. The market price of Company stock may
fluctuate daily during such limited periods as a result of overall market
movements and other factors not directly related to the Company's business, and
may result in arbitrary differences in the amounts payable for stock
appreciation rights which are exercised on different days during the same
period. The Plan's provision for a uniform price to be estimated for rights
exercised within each such period, in lieu of daily pricing of the Company's
common stock for the purpose, should eliminate such arbitrary differences. While
under the Plan the uniform price established for any such period may not exceed
the highest mean between the daily high and low selling prices of Company common
stock during the period to which such uniform price applies, it is presently
contemplated that the uniform price heretofore established by the Committee
under the Amended 1984 Plan with respect to rights exercised during window
periods will continue to be used for that purpose under the Plan. Such uniform
price heretofore established by the Committee is the average mean between the
daily high and low selling prices of Company common stock during each window
period.
Stock appreciation rights and limited stock appreciation rights may be granted
in connection with options granted under the Plan. A total of 1,996,128 shares
for options without stock appreciation rights were outstanding as of December
31, 1993 under the Amended 1984 Plan at an average weighted option price per
share of $29.68. To the extent that stock appreciation rights are exercised and
the corresponding option cancelled, the shares subject to the option are charged
against the maximum number of shares authorized under the plan under which the
option was granted.
Stock appreciation rights granted concurrently with an option are subject to
the same minimum employment requirement as applies to the option and hence may
not be exercised to any extent until the optionee completes 12 months of
continuous service after the date of grant, subject to the same exceptions
applicable to the option, i.e., Committee approval in the case of death,
disability, Retirement or a Change in Control. Stock appreciation rights granted
after the date of grant of the related option may not be exercised to any extent
until the option is exercisable, the employment requirement (or related
exceptions) applicable to the option having been satisfied, and in addition may
not be exercised until the optionee completes at least six months of continuous
employment following the date of grant of such rights, subject to the same
exceptions relat-
19
<PAGE> 23
ing to death, disability, Retirement and a Change in Control as apply to the
option.
The Plan specifically provides for limited stock appreciation rights which are
defined as a stock appreciation right exercisable only upon a Change in Control
of the Company. In all other respects, limited stock appreciation rights are
subject to the same terms and conditions applicable to stock appreciation rights
in the Plan. Under the provisions of the Amended 1984 Plan, the Committee issued
stock appreciation rights the exercise of which was conditioned upon a Change in
Control of the Company. Options to purchase a total of 2,199,980 shares of
Borden common stock under these limited stock appreciation rights were
outstanding under the Amended 1984 Plan as of December 31, 1993.
It is presently contemplated that, consistent with past practice, stock
appreciation rights will be granted only to officers, whose exercise of such
rights are restricted by the rules of the Securities and Exchange Commission
precluding short-swing profits.
The Plan specifically authorizes the Company, in the event of death of an
employee holding an option granted under the Plan, to purchase the option on
request of its holder, at a price equal to the difference between the fair
market value of the shares subject to option and the option price, thus avoiding
an option exercise and immediate sale of the shares. In the event of the
purchase of the option by the Company, the shares subject to option will be
charged against the maximum number authorized under the Plan.
The Plan authorizes the Committee to grant (either alone or in addition to
other grants under the Plan) restricted stock which are shares of common stock
of the Company, subject to restrictions imposed by the Committee. Restricted
stock may not be disposed of or encumbered by the recipient and may be required
to be held in the custody of the Company or any unrelated custodian until the
restrictions established by the Committee lapse. The restrictions could, at the
discretion of the Committee, include, among others, restrictions that lapse
after the recipient completes a specified period of service with the Company.
The Committee may also condition the awards upon the attainment of performance
goals.
Upon termination of employment during the restriction period, the restricted
stock would be forfeited, subject to such exceptions as might be authorized by
the Committee including retirement, disability, death or special circumstances.
Recipients of restricted stock would not normally be required to provide
consideration other than the rendering of services; however, the Committee would
have the discretion to grant restricted stock for which a cash payment is
required. During the restriction period, the recipient of restricted stock would
have the right to vote the shares, and the right to receive any dividends. If
the recipient remains employed by the Company at the time the restrictions lapse
and any conditions imposed are met, he would have a right to the restricted
stock, free of the foregoing restrictions.
The Plan also authorizes the Committee to establish other plans, programs or
arrangements under the Plan, for key employees of the Company who are subject to
a foreign jurisdiction, containing provisions that are not inconsistent with the
intent and objectives of the Plan, in order to make available to them tax or
other benefits under the laws of such foreign jurisdiction.
Under present financial accounting rules, the exercise of any option granted
under the plan as the Company presently expects it to be administered would
increase the number of shares outstanding but would not result in a charge
against earnings, whereas exercise of stock appreciation rights would result in
a smaller increase in the number of outstanding shares if shares are delivered
in settlement of the exercise, or no such increase if cash is paid in full
settlement of the exercise, and charges against earnings to the extent of the
value of the shares and amount of cash delivered in settlement of the exercise.
However, under a proposed Financial Accounting Standards Board standard,
beginning January 1, 1997, the grant of options would result in a charge against
earnings.
The Plan may be amended or discontinued by the Board of Directors without
shareholder approval except that no such amendment may increase the number of
shares in the aggregate or to an individual that may be purchased upon exercise
of options or granted as restricted stock under the Plan, permit any person who
is not a key employee to be granted an option or restricted stock, permit an
option to be exercised more than ten years after it is granted, extend the date
after which no further options or restricted stock may be granted under the Plan
or materially increase benefits accruing to participants under the Plan.
20
<PAGE> 24
A provision of the Plan provides specifically that, subject to the foregoing
amendments requiring approval of shareholders, without further action on the
part of shareholders or the consent of participants, the Board of Directors may,
on recommendation of the Committee, amend the Plan to permit or facilitate
qualification of options granted under the Plan as incentive stock options
within the meaning of Section 422 of the Code or any successor provision at the
time in effect.
No amendment or termination of the Plan, whether by the Board of Directors or
the shareholders, may, without the consent of the participant, affect any stock
option or stock appreciation rights theretofore granted to him.
The Plan is not intended to and does not provide for the use of shares to
grant options in substitution for options of acquired companies or to cover the
assumption of such options, and no shares under the Plan will be used for the
purpose. If and to the extent necessary, options in substitution for such
options or shares to cover the assumption of options may be granted or used
independently of the Plan and without reference to its terms.
It is not possible to specify when in the future options will be granted under
the Plan, or to whom, but it is contemplated that options will be granted to a
limited number of key employees. Certain options have been granted subject to
shareholder approval of the Plan and these grants are described in the New Plan
Benefits Table herein.
The affirmative vote of a majority of the votes cast is required for adoption
of the Plan. However, to qualify the Plan so that grants of stock or options to
executive officers of the Company under the Plan will be "exempt transactions"
pursuant to SEC Rule 16b-3, the affirmative votes of holders of a majority of
the shares present or represented and entitled to vote is required. Under New
Jersey law, dissenting shareholders do not have appraisal rights with respect to
this proposal.
The Plan is being submitted to shareholders for their approval as a matter of
Board policy, to comply with New York Stock Exchange listing requirements,
Section 162(m) of the Code and to assure continued availability of the exemption
from the short-swing profits recapture provision of federal securities
legislation applicable to officers and directors. If the Plan should not be
approved, the Plan will not be put into effect, the Board of Directors may make
other appropriate arrangements for grants of stock options and stock
appreciation rights, and the Amended 1984 Plan will continue in effect with
respect to options and rights already granted in accordance with its terms
without the further amendments described herein.
FEDERAL INCOME TAX CONSEQUENCES
The Company is advised by counsel that under present law and proposed
regulations the federal income tax consequences in respect to the grant and
exercise of stock options, stock appreciation rights, limited stock appreciation
rights and restricted stock should be generally as follows:
OPTIONS WHICH DO NOT QUALIFY AS INCENTIVE STOCK OPTIONS
An employee who is granted an option which does not qualify as an incentive
stock option should not be subject to federal income tax upon the grant of the
option, and the Company should not be entitled to a tax deduction by reason of
such grant. Upon exercise of the option, the excess of the fair market value of
the shares on the exercise date over the option price will be considered
compensation taxable as ordinary income to the employee and subject to
withholding unless the shares so received are subject to a substantial risk of
forfeiture, in which event (unless the employee elected to be taxed on exercise)
compensation should generally be realized subject to federal income tax and
withholding only at the time the shares are no longer subject to a substantial
risk of forfeiture, with the amount of compensation realized being the excess of
the fair market value of the shares at that time over the option price. Shares
received by an officer or director of the Company upon exercise of an option
would be considered subject to a "substantial risk of forfeiture" for this
purpose so long as the sale of such shares could subject the individual to suit
under the short-swing profits recapture provision of federal securities
legislation, generally a period of six months. The Company may claim a tax
deduction at the time and in the amount that such taxable compensation is
realized by the employee.
INCENTIVE STOCK OPTIONS
An employee should not realize taxable income at the time of the grant of an
incentive stock option and the Company will not be entitled to a tax deduction
with respect to such grant. No taxable income should be realized by an employee
and the Company will not be entitled to a federal income
21
<PAGE> 25
tax deduction in respect of the exercise of an incentive stock option. However,
exercise of an incentive stock option will give rise to an item of tax
preference to the employee equal to the excess, on the date of exercise of the
option, of the fair market value of the shares acquired through such exercise
over the option price of such shares, and such item of tax preference may be
subject to the alternative minimum tax. The Company would not be entitled to a
tax deduction in respect of any such item of tax preference.
If the shares acquired through the exercise of an incentive stock option are
sold more than two years after the date of grant of the option and more than one
year after the date of the transfer of such shares to the employee, and the
option price of such shares had been paid in cash, the full difference between
the amount realized on the sale and the option price will constitute long-term
capital gain or loss to the employee and no deduction will be allowed to the
Company. However, if and to the extent that shares previously acquired by the
employee had been delivered in payment of the option price of the option, upon
sale of an equivalent number of shares received on exercise of the option, more
than two years after the date of grant of the option and one year after the date
of transfer of such shares to the optionee, the full difference between the
amount realized on the sale and the adjusted tax basis of the previously
acquired shares delivered in payment of the option price should constitute
long-term capital gain or loss. Upon sale of any shares acquired on exercise of
the incentive stock option in excess of the number of previously acquired shares
delivered by the employee in payment of the option price, more than two years
after the date of transfer of such shares to the employee, the amount realized
on the sale of such shares should constitute long-term capital gain. The Company
will not be entitled to a tax deduction in respect of any such sales.
If the shares acquired through the exercise of an incentive stock option are
sold or otherwise disposed of at a gain within two years after the date of grant
of the option or within one year after the transfer of such shares to the
employee (a "disqualifying disposition"), the employee should realize income
subject to tax at ordinary income rates equal to the difference between the
option price of the shares and the lesser of (a) the amount realized on such
disposition and (b) the fair market value of the shares on the date of exercise,
with any appreciation after the date of exercise generally constituting long-or
short-term capital gain (depending on whether the shares were considered held by
the employee for federal income tax purposes for more than one year prior to
such disposition). The Company should be able to claim a tax deduction in the
amount of ordinary income (but not capital gain) realized by the employee.
However, in the case of a disqualifying disposition by an employee who was an
officer or director on the date of exercise of the option, the employee will
generally realize income subject to tax at ordinary income rates and the Company
will be entitled to a tax deduction in an amount equal to the difference between
the option price of the shares and the lesser of (a) the amount realized on such
disposition, and (b) the fair market value of the shares on the first day when
the employee could have sold the shares at a profit without liability under the
SEC short-swing profit rules, which would generally have been six months after
the date of exercise, with any appreciation thereafter generally constituting
long-or short-term capital gain to the employee and without any tax deduction to
the Company in respect of such gain. If shares, previously acquired by an
officer or other employee through the exercise of an incentive stock option, are
delivered by the employee in payment of the option price of an incentive stock
option prior to satisfaction of the statutory holding periods applicable to such
shares, such delivery will constitute a disqualifying disposition of such
previously-acquired shares that may give rise to ordinary income to the employee
and a tax deduction to the Company in accordance with the rules described above,
and no capital gain would be realized by the employee at the time of such
disposition.
