<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
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)(1) 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 20, 1999
------------------------
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 20, 1999, 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 LLP as independent auditors for the
Company for the current fiscal year;
3. To consider and take action upon an amendment of the Company's 1996
Long-Term Incentive Plan (the "LTIP") to increase by 4,500,000 shares
the number of shares of Common Stock that may be delivered or purchased
pursuant to awards made under the LTIP; and
4. 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 7, 1999 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 18, 1999
<PAGE> 3
CARTER-WALLACE, INC.
1345 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10105
------------------------
ANNUAL MEETING OF STOCKHOLDERS
JULY 20, 1999
------------------------
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 1999 Annual Meeting of Stockholders (the "Meeting") to be
held at the Hotel du Pont, 11th and Market Streets, Wilmington, Delaware 19801,
on Tuesday, July 20, 1999, 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 18, 1999.
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 LLP as independent auditors for the Company and (c) FOR the
proposal to amend the Company's 1996 Long-Term Incentive Plan (the "LTIP"). 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 7, 1999, 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
32,678,381 shares of Common Stock outstanding and entitled to vote and
12,303,718 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 11,931,503 shares of Common Stock, representing 36.51% of
the outstanding shares of Common Stock, and an aggregate of 11,799,630 shares of
Class B Common Stock, representing 95.90% of the outstanding shares of Class B
Common Stock; such holdings represent 83.44%, in the aggregate, of the voting
power of the shares entitled to vote at the Meeting. See "STOCK OWNERSHIP."
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
<PAGE> 4
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
Marc J. Gabelli and various entities directly or indirectly controlled by them
or for which one of them 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 35.97% of the outstanding shares of Common Stock, and
11,754,000 shares of Class B Common Stock, which represent 95.53% 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, and 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 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 35.97% 11,754,000 95.53%
103 Springer Building
3411 Silverside Road
Wilmington, Delaware 19810
MARIO J. GABELLI and MARC J. GABELLI........ 6,133,750(2) 18.77%
One Corporate Center
Rye, New York 10580-1434
HENRY H. HOYT, JR........................... 12,195,651(3)(4) 36.97% 11,785,530(3) 95.79%
1345 Avenue of the Americas
New York, New York 10105
RICHARD L. CRUESS, M.D...................... 11,763,300(3) 36.00% 11,763,300(3) 95.61%
1110 Pine Avenue West
Montreal, H3A 1A3
Quebec, Canada
SUZANNE H. GARCIA........................... 11,773,800(3) 36.03% 11,776,800(3) 95.72%
P.O. Box 5040
Santa Fe, New Mexico 87502
T. ROSIE ALBRIGHT........................... 75,030(4)
DAVID M. BALDWIN............................ 3,000
SCOTT C. HOYT............................... 324
STEPHEN R. LANG............................. 38,863(4)
RALPH LEVINE................................ 181,885(4)
HERBERT M. RINALDI.......................... 9,000
HERBERT SOSMAN.............................. 86,983(4)
PAUL A. VETERI.............................. 175,485(4)
All directors and executive officers of the
Company as a group (22 persons)........... 13,085,750(3)(4) 38.68% 11,799,630(3) 95.90%
</TABLE>
- ---------------
(1) Ownership percentages representing less than one percent of the class
outstanding have been omitted.
2
<PAGE> 5
(2) Based solely upon information contained in Amendment No. 12 to Schedule 13D,
dated April 20, 1999, filed with the Securities and Exchange Commission. The
shares are beneficially owned by Mario J. Gabelli and Marc J. Gabelli and
various entities that they directly or indirectly control or for which one
of them 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, Jr. 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.
(4) Includes 309,172 shares of Common Stock for Henry H. Hoyt, Jr., 75,032
shares for T. Rosie Albright, 38,863 shares for Stephen R. Lang, 178,885
shares for Ralph Levine, 86,983 shares for Herbert Sosman and 170,385 shares
for Paul A. Veteri, respectively, and 1,154,247 shares for all directors and
executive officers as a group, including the persons named above, that may
be acquired within 60 days of the Record Date upon exercise of options
granted to such persons under the LTIP. Does not include 228,796 shares of
Common Stock in the case of Henry H. Hoyt, Jr., 43,104 shares in the case of
T. Rosie Albright, 34,646 shares in the case of Stephen R. Lang, 145,472
shares in the case of Ralph Levine, 37,843 shares in the case of Herbert
Sosman and 132,876 shares in the case of Paul A. Veteri, respectively, and
846,574 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
Eight 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.
<TABLE>
<CAPTION>
DIRECTOR
NAME, AGE, PRINCIPAL OCCUPATION AND OTHER INFORMATION SINCE
- ----------------------------------------------------- --------
<S> <C>
DAVID M. BALDWIN; 70........................................ 1990
Chairman of the Board, David M. Baldwin Realty Co., Inc.
since February 28, 1994.
