<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to section 240.14a-11(c) or section 240.14a-12
CARTER-WALLACE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
CARTER-WALLACE, INC.
1345 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10105
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JULY 15, 1997
------------------------
The Annual Meeting of Stockholders of Carter-Wallace, Inc. will be held
at the Hotel du Pont, 11th and Market Streets, Wilmington, Delaware 19801, on
Tuesday, July 15, 1997, at 1:00 P.M., Eastern Daylight time, for the following
purposes:
1. To elect directors.
2. To consider and take action upon the ratification of the
appointment by the Board of Directors of KPMG Peat Marwick LLP as
independent auditors for the Company for the current fiscal year.
3. To consider and take action upon amendment of the 1996 Long-Term
Incentive Plan with respect to the rights of participants who retire under
the Company's pension plan to exercise options.
4. To consider and take action upon a proposal made by a stockholder
relating to certain attributes of individuals to be directors of the
Company.
5. To consider and take action upon a proposal made by a stockholder
relating to the form of compensation to be paid to non-employee directors.
6. To transact any other business that may properly come before the
meeting.
Only holders of record of Common Stock and Class B Common Stock at the
close of business on June 2, 1997 will be entitled to vote at the meeting.
To assure your representation at the meeting, please date, sign and mail
promptly the accompanying proxy, for which a postpaid return envelope is
provided. Please return the proxy in a timely fashion to save the Company the
expense of an additional mailing of the proxy materials.
STEPHEN R. LANG
Secretary
New York, New York
June 16, 1997
<PAGE> 3
CARTER-WALLACE, INC.
1345 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10105
------------------
ANNUAL MEETING OF STOCKHOLDERS
JULY 15, 1997
------------------
PROXY STATEMENT
------------------
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Carter-Wallace, Inc. (the "Company") of proxies for
use at the Company's 1997 Annual Meeting of Stockholders (the "Meeting") to be
held at the Hotel du Pont, 11th and Market Streets, Wilmington, Delaware 19801,
on Tuesday, July 15, 1997 at 1:00 P.M., Eastern Daylight Time, and at any
adjournment thereof. The date of mailing of this Proxy Statement and the
accompanying proxy is on or about June 16, 1997.
At the Meeting, all shares represented by a properly executed proxy in the
accompanying form (which has not been revoked) will be voted, and, where
instructions are specified, will be voted in accordance with such
specifications. Where instructions are not specified, the shares represented by
such proxy will be voted (a) FOR the election of each of the nominees for
director named in this Proxy Statement, (b) FOR the ratification of the
appointment of KPMG Peat Marwick LLP as independent auditors for the Company,
(c) FOR the proposed amendment of the 1996 Long-Term Incentive Plan ("LTIP"),
(d) AGAINST the stockholder proposal relating to certain attributes of
individuals to be directors of the Company and (e) AGAINST the stockholder
proposal relating to the form of compensation to be paid to non-employee
directors. If any nominee for election as a director should be unable to serve,
which is not presently anticipated, proxies will be voted for a nominee
designated by the Board of Directors. In addition, proxies will be voted in the
discretion of the proxy holders with respect to such other business that may
properly come before the Meeting.
Any proxy may be revoked by a stockholder by a written communication to the
Secretary of the Company delivered prior to or at the Meeting, to the extent the
proxy has not theretofore been voted. Sending in a signed proxy will not affect
a stockholder's right to attend the Meeting and to vote in person.
VOTING RIGHTS
On each matter submitted to a vote at the Meeting, (i) each holder of
Common Stock, par value $1.00 per share, of the Company ("Common Stock") is
entitled to one (1) vote for each such share registered in his name at the close
of business on June 2, 1997, the record date stated in the Notice of Annual
Meeting of Stockholders (the "Record Date"), and (ii) each holder of Class B
Common Stock, par value $1.00 per share, of the Company ("Class B Common Stock")
is entitled to ten (10) votes for each such share registered in his name at the
close of business on the Record Date. As of the Record Date, the Company had
33,951,256 shares of Common Stock outstanding and entitled to vote and
12,389,361 shares of Class B Common Stock outstanding and entitled to vote. On
all actions to be taken at the Meeting, holders of Common Stock and holders of
Class B Common Stock vote together as a single class. On the Record Date,
officers and directors of the Company and members of their immediate families
owned an aggregate of 11,938,656 shares of Common Stock, representing 35.16% of
the outstanding shares of Common Stock, and an aggregate of 11,802,405 shares of
Class B Common Stock, representing 95.26% of the outstanding shares of Class B
Common Stock; such holdings represent 82.34%, in the aggregate, of the voting
power of shares entitled to vote at the Meeting. See "STOCK OWNERSHIP."
<PAGE> 4
STOCK OWNERSHIP
As used in this Proxy Statement, "beneficial ownership" means the sole or
shared power to vote, or to direct the voting of, a security, or the sole or
shared investment power with respect to a security (that is, the power to
dispose of, or to direct the disposition of, a security). In addition, for
purposes of this Proxy Statement, a person is deemed as of any date to have
"beneficial ownership" of any security that such person has the right to acquire
within 60 days after such date through the exercise of an option or similar
right or otherwise and of any security held in the name of such person's spouse
or minor children.
As of the Record Date, the only persons known to the Company who
beneficially owned more than 5% of either the outstanding shares of Common Stock
or the outstanding shares of Class B Common Stock were The CPI Development
Corporation ("CPI") and its directors and stockholders and Mario J. Gabelli and
various entities directly or indirectly controlled by him or for which he acts
as chief investment officer. CPI is a personal holding company, the assets of
which consist of 11,754,000 shares of Common Stock, which represent 34.62% of
the outstanding shares of Common Stock, and 11,754,000 shares of Class B Common
Stock, which represent 94.87% of the outstanding shares of Class B Common Stock.
The directors of CPI are Henry H. Hoyt, Jr., Chairman of the Board of Directors
and Chief Executive Officer of the Company, Richard L. Cruess, M.D. and Suzanne
H. Garcia, each of whom is currently a director of the Company. Henry H. Hoyt,
Jr., Richard L. Cruess and Suzanne H. Garcia are the beneficial owners of
substantially all the outstanding voting securities of CPI.
The table below sets forth certain information as to shares of Common Stock
and of Class B Common Stock beneficially owned as of the Record Date (unless
otherwise noted) by persons who beneficially own more than 5% of either class,
each director named under "ELECTION OF DIRECTORS," each executive officer named
in the Summary Compensation Table under "EXECUTIVE COMPENSATION AND OTHER
INFORMATION" and the directors and executive officers of the Company as a group.
Such ownership information is based upon information furnished by such persons.
Except as otherwise indicated, such persons have sole voting and investment
power with respect to such shares.
<TABLE>
<CAPTION>
CLASS B
COMMON PERCENT COMMON PERCENT
NAME AND ADDRESS STOCK OF CLASS(1) STOCK OF CLASS(1)
- ---------------------------------------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
THE CPI DEVELOPMENT CORPORATION 11,754,000 34.62% 11,754,000 94.87%
103 Springer Building
3411 Silverside Road
Wilmington, Delaware 19810
MARIO J. GABELLI 2,617,500(2) 7.71%
One Corporate Center
Rye, New York 10580-1434
HENRY H. HOYT, JR. 11,943,719 35.12% 11,785,530(3) 95.11%
1345 Avenue of the Americas (3)(4)
New York, New York 10105
RICHARD L. CRUESS, M.D. 11,763,300(3) 34.65% 11,763,300(3) 94.93%
1110 Pine Avenue West
Montreal, H3A 1A3
Quebec, Canada
SUZANNE H. GARCIA 11,773,800(3) 34.68% 11,776,800(3) 95.04%
P.O. Box 5040
Santa Fe, New Mexico 87502
T. ROSIE ALBRIGHT 16,260(4)
DANIEL J. BLACK 60,015(4) 2,775
DAVID M. BALDWIN 3,000
SCOTT C. HOYT 324
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
CLASS B
COMMON PERCENT COMMON PERCENT
NAME AND ADDRESS STOCK OF CLASS(1) STOCK OF CLASS(1)
- ---------------------------------------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
RALPH LEVINE 32,820(4)
HERBERT M. RINALDI 9,000
HERBERT SOSMAN 18,860(4)
PAUL A. VETERI 34,920(4)
All directors and executive officers of
the Company as a group (23 persons) 12,202,176 35.66% 11,802,405(3) 95.26%
(3)(4)
</TABLE>
- ---------------
(1) Ownership percentages representing less than one percent of the class
outstanding have been omitted.