STOCK APPRECIATION RIGHTS AND LIMITED STOCK APPRECIATION RIGHTS
The grant of stock appreciation rights should not result in taxable income to
the recipient or a tax deduction for the Company. The exercise of stock
appreciation rights should result in compensation taxable as ordinary income to
the employee subject to withholding, and in a tax deduction for the Company, in
the amount of the cash paid and the fair market value of any shares issued or
transferred, unless any such shares are subject to a substantial risk of
forfeiture, in which event (unless the employee elected to be taxed on exercise)
compensation should generally be realized subject to federal income tax and
withholding and a tax deduction should be available to the Company only at the
time the shares are no longer subject to a substantial risk of forfeiture, with
the amount based on the fair
22
<PAGE> 26
market value of the shares at that time. Shares received by an officer or
director of the Company would be considered subject to a "substantial risk of
forfeiture" for this purpose so long as the sale of such shares could subject
the individual to suit under the short-swing profits recapture provision of
federal securities legislation.
RESTRICTED STOCK
Unless an election is made as described below, an employee who receives an award
of restricted stock under the Plan will not realize taxable income at the time
of the award, nor will the Company be entitled to a tax deduction at that time.
When the awards become vested (i.e. when restrictions lapse through attainment
of specified performance goals or otherwise) or the election described below is
made, participants will realize income and the Company may claim a deduction at
such time in an amount equal to the fair market value of the shares less any
amount paid by the participant. Dividends paid to the employee with respect to
restricted stock prior to their vesting constitute compensation and, as such,
are taxable to the participant and deductible by the Company.
Pursuant to provisions of Section 83(b) of the Code as amended, the recipient
of restricted stock under the Plan may elect to be taxed at the time of the
award. If the participant so elects, the full value of the shares (without
regard to restrictions) at the time of the grant, less any amount paid by the
participant, will be taxed to the participant as ordinary income and will be
deductible by the Company. Dividends paid with respect to the shares during the
period of restriction will be taxable as dividends to the participant and not
deductible by the Company. If, after making an election pursuant to Section
83(b), any shares are subsequently forfeited, or if the market value at vesting
is lower than the amount on which the participant was taxed, the participant
cannot then claim a deduction.
The provision for grants of restricted stock can be conditioned by the
Committee on performance factors and thus comply with Section 162(m) of the
Internal Revenue Code relating to compensation in excess of $1,000,000 and be
tax deductible by the Company. It is at present contemplated that, as far as
practicable, future restricted stock grants will be made to insure compliance
with this section of the Internal Revenue Code.
ADDITIONAL STOCK OPTION PLAN
The Board of Directors in 1993 also established a stock option plan for certain
of the Company's employees who are not currently eligible for grants under the
1994 Plan described above. The Company has authorized 1,700,000 shares for this
plan. This plan is not being submitted for shareholder approval.
23
<PAGE> 27
- - --------------------------------------------------------------------------------
NEW PLAN BENEFITS
1994 STOCK OPTION PLAN
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET VALUE AS
# OF SHARES OF EXPECTED OF 2/22/94
COMMON STOCK EXERCISE OR ($15.18) OF
UNDERLYING BASE PRICE EXPIRATION UNDERLYING
NAME POSITION OPTIONS ($/SHARE) DATE SECURITIES
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
E. R. Shames President & Chief Executive 30,0001 18.50 -- 455,400
Officer 200,000 17.75 9/27/2003 3,036,000
150,000 14.50 1/24/2004 2,277,000
250,0002 -- 6/30/2004 3,795,000
250,0003 -- 12/31/2004 3,795,000
J. M. Saggese Executive Vice President & 14,000 15.18 2/21/2004 212,520
President, Packaging & 7,0002 -- 6/30/2004 106,260
Industrial Products Division 7,0003 -- 12/31/2004 106,260
G. J. Waydo Vice President 0 -- -- --
L. O. Doza Former Senior Vice President 0 -- -- --
& Chief Financial Officer
A. L. Miller Senior Vice President & Chief 10,500 15.18 2/21/2004 159,390
Administrative Officer 5,2502 -- 6/30/2004 79,695
5,2503 -- 12/31/2004 79,695
A. S. D'Amato Former Chairman & Chief 0 -- -- --
Executive Officer
J. G. Hettinger Former Executive Vice 0 -- -- --
President & President,
Grocery Products Division
Executive Group 78,700 15.18 2/21/2004 1,194,666
30,0001 18.50 -- 455,400
240,000 17.75 9/27/2003 3,643,200
150,000 14.50 1/24/2004 2,277,000
282,2502 -- 6/30/2004 4,284,555
292,2503 -- 12/31/2004 4,436,355
Non-Executive Director Group
Non-Executive Officer 165,700 15.18 2/21/2004 2,515,326
Employee Group 40,000 17.75 9/27/2003 607,200
73,0002 -- 6/30/2004 1,108,140
73,0003 -- 12/31/2004 1,108,140
</TABLE>
- - --------------------------------------------------------------------------------
General Description: Unless footnoted, all grants are subject to shareholder
approval of the 1994 Stock Option Plan, are non-qualified stock options which
vest after 1 year from date of grant, and are exercisable for a period of ten
years from date of grant. All grants to executive officers also include limited
stock appreciation rights.
(1) Restricted stock vests 25% annually, or 7,500 shares for each completed year
of employment beginning July 1, 1994.
(2) These grants are performance vesting options to be granted at market price
on July, 1, 1994. All of the conditions contained in the general description
apply and in addition, to vest, an average price of $21.50 or more must be
attained for 20 consecutive trading days on the New York Stock Exchange
(NYSE).
(3) These grants are performance vesting options to be granted at market price
on January 2, 1995. All of the conditions contained in the general
description apply and in addition, to vest, an average price of $25.00 or
more must be attained for 20 consecutive trading days on the NYSE.
- - --------------------------------------------------------------------------------
APPROVAL OF THE 1994 MANAGEMENT INCENTIVE PLAN
The Board of Directors, believing the continued success of any company depends
upon its ability to attract and retain key executives and managerial employees
of better than average competence and talents, recommends the approval of the
"1994 Management Incentive Plan" (the "Plan"). The Company has had incentive
plans for key executives approved by the shareholders since 1969. This plan is
designed to allow compliance with recent changes in the federal tax code to make
payments under it deductible for tax purposes by the Company. The Plan is not
intended to preclude continuation or adoption of other incentive plans for
employees of the Company or its divisions or subsidiaries or to operate as a
substitute for any other plan, practice or arrangement for compensation such as
commissions, prizes or special awards. The following description of the
principal features of the Plan is qualified by reference to the actual
provisions of the Plan, as set forth in Exhibit "B" to this proxy statement.
24
<PAGE> 28
ELIGIBLE EMPLOYEES
The Plan will be confined to corporate officers (including directors who are
employees) and other key executives and managerial employees of the Company and
its subsidiaries who are selected to participate. Participants in this Plan may
also participate in divisions' or subsidiaries' plans subject to such
restrictions as the Committee may impose.
The selection of eligible participants for the Plan will be made, on
recommendation of the chief executive officer of the Company or another officer
designated by him, by the Committee on Officers' Compensation (the Committee),
composed of non-employee directors who are not eligible to participate and who
qualify as "outside directors" as defined in Section 162(m) of the Internal
Revenue Code of 1986 (the Code). It is not possible to state the number of
officers and directors and other key executives who will participate in the Plan
for 1994 since selection of participants rests within the discretion of the
Committee.
AWARDS OF INCENTIVE COMPENSATION
The Committee may, but is not required, to provide for annual incentive awards
and long-term incentive awards based on a multi-year period. The Plan provides
the form of awards, if intended by the Committee, to meet the exception for
performance based compensation qualified under the Code as follows:
Annual Incentive Awards
In advance of each calendar year or such later date permitted under
regulations issued under Section 162(m) of the Code (before April 1, 1994 for
the 1994 year) the Committee will establish a dollar amount of targeted pretax
income from continuing operations for the Company (the standard award) and
amounts of pre-tax income below which no award (the minimum award) and at which
a maximum award will be paid. At the same time, the Committee will establish for
each participant selected to be eligible for an annual award the percentages of
his salary paid in the calendar year at the minimum, standard and maximum award
levels. Should the pre-tax income of the Company fall between the minimum and
maximum award amounts the award will be pro-rated in accordance with the
percentages assigned to each participant.
For example, using minimal numbers for clarity, assume that in December 1994
the Committee establishes $10,000 as the Company's targeted pre-tax income for
Compensation Year 1995 with a minimum lower amount of $8,500 and a maximum
amount of $11,500. Assume that, with respect to Participant A, whose annual
salary is $1,000, the Committee assigns the 3 percentages of 20%, 40% and 65%
for the minimum, standard and maximum awards respectively. If the Company
actually earns pre-tax income in 1995 of $10,000, Participant A will receive an
annual award of $400 (40% of $1,000). If pre-tax income actually is $8,500 his
annual award would be at the minimum level of $200 (20% of $1,000), and if
pre-tax income is actually $11,500 or more, A's annual award would be at the
maximum level of $650 (65% of $1,000). If, for example, pretax income is between
$8500 and $10,000, participant A would receive an award pro-rated between $200
and $400.
The Committee has discretion under the Plan to add conditions that would
reduce the amount otherwise payable.
Long-term Incentive Awards
Long-term incentive award cycles are three calendar years. Each year a new
award cycle may begin and thus in any given year three award cycles may be in
progress. Each cycle is completely independent and separate from any other
cycle.
In advance of each year or such later date permitted under regulations issued
under Section 162(m) of the Code (April 1, 1994 for the 1994 year), the
Committee will establish a dollar goal for earnings per share (EPS) (target
award) for each of the three years of the cycle, and the percentages of those
goals below which no award (minimum award) and at which the maximum award will
be earned. The Committee may also include as part of a cycle an increment for
the cycle as a whole. At the same time the Committee will establish for each
Participant a dollar amount as a standard allocation to be earned in the cycle,
the percentage of the standard allocation to be earned at minimum and maximum
levels of EPS and the dollar amount of the allocation assigned to each year or
other component of the cycle. The maximum award shall not exceed 150% of the
standard allocation. Where the EPS is between the minimum, target and maximum
the award will be prorated accordingly.
For example let us assume that the Committee established EPS targets of $2.00,
$2.20 and $2.45 for years 1, 2 and 3 respectively and a total of $6.65 and the
percentages 75% and 125% for the minimum and maximum range for earnings per
share.
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<PAGE> 29
Assume also a standard allocation of $1,000 for employee A weighted 25% for each
of the three years and 25% for the cycle as a whole with a weighted allocation
earning percentages of 50% at minimum and 150% at maximum.
If earnings per share were $1.50, $2.20 and $3.15 in the three years of the
cycle for a total of $6.85, the awards would be computed as follows:
<TABLE>
<S> <C>
YEAR 1: Since the EPS was 75%
of target, 50% of the
weighted allocation was
earned $ 125.
YEAR 2: Since the EPS target
was achieved, the weighted
allocation was earned $ 250.
YEAR 3: Since the EPS target
was exceeded by more than
125%, 150% of the weighted
allocation was earned $ 375.
CYCLE AS A WHOLE: Since EPS
for the three years at $6.85
was 103% of the target of
$6.65, the award would be
prorated between the
weighted and maximum
allocation in the ratio that
the actual EPS bears to the
target and maximum range set
for the EPS $ 265.
-------
Total awards for the Cycle $1,015.
</TABLE>
Annual incentive awards and long-term incentive awards made under the Plan are
expected to meet the exception for performance based compensation qualified
under Section 162(m) of the Code. However, the Plan authorizes the Committee, in
its sole discretion, to make other awards which are different in amount, form,
and time of payment and subject to such other terms and conditions, if any, as
the Committee may impose, subject, however, to the annual individual award
limitation described below.
CERTIFICATION OF AWARD
The Plan provides that the Company's independent auditors shall report to the
Committee the incentive compensation amount for each award and shall certify
that each award has been computed in accord with the formula, if any, applicable
to each such award. The report of the auditors is final and binding on the
Committee, participants and their beneficiaries irrespective of any subsequently
discovered miscalculation or error and irrespective or any subsequent audit or
review by any person or tribunal.
CHANGE IN CONTROL
In case of, or in anticipation of, a change in control of the Company, as
defined in the Plan, the Committee may make pro-rata interim annual and long-
term awards for the year of the change, based on the lower of that year's
estimated income or the prior year's actual income. If such change in control
should take place soon after the end of a year, the Committee may make annual
and long-term awards for the prior year based upon unaudited figures.