RICHARD L. CRUESS, M.D.; 69................................. 1977
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 1993 to May 1995.
SUZANNE H. GARCIA; 64....................................... 1997
Owner, La Tierra Beneficiaries (real estate development)
and Santa Fe Ranch since prior to June 1994(2).
HENRY H. HOYT, JR.; 71...................................... 1955
Chairman of the Board of Directors and Chief Executive
Officer of the Company since prior to June 1994(1)(2).
SCOTT C. HOYT; 46........................................... 1988
Vice President, New Products, Carter Products Division
since prior to June 1994.
RALPH LEVINE; 63............................................ 1990
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(1).
HERBERT M. RINALDI; 70...................................... 1977
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(3).
PAUL A. VETERI; 57.......................................... 1990
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(1).
</TABLE>
- ---------------
(1) Member of the Executive Committee.
(2) 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.
(3) The firm of Carella, Byrne, Bain, Gilfillan, Cecchi, Stewart & Olstein
performed legal services for the Company in the fiscal year ended March 31,
1999 ("fiscal 1999").
Directors will be elected by the vote of a majority of the votes of the
outstanding shares of Common Stock and Class B Common Stock voting as one class.
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 fiscal 1999, the Board of Directors held ten 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 fiscal 1999. 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 fiscal 1999. 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 2000 Annual
Meeting of Stockholders should be furnished in writing to the Secretary of the
Company by February 18, 2000 and should indicate the nominee's name, age and
business experience.
The Compensation Committee, composed of Richard L. Cruess, M.D., Chairman,
David M. Baldwin, Suzanne H. Garcia and Herbert M. Rinaldi, met once in fiscal
1999. 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 last three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------------------------ ----------------------------
RESTRICTED SECURITIES
FISCAL OTHER ANNUAL AND DEFERRED UNDERLYING ALL OTHER
NAME AND 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............. 1999 $1,281,400 $794,500 $ 60,942 $1,236,971 277,774 $ 31,548
Chairman of the Board, 1998 1,232,100 639,100 60,851 1,122,605 267,088 32,133
Chief Executive Officer 1997 1,140,800 641,700 63,075 477,090 141,360 22,816
and Director
Ralph Levine.................. 1999 $ 884,000 $548,100 $ 68,905 $ 853,343 191,628 $ 18,886
President and Chief
Operating 1998 850,000 478,100 48,175 774,470 184,260 18,481
Officer and Director(4) 1997 625,000 367,500 56,933 292,680 86,720 12,500
Paul A. Veteri................ 1999 $ 780,000 $483,600 $ 55,113 $ 752,952 169,084 $ 16,764
Executive Vice President, 1998 750,000 421,900 54,427 683,345 162,580 15,647
Chief Financial Officer 1997 600,000 341,300 51,769 271,890 80,560 12,000
and Director(5)
Herbert Sosman................ 1999 $ 402,450 $310,700 $ 67,931 $ -- -- $1,122,165
Vice President, 1998 521,000 273,500 78,861 127,150 30,252 13,466
Pharmaceuticals, U.S.(6) 1997 491,500 258,000 64,687 154,170 45,680 9,830
T. Rosie Albright............. 1999 $ 454,500 $268,400 $104,262 $ 186,176 41,806 $ 8,282
Vice President, 1998 432,667 236,300 50,306 109,820 26,129 5,944
Consumer Products, U.S. 1997 408,000 222,600 61,250 133,110 39,440 3,264
Stephen R. Lang............... 1999 $ 437,792 $234,300 $ 44,970 $ 366,416 81,141 $ 5,614
Vice President, Secretary 1998 425,058 206,400 32,098 197,450 57,440 1,513
and General Counsel(7)
</TABLE>
- ---------------
(1) Included in this amount in fiscal 1999 was $22,502, $29,878, $24,906,
$30,454, $84,099 and $21,532 for Mr. Hoyt, Mr. Levine, Mr. Veteri, Mr.
Sosman, Ms. Albright and Mr. Lang, respectively, relating to withholding
taxes paid by the Company on the employee's behalf in respect of certain
perquisites and other taxable benefits. Also included is $17,791, $18,373,
$17,368, $17,708, $13,503 and $17,838 for Mr. Hoyt, Mr. Levine, Mr. Veteri,
Mr. Sosman, Ms. Albright and Mr. Lang, respectively, representing the
imputed annual income related to a Company provided automobile.