(2) Based solely upon information contained in Amendment No. 2 to Schedule
13D, dated March 11, 1997, filed with the Securities and Exchange Commission.
The shares are beneficially owned by Mario J. Gabelli and various entities that
he directly or indirectly controls or for which he acts as chief investment
officer.
(3) Includes the number of shares of Common Stock and of Class B Common
Stock, as the case may be, owned of record by CPI as to which Henry H. Hoyt,
Jr., Richard L. Cruess and Suzanne H. Garcia are deemed to have shared
beneficial ownership by virtue of their relationships with CPI. Also includes
9,000 shares of Common Stock and 9,000 shares of Class B Common Stock held in
trust under the will of Kate Good Orcutt; Henry H. Hoyt and Suzanne H. Garcia
are trustees and beneficiaries of the trust and Richard L. Cruess is a trustee
of the trust and, as such, are deemed to have shared beneficial ownership of
such shares. Henry H. Hoyt, Jr., Richard L. Cruess and Suzanne H. Garcia each
disclaim beneficial ownership of the shares of Common Stock and Class B Common
Stock owned by CPI and such trust. In no case do the additional shares
beneficially owned directly by such persons constitute more than 1/2 of 1% of
the outstanding shares of Common Stock or Class B Common Stock, as the case may
be, and they do not change the approximate percentage of ownership reflected in
the table.
(4) Includes 57,240 shares of Common Stock for Henry H. Hoyt, Jr., 16,260
shares for T. Rosie Albright, 57,240 shares for Daniel J. Black, 29,820 shares
for Ralph Levine, 18,860 shares for Herbert Sosman and 29,820 shares for Paul A.
Veteri, respectively, and 263,520 shares for all directors and executive
officers as a group, including the persons named above, that may be acquired
within 60 days of June 2, 1997 upon exercise of options granted to such persons
under the LTIP. Does not include 92,580 shares of Common Stock in the case of
Henry H. Hoyt, Jr., 26,120 shares in the case of T. Rosie Albright, 51,500
shares in the case of Ralph Levine, 30,280 shares in the case of Herbert Sosman
and 49,960 shares in the case of Paul A. Veteri, respectively, and 402,607
shares in the case of all directors and executive officers as a group, including
the persons named above, awarded under the LTIP and the Company's Restricted
Stock Award Plan that are subject to forfeiture under certain conditions.
3
<PAGE> 6
ELECTION OF DIRECTORS
Nine directors will be elected to serve until the next Annual Meeting of
Stockholders or until their successors are elected. Shares represented by
proxies solicited by the Board of Directors will, unless otherwise specified
thereon, be voted for the election of the nominees named below, each of whom is
presently a director. All nominees for director were elected at the last annual
meeting of stockholders except Suzanne H. Garcia, who was elected a director to
fill a newly created directorship on April 17, 1997.
<TABLE>
<CAPTION>
DIRECTOR
NAME, AGE, PRINCIPAL OCCUPATION AND OTHER INFORMATION SINCE
- --------------------------------------------------------------------------------- ----------
<S> <C>
DAVID M. BALDWIN; 68;
Chairman of the Board, David M. Baldwin Realty Co., Inc. since February 28,
1994; prior thereto, President, Helmsley-Noyes Company, Inc. since prior to
June 1992(1).................................................................. 1990
DANIEL J. BLACK; 65;
Consultant to the Company; President and Chief Operating Officer of the
Company for more than five years prior to March 28, 1997(2)................... 1975
RICHARD L. CRUESS, M.D.; 67;
Professor of Surgery, Center for Medical Education, McGill University,
Montreal, Quebec, Canada since June 1995; Dean, Faculty of Medicine, McGill
University, Montreal, Quebec, Canada from prior to June 1992 to May 1995...... 1977
SUZANNE H. GARCIA; 62;
Owner, La Tierra Beneficiaries (real estate development) and Santa Fe Ranch
since prior to June 1992(3)................................................... 1997
HENRY H. HOYT, JR.; 69;
Chairman of the Board of Directors and Chief Executive Officer of the Company
since prior to June 1992(2)(3)................................................ 1955
SCOTT C. HOYT; 44;
Vice President, New Products, Carter Products Division ("CPD") since August
1993; Vice President, Personal Products Marketing, CPD from prior to June 1992
to July 1993(3)............................................................... 1988
RALPH LEVINE; 61;
President and Chief Operating Officer of the Company since April 1, 1997; Vice
President, Secretary and General Counsel of the Company for more than five
years prior to April 1, 1997(2)............................................... 1990
HERBERT M. RINALDI; 68;
Of Counsel to the firm of Carella, Byrne, Bain, Gilfillan, Cecchi, Stewart &
Olstein (attorneys), of which he was a Partner for more than five years prior
to December 31, 1996(4)....................................................... 1977
PAUL A. VETERI; 55;
Executive Vice President and Chief Financial Officer of the Company since
April 1, 1997, Vice President, Finance and Chief Financial Officer of the
Company for more than five years prior to April 1, 1997(2).................... 1990
</TABLE>
- ---------------
(1) David M. Baldwin earned a fee of $615,028 for real estate brokerage
services he provided to the Company in connection with the Company's sublease of
two floors of the Company's premises located at 1345 Avenue of the Americas, New
York, New York 10105 for a term expiring on April 29, 2011. One-half of the fee
was paid in December 1995 and the balance of $307,514 was paid in December 1996.
(2) Member of the Executive Committee.
(3) Henry H. Hoyt, Jr. and Suzanne H. Garcia are siblings. Scott C. Hoyt is
the nephew of Henry H. Hoyt, Jr. and Suzanne H. Garcia. There are no other
family relationships among the directors and officers of the Company.
(4) The firm Carella, Byrne, Bain, Gilfillan, Cecchi, Stewart & Olstein has
performed legal services for the Company in the last fiscal year.
Directors will be elected by the vote of a majority of the shares entitled
to vote at the Meeting. Votes that are withheld and broker non-votes will have
the same effect as negative votes in the election.
4
<PAGE> 7
BOARD OF DIRECTORS AND COMMITTEES
In the fiscal year ended March 31, 1997, the Board of Directors held 11
meetings. The Board of Directors has appointed an Audit Committee, an Executive
Committee, a Nominating Committee and a Compensation Committee.
The Audit Committee, composed of Herbert M. Rinaldi, Chairman, and David M.
Baldwin, held four meetings in the fiscal year ended March 31, 1997. The Audit
Committee meets with the Company's independent auditors, the Company's internal
audit personnel and other corporate officers on matters relating to corporate
financial reporting and accounting procedures and policies, the adequacy of the
Company's financial, accounting and operational controls and the scope of the
audits of both the independent and internal auditors, and reviews and reports to
the Board of Directors the results of such audits and its recommendations
relating to the appointment of independent auditors, financial reporting and
accounting practices and policies.
The Nominating Committee, composed of David M. Baldwin, Chairman, Richard
L. Cruess, M.D. and Herbert M. Rinaldi, met once in the fiscal year ended March
31, 1997. The Nominating Committee identifies and recommends candidates for
election to the Board of Directors. The Nominating Committee will consider
nominees recommended by stockholders. Such nominations for directors to be
elected at the 1998 Annual Meeting of Stockholders should be furnished in
writing to the Secretary of the Company by February 16, 1998 and should indicate
the nominee's name, age and business experience.
The Compensation Committee, composed of Richard L. Cruess, M.D., Chairman,
Herbert M. Rinaldi and David M. Baldwin, met once in the fiscal year ended March
31, 1997. The Compensation Committee is empowered to make recommendations to the
Board with respect to the base salary of the two senior officers of the Company.
All of the Company's directors attended at least 75% of the meetings of the
Board of Directors and of the committees on which they served.