SELECTION OF PARTICIPANTS AND TERMS AND CONDITIONS OF AWARDS
It is presently contemplated that selection of participants for any year and the
basis of participation of each will continue to be made in advance of such year
by the Committee. Subject to the terms of any written commitment delivered by or
on behalf of the Committee to a participant, at any time prior to the end of
such year, the Committee, on recommendation of the chief executive officer of
the Company or another officer designated by him, in its discretion may add or
eliminate participants or change the basis of participation of any participant.
At the time of making awards, the Committee may, on recommendation of the chief
executive officer of the Company or any other officer designated by him, also
make discretionary awards to those who had not been designated participants for
the year.
Awards may be made subject to terms and conditions such as continued service
or availability, non-competition, attainment of specified performance goals, or
otherwise, as the Committee may prescribe. The total amount awarded under the
Plan for any year may be allocated and paid currently or deferred as the
Committee may determine. The full amount available for incentive compensation
awards need not be awarded.
In no event may an annual incentive award or a long-term incentive award
exceed in either case 100% of a participant's annual salary rate at the end of
the last year in which the award was earned. The cap under the 1989 Plan was a
combined cap of 175%. For this purpose, salary includes any amount that may be
deducted in respect of a contribution to an employee plan from salary otherwise
payable. The aggregate amount to be awarded under the Plan, in cash or in stock,
cannot presently be determined because such awards depend, among other things,
on the future profits and earnings per share of the Company.
26
<PAGE> 30
For any year, a participant may receive an annual award, a long-term award, or
both such forms of award.
It is contemplated that annual and long-term incentive awards will be
continued. However, the continuation of the awards, including the establishment
of performance objectives and the selection of participants, are matters that
are in the discretion of the Committee and which, subject to the applicable
provisions of the Plan, it is free to modify or discontinue in whole or in part
at any time.
Under the 1989 Plan as of December 31, 1993, 11 officers and key executives,
including four of the named executive officers, are participating in the
long-term performance improvement program for the 1991-1993 performance period,
17 officers and key executives, including four of the named executive officers,
are participating for the 1992-1994 period, and 21 officers and key executives,
including five of the named executive officers, are participating in the program
for the 1993-1995 performance period. The number of officers and key executives
who will participate in long-term incentive awards under the Plan may be
increased or decreased in subsequent years depending on the number of executives
believed by the Committee to have a significant influence on long-term
performance of the Company.
FORM OF PAYMENT -- CASH AND STOCK
As under the 1989 Plan, awards are payable in cash or in Common Stock of the
Company, or partly in cash and partly in such stock, as determined by the
Committee, which can also authorize deferred payments, taking into consideration
but not being governed by statements of preference filed by participants in
advance of the year for which awards are to be made. Common Stock transferred in
payment of an award may be unrestricted shares, or shares transferred subject to
such restrictions as to transferability and other terms and conditions as the
Committee may prescribe. As compared with the transfer of unrestricted shares,
the use of restricted shares may result in a postponement or reduction of the
Company's federal income tax deductions. No such use is presently contemplated.
Interest equivalents, not in excess of the greater of 5% per annum or the 90-day
certificate of deposit rate, with such periodic compounding of such rates, if
any, as the Committee may prescribe, may be credited and paid with respect to
deferred payments in cash; dividend equivalents may be credited with respect to
deferred awards payable in stock, with such dividend equivalents payable either
in cash or in additional Common Stock. Any interest equivalents and dividend
equivalents, and amounts equivalent to increases in market value paid in respect
of deferred awards, together with any expenses of administering the Plan, will
not be chargeable against the incentive compensation amount. Common Stock
transferred in payment of an award may be either authorized and unissued shares
or treasury shares. In general, shares under the Plan will be valued for award
purposes at fair market value at the time the awards are approved for payment.
In addition to authorizing payment of awards in the above forms, the Plan,
like the 1989 Plan, also authorizes deferred awards in the form of share units,
each such unit representing the value, from time to time, of one share of Common
Stock of the Company, with payment in respect of such units made in cash based
upon the fair market value of a share of Common Stock of the Company at the time
of payment.
The Plan provides that awards payable in shares of Common Stock of the Company
may be paid in the discretion of the Committee in cash on each date on which
payment in shares would otherwise have been made, in an amount equal to the fair
market value on each such date of the number of shares which would otherwise
have been paid on such date.
The Plan contains a feature similar to one in the 1989 Plan to the effect that
the Committee is authorized in its discretion to change, with the consent of the
participant if required, any deferred award outstanding under the Plan or under
the 1989, 1984, 1979, 1974 or 1969 Plans to any other form of deferred award
authorized by the Plan, subject to the terms and conditions applicable to awards
made under the Plan. Thus, for example, share units credited to a participant
under the 1989 Plan may be changed, in the discretion of the Committee and with
the consent of the participant if required, to a deferred award carrying
interest equivalents. The amount available for awards under the Plan will not be
reduced or increased by reason of any of the foregoing changes. Approval of the
Plan will constitute authorization to so change any such awards now or hereafter
outstanding. The Company will reserve up to 400,000 shares of Common Stock as
required for issuance pursuant to the various Management Incentive Plans.
27
<PAGE> 31
ADMINISTRATION
The Plan will be administered by the Committee with full power and discretion to
construe and interpret the Plan. No member of the Committee will be eligible to
receive an incentive compensation award for any period during which he is
serving on the Committee. The Committee may establish, and from time to time
amend, rules and regulations of general application for the administration of
the Plan.
TERM; AMENDMENT
Awards under the Plan may be made for five years, commencing with awards for
1994. The Plan permits changes to be made in the Plan by the Board of Directors
during the term of the Plan, except that no change may be made which would
increase the amount available for incentive compensation awards above that
presently authorized by the Plan, or change the administration of the Plan by
the Committee, or permit awards to be made to members of the Committee while
serving as such, or materially modify the requirements as to eligibility for
participation in the Plan.
EFFECT OF PLAN AND REQUIRED VOTE
If the Plan had been in effect in 1993, the results for the participants would
not have differed substantially from the awards received by them under the 1989
Plan. No annual awards were earned under the 1989 Management Incentive Plan for
the year 1993.
The affirmative vote of a majority of the votes cast is required for adoption
of the Plan. However, to qualify the Plan so that grants of stock to executive
officers of the Company under the Plan will be "exempt transactions" pursuant to
SEC Rule 16b-3, the affirmative votes of holders of a majority of the shares
present or represented and entitled to vote is required. Under New Jersey law,
dissenting shareholders do not have appraisal rights with respect to this
proposal.
Reference is made to the Summary Compensation table and the Long-Term
Incentive Awards table for the long-term incentive awards paid and granted under
the 1989 Plan during 1993.
The Plan is being submitted to shareholders for their approval as a matter of
Board policy, to comply with New York Stock Exchange listing requirements, to
allow compliance with Section 162(m) of the Code and to assure continued
availability of the exemption from the short-swing profit rules of federal
securities legislation applicable to officers and directors. If the Plan should
not be approved, the Plan will not be put into effect but the Board of Directors
may make other appropriate arrangements for the payment of incentive
compensation or bonus awards.
TRANSACTIONS WITH DIRECTORS,
OFFICERS OR THEIR ASSOCIATES
No Director, Executive Officer, nominee for Director or any of their associates
had any material interest in any material transaction or currently proposed
transaction of the Company or any of its subsidiaries during the period January
1, 1993 through April 8, 1994.
SHAREHOLDER PARTICIPATION
In the event that a shareholder wishes to submit a proposal for consideration by
the shareholders of the Company at the 1995 Annual Meeting of Shareholders, in
conformity with current Securities and Exchange Commission proxy regulations,
any such proposal must be received by the Company's Secretary no later than
December 7, 1994 in order for it to be includible in the proxy statement for the
1995 Annual Meeting.
If a shareholder wishes to nominate a candidate to stand for election as a
Director at the 1995 Annual Meeting, such nomination should be submitted, along
with a description of the candidate's qualifications and relevant biographical
data, to the Secretary of the Company, who will forward it to the Nominating
Committee for its consideration. The By-Laws provide that such a nomination must
be in writing and received by the Secretary between February 20 and March 21,
1995.
OTHER MATTERS
The Company will bear the cost of the solicitation of proxies. The firm of
Morrow & Co., New York, NY has been retained to assist in the solicitation of
proxies for the Annual Meeting at a fee not to exceed $15,000 plus expenses.
The management has at this time no knowledge of any matters to be brought
before the meeting other than those mentioned above. However, if any other
matters come before the meeting, it is the intention of the Company that such
matters be voted upon in accordance with the judgment of the Proxy Committee or
such member of the Committee as may act.
PAUL J. JOSENHANS
Secretary
April 8, 1994
28
<PAGE> 32
EXHIBIT "A"
1994 STOCK OPTION PLAN
1. PURPOSE
The purpose of the Plan is to cement more closely the many bonds which exist
between the Company and its key employees, to give them an interest in the
Company parallel to that of the shareholders, to increase their proprietary
interest in the Company, to furnish an inducement for them to remain in its
employ, and to assist in attracting, motivating and retaining employees who are
contributing significantly, or are considered, in the opinion of the Committee,
to have the potential to contribute significantly to the success of the Company
or a unit of the Company.
2. ELIGIBILITY AND ADMINISTRATION
(a) Only key employees of the Company may be granted stock options or
restricted stock under the Plan. No key employee shall be disqualified to
receive such an option or restricted stock merely because he is already a
shareholder of the Company nor merely because he is a member of the Board of
Directors of the Company. For all purposes of the Plan, the "Company" shall mean
Borden, Inc.; and employees of subsidiaries shall be deemed to be employees of
the Company. For the purpose of an Incentive Stock Option, a subsidiary shall
mean any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company if, at the time of the granting of such
option, each of the corporations other than the last corporation in the chain
owns stock having 50% or more of the combined voting power of all classes of
stock in one of the other corporations in such chain. For all other purposes of
the Plan, a subsidiary shall mean a corporation or other form of business
association of which shares (or other ownership interests) having 50% or more of
the voting power are owned or controlled, directly or indirectly, by the
Company.
(b) The key employees to whom options shall be granted and the number of
shares of stock covered by each option shall be designated, by or only in
accordance with the recommendations of, and the Plan shall be administered,
interpreted and construed by, a duly authorized committee of not less than three
members of the Board of Directors of the Company (the "Committee"), each of whom
shall be a "disinterested person" within the meaning of Rule 16b-3 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended from time to time, or any law, rule, regulation or other provision that
may hereafter replace such rule ("Rule 16b-3"), and an "outside director" within
the meaning of Section 162(m) of the Internal Revenue Code of 1986 as amended by
the Revenue Reconciliation Act of 1993 ("Section 162(m)"). Subject to the
provisions of the Plan, the Committee shall have full authority to administer,
interpret and construe the Plan and options granted thereunder, to determine the
times when options shall be granted and the times when they may be exercised, to
prescribe, amend and rescind rules and regulations of general application
relating to the Plan, to determine the terms and conditions of options and
provisions with reference to the effect of approved leaves of absence which, in
the case of Incentive Stock Options, shall be consistent with requirements
relating to Incentive Stock Options under regulations of the United States
Treasury Department at the time in effect, and to make all other determinations
necessary or advisable for the administration of the Plan. The determinations of
the Board of Directors of the Company (the "Board") and of the Committee under
the Plan shall be final, conclusive and binding on the Company and its
shareholders and upon all employees eligible to participate in the Plan and
anyone claiming under or through any of them. Anything in this Plan to the
contrary notwithstanding, insofar as this Plan applies to employees who are not
subject to reporting requirements of Section 16(a) of the Securities Exchange
Act of 1934, as amended from time to time, and who are not "covered employees"
within the meaning of Section 162(m) with respect to equity securities of the
Company, determinations and interpretations in individual cases can be made by,
or at the direction of the Chief Executive Officer of the Company.