(2) On March 31, 1999, Mr. Hoyt held 228,796 shares of restricted and/or
deferred stock awarded under the LTIP, the market value of which was
$4,118,328, Mr. Levine held 145,472 shares of LTIP stock, the market value
of which was $2,618,496, Mr. Veteri held 132,876 shares of LTIP stock, the
market value of which was $2,391,768, Mr. Sosman held 37,843 shares of LTIP
stock, the market value of which was $681,174, Ms. Albright held 43,104
shares of LTIP stock, the market value of which was $775,872 and Mr. Lang
held 34,646 shares, the market value of which was $623,628. 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, with respect
to fiscal 1998 and 1999 , premiums paid by the Company with respect to the
term life portion of split-dollar life insurance policies with respect to
the Named Executives. The Named Executives do not have any interest in the
cash surrender value under such policies. The vested contributions to the
Supplemental Retirement Savings Plan and the Executive Pension Benefits
Plans for each Named Executive for fiscal 1999 are as follows: Mr.
Hoyt -- $25,625; Mr. Levine -- $17,197; Mr. Veteri -- $15,550; Mr.
Sosman -- $3,278; Ms. Albright -- $7,270 and Mr. Lang -- $3,496. The
premiums paid with respect to the term life portion of the split-dollar
insurance for each Named Executive for fiscal 1999 are as follows: Mr.
Hoyt -- $5,923; Mr. Levine -- $1,689; Mr. Veteri -- $1,214; Mr.
Sosman -- $3,675; Ms. Albright -- $1,012 and Mr. Lang -- $2,118. Also
6
<PAGE> 9
includes $1,115,212 paid to Mr. Sosman in connection with his retirement,
including $1,020,275 of separation pay equal to the present value of two
years' salary and $94,937 of vacation pay.
(4) Mr. Levine was appointed President and Chief Operating Officer effective
April 1, 1997. Prior to that date, he served as Vice President, Secretary
and General Counsel of the Company.
(5) Mr. Veteri was appointed Executive Vice President and Chief Financial
Officer effective April 1, 1997. Prior to that date, he served as Vice
President, Finance and Chief Financial Officer of the Company.
(6) Mr. Sosman retired on December 31, 1998.
(7) Mr. Lang was appointed Vice President, Secretary and General Counsel of the
Company effective April 1, 1997.
The following table contains information concerning options to purchase
shares of the Company's Common Stock granted to the Named Executives pursuant to
the LTIP during fiscal 1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK PRICE
INDIVIDUAL GRANTS APPRECIATION FOR OPTION TERM(3)
----------------------------------------------------- -------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION AT 0% ANNUAL AT 5% ANNUAL AT 10% ANNUAL
NAME GRANTED(#) FISCAL 1999 ($/SHARE)(1) DATE(2) GROWTH RATE GROWTH RATE GROWTH RATE
- ---- ---------- ------------ ------------ ---------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Henry H. Hoyt, Jr....... 277,774 23.29% $17.81 11/01/08 -0- $3,111,676 $7,885,598
Ralph Levine............ 191,628 16.07% $17.81 11/01/08 -0- $2,146,652 $5,440,039
Paul A. Veteri.......... 169,084 14.18% $17.81 11/01/08 -0- $1,894,110 $4,800,047
T. Rosie Albright....... 41,806 3.51% $17.81 11/01/08 -0- $ 468,319 $1,186,811
Stephen R. Lang......... 40,571 3.40% $18.31 4/01/08 -0- $ 467,241 $1,184,081
40,570 3.40% $17.81 11/01/08 -0- $ 454,473 $1,151,723
</TABLE>
- ---------------
(1) Market price of the stock on the date of grant.
(2) These options will become exercisable at the rate of 25% of the total award
in each year commencing on the first anniversary of the date of the grant.
(3) The dollar amounts under these columns are the results of calculations at 0%
and at the 5% and 10% annual appreciation rates set by the Securities and
Exchange Commission for illustrative purposes and, therefore, are not
intended to forecast future financial performance or possible future
appreciation, if any, in the price of Common Stock. Stockholders are,
therefore, cautioned against drawing any conclusion from the appreciation
data shown. Optionees will only realize value from these grants if the price
of Common Stock appreciates, which would benefit all stockholders
commensurately. The Company did not use an alternative formula for grant
valuation as it is not aware of any formula that will determine, with
reasonable accuracy, a present value based on future unknown or volatile
factors.