5
<PAGE> 8
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE COMPENSATION
The Summary Compensation Table shows certain information for the Company's
Chief Executive Officer and each of the five other most highly compensated
executive officers of the Company (the "Named Executives") for services rendered
in all capacities during the fiscal years ended March 31, 1997, 1996 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION AWARDS
ANNUAL COMPENSATION ------------------------------
------------------------------------------------- RESTRICTED SECURITIES ALL
NAME AND FISCAL OTHER ANNUAL AND DEFERRED UNDERLYING OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) STOCK AWARDS(2) OPTIONS(#) COMPENSATION(3)
- ---------------------------- ------ ---------- -------- --------------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Henry H. Hoyt, Jr........... 1997 $1,140,800 $641,700 $ 63,075 $ 477,090 141,360 $ 43,303
Chairman of the Board, 1996 1,056,300 594,100 78,504 787,050 228,960 41,613
Chief Executive Officer 1995 978,000 550,200 80,662 -0- -0- 40,752
and Director
Daniel J. Black............. 1997 $1,137,144 $641,700 $ 89,451 $ 477,090 -0- $ 551,221
President, Chief Operating 1996 1,056,300 594,100 110,412 787,050 228,960 36,966
Officer and Director(4) 1995 978,000 550,200 109,387 -0- -0- 36,105
Ralph Levine................ 1997 $ 625,000 $367,500 $ 56,933 $ 292,680 86,720 $ 24,338
Vice President, Secretary, 1996 493,900 288,800 85,671 410,025 119,280 21,716
General Counsel and 1995 448,800 249,500 67,129 -0- -0- 20,814
Director(5)
Paul A. Veteri.............. 1997 $ 600,000 $341,300 $ 51,769 $ 271,890 80,560 $ 19,386
Vice President, Finance, 1996 493,900 288,800 55,738 410,025 119,280 17,264
Chief Financial Officer 1995 448,800 249,500 61,064 -0- -0- 16,362
and Director(6)
Herbert Sosman.............. 1997 $ 491,500 $258,000 $ 64,687 $ 154,170 45,680 $ 24,611
Vice President, 1996 463,600 243,400 66,293 259,325 75,440 24,053
Pharmaceuticals, U.S. 1995 437,400 229,700 71,931 -0- -0- 23,894
T. Rosie Albright........... 1997 $ 408,000 $222,600 $ 53,288 $ 133,110 39,440 $ 3,264
Vice President, Consumer
Products, U.S.(7)
</TABLE>
- ---------------
(1) Included in this amount in 1997 was $22,491, $42,041, $26,914, $23,483,
$27,443 and $23,716 for Messrs. Hoyt, Black, Levine, Veteri and Sosman and Ms.
Albright, respectively, relating to withholding taxes paid by the Company on the
employee's behalf.
(2) On March 31, 1997, Mr. Hoyt held 92,580 shares of restricted and/or
deferred stock awarded under the LTIP, the market value of which was $1,272,975,
Mr. Levine held 51,500 shares of LTIP stock, the market value of which was
$708,125, Mr. Veteri held 49,960 shares of LTIP stock, the market value of which
was $686,950, Mr. Sosman held 30,280 shares of LTIP stock, the market value of
which was $416,350, and Ms. Albright held 26,120 shares of LTIP stock, the
market value of which was $359,150. Dividends accumulated since the date of
grant are paid to the recipient of the award at vesting.
(3) Includes Company contributions vested pursuant to the Supplemental
Retirement and Savings Plan and the Executive Savings Plan and premiums paid by
the Company in connection with supplemental death benefit agreements with each
Named Executive. The vested contributions to the Supplemental Retirement and
Savings Plan and the Executive Pension Benefits Plans for each named executive
officer for the fiscal year ended March 31, 1997 are as follows: Mr.
Hoyt-$22,816; Mr. Black-$22,743; Mr. Levine-$12,500; Mr. Veteri-$12,000; Mr.
Sosman-$9,830 and Ms. Albright-$3,264. The premiums paid with respect to the
supplemental death benefit agreement for each Named Executive for the fiscal
year ended March 31, 1997 are as follows: Mr. Hoyt-$20,487; Mr. Black-$15,840;
Mr. Levine-$11,838; Mr. Veteri-$7,386; and Mr. Sosman-$14,781. Also includes
$512,638 in the case of Mr. Black, representing amounts paid to him in
connection with his retirement, including $228,160 for accrued vacation pay,
$249,478 for the repurchase at the then current market price of shares of
restricted stock
6
<PAGE> 9
that had vested under the LTIP, $20,739 in respect of certain fringe benefits
and $14,261 relating to withholding taxes paid by the Company on his behalf with
respect to such fringe benefits.
(4) Mr. Black retired as President and Chief Operating Officer of the
Company as of March 28, 1997. Mr. Black continues to provide consulting services
to the Company. See "Compensation of Directors."
(5) Mr. Levine was appointed President and Chief Operating Officer
effective April 1, 1997. Prior to that date, he served as Vice President,
Secretary and General Counsel of the Company.
(6) Mr. Veteri was appointed Executive Vice President and Chief Financial
Officer effective April 1, 1997. Prior to that date, he served as Vice
President, Finance and Chief Financial Officer of the Company.
(7) Ms. Albright was appointed Vice President, Consumer Products, U.S. on
December 4, 1995.
The following table contains information concerning options to purchase
shares of the Company's Common Stock granted to the Named Executives pursuant to
the LTIP during the fiscal year ended March 31, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
POTENTIAL REALIZABLE VALUE AT
<CAPTION> ASSUMED ANNUAL RATES OF STOCK PRICE
INDIVIDUAL GRANTS APPRECIATION FOR OPTION TERM(3)
--------------------------------------------------- -------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES PRICE EXPIRATION AT 0% ANNUAL AT 5% ANNUAL AT 10% ANNUAL
NAME GRANTED(#) IN 1997 ($/SHARE)(1) DATE(2) GROWTH RATE GROWTH RATE GROWTH RATE
- -------------------- ---------- ---------- ------------ ---------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Henry H. Hoyt, 141,360 25.71% $13.50 2/20/07 -0- $1,200,157 $ 3,041,434
Jr................
Ralph Levine........ 86,720 15.77% $13.50 2/20/07 -0- $ 736,260 $ 1,865,826
Paul A. Veteri...... 80,560 14.65% $13.50 2/20/07 -0- $ 683,961 $ 1,733,291
Herbert Sosman...... 45,680 8.31% $13.50 2/20/07 -0- $ 387,827 $ 982,829
T. Rosie Albright... 39,440 7.17% $13.50 2/20/07 -0- $ 334,849 $ 848,572
</TABLE>
- ---------------
(1) Market price of the stock on the date of grant.
(2) These options will become exercisable at the rate of 25% of the total
award in each year commencing on the first anniversary of the date of the grant.
(3) The dollar amounts under these columns are the results of calculations
at 0%, and at the 5% and 10% annual appreciation rates set by the Securities and
Exchange Commission for illustrative purposes and, therefore, are not intended
to forecast future financial performance or possible future appreciation, if
any, in the price of Common Stock. Stockholders are, therefore, cautioned
against drawing any conclusion from the appreciation data shown. Optionees will
only realize value from this grant if the price of Common Stock appreciates,
which would benefit all stockholders commensurately. The Company did not use an
alternative formula for grant valuation as it is not aware of any formula that
will determine, with reasonable accuracy, a present value based on future
unknown or volatile factors.
7
<PAGE> 10
No options were exercised by the Named Executives during the fiscal year
ended March 31, 1997. The following table sets forth information with respect to
the unexercised options held by them at March 31, 1997.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT MARCH 31, 1997(#) AT MARCH 31, 1997($)(1)
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Henry H. Hoyt, Jr. ......................... 57,240 313,080 -0- $35,340
Daniel J. Black............................. 57,240 -0- -0- -0-
Ralph Levine................................ 29,820 176,180 -0- $21,680
Paul A. Veteri.............................. 29,820 170,020 -0- $20,140
Herbert Sosman.............................. 18,860 102,260 -0- $11,420
T. Rosie Albright........................... 16,260 88,220 -0- $ 9,860
</TABLE>
- ---------------
(1) Calculated by determining the difference between the exercise price and
the closing price of the Company's Common Stock on the New York Stock Exchange
on March 31, 1997 with respect to those options for which such closing price
exceeded the exercise price.
The Employees' Retirement Plan of Carter-Wallace, Inc. (the "Retirement
Plan") is a noncontributory defined benefit plan. The Retirement Plan provides
for a pension payable upon retirement at age 65 in an amount calculated on the
basis of the number of years of credited service and the individual's average
salary and bonus during the five consecutive highest paid years in the ten-year
period immediately preceding the individual's retirement date. Covered
compensation does not include deferred compensation or other incentive
compensation. The Retirement Plan permits early retirement and deferred
retirement under specified conditions.