3. SHARES SUBJECT TO THE PLAN
(a) The shares covered by options and restricted stock grants may be either
authorized but unissued Common Stock of the Company as such stock is constituted
at the time ("Common Stock"); or may be Common Stock previously issued but then
held in the treasury of the Company. In the event of any change in
A-1
<PAGE> 33
the stock subject to restricted stock grants or being optioned under this Plan,
or to options granted hereunder, through merger, consolidation, or
reorganization, or in the event of any dividend to holders of such stock payable
in stock of the same class or the issue to such holders of rights to subscribe
to stock of the same class, or in the event of any other change in the capital
structure, the Committee may make such adjustments with respect to options and
restricted stock, or any provision of this Plan, as it deems equitable to
prevent dilution or enlargement of restricted stock and option rights provided,
however, that all adjustments made as a result of the foregoing in respect of
each stock option which is granted as an Incentive Stock Option shall be made so
that such stock option shall continue to be an Incentive Stock Option as defined
in Section 422 of the Internal Revenue Code of 1986, as amended, or any
provision that may hereafter be enacted in lieu thereof ("Section 422"). Subject
to the next preceding sentence, there shall be reserved for issuance under this
Plan, six million (6,000,000) shares of which no more than 1,000,000 may be
issued in the form of restricted stock.
(b) No options, stock appreciation rights (sometimes herein referred to as
"Rights" or "SARs") or shares of restricted stock shall be granted after April
30, 1999. The Plan shall continue in effect in accordance with its terms after
April 30, 1999 with respect to options, SARs, and shares of restricted stock
theretofore granted.
(c) Upon the granting of any option, the Company may set aside and hold in
reserve in a properly designated account an amount of stock equal to that called
for by the option.
(d) Subject to the provisions of paragraph 3(a) above, any shares subject to
an option and any restricted stock granted under the Plan which terminate, are
cancelled or expire for any reason unexercised or are forfeited may, except as
provided in paragraph 4(h)(iii) relating to stock appreciation rights, again be
made subject to an option or restricted stock grant under the Plan, provided,
however, that with respect to an optionee who is subject to the provisions of
Section 16(b) of the Securities Exchange Act of 1934, the number of shares for
use under the Plan for such optionee (a "Section 16 Person"), shall be in accord
with any applicable requirements of Rule 16b-3.
4. FORM AND TERMS OF OPTION
Options shall be evidenced by agreements in such form as the Committee shall
approve and the granting of such options and the form of said agreements to
evidence the same shall comply with and be subject to the following terms and
conditions:
(a) Form of Option. Any option granted hereunder may, but need not, be an
Incentive Stock Option; provided, however, that any provision of the Plan to the
contrary notwithstanding, the aggregate fair market value (determined at the
time the option is granted) of the shares with respect to which Incentive Stock
Options are exercisable for the first time by the optionee during any calendar
year under all plans of his employer corporation and its parent corporation (as
defined in Section 424(e) of the Internal Revenue Code of 1986, as amended) and
subsidiaries shall not exceed $100,000. Each provision of the Plan and of each
Incentive Stock Option thereunder shall be construed so that such option shall
be an Incentive Stock Option and any provision thereof which cannot be so
construed shall be disregarded.
REPLACEMENT OPTION. Subject to the provisions of paragraph 4(c) below, the
Committee may provide, either at the time of the grant of an option or
subsequently, for the grant of a Replacement Option. Without limiting the
authority of the Committee to make grants hereunder, the Committee may, but need
not, include within any option agreement under this Plan or under the 1984 Plan
as Amended, which shall be deemed to be so amended, a provision entitling the
optionee to a further option (a "Replacement Option") in the event the optionee
exercises the option evidenced by the option agreement, in whole or in part, by
surrendering other shares of the Company in accordance with this Plan, or the
1984 Plan as Amended, as the case may be, and the terms and conditions of the
option agreement. Any such Replacement Option shall be for a number of shares
equal to the number of surrendered shares, shall become exercisable in the event
the purchased shares are held for a minimum period of time established by the
Committee, and shall be subject to such other terms and conditions as the
Committee may determine.
(b) Incentive Stock Option Defined. An Incentive Stock Option shall mean an
option intended by the Company to meet the requirements of Section 422 and
regulations of the Treasury Department thereunder.
A-2
<PAGE> 34
(c) Share Limitation. One individual may hold more than one option. Subject to
the provisions of paragraph 3(a) above, no one individual participant may
receive more than, an aggregate of 1,400,000 options during the period
commencing with the effective date as defined herein in Section 7 and ending at
the close of business on April 30, 1999.
(d) Period of Exercise and Price. Options may not run for more than ten years
from the date of grant and, subject to the provision of the last sentence of
this paragraph 4(d), shall entitle the holder to buy shares of Common Stock to
the number therein specified at fair market value, which for purposes of the
Plan shall mean an amount as nearly equal to as practical but not less than 100%
of the mean between the highest and lowest selling prices for Common Stock on
the day such option is granted (or on such other valuation day or days as may be
applicable) as reported on the consolidated trading network; provided, however,
that in the case of an Incentive Stock Option, if the foregoing method of
determining fair market value should be inconsistent with any regulation adopted
by the Treasury Department applicable to Incentive Stock Options, fair market
value shall be determined by the Committee in a manner consistent with such
regulations and shall mean the value as so determined. The purchase price of
shares subject to any option granted under the Plan, shall be payable in U.S.
funds on delivery of the certificates for the purchased stock or, if, to the
extent, and on the terms and conditions specifically authorized by the option
agreement, in whole shares of Common Stock or in a combination of such funds and
such shares, provided that the sum of such funds and the fair market value of
such shares (determined as provided above) on the date of such exercise shall be
not less than the full purchase price.
The holder may from time to time exercise his option in part and retain the
remaining part for a longer period within the option term.
Anything in this paragraph 4(d) or elsewhere in the Plan to the contrary
notwithstanding, in the case of any option grant, the Committee may provide for
an exercise price that varies during the term of the option but not below 100%
of the mean between the highest and lowest selling prices for Common Stock on
the day such option is granted (or on such other valuation day or days as may be
applicable) as reported on the consolidated trading network based upon such
terms, conditions, indexes and standards, if any, as the Committee may
determine.1
(e) Consideration.
(i) No option may be exercised in whole or in part unless and until
the individual to whom it was granted shall have remained in the employ of
the Company for a period of time after the date of grant of such option,
but not less than 12 months from the first day of the month in which the
option shall have been granted except in the event of death, disability,
Retirement or a Change in Control, as may have been prescribed by the
Committee in its sole discretion. The Committee may, at any time,
authorize, subject to such terms, conditions and limitations as the
Committee may impose, an option to be exercised in whole or in part in the
event that death, disability, Retirement or a Change in Control should
occur less than 12 months after the date of grant of such option.
(ii) A "Change in Control" shall be deemed to occur if and when (a) an
offeror other than the Company purchases shares of Common Stock pursuant to
a tender or exchange offer for such shares, (b) any person (as such term is
used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934)
is or becomes the beneficial owner, directly or indirectly, of securities
of the Company representing 20% or more of the combined voting power of the
Company's then outstanding securities, (c) the membership of the Board
changes as the result of a contested election, such that individuals who
were directors at the beginning of any twenty-four month period (whether
commencing before or after the date
- - ---------------
1These types of options are typically referred to as indexed or premium priced
options. In either case, the option exercise price is adjusted upward after
grant either based on an applicable index, such as the Standard and Poors 500
Stock Index, or other indexes or in the case of premium priced options, the
exercise price is increased over time by the Committee a specified percentage or
amount above the fair market value at the date of grant. In either type of
option the exercise price would never be less than the fair market value on the
date of grant.
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<PAGE> 35
of adoption of this Plan) do not constitute a majority of the Board at the
end of such period, or (d) shareholders of the Company approve a merger,
consolidation, sale or disposition of all or substantially all of the
Company's assets, or a plan of partial or complete liquidation.
(iii) "Retirement" means (a) retirement at or after attaining age 65,
and (b) retirement prior to attaining age 65, provided that the employee is
entitled to receive a benefit under a retirement plan of the Company or of
a subsidiary in which such employee participates, and provided, further,
that the Committee, in the case of an employee subject to the provisions of
Section 16(b) of the Securities Exchange Act of 1934, as amended and in
effect at the time ("Section 16(b)"), or the Chief Executive Officer, in
the case of any other employee, shall have consented to such retirement in
advance thereof or subsequent thereto, with specific reference to this
Plan, subject to fulfillment of any terms, conditions and limitations as
the Committee or the Chief Executive Officer, as the case may be, may have
imposed.
(f) Transfer, Termination, Death, Disability and Retirement.
(i) Any provision of the Plan to the contrary notwithstanding, any
derivative security issued under the Plan (within the meaning of paragraph
(a) (2) of SEC Rule 16b-3 as amended), including without limitation any
option or stock appreciation right, shall not be transferable other than by
will or the laws of descent and distribution or to a death beneficiary
("Beneficiary") designated by the optionee. Any purported transfer of a
derivative security to a Beneficiary by a Section 16 Person, and any
purported transfer of an Incentive Stock Option to a Beneficiary, shall be
effective only if such transfer is, in the opinion of counsel to the
Company, permissible under and consistent with SEC Rule 16b-3 or Section
422 of the Code, as the case may be. Notwithstanding the foregoing, a
participant may transfer any option or SAR granted under this Plan, other
than an Incentive Stock Option or any SAR that is linked to an Incentive
Stock Option, to members of his immediate family (defined as his children,
grandchildren and spouse) or to one or more trusts for the benefit of such
family members or partnerships in which such family members are the only
partners if (and only if) the instrument evidencing such option or SAR
expressly so provides (or is amended to so provide) and the participant
does not receive any consideration for the transfer; provided that any such
transferred option or SAR shall continue to be subject to the same terms
and conditions that were applicable to such option or SAR immediately prior
to its transfer (except that such transferred option or SAR shall not be
further transferable by the transferee during the transferee's lifetime)
and provided, further, that the foregoing provisions of this sentence shall
not apply to any Section 16 Person unless and until SEC Rule 16b-3 as
amended in SEC Release No. 34-28869 becomes effective with respect to the
Plan. If in the opinion of counsel, should the transfer of an instrument
under this Plan disqualify the instrument as an exempt performance-based
instrument under Section 162(m), or should the transfer of any instrument
under this Plan cause the instrument, or the Plan, to be non-exempt under
Rule 16b-3, then the transfer shall not be made. Options, SARs and unvested
restricted stock shall terminate or be forfeited, as the case may be, upon
the grantee leaving the company except upon death, disability or Retirement
provided, however, that the Committee may in its discretion provide at any
time on or after the date of grant of an option granted under the Plan,
while such option and any related stock appreciation right is exercisable,
that if the optionee is terminated by the Company without cause within two
(2) years following a Change in Control of the Company, the optionee shall
have a period of ninety (90) days following such termination (but not
beyond the expiration date of the option or SAR) within which to exercise
such option or SAR unless the optionee is otherwise entitled to exercise
the option or SAR for a longer period of time. The Company may at any time
terminate the employment of any option holder with or without cause and,
subject to the proviso in the next preceding sentence, upon such
termination any such option or the unexercised portion shall be cancelled
without any liability on the part of the Company.
(ii) The holder of an option granted under the Plan may exercise his
option, after Retirement or commencement of disability, subject to the
terms, conditions and limitations provided in the option and in any consent
by the Committee or Chief Executive Officer to retirement prior to
attaining age 65, for the period specified in his option, which may not
extend beyond two years following commencement of disability (whether or
not he is then an employee of the Company) and the balance of the original
option term following the date of Retirement; provided, however, that if
the holder retires at or after attaining
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age 55, the Committee may in its discretion provide, at any time on or
prior to such retirement, that the holder may exercise any option granted
to him under the Plan, or the 1984 Plan as Amended during a specified
period extending not beyond the term of the option, and the 1984 Plan as
Amended shall be deemed to conform to the foregoing provisions of this
sentence applicable to options granted thereunder. On the death of the
option holder while he is in the employ of the Company or within two years
following commencement of disability or following Retirement, while the
option is exercisable, such option may be exercised, subject to the terms,
conditions and limitations provided in the option, by his heirs, executors,
or administrators or permitted assignees or transferees at any time within
the period specified in his option but not more than one year following the
date of death. In no event may an option be so exercised after the
expiration of the original term thereof.
(g) Conditions of Exercise.
(i) No option may be exercised by the holder thereof if, at the time,
the exercise of such option and the issuance of stock thereunder would be
contrary to law or the regulations of any duly constituted authority having
jurisdiction of the subject matter.
(ii) Appropriate provision shall be made for all taxes the Company
determines to be required to be withheld under the laws or other
regulations of any governmental authority, whether Federal, state or local
and whether domestic or foreign, in connection with the exercise of any
option or stock appreciation right granted under the Plan. The Committee
may provide, in an option agreement or otherwise, that in the event that an
optionee is required to pay to the Company any amount to be withheld for
taxes in connection with the exercise of an option under the Plan, the
optionee may satisfy such obligation, in whole or in part, by electing to
have the Company withhold a portion of the shares of Common Stock to be
received upon the exercise of the option, otherwise issuable to the
optionee upon such exercise, having a value equal to the amount to be
withheld (or such portion thereof as the optionee may elect). The value of
the shares to be withheld shall be their fair market value on the date that
the amount of tax to be withheld is to be determined (the "Tax Date"). Any
election by an optionee to have shares withheld under this subsection (ii)
shall be subject to such terms and conditions as the Committee may specify
which may include all or part of the following restrictions:
(aa) the election shall be irrevocable;
(bb) the election shall be subject, in whole or in part, to the
approval of the Committee and to such rules as it may adopt;
(cc) the election may not be made within six months of the date of
grant of the option being exercised (except that this limitation shall
not apply in the event that the death or disability of the optionee
occurs prior to the expiration of such six-month period); and
(dd) in the case of a Section 16 Person, the election must be made
either (a) not less than six months prior to the Tax Date, or (b) during
the period beginning on the third business day following the date of
release for publication of the Company's quarterly or annual summary
statements of sales and earnings and ending on the twelfth business day
following such date (a "window period").
(h) Stock Appreciation Rights and Limited Stock Appreciation Rights.
Stock appreciation rights and limited stock appreciation rights ("LSARs") may
be granted in connection with all or any part of any stock option granted under
this Plan, at the time of the grant of such option. Stock appreciation rights
shall, upon their exercise, entitle the holder of the related option, to the
extent unexercised, to surrender the related option, in whole or in part, and to
receive a number of shares of Common Stock or cash, or a combination of such
shares and cash, determined as hereinafter set forth.
A limited stock appreciation right is a form of stock appreciation right that
differs from a stock appreciation right by the fact that a limited stock
appreciation right is exercisable only upon or following a Change in Control. In
all other respects, LSARs shall have the same terms, provisions, and conditions
that are applicable to stock appreciation rights in the Plan.
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(i) Stock appreciation rights shall be subject to such terms and
conditions, not inconsistent with the Plan under which the related stock
option shall have been or shall be granted, as shall from time to time be
determined by the Committee and to the following terms and conditions:
(aa) Stock appreciation rights shall in no event be exercisable
except at such time or times and to the extent that the option to which
they relate shall be exercisable.
(bb) Upon exercise of a stock appreciation right, the holder
thereof shall be entitled to receive such number of the shares of the
Common Stock as may be authorized by the Committee, the aggregate value
of which shall not exceed the amount by which the fair market value per
share of such stock on the date of such exercise shall exceed the option
price per share of the related option multiplied by the number of shares
in respect of which the stock appreciation right shall have been
exercised. For purposes of the preceding sentence, the "fair market
value per share" of Common Stock on the date of exercise of the stock
appreciation right shall mean an amount as nearly equal to as practical
but not more than 100% of the mean between the highest and lowest
selling prices for Common Stock on the day such stock appreciation right
is exercised as reported on the consolidated trading network; provided
that with respect to exercises of stock appreciation rights by a Section
16 Person during a Window Period or during the thirty-day period
following a Change in Control (a "Change in Control Period"), the
Committee may, at any time, prescribe, by rule of general application,
such other measure of fair market value per share as the Committee may,
in its discretion, determine but not in excess of the highest daily mean
between the highest and lowest selling prices for Common Stock during
such Window Period or such Change in Control Period as reported on the
consolidated trading network and, in the case of stock appreciation
rights that relate to an Incentive Stock Option, not in excess of the
maximum amount that may be paid under the Treasury Regulations under
Section 422 without disqualifying such option as an Incentive Stock
Option under Section 422 and provided further that any such measure of
fair market value per share determined by the Committee may be used with
respect to the exercise of stock appreciation rights notwithstanding
that the expiration date of such Rights, though after the exercise date,
is before the end of the applicable Window Period, Change in Control
Period or other measuring period used. All or any part of the obligation
arising out of an exercise of stock appreciation rights may be settled
by the payment of cash equal to the aggregate value of the shares (or a
fraction of a share) that would otherwise be delivered under the
preceding provisions of this paragraph. Any provision of the Plan to the
contrary notwithstanding, in the case of an exercise of stock
appreciation rights by a Section 16 Person, the Committee shall have
sole discretion to determine, in each case or by rule of general
application or otherwise, whether such exercise shall be settled in the
form of shares of Common Stock or cash, or cash and shares of such
Common Stock.
(cc) Any election by a holder of stock appreciation rights to
receive cash in full or partial settlement of stock appreciation rights,
as well as any exercise by him of his stock appreciation rights for such
cash, shall be made only in compliance with any applicable provision of
Rule 16b-3 exempting such election or exercise from the operation of
Section 16(b).
(ii) To the extent that a stock appreciation right shall be exercised,
the stock option in connection with which such stock appreciation right
shall have been granted shall be deemed to have been exercised for the
purpose of the maximum limitation as to the number of shares that may be
purchased under the plan under which such option was granted.
(iii) Following the death of the holder of an option granted under the
Plan and irrespective of whether stock appreciation rights shall have been
granted in connection with his option, the Company may, in its discretion,
upon the request of the then holder of an exercisable option and in
consideration for the surrender of such option, pay the amount by which the
fair market value per share on the date of such request (determined in the
manner applicable to stock appreciation rights) of the stock subject to
such option shall exceed the option price per share multiplied by the
number of shares as to which the request is made; provided that no such
payment or surrender shall be made in respect of any Incentive Stock Option
under Section 422 unless the fair market value per share of Common Stock on
the date thereof (determined in accordance with the Treasury Regulations
under Section 422) exceeds the option price
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per share and provided further that in no event shall such payment in
respect of any Incentive Stock Option under Section 422 exceed the maximum
amount that may be paid under the Treasury Regulations under Section 422
without disqualifying such option as an Incentive Stock Option under
Section 422. The number of shares subject to an option so surrendered shall
be charged against the maximum limitation as to the number of shares that
may be purchased under the Plan.
5. RESTRICTED STOCK
(a) Stock and Administration. Shares of restricted stock may be issued either
alone or in addition to other grants under the Plan. The Committee shall
determine the key employees of the Company to whom, and the time or times at
which, grants of restricted stock will be made, the number of shares to be
granted, the time or times within which such grants may be subject to
forfeiture, and all other conditions of the grants. In addition to any other
conditions or restrictions to be imposed in connection with the grant of any
restricted stock, the Committee may determine to condition such grant upon the
attainment of performance goals. The Committee may also require a cash payment
as a condition to the receipt of any Common Stock subject to a restricted stock
grant. The provisions of restricted stock grants need not be the same with
respect to each recipient. Subject to the provisions of paragraph 3(a) above,
shares of restricted stock previously granted, but which are forfeited pursuant
to paragraph (c) of this Section 5, shall be available for future grants under
the Plan.
(b) Grants and Certificates. The prospective recipient of a grant of shares of
restricted stock shall not, with respect to such grant, be deemed to have become
a participant, or have any rights with respect to such grant, until and unless
such recipient shall have executed an agreement or other instrument evidencing
the grant and containing such terms and conditions, including for vesting or
retention of the shares, as the Committee may impose and delivered a fully
executed copy thereof to the Company, and otherwise complied with the then
applicable terms and conditions.
(i) Each participant shall be issued a stock certificate in respect of
shares of restricted stock granted under the Plan. Such certificate shall
be registered in the name of the participant, and may bear an appropriate
legend referring to the terms, conditions and restrictions applicable to
such grant, substantially in the following form:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of the Borden, Inc. 1994 Stock Option Plan and an agreement
entered into between the registered owner and Borden, Inc. Copies of such
Plan and agreement are on file in the offices of Borden, Inc., 180 East
Broad Street, Columbus, OH 43215."
(ii) The Committee may require that the stock certificates evidencing
such shares be held in custody by the Company or an unrelated custodian
until the restrictions thereon shall have lapsed, and may require, as a
condition of any restricted stock grant, that the participant shall have
delivered a stock power, endorsed in blank, relating to the stock covered
by such grant.
(c) Restrictions and Conditions. The shares of restricted stock granted
pursuant to the Plan shall be subject to the following restrictions and
conditions:
(i) Subject to the provisions of the Plan and the grant agreements,
during a period set by the Committee commencing with the date of such grant
(the "Restriction Period"), the participant shall not be permitted to sell,
transfer, pledge, assign or otherwise encumber shares of restricted stock
granted under the Plan. Within these limits the Committee may provide for
the lapse of such restrictions in installments where deemed appropriate.
(ii) Except as provided in paragraph (c)(i) of this Section 5, the
participant shall have, with respect to the shares of restricted stock, all
of the rights of a shareholder of the Company, including the right to vote
the shares and the right to receive any cash dividends. The Committee, in
its sole discretion, may permit or require the payment of cash dividends to
be deferred and, if the Committee so determines, reinvested in additional
restricted stock or otherwise reinvested. Certificates for shares of
unrestricted stock shall be delivered to the participant promptly after,
and only after, the period of forfeiture shall expire without forfeiture in
respect of such shares of restricted stock.
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(iii) Subject to the provisions of paragraph (c)(iv) of this Section
5, if the participant ceases to be employed by the Company for any reason
during the Restriction Period, all shares still subject to restrictions
shall be forfeited by the participant and reacquired by the Company.
(iv) In the event of a participant's retirement, disability, or death,
or in cases of special circumstances, the Committee may, in its sole
discretion, when it finds that a waiver would be in the best interests of
the Company, waive in whole or in part any or all remaining restrictions
with respect to such participant's shares of restricted stock.
6. AMENDMENT AND DISCONTINUANCE
The Board of Directors may amend, from time to time, or discontinue this Plan,
provided that, without the approval of the shareholders of the Company, no
amendment shall be made which (a) increases the aggregate number of shares of
Common Stock that may be purchased upon exercise of options or granted as
restricted stock under the Plan, or increases the number of shares that may be
received by any one individual pursuant to paragraph 4(c) herein, (b) permits
any option to be exercised more than ten years after the date it was granted,
(c) permits any option or restricted stock to be granted after April 30, 1999,
(d) materially increases benefits accruing to participants under the Plan, or
(e) amends any provision of this paragraph 6. No amendment or discontinuance of
this Plan by the Committee, the Board of Directors or the shareholders of the
Company shall, without the consent of the employee, adversely affect any option
or restricted stock theretofore granted to him. Subject to the foregoing and the
requirements of Section 162(m), the Board may, in accordance with the
recommendation of the Committee and without further action on the part of the
shareholders of the Company or the consent of participants, amend the Plan, (a)
to permit or facilitate qualification of options thereafter granted under the
Plan as "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986 as amended, and (b) to preserve the employer
deduction under Section 162(m).
7. EFFECTIVE DATE
This Plan shall be effective upon its adoption by the Board of Directors of
the Company, subject to the approval of the Plan by the affirmative vote of the
holders of a majority of the outstanding voting stock of the Company present or
represented and entitled to vote at the 1994 Annual Meeting of Shareholders or
any adjournment thereof.
8. LAWS OF FOREIGN JURISDICTIONS
The Committee may, from time to time, adopt, amend and terminate, under the
Plan, such options, plans, programs or arrangements, containing terms,
conditions, limitations and restrictions not inconsistent with the intent and
objectives of the Plan, as it may deem necessary or desirable to make available,
tax or other benefits of the laws of any foreign jurisdiction, to individuals
subject thereto who are eligible key employees of the Company.
9. COMPLIANCE WITH RULE 16B-3 AND SECTION 162(M)
With respect to employees subject to Section 16(b) or Section 162(m),
transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3 and avoid loss of the deduction referred to in
paragraph (1) of Section 162(m). Anything in the Plan or elsewhere to the
contrary notwithstanding, to the extent any provision of the Plan or action by
the plan administrators fails to so comply or avoid the loss of such deduction,
it shall be deemed null and void, to the extent permitted by law and deemed
advisable by the plan administrators concerned with matters relating to
employees subject to Section 16(b) and Section 162(m) respectively.