Amounts payable under the Retirement Plan may not exceed the limitation
imposed by Section 415 of the Internal Revenue Code (the "Code") (currently
$125,000, but subject to periodic cost-of-living adjustments, or the
individual's average covered compensation for his three highest paid years,
whichever is less) and the amount of credited compensation which may be taken
into account in the computation of pension benefits may not exceed the amount
permitted under Section 401(a)(17) of the Code (currently $160,000, subject to
cost-of-living adjustments). Amounts shown in the table below include benefits
in excess of such limitations that are payable under the Executive Pension
Benefits Plan and the Executive Pension Benefits Core Plan (collectively, the
"Executive Pension Benefits Plans") described below.
The Executive Pension Benefits Plans are unfunded plans that provide for
the payment of vested pension benefits that would otherwise be payable under the
Retirement Plan but for the limitations of Sections 415 and 401(a)(17) of the
Code and the exclusion from covered compensation of amounts deferred under the
Executive Savings Plan and that mitigate the reduction in retirement benefits of
corporate officers who elect early retirement. Corporate officers' covered
compensation used in calculating benefits under the Executive Pension Benefits
Plans includes accrued bonuses.
8
<PAGE> 11
PENSION PLAN TABLE
<TABLE>
<CAPTION>
COVERED 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS 45 YEARS
COMPENSATION SERVICE SERVICE SERVICE SERVICE SERVICE SERVICE SERVICE
- --------------- -------- -------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 400,000 $115,338 $153,784 $ 192,230 $ 232,230 $ 272,230 $ 312,230 $ 352,230
$ 600,000 $175,338 $233,784 $ 292,230 $ 352,230 $ 412,230 $ 472,230 $ 532,230
$ 800,000 $235,338 $313,784 $ 392,230 $ 472,230 $ 552,230 $ 632,230 $ 712,230
$ 1,000,000 $295,338 $393,784 $ 492,230 $ 592,230 $ 692,230 $ 792,230 $ 892,230
$ 1,200,000 $355,338 $473,784 $ 592,230 $ 712,230 $ 832,230 $ 952,230 $1,072,230
$ 1,400,000 $415,338 $553,784 $ 692,230 $ 832,230 $ 972,230 $1,112,230 $1,252,230
$ 1,600,000 $475,338 $633,784 $ 792,230 $ 952,230 $1,112,230 $1,272,230 $1,432,230
$ 1,800,000 $535,338 $713,784 $ 892,230 $1,072,230 $1,252,230 $1,432,230 $1,612,230
$ 2,000,000 $595,338 $793,784 $ 992,230 $1,192,230 $1,392,230 $1,592,230 $1,792,230
$ 2,200,000 $655,338 $873,784 $1,092,230 $1,312,230 $1,532,230 $1,752,230 $1,972,230
</TABLE>
The above table shows the estimated annual benefits payable on retirement
to eligible employees, including officers and directors, under the Retirement
Plan and the Executive Pension Benefits Plans as in effect on March 31, 1997.
Amounts shown are based on the assumptions that the Retirement Plan and the
Executive Pension Benefits Plans remain in effect without change and that the
individual receives a straight life benefit with no reduction to allow for
payment to a surviving spouse, as is permitted by the Retirement Plan and the
Executive Pension Benefits Plans.
The above computation of benefits assumes continued employment to at least
age 65 and covered compensation as described above. Amounts shown are before
applicable federal and state income taxes payable by the recipient and are net
of a portion of applicable Social Security benefits received. The portion of the
benefits accrued as of September 30, 1980 is subject to annual cost-of-living
adjustments.
Current covered remuneration and credited years of service for purposes of
the Retirement Plan and the Executive Pension Benefits Plans for each Named
Executive are $1,782,500 and 45 years for Mr. Hoyt; $992,500 and 33 years for
Mr. Levine; $941,300 and 20 years for Mr. Veteri; $749,500 and 18 years for Mr.
Sosman; and $630,600 and 1 year for Ms. Albright. Mr. Black retired on March 28,
1997. His covered compensation for fiscal 1997 and credited years of service at
the time of retirement were $1,778,844 and 36 years.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs. Levine,
Veteri and Sosman and Ms. Albright.
Mr. Levine's current employment agreement, which became effective on April
1, 1997, provides for his employment at a base salary of not less than $850,000
per year for a period of five years from September 1st of any year in which the
Board of Directors decides, without cause, to terminate Mr. Levine's agreement.
Mr. Veteri's current employment agreement, which became effective April 1,
1997, provides for his employment at a base salary of not less than $750,000 per
year for a period of five years from September 1st of any year in which the
Board of Directors decides, without cause, to terminate Mr. Veteri's agreement.
Mr. Sosman's current employment agreement, which expires October 30, 1997,
provides for his employment as a Vice President of the Company and President of
the Company's Wallace Laboratories Division. His current base salary, effective
as of April 1, 1997, is $521,000. The Company and Mr. Sosman have entered into a
two-year extension of such agreement, effective
9
<PAGE> 12
October 31, 1997, providing for his continued employment in such capacity at a
base salary of not less than $521,000 per year.
Ms. Albright's employment agreement provides for her employment at a base
salary of at least $400,000 per year through December 3, 2000.
In addition to the base salary provided for under the employment
agreements, such persons are entitled to annually determined bonus payments
pursuant to the Company's Profit Sharing Plan. The actual cash compensation paid
to such persons with respect to fiscal 1997 is disclosed in the Summary
Compensation Table.
COMPENSATION OF DIRECTORS
Directors, other than those who are salaried employees of the Company,
receive an annual fee of $35,000 for serving on the Board of Directors and a fee
of $500 for each meeting of the Audit Committee that they attend, but do not
receive a fee for attendance at meetings of the Board of Directors or meetings
of any committee other than the Audit Committee. Directors who are salaried
employees of the Company receive a fee of $250 for each meeting of the Board of
Directors that they attend.
The Company has entered into a three-year consulting agreement effective as
of April 1, 1997 with Daniel J. Black, who was President and Chief Operating
Officer of the Company for more than five years prior to March 28, 1997,
providing for an annual fee of $400,000, pursuant to which he shall render
consulting and advisory services relating to subjects assigned to him by the
Company.
REPORT ON EXECUTIVE COMPENSATION
General
The Company's Compensation Committee, consisting of Messrs. Baldwin, Cruess
and Rinaldi, non-employee Directors of the Company, makes recommendations to the
Board of Directors with respect to the base salaries of the Company's Chief
Executive Officer and its President and Chief Operating Officer. The form and
amount of compensation of the Company's Chief Executive Officer and its
President are then approved by the entire Board of Directors upon the
recommendation of the Compensation Committee. The compensation of all other
executive officers is recommended to the Board for its determination by the
Company's Executive Committee.
The Company's compensation program for its executive officers consists of
the following significant components: annually determined salary; annually
determined bonus payments pursuant to the Company's Profit Sharing Plan; and
periodic grants of restricted and/or deferred stock units and stock options. The
elements of the Company's compensation are designed with different purposes in
mind. Salary and bonus payments are primarily intended to compensate for current
and past performance. Restricted and/or deferred stock units and stock options
are awarded in an effort to provide a strong incentive for outstanding long-term
performance. The restricted and/or deferred stock units are forfeitable
generally if the executive holding the units leaves the Company prior to four
years from the date on which the restricted stock and/or deferred units were
awarded or if such executive is terminated for cause. Awards of restricted stock
and/or deferred units and stock options are directly tied to the interests of
the Company's shareholders, inasmuch as the value of the units will increase or
decrease based upon the future price of the Company's stock and the options will
be of value to the holder only if the future price of the Company's stock
exceeds the price at which the options are exercisable.
In determining the amount and the form of the executive compensation
package for 1997, the Compensation Committee and the Board considered the
Company's overall performance over a number of years rather than considering any
single year. The Compensation Committee also considered the objectives the
Company desires to achieve in the future as well as the challenges with which
the Company would be confronted. Given this overall view, the Compensation
Committee
10
<PAGE> 13
considered several specific factors. They included continued efforts to acquire
and market new drugs, continued efforts to license the Company's products to
others and continued efforts to upgrade the Company's management of its
inventory and thus improve the Company's working capital and cash flow. However,
in making the compensation determination, no specific weight was given to any
one factor. In December 1995, the Company adopted its 1996 Long-Term Incentive
Plan (the "LTIP") under which certain key employees of the Company have been
granted awards of restricted and/or deferred stock, together with options to
purchase the Company's Common Stock, as indicated above.
Chief Executive Officer Compensation
The compensation of Henry H. Hoyt, Jr., the Company's Chief Executive
Officer, in 1997 consisted of salary and bonus payments. In determining Mr.
Hoyt's 1997 base salary, the Compensation Committee continued its practice of
prior years and granted a merit increase in annual salary of 8%. The merit
increase philosophy is to set consistent increases in compensation that will
retain superior executives over a period of years, rather than have fluctuating
increases varying with the annual performance of the Company.
The Company believes it has had and continues to have an appropriate
compensation program. Base salaries, adjusted in accordance with the Company's
merit increase philosophy, together with short-term bonus orientation and
emphasis on long-term equity-based incentives, constitute the crucial elements
of the Company's compensation policy.
Submitted by the Company's Board of Directors:
<TABLE>
<S> <C>
Daniel J. Black Scott C. Hoyt
David M. Baldwin Ralph Levine
Richard L. Cruess, M.D. Herbert M. Rinaldi
Henry H. Hoyt, Jr. Paul A. Veteri
Suzanne H. Garcia
</TABLE>
TAX DEDUCTION CONSIDERATIONS
Section 162(m) of the Internal Revenue Code of 1986 (the "Code") limits to
$1 million the Company's deduction for compensation paid in any taxable year to
the Company's Chief Executive Officer and the Named Executives, subject to an
exception for "performance-based compensation." While compensation paid by the
Company to such individuals will be subject to this deduction limit, income
realized from the exercise of stock options granted under the LTIP will qualify
as performance-based compensation and will be exempt from the limit.
11
<PAGE> 14
PERFORMANCE GRAPH
The following graph compares the yearly change in the cumulative total
shareholder return on the Company's Common Stock for each of the Company's last
five fiscal years with the cumulative total return (assuming reinvestment of
dividends) of (i) the Wilshire 5000 Index and (ii) a peer group of five
companies within the Company's Standard Industry Codes (SIC) and with market
capitalization similar to the Company consisting of the following companies:
A.L. Pharma Inc., Block Drug Company, Inc., Ivax Corporation, Alberto-Culver
Corporation and Del Laboratories.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Carter-Wallace Peer Group Wilshire 5000
<S> <C> <C> <C>
1992 100.0 100.0 100.0
1993 91.1 94.9 112.2
1994 69.4 77.4 112.6
1995 39.9 89.7 124.3
1996 55.5 92.3 160.8
1997 46.8 53.5 182.3
</TABLE>
12
<PAGE> 15
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors will recommend at the Meeting that a resolution be
adopted ratifying the appointment by the Board of Directors of the firm of KPMG
Peat Marwick LLP to audit the financial statements of the Company and its
subsidiaries for the current fiscal year. If the stockholders do not ratify the
appointment of KPMG Peat Marwick LLP as independent auditors, the Board of
Directors will consider the selection of another accounting firm. A
representative of KPMG Peat Marwick LLP is expected to be present at the
Meeting, to have an opportunity to make a statement if he desires to do so and
to be available to answer any questions relating to their audit of the financial
statements of the Company for the fiscal year ended March 31, 1997. The fees
paid by the Company and its subsidiaries for auditing services to this firm were
approximately $890,000 for the fiscal year ended March 31, 1997. See "BOARD OF
DIRECTORS AND COMMITTEES" for information concerning the Company's Audit
Committee.
MANAGEMENT RECOMMENDS A VOTE "FOR" THIS RESOLUTION. PROXIES SOLICITED BY
THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY A CONTRARY
VOTE.
AMENDMENT OF THE 1996 LONG-TERM INCENTIVE PLAN
The LTIP was adopted by the Board of Directors in December 1995 and
approved by the stockholders in February 1996. The purpose of the LTIP is to
advance the interests of the Company and its stockholders by providing corporate
officers of the Company with a larger personal and financial interest in the
success of the Company through stock-based incentive compensation.
The Board of Directors has approved, subject to the approval of the
stockholders, the amendment of the LTIP to provide that participants who retire
under the Company's pension plan may exercise options with respect to the number
of shares as to which the right of exercise had accrued at the time of
retirement at any time prior to expiration of the option term regardless of the
age of such participant at the time of retirement. Prior to the amendment,
persons who retired prior to age 62 were only able to exercise such options
during the three-month period following retirement. The Board of Directors
believes that the age of a participant at the time of retirement should not
determine what his or her rights are with respect to the exercise of options
granted under the LTIP. The amendment, if adopted by the stockholders, will
apply to options currently outstanding as well as those granted in the future.
On June 2, 1997, the closing price of the Company's Common Stock on the New
York Stock Exchange was $16 3/8 per share. See "EXECUTIVE COMPENSATION AND OTHER
INFORMATION" for certain information concerning options granted to certain
executive officers under the LTIP. To date, options covering 1,810,470 shares
have been granted to all executive officers as a group.
The adoption of the proposal to amend the LTIP requires that the number of
votes cast in favor of the proposal constitute at least a majority of the
outstanding shares of Common Stock and Class B Common Stock voting as one class.
Abstentions and broker non-votes will have the same effect as a negative vote
with respect to this matter.
MANAGEMENT RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENT OF THE 1996
LONG-TERM INCENTIVE PLAN. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO
VOTED UNLESS STOCKHOLDERS SPECIFY A CONTRARY VOTE.
INFORMATION ABOUT THE LTIP
The following is a summary of the LTIP as amended by the Board of Directors
and submitted to the stockholders for approval. A copy of the LTIP as amended
will be sent to stockholders upon request.
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<PAGE> 16
Duration of the LTIP. The LTIP will terminate ten years from the date of
its adoption or on such earlier date as the Board of Directors may determine.
Administration. The LTIP is administered by a committee of the Board of
Directors (the "Committee") that consists of at least two directors and that
satisfies the provisions of Rule 16b-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or any successor rule, and Section
162(m)(4)(C)(i) of the Internal Revenue Code of 1986, as amended (the "Code").
Such Committee selects persons to receive awards under the LTIP, determines the
amount of each award and the terms and conditions governing such award,
interprets the LTIP and any awards granted thereunder, establishes rules and
regulations for the administration of the LTIP and takes other action necessary
or desirable for the administration of the LTIP.
Underlying Shares Awarded Under the LTIP. The maximum number of shares
that can be delivered or purchased under the LTIP is 4,500,000 shares of Common
Stock, subject to adjustment in the event of any stock dividend, stock split,
combination of shares, recapitalization, or other similar change in the capital
stock of the Company, or in the event of the merger or consolidation of the
Company into or with any other corporation or the reorganization of the Company.
If, as a result of the termination, expiration or forfeiture of an award or
otherwise, certain shares are no longer subject to an award under the LTIP, such
shares will again be available for future awards under the LTIP.
Amendment of the LTIP. The LTIP may be amended by the Board as the Board
deems advisable; provided, however, that no amendment will become effective
unless approved by affirmative vote of the Company's stockholders if such
approval is necessary for the continued validity of the LTIP or if the failure
to obtain such approval would adversely affect the compliance of the LTIP with
Rule 16b-3 under the Exchange Act or any other rule or regulation. No amendment
may, without the consent of a participant, impair such participant's rights
under any option previously granted under the LTIP. The Board of Directors has
previously amended the LTIP to permit the grant of options, restricted stock or
deferred stock on a stand alone basis rather than requiring that an award
consist of a combination of options and restricted stock and/or deferred stock,
to expand the definition of "cause" as used in the LTIP and to provide that
certificates evidencing shares of restricted stock will be registered in the
name of the Company, rather than the participant, pending vesting or forfeiture.
Those amendments are not being submitted for stockholder approval.
Awards Available Under the LTIP. Pursuant to the LTIP, awards may be
granted to any corporate officer of the Company. Awards consist of options to
purchase Common Stock of the Company, restricted stock, deferred stock or any
combination of the foregoing.
Options. Options awarded under the LTIP are either incentive stock options
under Section 422 of the Code ("incentive stock options") or options not
intended to so qualify ("nonstatutory stock options").
The aggregate fair market value of Common Stock for which a participant is
granted incentive stock options that first become exercisable during any given
calendar year is limited to $100,000. To the extent such limitation is exceeded,
an option will be treated as a nonstatutory stock option.