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EXHIBIT "B"
1994 MANAGEMENT INCENTIVE PLAN
1. PURPOSES
The purposes of the Plan are (a) to provide an incentive to officers, other
key executives and managerial employees of the Company, (b) to attract,
motivate, and retain in the employ of the Company and its Subsidiaries
individuals of outstanding competence, (c) to enable the Company to compete with
other organizations offering similar arrangements, and (d) to further identify
the interest of officers, other key executives and managerial employees of the
Company and its Subsidiaries with those of the Company's shareholders generally.
2. INCENTIVE COMPENSATION AMOUNT
For each Compensation Year, commencing with the calendar year 1994 and
continuing through the calendar year 1998, the Incentive Compensation Amount
shall be equal to the sum of the awards granted under both the annual and
long-term portions of the Plan.
3. CERTIFICATION
3.01 As soon as practicable after the end of each Compensation Year, the
independent accounting firm employed by the Company as its auditors shall
examine and report on the incentive compensation computation for such
Compensation Year or Years. Such report shall be in all respects final and
conclusive on the Company and its shareholders, the Committee, the members at
any time of the Incentive Compensation Group, the Participants and their
Beneficiaries, and all others who may be eligible for incentive compensation
awards or to whom such awards may be made or claiming under the Plan or
otherwise, and, except and to the extent amended by such auditors within six
weeks after submission to the Board of Directors, shall remain final and
conclusive as to the incentive compensation computation for such Compensation
Year irrespective of any subsequently discovered miscalculation or error and
irrespective of the results of any subsequent audit or review by the
Commissioner of Internal Revenue, or as the result of the action or decision of
any other agency or tribunal.
3.02 In addition to certification of the Incentive Compensation Amount, the
independent accounting firm employed by the Company shall certify that each
annual and long-term award has been computed in accord with the formula, if any,
applicable to such award.
3.03 Such certification reports by the Company's auditors of the Incentive
Compensation Amount and individual awards for each Compensation Year shall be
directed to and delivered to the Committee on Officers' Compensation which shall
then issue its certification of the results.
4. INCENTIVE COMPENSATION GROUP
4.01 The Incentive Compensation Group for any Compensation Year shall consist
of the Chief Executive Officer of the Company and, subject to the provisions of
paragraph 4.02 below, such other officers and other key executives and
managerial employees of the Company and its Subsidiaries as the Committee may
select for such Compensation Year in the manner hereinafter provided.
4.02 An employee selected for participation for any Compensation Year in an
incentive compensation, profit participation or bonus plan of any Subsidiary,
division or profit center of the Company shall not be eligible for participation
in this Plan for such Compensation Year except for the period of time during
such Compensation Year in which he is both a key executive or managerial
employee of a Corporate Division or Subsidiary.
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NOTE: Unless otherwise required by the Plan, the terms capitalized in the Plan
and defined in Section 14 thereof, have the meaning ascribed to such terms
in such Section 14.
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4.03(a) Prior to the commencement of each Compensation Year, or such later
date permitted under regulations issued under Section 162(m), the Committee
shall select from the employees eligible for the Incentive Compensation Group
for such Compensation Year the employees who, in addition to the Chief Executive
Officer, will, in the opinion of the Committee, contribute substantially to the
progress and earning power of the Company and at the time of such selection the
Committee shall determine the basis for participation of each employee so
selected. The selection by the Committee of such employees and its determination
of the basis of participation of the members of the Incentive Compensation Group
shall, except in the case of the Chief Executive Officer, be made on the
recommendation of the Chief Executive Officer or on the recommendation of such
other officer or officers of the Company as he may designate, but the Committee
shall have full authority to act with respect to the selection and participation
of all employees, including the Chief Executive Officer.
(b) In determining the amount that any member of the Incentive Compensation
Group who is or becomes a key executive or managerial employee of a Corporate
Division or Subsidiary of the Company during the Compensation Year in which he
is a member of the Incentive Compensation Group, may be eligible to receive
under this Plan, the Committee shall take into consideration and make
appropriate allowance for the amount which such member may be eligible to
receive under any other incentive compensation, profit participation or bonus
plan of the Corporate Division or Subsidiary of which such member is a key
executive or managerial employee.
4.04 Notwithstanding the provisions of paragraph 4.03 above, the Committee
may, at any time prior to the end of a Compensation Year, on recommendation of
the Chief Executive Officer or such other officer or officers of the Company as
he may designate, (a) add members to the Incentive Compensation Group for such
Compensation Year from among employees who have become eligible under the Plan
during such Compensation Year as the result of entering the employ of the
Company or a Subsidiary, promotions or otherwise, (b) eliminate members from the
Incentive Compensation Group, or (c) reduce the amount of incentive compensation
for any member or members for any reason deemed good and sufficient in the
Committee's discretion.
4.05 An employee shall be eligible for selection as a member of the Incentive
Compensation Group for a Compensation Year only if employed by the Company or a
Subsidiary on a full-time basis at the time selected.
4.06 No member of the Committee shall, while serving on the Committee, be
eligible for membership in the Incentive Compensation Group.
4.07 A member of the Board of Directors of the Company or any committee
thereof shall not be eligible for membership in the Incentive Compensation Group
unless he shall also be an employee meeting the requirements of paragraph 4.05
above, but, if such an employee, he shall not be ineligible because he is such a
director.
4.08 Every member of the Committee while serving in a voting capacity, shall
meet all the criteria necessary to qualify as an outside director as defined
under Section 162(m).
5. AWARDS OF INCENTIVE COMPENSATION
5.01 Subject to paragraph 5.04 below, the Committee may provide for annual
incentive awards and long-term incentive awards of a multi-year nature.
5.02(a)(i) Annual incentive awards, if any, if intended by the Committee to
meet the exception for performance-based compensation qualified under Section
162(m), shall be paid under a preestablished performance goal based on the
business criterion of Pretax Income of the Company. The award procedure operates
as follows: In advance of each Compensation Year (except for the 1994
Compensation Year with respect to which the Committee must act prior to April 1,
1994), or such later date permitted under regulations issued under Section
162(m), the Committee will establish a dollar amount representing targeted
Pretax Income for that Compensation Year. At the same time, the Committee will
establish, for each Participant selected to be eligible for an annual award for
that Compensation Year, three percentages. The first represents the percentage
of the Participant's salary paid during that Compensation Year that the
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Participant will receive as his annual award if the Company's actual Pretax
Income for that Compensation Year equals the targeted Pretax Income. The second
percentage, lower than the first, is the percentage of such salary that he will
receive as an annual award if the Company's actual Pretax Income is a stated
minimum amount, which is less than the targeted Pretax Income. The third and
highest percentage, is the percentage of such salary that the Participant will
receive if the Company earns at least a stated Pretax Income which is higher
than the targeted Pretax Income. If the Company's actual Pretax Income is
between the minimum and highest stated Pretax Income amounts, the participant
will receive a prorated award.
5.02(a)(ii) Annual incentive awards made under the Plan are expected to meet
the exception for performance-based compensation qualified under Section 162(m).
However, the Committee in it's sole discretion may make other awards which are
different in amounts, form and time of payment, subject to paragraph 5.04 hereof
and to any other terms and conditions that the Committee may impose.
5.02(b)(i) Long-term incentive awards, if any, if intended by the Committee to
meet the exception for performance-based compensation qualified under Section
162(m), shall be paid under a preestablished performance goal based on the
business criterion of earnings per share ("e.p.s."). The long-term award
arrangements and procedure are as follows: Each long-term award cycle shall
consist of three calendar years. Each Compensation Year a new long-term award
cycle begins and, while in that year, there may be up to two other cycles
running from the two prior years, the calculation for each cycle shall be
completely independent and separate from any other cycles running at the same
time. In advance of each year, (except for the 1994 compensation year with
respect to which the Committee must act prior to April 1, 1994), or such later
date permitted under regulations issued under Section 162(m), as a new cycle is
about to begin, the Committee establishes an e.p.s. "standard" dollar goal for
each of the three years of the forthcoming cycle and percentages of the e.p.s.
standard dollar goals below which no award will be earned and at which the
maximum award will be earned. The Committee may also include as part of a cycle
an increment of the allocation for the cycle as a whole. At the same time, the
Committee will establish, for each Participant selected to be eligible for a
long-term award, a dollar amount as a "standard" allocation that would be earned
if the standard e.p.s. goal is attained and the percentages of the standard
allocation to be earned at the lowest and highest compensable levels of e.p.s.
for that year. After each year of each cycle, the actual e.p.s. achieved is
compared with the "standard" e.p.s. for that year and a portion of the
allocation for that cycle is credited if a stated minimum e.p.s. is earned, with
the possibility of earning up to a maximum of 150% of the allocation for any
cycle in which all three years of a cycle exceeded the "standard" e.p.s. If the
Company's actual e.p.s. for a Compensation Year is between the minimum, the
standard, and highest stated e.p.s. for such year, the Participant will receive
an award prorated accordingly.
5.02(b)(ii) Long-term incentive awards, made under the Plan are expected to
meet the exception for performance-based compensation qualified under Section
162(m). However, the Committee in its sole discretion may make other awards
which are different in amounts, form and time of payment, subject to paragraph
5.04 hereof and to such other terms and conditions, if any, as the Committee may
impose.
Notwithstanding the above provisions of this paragraph 5.02, the Committee
may, in its discretion, reduce, or add additional conditions that would reduce,
the amount of compensation otherwise payable if any performance goal and other
conditions and requirements are not met.
5.03 As promptly as practicable after receiving notice, pursuant to paragraph
3.03 above, that an incentive compensation computation is available for a
Compensation Year, and individual incentive amounts have been computed, the
Committee shall determine the time and form of payment of such awards as
hereafter more specifically provided. At the same time, the Committee may, on
recommendation of the Chief Executive Officer or such other officer or officers
of the Company as he may designate, make awards of incentive compensation to
employees who were eligible for the Incentive Compensation Group for such
Compensation Year but who had not been selected as members of the Incentive
Compensation Group during such Compensation Year pursuant to the provisions of
paragraphs 4.03 and 4.04, and shall similarly determine the time and form of
payment of such awards. Awards may be made either in cash, in shares of Common
Stock of the Company, in Share Units, or partly in one form and partly in one or
more other forms. In the case of an award in shares or Share Units, the number
shall be determined by using the Fair Market Value per share of Common Stock on
the date the award is approved for payment.
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5.04 In no event shall any annual incentive award, made for any Compensation
Year to any Participant, exceed the lesser of 100% of the annual salary of such
Participant at the Participant's final salary rate for such Compensation Year,
or such other percentage of salary as the Committee may have fixed in advance of
such Compensation Year. Neither shall any long-term incentive award exceed the
lesser of 100% of the Participant's annual salary at his final salary rate or
such other percentage of salary as the Committee may have fixed in advance of
the Compensation Year. For the purpose of the Plan, including, without
limitation, this paragraph 5.04, the final year of a cycle shall be deemed to be
the Compensation Year of such cycle.
5.05 If the employment of a member of the Incentive Compensation Group shall
have terminated during a Compensation Year for any reason, other than for
"cause", or if a member of the Incentive Compensation Group shall have been on
leave of absence during any part of a Compensation Year, he, or, in the event of
his death, such person or persons as the Committee, upon recommendation of the
Chief Executive Officer or such officer or officers of the Company as he may
designate, may in its discretion select, may (but need not) be granted such
award, if any, or part thereof, but never in excess of the amount such member
would have received if employed throughout the whole of such Compensation Year,
on such basis, and upon such terms and conditions, if any, as the Committee may
in its discretion determine.
5.06 The reduction or elimination of an award for a Compensation Year of a
member of the Incentive Compensation Group for any reason shall not serve to
increase the awards for such Compensation Year to other members of the Incentive
Compensation Group.
5.07(a) Anything in paragraphs 3.01 or 5.01 above or elsewhere in the Plan to
the contrary notwithstanding, but subject to Section 15 below, in the event of,
or in anticipation of, a Change in Control, the Committee may, in its discretion
(i) make pro-rata interim annual and long-term awards for the
Compensation Year in which falls the Change in Control, based on a good
faith calculation of a projected incentive compensation award for such
Compensation Year utilizing among other things and if deemed appropriate by
the Committee, the lower of the estimated financial results for such
Compensation Year or the financial results for the next preceding year, and
(ii) make annual and long-term awards for the Compensation Year next
preceding the Compensation Year in which falls the Change in Control, prior
to receipt of, or finalization of, the auditor's report provided for in
paragraph 3.01 above, based upon the Committee's best estimate of the
financial results for such Compensation Year.
(b) For purposes of this paragraph 5.07, a "Change in Control" shall be deemed
to occur if and when (i) an offeror other than the Company or a Subsidiary
purchases shares of Common Stock pursuant to a tender or exchange offer for such
shares, (ii) any person (as such term is used in Sections 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934) is or becomes the beneficial owner,
directly or indirectly, of securities of the Company representing 20% or more of
the combined voting power of the Company's then outstanding securities, (iii)
the membership of the Board changes as the result of a contested election, such
that individuals who were directors at the beginning of any twenty-four month
period (whether commencing before or after the date of adoption of this Plan) do
not constitute a majority of the Board at the end of such period, or (iv)
shareholders of the Company approve a merger, consolidation, sale or disposition
of all or substantially all of the Company's assets, or a plan of partial or
complete liquidation.
6. TIME OF PAYMENT OF AWARDS
6.01 The Committee may determine the time of payment of awards of incentive
compensation by rules and regulations of general application, which may provide
for payment of awards at the time such awards are made or for a class or classes
of awards the payment of which shall be made, in whole or in part, to the
Participant or, in the event of his death, to his Beneficiary, at a future time
or times, in such installment or installments, if any, with or without interest
or interest equivalents and subject to such conditions, if any, with respect to
continued service or availability, non-competition or otherwise, as the
Committee may prescribe.
6.02 At the time that an employee shall be selected for participation in the
Plan for any Compensation Year, or as soon as practicable thereafter, the
Committee shall determine the amount, if any, of the award that
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<PAGE> 44
may be made for such Compensation Year which shall be paid upon the making of
such award and the portion of such award which shall be one of the class of
awards established by the Committee pursuant to paragraph 6.01 above. If the
Committee shall have failed to make such a determination in the case of any
Participant for any Compensation Year, the award to such Participant shall be
paid in cash at the time the award shall be made or as soon as practicable
thereafter.
6.03 In making the determination provided for in paragraph 6.02 above, the
Committee may act with or without consultation with the Participant and to that
end may permit Participants to indicate a preference as to the time of payment
of any awards to be made to them.
7. FORM OF PAYMENT OF AWARDS
7.01 Once awards of incentive compensation have been earned, certified and
approved by the Committee for any Compensation Year they shall be paid in cash,
in shares of Common Stock, partly in cash and partly in such shares of Common
Stock, or in the manner provided in paragraph 7.03 or in such other manner as
the Committee may in its sole discretion from time to time determine.
7.02 Shares of Common Stock may be issued or transferred in payment of an
award subject to such restrictions as to transferability and as to such
requirements, if any, as to re-transfer to the Company in the event of failure
to comply with obligations as to continued service or availability,
non-competition or otherwise as the Committee may prescribe.
7.03 The Committee may in its discretion direct that a Participant be
contingently credited with shares of Common Stock or Share Units in payment of
an award, subject to such conditions, if any, as to continued service or
availability, non-competition or otherwise as the Committee may prescribe, and
may provide that the equivalent of any dividends paid on an equal number of
outstanding shares of Common Stock be paid to the Participant either at the time
such dividends are declared and paid or at some subsequent time or times or that
additional shares of Common Stock or Share Units equal to the amounts of such
dividends shall be contingently credited, subject to the same conditions, if
any, as those attached to delivery of the shares or payment of cash in respect
of Share Units in respect of which such dividend equivalents are credited.
Provided there has been compliance with any conditions attached to the delivery
or payment thereof, the shares and Share Units so contingently credited shall be
issued, transferred or payment in respect thereof made, to the Participant or,
in the event of his death, to his Beneficiary, at such time or times and in such
installments, if any, as the Committee may direct.
7.04 Cash contingently credited in payment of any award may carry such rate of
interest equivalent as the Committee may prescribe by rules and regulations of
general application, which shall in no event exceed the greater of five per cent
(5%) per annum computed no less often than quarter-annually, and the 90-day
prime certificate of deposit rate, determined quarter-annually, in each case
with such periodic compounding, if any, as the Committee may prescribe.
7.05 In the event that the Company's obligation to pay an award for a
Compensation Year shall terminate or be reduced subsequent to such Compensation
Year as the result of failure to comply with requirements or conditions attached
thereto, or in the event that shares are re-transferred to the Company or shares
or Share Units contingently credited or dividend equivalents in respect of
shares or Share Units are cancelled, the amount thereof shall not thereby become
available to other members of the Incentive Compensation Group.
7.06 Shares of Common Stock to be transferred in payment of awards of
incentive compensation may be authorized but unissued shares or treasury stock
or shares acquired for the purpose of the Plan. Any and all shares purchased by
the Company for the purpose of the Plan, unless and until transferred pursuant
to the Plan (and not re-transferred to the Company), shall be and remain the
property of the Company and shall be available for any corporate purposes; and
neither the Incentive Compensation Group for any Compensation Year, individually
or as a group, nor any Participant or Beneficiary nor any other person claiming
under or
B-5
<PAGE> 45
through any of them, shall have any right, title or interest in or to any such
shares unless and until transferred pursuant to the Plan.
7.07 Shares of Common Stock transferred under the Plan and shares of Common
Stock or Share Units contingently credited shall, for purposes of the Plan, be
valued at the Fair Market Value of such shares, as determined by the Committee
in the reasonable exercise of its discretion, (a) at the date as of which such
shares are transferred or payment in respect of shares or Share Units is made or
at the date shares or Share Units are contingently credited, as the case may be,
or (b) when deemed by the Committee to warrant it, at the date an agreement for
the transfer or contingent credit of such shares or Share Units is made, as the
Committee may determine.
7.08 Payment of dividends, dividend equivalents, interest or interest
equivalents in respect of awards under the Plan, amounts equal to increases or
decreases in market value in respect of shares of Common Stock transferred under
the Plan and amounts based on such increases or decreases in respect of Share
Units, shall not be charged against the amount of any award.
7.09 Any award payable in shares of Common Stock under the Plan may, in the
discretion of the Committee, be paid in cash on each date on which payment in
shares would otherwise have been made, in an amount equal to the Fair Market
Value on each such date, of a number of shares equal to the number of shares of
Common Stock which would otherwise have been transferred on such date.
7.10 Anything in the Plan to the contrary notwithstanding, in the case of an
award or awards of incentive compensation made in Share Units, the Committee may
reduce the amount payable with respect to such Share Units (but not to an amount
below the amount of such award or awards) if, and to the extent that, the
Committee determines that the amount payable would be in excess of reasonable
compensation.
7.11(a) Any award deferred under the Plan or under any of the Prior Management
Incentive Plans may, in the discretion of the Committee and with the consent of
the affected participant if necessary, be changed into any other form of
deferred award authorized by this Section 7; and any award that shall be so
changed shall be subject to all the terms and conditions of the Plan. Unless the
Committee shall otherwise direct, cash contingently credited in payment of an
outstanding award made under any of the Prior Management Incentive Plans shall
carry interest equivalents at the rate and with such periodic compounding, if
any, as may be prescribed from time to time by the Committee for cash
contingently credited in payment of awards under the Plan.
(b) Any award made to an employee who is at the time of the award, or later
becomes, an officer of the Company, heretofore or hereafter deferred under an
incentive plan of the Company or a Subsidiary, other than under the Plan, or
under any of the Prior Management Incentive Plans, may, in the discretion of the
Committee and with the consent of the affected officer if necessary, be changed
into any other form of deferred award authorized by this Section 7; and any
award that shall be so changed shall be subject to all the terms and conditions
of the Plan.
7.12 The Company shall reserve up to 400,000 shares of Common Stock as
required for issuance pursuant to the Plan and to the Prior Management Incentive
Plans, provided, however, that in the event of any change in the Common Stock
through merger, consolidation, or reorganization, or in the event of any
dividend to holders of such stock payable in stock of the same class or the
issue to such holders of rights to subscribe to stock of the same class, or in
the event of any other change in the capital structure, the Committee or the
Board of Directors on recommendation of the Committee may make such adjustments
with respect to the number of shares reserved under this paragraph 7.12 or
provided for under any other provision of this or any of the Prior Management
Incentive Plans, as it deems equitable to prevent dilution or enlargement of the
rights of any then or later holder of such stock.
B-6
<PAGE> 46
8. ADMINISTRATION
8.01 The Plan shall be administered by the Committee on Officers' Compensation
of the Board of Directors, which shall have full power and discretion to
construe and interpret the Plan. No member of the Committee shall be eligible to
receive an incentive compensation award while serving on the Committee and no
person shall be eligible to serve on the Committee unless he shall be a
"disinterested person" within the meaning of Rule 16b-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended from time to
time, or any law, rule, regulation or other provision that may hereafter replace
such rule ("Rule 16b-3"), and an "outside director" within the meaning of
Section 162(m). Nothing herein shall prevent the Board from imposing additional
qualifications or requirements with respect to members of the Committee.
Anything in this Plan to the contrary notwithstanding, but subject to
paragraph 15 below, insofar as this Plan applies to employees who are not
subject to reporting requirements of Section 16(a) of the Securities Exchange
Act of 1934, as amended from time to time, and who are not "covered employees"
within the meaning of Section 162(m) with respect to equity securities of the
Company, determinations and interpretations in individual cases can, if
delegated by the Committee be made by, or at the direction of, the Chief
Executive Officer of the Company.
8.02 The Committee may establish and from time to time amend rules and
regulations of general application for the administration of the Plan, subject
to the provisions thereof, and rules for its own organization and procedure. The
Committee may act or recommend by written determination instead of by
affirmative vote at a meeting, provided that any written determination shall be
signed by a majority of all the members of the Committee and all members of the
Committee shall have been notified. The Company shall pay such compensation, if
any, for the services of the members of the Committee and such of their
expenses, if any, and any other expenses, of the Plan as the Board of Directors
may from time to time approve.
8.03 Any costs incidental to the administration of the Plan shall be borne by
the Company.
9. CERTAIN PROVISIONS RELATING TO PARTICIPATION
9.01 No member of the Incentive Compensation Group, no Participant, no
Beneficiary, no person claiming under or through any of them, nor any other
person shall have any right or interest, whether vested or otherwise, in the
Plan or its continuance, or in or to the payment of any award under the Plan,
whether such award be vested, contingent or otherwise, unless and until all the
terms and conditions of the Plan, of any rules and regulations of the Committee
thereunder, and of any instrument executed pursuant thereto, that affect such
award and its payment, shall have been fully complied with as specifically
provided in the Plan and the rules and regulations of the Committee thereunder.
No rights under the Plan, contingent or otherwise, shall be assignable or
subject to any encumbrance, pledge or charge of any nature, except as may be
specifically authorized by the Committee and no such rights shall be
transferrable other than by will or the laws of descent and distribution. Rights
may be exercised during the Participant's lifetime only by him or by his
guardian or legal representative, except that a Participant may, under such
rules and regulations as the Committee may establish, designate a Beneficiary to
receive any unpaid portion of an award after his death.
9.02 Neither the adoption of the Plan nor its operation shall in any way
affect the right and power of the Company or any Subsidiary to dismiss or
otherwise terminate the employment of any employee at any time for any reason
with or without cause.
9.03 By accepting any benefits under the Plan, each member of the Incentive
Compensation Group, each Participant, each Beneficiary, and each person claiming
under or through any of them, shall be conclusively deemed to have indicated his
acceptance and ratification of, and consent to, any action or decision taken or
made or to be taken or made under the Plan by the Company, the Board of
Directors and the Committee.
10. GENERAL PROVISIONS
10.01 Any action taken or decision made under the respective provisions of the
Plan by the Company, the Board of Directors and the Committee, arising out of or
in connection with the construction, administration, interpretation or effect of
the Plan, or recommendations in accordance therewith, or of any rules and
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<PAGE> 47
regulations adopted thereunder, including, without limitation, any adjustment in
the number or class of shares to be issued or transferred under the Plan as the
result of a change affecting the Common Stock shall in each case lie within the
Committee's discretion and shall be conclusive and binding on the Company, its
Subsidiaries and its shareholders and on all members of the Incentive
Compensation Group, all Participants and Beneficiaries and all persons claiming
under or through any of them.