No corporate officer may be granted options during any consecutive 60-month
period on more than 1,000,000 shares of Common Stock, subject to adjustment in
the event of any stock dividend, stock split, combination of shares,
recapitalization, or other similar change in the capital stock of the Company,
or in the event of the merger or consolidation of the Company into or with any
other corporation or the reorganization of the Company.
An option may be granted for a term not to exceed ten years from the date
of grant. An incentive stock option awarded to a corporate officer who owns
stock possessing more than 10% of the total combined voting power of all classes
of stock of the Company may not, in any event, be exercisable after the
expiration of five years from the date such incentive stock option is granted.
All
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<PAGE> 17
options will be exercisable in accordance with the terms and conditions set
forth in the option agreements evidencing the grant of such options. Except
under limited circumstances involving termination of employment due to death or
disability, a participant may not exercise any option granted under the LTIP
within the first year after the date of the grant of such option.
The price for which shares of Common Stock may be purchased upon the
exercise of an option is the fair market value of such shares on the date of the
grant of such option; provided, however, that an incentive stock option granted
to an employee who owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company must have a purchase price
for the underlying shares equal to 110% of the fair market value of the Common
Stock on the date of grant.
Full payment of the purchase price for shares of Common Stock purchased
upon the exercise, in whole or in part, of an option granted under the LTIP must
be made at the time of such exercise. The LTIP provides that the purchase price
may be paid in cash or in shares of Common Stock valued at their fair market
value on the date of purchase. Alternatively, an option may be exercised in
whole or in part by delivering a properly executed exercise notice, together
with irrevocable instructions, to a broker to deliver promptly to the Company
the amount of sale or loan proceeds necessary to pay the purchase price and
applicable withholding taxes, and any other documents that the Committee deems
necessary.
During a participant's lifetime, options granted under the LTIP may be
exercisable only by such participant. Furthermore, options granted under the
LTIP may not be transferred, other than by will or by the laws of descent and
distribution. Notwithstanding the foregoing, a participant may transfer a
nonstatutory stock option granted under the LTIP to his or her spouse, children
and/or grandchildren, or to one or more trusts for the benefit of such family
members, if the agreement evidencing such option so provides and the participant
does not receive any consideration for the transfer. Any option so transferred
will be subject to the same terms and conditions that applied to such option
immediately prior to its transfer, except that it will not be further
transferable by the transferee during the transferee's lifetime.
If the Company terminates a participant's employment for "cause" (as
defined in the LTIP), such participant may not exercise options received under
the LTIP. If a participant's employment terminates by reason of retirement, such
participant's options may be exercised at any time prior to their expiration,
with respect only to such number of shares of Common Stock as to which the right
of exercise had accrued at the time of termination of employment. If a
participant's employment terminates by reason of death or permanent disability,
such participant's options may be exercised at any time prior to their
expiration, with respect to all shares of Common Stock subject thereto. If a
participant's employment terminates under any other circumstances, the options
will be exercisable for a period of three months following the date of such
termination, with respect only to such number of shares as to which the right of
exercise had accrued at the time of termination of employment. Except in the
event of a participant's death, an incentive stock option exercised more than
three months (or one year if the participant is permanently disabled) following
the participant's termination of employment will be treated as a nonstatutory
stock option.
The following is a brief summary of the principal Federal income tax
consequences under current law relating to options granted under the LTIP. The
grant of an option has no immediate tax consequences to the optionee or the
Company. The exercise of a nonstatutory stock option requires an optionee to
include in income, as compensation, the amount by which the fair market value of
the acquired shares on the exercise date exceeds the option price. Upon a
subsequent sale or taxable exchange of shares acquired upon exercise of a
nonstatutory stock option, an optionee recognizes
15
<PAGE> 18
long or short-term capital gain or loss equal to the difference between the
amount realized on the sale and the tax basis of such shares. The Company is
entitled (provided applicable withholding requirements are met) to a deduction
at the same time and in the same amount as the optionee is in receipt of income
in connection with the exercise of a nonstatutory stock option. If the optionee
exercises an incentive stock option and does not dispose of the acquired shares
within two years after the date of grant of the option nor within one year after
the date of the transfer of such shares to him (a "disqualifying disposition"),
the optionee realizes no compensation income and any gain or loss that the
optionee realizes on a subsequent disposition of such shares is treated as
long-term capital gain or loss. For purposes of computing the alternative
minimum tax, however, the option generally is treated as if it were a
nonstatutory stock option. If an optionee makes a disqualifying disposition, the
optionee is required to include in income, as compensation, the lesser of (i)
the difference between the option price and the fair market value of the
acquired shares on the exercise date or (ii) the amount of gain realized on such
disposition. In addition, depending on the amount received as a result of such
disposition, the optionee may realize long or short-term capital gain or loss.
The Company is entitled to a deduction at the same time and in the same amount
as the optionee is in receipt of compensation income as a result of a
disqualifying disposition. If there is no disqualifying disposition, no
deduction is available to the Company.
Restricted Stock. Restricted stock is evidenced by restricted stock
agreements that set forth the award and reflect the conditions of such award.
Participants who receive a restricted stock award are issued a certificate in
respect of the shares of Common Stock covered by such award. Such certificate is
registered in the name of the Company, which holds it on behalf of the
participant as the beneficial owner thereof pending the vesting or forfeiture of
such shares, and bears an appropriate legend referring to the terms, conditions
and restrictions of the award. Upon the vesting of the restricted stock award, a
new certificate for the shares of Common Stock is issued in the name of the
participant.
A participant who is awarded restricted stock has, subject to certain
limitations, all of the rights of a shareholder of the Company, other than the
right to vote. Cash dividends paid with respect to shares of restricted stock
are deferred and paid to the participant, without any interest thereon and less
any amounts due to the Company, upon the vesting of such restricted stock.
Prior to the vesting of shares of restricted stock, a participant is not
permitted to sell, transfer, pledge, or assign shares of restricted stock, and
any attempt to so sell, transfer, pledge, or assign such shares will be
ineffective.
Restricted stock vests only at the end of the four-year period commencing
with the date of such award, and only if the participant shall have remained in
the employ of the Company throughout such period; provided, however, that under
certain limited circumstances involving the termination of employment due to
retirement, death or permanent disability, or certain other limited cases, such
restricted stock may vest earlier. If a participant's employment terminates by
reason of retirement, any restricted stock award held by such participant vests
with respect to a number of shares determined by multiplying the total number of
shares covered by the restricted stock award by a fraction, the numerator of
which is equal to the number of days from the date of the award to the date of
retirement, and the denominator of which is 1,461; any remaining shares of
restricted stock are forfeited. If employment terminates by reason of death or
permanent disability of the participant, his or her restricted stock vests
immediately. If a participant, other than one who is retiring, voluntarily
terminates employment or is terminated by the Company for "cause" (as defined in
the LTIP), restricted stock held by such participant is forfeited. If a
participant's employment terminates under any other circumstances, any
restricted stock award held by such participant vests with respect to a number
of shares determined by multiplying the total number of shares covered by the
restricted stock award by a fraction, the numerator of which is equal to the
number of days from the date of the award to the date of termination, and the
denominator of which is 1,461; any remaining shares of restricted stock are
forfeited.
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<PAGE> 19
Deferred Stock. Deferred stock, representing the Company's unfunded
promise to transfer shares of Common Stock in the future, is evidenced by
deferred stock agreements that set forth the deferred stock award and reflect
the conditions of such award. Upon the vesting of a deferred stock award, a
participant is issued a stock certificate for a number of shares of Common Stock
equal to the number of shares of deferred stock.
The rights of a participant with respect to deferred stock are no greater
than those of a general creditor of the Company.
An amount equal to any cash dividends paid with respect to the number of
shares of Common Stock covered by a deferred stock award is paid to a
participant, without any interest thereon and less any amounts due to the
Company, upon the vesting of such deferred stock.
Prior to the vesting of shares of deferred stock, a participant is not
permitted to sell, transfer, pledge, or assign shares of deferred stock, and any
attempt to so sell, transfer, pledge, or assign such shares will be ineffective.
The vesting provisions with respect to deferred stock are identical to those
applicable to restricted stock.