10.02 The Board of Directors and the Committee may rely upon any information
supplied to them by any officer of the Company or by the Company's independent
public accountants and may rely upon the advice of such accountants and of
counsel, and shall be fully protected in relying upon any such information and
advice. Members of the Board of Directors who are also officers of the Company
may on invitation attend the meetings of the Committee, but, unless appointed
and serving as members of the Committee, shall have no vote.
10.03 No member of the Board of Directors or of the Committee shall be liable
for any act or failure to act of any other member of such Board or Committee, as
the case may be, or of any officer, agent or employee, nor shall any member of
the Board of Directors or of the Committee be liable for any act, or failure to
act, of his own unless such act or failure to act shall have been in bad faith
or grossly negligent. Any document required to be delivered to the Board of
Directors or to the Committee shall be deemed to have been so delivered if and
when addressed to and received by the Secretary of the Company or the Secretary
of the Committee, as the case may be.
10.04 The fact that a member of the Board of Directors shall at the time be,
or shall theretofore have been or thereafter may be, a Participant or eligible
to receive an incentive compensation award shall not disqualify him from taking
part in and voting at any time as a director in favor of or against amendment or
termination of the Plan or other matters affecting the Plan.
10.05 Appropriate provision shall be made for any taxes that the Company
determines are required to be withheld from awards of incentive compensation
under the applicable laws or other regulations of any governmental authority,
whether Federal, state or local and whether domestic or foreign.
10.06 The place of administration of the Plan shall be conclusively deemed to
be within the State of Ohio, and the validity, construction, interpretation and
administration of the Plan, and of any rules and regulations or determinations
or decisions made thereunder, and the rights of any and all persons having or
claiming to have any interest therein or thereunder, shall be governed by, and
determined exclusively and solely in accordance with, the laws of the State of
Ohio. Without limiting the generality of the foregoing, the period within which
any action arising under or in connection with the Plan, or any payment or award
made or purportedly made under or in connection therewith, must be commenced
shall be governed by the laws of the State of Ohio, irrespective of the place
where the act or omission complained of took place and of the residence of any
party to such action and irrespective of the place where the action may be
brought.
11. TERM OF PLAN
The Plan shall be in effect, and awards of incentive compensation may be made
under the Plan, for each of the calendar years from 1994 to 1998, both
inclusive. Unless the Plan shall be renewed, no awards of incentive compensation
shall be made under the Plan for any calendar year subsequent to 1998, but as to
awards made for the calendar years 1994 to 1998, both inclusive, the Plan will
continue in effect in accordance with its terms.
12. OTHER COMPENSATION OR INCENTIVE ARRANGEMENTS
The Plan is not intended as and shall not be deemed a substitute for or
preclude continuance or establishment of incentive compensation, profit
participation or bonus plans of Subsidiaries, divisions or profit centers of the
Company or any other plan, practice or arrangement for the payment of
compensation or fringe benefits, including, without limitation, commissions,
prizes, suggestion or special awards, production or similar bonuses, retirement,
profit sharing, group insurance, stock purchase or stock bonus plans or other
bonus plans or arrangements, that may now or hereafter be in effect for
employees generally or any group or class of
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<PAGE> 48
employees, and any such plan, practice or arrangement may be continued or
authorized and payment thereunder made independently of the Plan.
13. AMENDMENT OR TERMINATION
13.01 Subject to any applicable shareholder approval requirement of law, the
Plan may at any time or from time to time be amended in any respect, including,
without limitation, to qualify incentive compensation awards hereunder as
performance-based compensation under Section 162(m), or may at any time be
terminated, by either the shareholders of the Company or by the Board of
Directors, subject to the provisions of paragraphs 13.02 and 13.03 below.
13.02 Only the shareholders of the Company may amend the provisions of the
Plan so as
(a) to increase any incentive compensation award for any Compensation Year
above the amount authorized by the Plan, and any rules and regulations
thereunder;
(b) to change the provisions of paragraph 8.01 relating to the administration
of the Plan;
(c) to materially modify the requirements as to eligibility for participation
in the Plan; or
(d) to change the provisions of this Section 13.
13.03 No amendment or termination of the Plan by either the shareholders of
the Company or the Board of Directors shall, without his consent, affect any
incentive compensation award theretofore made to a Participant.
14. DEFINITIONS
Unless otherwise required by the context, the terms used in this Plan shall
have the meanings set forth in this Section 14.
BENEFICIARY: As applied to a Participant, a person or entity (including a
trust or the estate of the Participant) designated with the approval of the
Committee, in a written document executed by the Participant in such form as
shall be approved by the Committee, to receive the unpaid balance of an award
after the death of the Participant. If at the time when an unpaid balance of an
award shall be or become payable at or after the death of a Participant there
shall not be any living person or any entity in existence so designated, the
term "Beneficiary" shall mean the legal representatives of the Participant's
estate.
BOARD OR BOARD OF DIRECTORS: The Board of Directors of the Company.
CHANGE IN CONTROL: A change in control of the Company as defined in paragraph
5.07(b) above.
CHIEF EXECUTIVE OFFICER: Such officer of the Company as shall at the time have
been designated by the Board of Directors to serve as chief executive officer of
the Company.
COMMITTEE OR COMMITTEE ON OFFICERS' COMPENSATION: The Committee on Officers'
Compensation, or any successor or substituted committee, of the Board of
Directors.
COMMON STOCK: The common stock of the Company, par value $0.625 per share, or
such other class of shares or securities as may be applicable pursuant to an
adjustment made under the Plan.
COMPANY: Borden, Inc., a New Jersey corporation.
COMPENSATION YEAR: A calendar year for which the Plan is in effect in
accordance with the provisions of Section 11 above.
CORPORATE DIVISION: Major units of Borden, Inc., as determined by the chief
executive officer from time to time.
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<PAGE> 49
FAIR MARKET VALUE: As applied to a specific date, the average of the highest
and lowest quoted selling prices of Common Stock on sales reported for such date
for New York Stock Exchange issues on the consolidated stock exchange network
or, if Common Stock was not traded on such date, on the next preceding day on
which the Common Stock was so traded, or such other standard as may reasonably
be fixed by the Committee.
INCENTIVE COMPENSATION AMOUNT: As applied to a Compensation Year, the
aggregate amount of the awards determined for such Compensation Year, beginning
in 1994 and continuing through 1998, as set forth in Section 2 of the Plan.
INCENTIVE COMPENSATION GROUP: As applied to a Compensation Year, the employees
for such Compensation Year determined pursuant to paragraph 4.01 of the Plan.
PARTICIPANT: A member of the Incentive Compensation Group.
PLAN: The Plan set forth in these pages. Any reference to this Plan may be
made by reference to the title "1994 Management Incentive Plan" or by other
suitable identification.
PRETAX INCOME: The pretax income of the continuing operations of the Company.
PRIOR MANAGEMENT INCENTIVE PLANS: Management incentive plans of the Company
that had been approved by its shareholders, namely, the Company's 1969, 1974,
1979, 1984, and 1989 Management Incentive Plans.
SECTION 162(m): Section 162(m) of the Internal Revenue Code of 1986 as amended
by the Revenue Reconciliation Act of 1993 and as it may be further amended from
time to time.
SHARE UNIT: A unit entitling the Participant to receive at a designated time
or times in the future a cash payment equal to the Fair Market Value at such
time or times of one share of Common Stock.
SUBSIDIARY: A corporation or other form of business association of which
shares (or other ownership interests) having 50% or more of the voting power are
owned or controlled, directly or indirectly, by the Company.
15. COMPLIANCE WITH RULE 16B-3 AND SECTION 162(M)
(a) With respect to employees subject to Section 16(b) of the Securities
Exchange Act of 1934 as amended or Section 162(m), except to the extent that the
Committee determines otherwise, transactions under the Plan are intended to, and
shall, comply with all applicable conditions of Rule 16b-3 and avoid loss of the
deduction referred to in paragraph (1) of Section 162(m), and every provision of
the Plan shall be administered, interpreted and construed to carry out that
intent. Anything in the Plan or elsewhere to the contrary notwithstanding, to
the extent any provision of the Plan or action by the plan administrators fails
to so comply it shall be disregarded to the extent permitted by law and deemed
advisable by the plan administrators concerned with matters relating to
employees subject to Section 16(b) and Section 162(m) respectively.
(b) Notwithstanding any provision of the Plan to the contrary,
(i) the Plan is intended to give the Committee the authority to grant
incentive awards that qualify as performance-based compensation under
Section 162(m), and if specifically authorized by the Committee incentive
awards that do not so qualify. Every provision of the Plan shall be
administered, interpreted and construed to carry out such intention and any
provision that cannot be so administered, interpreted and construed shall
to that extent be disregarded; and
(ii) any Provision of the Plan that would prevent an incentive award
that the Committee intends to qualify as performance-based compensation
under Section 162(m) from so qualifying shall be administered, interpreted
and construed to carry out such intention and any provision that cannot be
so administered, interpreted and construed shall to that extent be
disregarded.
B-10
<PAGE> 50
BORDEN, INC.
NOTICE OF ANNUAL MEETING AND
PROXY STATEMENT
------------------
THE GOVERNOR MORRIS HOTEL
2 WHIPPANY ROAD
MORRISTOWN, NEW JERSEY 07960
------------------
11:00 A.M. -- FRIDAY
MAY 20, 1994
IF IT'S BORDEN - IT'S
GOT TO BE GOOD
<PAGE> 51
SHAREHOLDERS' PROXY
BORDEN, INC.
180 EAST BROAD STREET, COLUMBUS, OHIO, 43215
The undersigned hereby appoints ERVIN R. SHAMES, ALLAN L. MILLER and PAUL J.
JOSENHANS, or the one of them who acts, the proxy or proxies of the undersigned,
with full power of substitution, to vote all of the shares of stock of BORDEN,
INC. which the undersigned is entitled to vote at the Annual Meeting of
Shareholders of the Company to be held on May 20, 1994, at 11:00 A.M. at the
Governor Morris Hotel, Two Whippany Road, Morristown, N.J., and any adjournments
thereof, on the election of Directors, the ratification of the selection of
independent auditors, two additional Board proposals and such other business as
may properly come before the meeting.
THIS PROXY SHALL BE VOTED IN ACCORDANCE WITH SUCH INSTRUCTIONS AS MAY BE
GIVEN ON THE REVERSE SIDE OF THIS PROXY CARD. IT IS UNDERSTOOD, HOWEVER, THAT
THE PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS, THE RATIFICATION OF THE
SELECTION OF INDEPENDENT AUDITORS AND THE TWO ADDITIONAL BOARD PROPOSALS UNLESS
CONTRARY INSTRUCTIONS ARE SPECIFIED. THE SPACES FOR YOUR VOTES AND SIGNATURE ARE
SET FORTH ON THE REVERSE SIDE. PLEASE VOTE, SIGN AND RETURN PROMPTLY. THE PROXY
IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
(Continued, and to be signed and dated, on reverse side)
- - ------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 THROUGH 4
------------------------------------------------------------
1. Election of directors--Nominees: Frederick E. Hennig, Wilbert J. LeMelle,
Robert P. Luciano, H. Barclay Morley, John E. Sexton, Ervin R. Shames,
Patricia Carry Stewart and Frank J. Tasco.
FOR X WITHHELD X EXCEPTIONS* X
Exceptions.................................................................
...........................................................................
*(MARK THE EXCEPTIONS BOX AND STRIKE OUT THAT NOMINEE'S NAME.)
2. Ratification of selection of independent auditors.
FOR X AGAINST X ABSTAIN X
- - ------------------------------------------------------------
- - ------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 THROUGH 4
------------------------------------------------------------
3. Adoption of the Company's 1994 Stock Option Plan.
FOR X AGAINST X ABSTAIN X
4. Adoption of the Company's 1994 Management Incentive Plan.
FOR X AGAINST X ABSTAIN X
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
- - ------------------------------------------------------------
- - ------------------------------------------------------------
I WILL ATTEND IN
PERSON. X
- - ------------------------------------------------------------
PROXY DEPARTMENT
NEW YORK, N.Y. 10203-0065
Please sign exactly as name
appears on left. Joint owners
should each sign. Trustees,
Executors, etc. should indicate
capacity in which they are
signing.
DATED: , 1994
Signature
Signature
PLEASE SIGN, DATE AND RETURN CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