Change in Control. Upon the occurrence of a Change in Control (as defined
below), outstanding awards of restricted stock or deferred stock will become
fully vested, and outstanding options will become immediately exercisable. An
option held by a participant upon his or her termination of employment following
a Change in Control will remain exercisable for the balance of its term. Upon
the exercise of an option within one year after the occurrence of a Change in
Control, a participant will be entitled to receive, in addition to the shares of
Common Stock thereby purchased, a cash payment equal to the excess of (i) the
aggregate Change in Control Price (as defined below) of the number of shares of
Common Stock purchased upon such exercise (or which would have been so purchased
but for the substitution or addition of other shares or securities pursuant to
the adjustment provisions of the LTIP) over (ii) the fair market value on the
date of exercise of the shares of Common Stock (or other securities) purchased
upon such exercise.
As used in the LTIP, a "Change in Control" means the acquisition by any
person (including an individual, a corporation, a partnership, an association, a
joint-stock company, a trust, or any unincorporated organization, but excluding
a member of the Hoyt Family or a trust primarily for the benefit of members of
the Hoyt Family or parties controlled by members of the Hoyt Family) in one
transaction or in a series of transactions of (i) shares of stock that would,
alone or aggregated with shares of stock already owned by such person, result in
such person owning more than 50 percent of the voting power of the securities of
the Company possessing the right to vote on the election of directors and all
other matters which require the approval of stockholders generally; (ii) all or
substantially all of the properties and assets of the Company; or (iii) the
power, whether direct or indirect, whether exercised or not, to direct or cause
the direction of the management or policies of the Company, whether through
record or beneficial ownership of voting securities or other equity or debt
interests, by contract, by proxy or otherwise. For purposes of this definition,
the "Hoyt Family" means the family of Henry H. Hoyt, Sr., his descendants, and
members of such descendants' families.
The "Change in Control Price" means the highest price per share paid in any
transaction reported on the New York Stock Exchange Composite Index, or paid or
offered in any bona fide transaction related directly, or in any way indirectly,
to a Change in Control, at any time during the six-month period immediately
preceding the occurrence of the Change in Control.
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<PAGE> 20
STOCKHOLDER PROPOSALS
1. STOCKHOLDER PROPOSAL WITH RESPECT TO CERTAIN ATTRIBUTES OF INDIVIDUALS TO BE
DIRECTORS OF THE COMPANY
Kenneth Steiner, 14 Stoner Avenue, Suite 2-M, Great Neck, New York 11021,
who was the beneficial owner of 500 shares of Common Stock at January 23, 1997,
has given notice that he intends to present a resolution at the Meeting. The
proposed resolution and Mr. Steiner's supporting statement, for which the Board
of Directors and the Company accept no responsibility, are as follows:
INDEPENDENT BOARD
Whereas the board of directors is meant to be an independent body elected
by shareholders charged by law and shareholders with the duty, authority and
responsibility to formulate and direct corporate policies and is to be held to
the highest standards of fiduciary care, duty and loyalty.
Now therefore be it "resolved that the shareholders request that the
Company's Board of Directors be comprised of a majority of independent
directors, meaning that the majority of the board will be non-family members and
individuals who do not currently work or consult with the Company, have been
employed by the Company or have consulted with the Company in the past. This is
meant to be applied only to nominees for directors at meetings subsequent to the
1997 annual meeting."
SUPPORTING STATEMENT
I believe that shareholders will be better served when the majority of the
board is truly independent. Such independent individuals hopefully will bring
true objectivity to serious issues facing our company.
As matter stand today, the majority of the members of the Board of
Directors are either family members, individuals who either are employed by, do
work for, or have been employed by the Company in the past. There is an apparent
conflict of interest each time matters concerning executive compensation
policies, possible takeover offers and corporate governance issues arise. I am a
founding member of the Investors Rights Association of America and I believe
this is a matter that is urgent and must be presented to the shareholders for
action.
I URGE YOUR SUPPORT. VOTE FOR THIS RESOLUTION.
BOARD OF DIRECTORS' STATEMENT IN OPPOSITION
The Board of Directors believes that this proposal would not serve the
Company's best interests and recommends a vote AGAINST it.
The Company has consistently sought to add to its Board of Directors
eminently qualified individuals whom the Company believes would provide
substantial benefit and guidance to the Company. However, the Company finds this
stockholder proposal to be unduly restrictive and wholly inappropriate.
The proposal seeks to impose "independence" requirements that are broad and
arbitrary. To restrict the election of any individual who has been "employed by
the Company or [has] consulted with the Company in the past" is excessively
broad. An individual who has been previously employed or engaged by the Company
will not necessarily lack the independence and "true objectivity" discussed by
the proponent in the supporting statement. Similarly, it cannot be assumed that
a director who is currently employed by or consults with the Company will not
act with objectivity or in the best interest of the stockholders. Individuals
who have a financial stake in the Company are often well suited to protect and
advance the interests of all stockholders. If the Board
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<PAGE> 21
of Directors were to adopt the narrow concept of "independence" set forth in
this stockholder proposal, it would be precluded from seeking as directors many
persons who, through past or present employment or consulting relationships with
the Company, are often the most knowledgeable and familiar with the Company and
its operations and are, thus, in the best position to further the interests of
the Company and its stockholders.
Furthermore, the proposal places limitations on the election of individuals
who have familial ties with members of the Company's management even though such
ties would not necessarily undermine a person's independence or objectivity.
The Board feels that this proposal too narrowly defines the concept of
"independence" as it applies to Directors. The Company believes that it would be
imprudent to adopt and apply the criteria as set forth in the proposal without
evaluating the substance of each relationship in question and the overall
qualifications of a Board nominee. This proposal restricts rather than enhances
the Company's ability to locate the most qualified individuals to serve as
directors. Stockholders ultimately decide on the composition of the Board, and
any stockholder who feels that a particular nominee is not qualified to serve as
a director by reason of lack of independence or objectivity is free to vote as
he or she deems best. The stockholder proposal, if implemented, would merely
limit the freedom of choice presently enjoyed by the Company's stockholders.
For all of the foregoing reasons, the Board of Directors recommends a vote
AGAINST this proposal.
The approval of the above-described proposal requires the favorable vote of
at least a majority of the outstanding shares of Common Stock and Class B Common
Stock voting as one class. Abstentions and broker non-votes will have the same
effect as a negative vote with respect to this matter.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED AGAINST THE
RESOLUTION UNLESS STOCKHOLDERS SPECIFY A CONTRARY VOTE.
2. NON-EMPLOYEE DIRECTORS COMPENSATION PROPOSAL
Dr. Charles Miller, 23 Park Circle, Great Neck, NY 11024, who was the
beneficial owner of 250 shares of Common Stock at January 28, 1997, has given
notice that he intends to present a resolution at the Meeting. The proposed
resolution and Dr. Miller's supporting statement, for which the Board of
Directors and the Company accept no responsibility, are as follows:
STOCK COMPENSATION PROPOSAL
"RESOLVED, that the shareholders recommend that the Board of Directors take
the necessary steps to ensure that from here forward all non-employee directors
should receive a minimum of fifty percent (50%) of their total compensation in
the form of Company stock which cannot be sold for three years."
SUPPORTING STATEMENT
A significant equity ownership by non-employee directors is probably the
best motivator for enhancing shareholder value and facilitating identification
with shareholders.
Traditionally, non-employee directors were routinely compensated with a
fixed fee, regardless of corporate performance. In today's competitive global
economy, outside directors must exercise critical oversight of management's
performance in fostering corporate profitability and shareholder value. All too
often, outside directors' oversight has been too lax, and their actions were too
late to effect any meaningful change.
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<PAGE> 22
The history of public corporations in America has too many examples of
directors passively allowing strategic management errors to occur. This results
in eroding corporate and shareholder value.
When compensation takes the form of company stock, there is a greater
likelihood that outside directors will exercise greater diligence in protecting
their own, as well as corporate, and shareholder interests.
What is being recommended in this proposal is neither novel nor untried. A
number of corporations have already established versions of such practices,
namely, Alexander & Alexander, Baxter International, Hartford Steam Boiler,
James River, McGraw Hill, NYNEX, RJR Nabisco, Sunbeam Corporation, The
Travelers, Westinghouse, Woolworth and Zurn Industries.
In June, 1995, the National Association of Corporate Directors' (NACD) Blue
Ribbon Commission on Director Compensation issued a report urging that directors
of public companies be paid their annual fees primarily in company stock to more
closely align their interests with those of shareholders. Several
widely-reported empirical studies have confirmed the potential efficacy of this
approach. Research conducted by Professor Charles M. Elson of the Stetson
University Law School found that those companies whose outside directors held
substantial amounts of company stock tended both to compensate their executives
more reasonably, and outperform those businesses where the directors held little
or no equity, suggesting a link between director stock ownership and better
corporate oversight and performance.
It can be argued that awarding stock options to outside directors
accomplishes the same purpose of insuring director's allegiance to a company's
profitability as paying them in stock. However, it is my contention that stock
options entail no downside risk, i.e., while stock options offer rewards should
the stock increase, if the stock price decreases, no penalties ensue. There are
few strategies that are more likely to align the interests of outside directors
with those of shareholder than one which results in their sharing of the same
bottom line.
I URGE YOUR SUPPORT. VOTE FOR THIS RESOLUTION!
BOARD OF DIRECTORS' STATEMENT IN OPPOSITION
The Board of Directors believes that this proposal would not serve the
Company's best interests and recommends a vote AGAINST it.
The Board of Directors believes that it is in the best interest of the
Company and its stockholders to attract and retain exceptional individuals to
serve on the Board as non-employee directors. Towards that end, the Company must
provide fair and competitive compensation to its non-employee directors.
The Company believes that its compensation package for its non-employee
directors is competitive with industry standards and, accordingly, gives the
Company the flexibility to attract and retain outstanding non-employee
directors. Furthermore, the Company believes that the current compensation
package is fair and appropriate in light of the obligations and responsibilities
of corporate directors.
In addition, the well-being and long-term viability of the Company demand
directors who are sufficiently committed to the Company and financially
sufficiently independent of the Company that their personal interests in high
stock prices and dividends will not override their judgment. The Company
believes that its compensation policy fosters the impartial judgment of its
non-employee directors.
In conclusion, the Company believes that its compensation program for
non-employee directors is appropriate. The adoption of this proposal would
impose an inflexible policy regarding compensa-
20
<PAGE> 23
tion of non-employee directors that could restrict the Company's ability to
compete with other companies in attracting and retaining the most qualified
non-employee directors.
For all of the foregoing reasons, the Board of Directors recommends a vote
AGAINST this proposal.
The approval of the above-described proposal requires the favorable vote of
at least a majority of the outstanding shares of Common Stock and Class B Common
Stock voting as one class. Abstentions and broker non-votes will have the same
effect as a negative vote with respect to this matter.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED AGAINST THE
RESOLUTION UNLESS STOCKHOLDERS SPECIFY A CONTRARY VOTE.
OTHER BUSINESS
The Board of Directors is not aware of any matters other those referred to
above that may be presented for action at the Meeting. If any other matters
should be presented, the persons named as proxies will vote on such matters in
accordance with their best judgment.
STOCKHOLDER PROPOSALS
Stockholder proposals for presentation at the Company's 1998 Annual Meeting
of Stockholders must be received in writing by the Secretary of the Company at
the Company's executive offices, 1345 Avenue of the Americas, New York, New York
10105, not later than February 16, 1998 in order to be considered for inclusion
in the Company's Proxy Statement and form of proxy.
MISCELLANEOUS
The solicitation of proxies will be by mail and the cost will be borne by
the Company. The Company will request banks, brokers and other nominees,
custodians and fiduciaries to forward proxy material to beneficial owners and to
seek authorization for the execution of proxies, and the Company will reimburse
them for their expense in this connection.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED MARCH 31, 1997 (WITHOUT EXHIBITS) AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION WILL BE MADE AVAILABLE WITHOUT CHARGE TO ANY STOCKHOLDER
UPON WRITTEN REQUEST ADDRESSED TO STEPHEN R. LANG, SECRETARY, AT THE COMPANY'S
PRINCIPAL EXECUTIVE OFFICES, CARTER-WALLACE, INC., 1345 AVENUE OF THE AMERICAS,
NEW YORK, NEW YORK 10105.
BY ORDER OF THE BOARD OF DIRECTORS
STEPHEN R. LANG
Secretary
New York, New York
June 16, 1997
21
<PAGE> 24
P R O X Y
CARTER-WALLACE, INC.
ANNUAL MEETING OF STOCKHOLDERS, JULY 15, 1997
HOTEL DUPONT, 11TH AND MARKET STREETS, WILMINGTON, DELAWARE 19801
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints HENRY H. HOYT, JR. and RALPH LEVINE,
and either of them, as proxies with full power of substitution, to represent
and to vote all shares of Stock of Carter-Wallace, Inc. which the undersigned
is entitled to vote at the Annual Meeting of Stockholders to be held on July
15, 1997, and all adjournments thereof, as designated on the reverse side of
this Proxy.
In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting.
Shares represented by this Proxy will be voted as specified. If no
specification is made, this Proxy will be voted FOR Proposals (1), (2) and (3)
and AGAINST Proposals (4) and (5).
(Continued and to be dated and signed on the reverse side)
Carter-Wallace, Inc.
P.O. Box 11068
New York, N.Y. 10203-0068
<PAGE> 25
/ /
(1) Election of Directors:
WITHHOLD
AUTHORITY
FOR, to vote for all
nominees nominees
listed below / / listed below / / Exceptions / /
D.M. Baldwin, D.J. Black, R.L. Cruess, M.D., S.H. Garcia, H.H. Hoyt, Jr.,
S.C. Hoyt, R. Levine, H.M. Rinaldi, P.A. Veteri
(INSTRUCTION: To withhold authority to vote for an individual nominee,
mark the exceptions box and write that nominee's name on the line below.)
Exceptions_______________________________________________________________
(2) Proposal to ratify the appointment of KPMG Peat Marwick LLP as
independent auditors for the Company for the current fiscal year.
For / / Against / / Abstain / /
(3) Proposal to amend 1996 Long-Term Incentive Plan with respect to the right
of participants who retire under the Company's pension plan to exercise
options.
For / / Against / / Abstain / /
(4) Stockholder proposal relating to certain attributes of individuals to be
directors of the Company.
For / / Against / / Abstain / /
(5) Stockholder proposal relating to the form of compensation to be paid to
non-employee directors.
For / / Against / / Abstain / /
(Please sign exactly as name appears.
If stock is registered in two names,
both should sign.)
DATED__________________________, 1997
SIGNED_______________________________
_____________________________________
VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK. / /
SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
<PAGE> 26
P R O X Y
CARTER-WALLACE, INC.
ANNUAL MEETING OF STOCKHOLDERS, JULY 15, 1997
HOTEL DUPONT, 11TH AND MARKET STREETS, WILMINGTON, DELAWARE 19801
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints HENRY H. HOYT, JR. and RALPH LEVINE,
and either of them, as proxies with full power of substitution, to represent
and to vote all shares of Stock of Carter-Wallace, Inc. which the undersigned
is entitled to vote at the Annual Meeting of Stockholders to be held on July
15, 1997, and all adjournments thereof, as designated on the reverse side of
this Proxy.
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
Shares represented by this Proxy will be voted as specified. If no
specification is made, this Proxy will be voted FOR Proposals (1), (2) and (3)
and AGAINST Proposals (4) and (5).
(Continued and to be dated and signed on the reverse side)
<PAGE> 27
PLEASE MARK BOXES [X] OR [Check Mark] IN BLUE OR BLACK INK.
(1) Election of Directors: [ ] FOR, NOMINEES LISTED BELOW (EXCEPT AS STATED
TO THE CONTRARY BELOW) [ ] WITHHOLD AUTHORITY TO VOTE
FOR ALL NOMINEES LISTED BELOW
D.M. Baldwin, D.J. Black, R.L. Cruess, M.D., S.H.
Garcia, H.H. Hoyt, Jr., S.C. Hoyt, R. Levine, H.M.
Rinaldi, P.A. Veteri
(INSTRUCTION: To withhold authority to vote for an individual nominee, write
that nominee's name on the line below.)
_____________________________________________________________________________
(2) Proposal to ratify the appointment of KPMG Peat Marwick LLP as independent
auditors for the Company for the fiscal year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) Proposal to amend 1996 Long-Term-Incentive Plan with respect to the right of
participants who retire under the Company's pension plan to exercise
options.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) Stockholder proposal relating to certain attributes of individuals to be
directors of the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(5) Stockholder proposal relating to the form of compensation to be paid to
non-employee directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Please sign exactly as name appears. If stock is registered in two names, both
should sign.) Dated: ______________________, 1997
Signed: _______________________________________________________________________
_______________________________________________________________________________
SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