7
<PAGE> 10
No options were exercised by the Named Executives during fiscal 1999. The
following table sets forth information with respect to the unexercised options
held by them at March 31, 1999.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT MARCH 31, 1999(#) AT MARCH 31, 1999($)(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Henry H. Hoyt, Jr......................... 309,172 606,010 $1,127,162 $851,288
Ralph Levine.............................. 178,885 403,003 $ 630,027 $521,892
Paul A. Veteri............................ 170,385 361,119 $ 609,731 $484,496
Herbert Sosman............................ 86,983 64,389 $ 352,226 $209,878
T. Rosie Albright......................... 75,032 97,383 $ 303,812 $188,955
Stephen R. Lang........................... 14,360 124,221 $ 61,030 $190,697
</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, 1999 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
covered compensation 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 of 1986, as amended (the
"Code") (currently $130,000, 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 10 YEARS 20 YEARS 30 YEARS 40 YEARS 50 YEARS
COMPENSATION SERVICE SERVICE SERVICE SERVICE SERVICE
------------ -------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 600,000 $116,705 $ 233,410 $ 351,762 $ 471,762 $ 591,762
$ 800,000 $156,705 $ 313,410 $ 471,762 $ 631,762 $ 791,762
$1,000,000 $196,705 $ 393,410 $ 591,762 $ 791,762 $ 991,762
$1,200,000 $236,705 $ 473,410 $ 711,762 $ 951,762 $1,191,762
$1,400,000 $276,705 $ 553,410 $ 831,762 $1,111,762 $1,391,762
$1,600,000 $316,705 $ 633,410 $ 951,762 $1,271,762 $1,591,762
$1,800,000 $356,705 $ 713,410 $1,071,762 $1,431,762 $1,791,762
$2,000,000 $396,705 $ 793,410 $1,191,762 $1,591,762 $1,991,762
$2,200,000 $436,705 $ 873,410 $1,311,762 $1,751,762 $2,191,762
$2,400,000 $476,705 $ 953,410 $1,431,762 $1,911,762 $2,391,762
$2,600,000 $516,705 $1,033,410 $1,551,762 $2,071,762 $2,591,762
</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, 1999.
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 $2,075,900 and 47 years for Mr. Hoyt; $1,432,100 and 35 years for
Mr. Levine; $1,263,600 and 22 years for Mr. Veteri; $722,900 and three years for
Ms. Albright and $672,092 and two years for Mr. Lang.
EMPLOYMENT AGREEMENTS AND TERMINATION AND CHANGE IN CONTROL ARRANGEMENTS
The Company has entered into employment agreements with Messrs. Levine and
Veteri and Ms. Albright.
The employment agreements with Mr. Levine and Mr. Veteri provide for their
employment at base salaries of not less than $884,000 and $780,000,
respectively. Pursuant to these agreements, each of Mr. Levine and Mr. Veteri
will be entitled to certain additional payments if his employment is terminated
by the Company for any reason other than for cause or is terminated by him as a
result of a diminution in his position, authority, duties or responsibilities or
in certain other circumstances. In such event, Mr. Levine or Mr. Veteri, as the
case may be, shall receive a lump sum payment equal to three times the sum of
his annual base salary at the time of termination and the greater of 100% of the
target bonus for the year of termination or the highest bonus earned by him in
any of the three preceding years. In addition, he shall receive an increased
benefit under the Company's Executive Pension Benefits Plan based on his final
salary and bonus as determined above and credit for five additional years of
service and, in the case of Mr. Veteri, five additional years of age, and he and
his family will be eligible to continue to participate in certain benefit
programs, including medical and life insurance, for three years following
termination or such longer period as an applicable plan or program provides. Mr.
Levine and Mr. Veteri will be made whole on an after-tax basis in the event any
excise tax becomes payable on such payments and other amounts they are entitled
to receive from the Company.
Ms. Albright's employment agreement provides for her employment at a base
salary of at least $400,000 per year through December 3, 2000.
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<PAGE> 12
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 1999 is disclosed in the Summary
Compensation Table.
The Company has also entered into agreements with certain executive
officers, including Ms. Albright and Mr. Lang, that provide for continuation of
their employment for two years in the event of a Change in Control of the
Company. During such two-year period, they will be entitled to receive a salary
equal to the highest annual base salary for any of the three fiscal years
immediately preceding the Change in Control and an annual bonus equal to the
greater of 100% of the target bonus for the year in which the Change in Control
occurs or the highest bonus earned during the three-year period preceding the
Change in Control and to receive benefits at least equal to those in effect at
the time the Change in Control occurs. If employment is terminated by the
Company for any reason other than for cause or is terminated by the officer as a
result of a diminution in position, authority, duties or responsibilities or in
certain other circumstances, the Company shall be obligated to pay such officer
a lump sum payment equal to two times the annual salary and bonus determined in
the manner described above and an increased benefit under the Company's
Executive Pension Benefits Plan based on final salary and bonus as determined
above and credit for three additional years of service and treating such benefit
as fully vested. In addition, the Company will continue the benefits specified
above for a two-year period following termination of employment or such longer
period as an applicable plan or program provides. The executive officers will be
made whole on an after-tax basis in the event any excise tax becomes payable on
such payments and other amounts they are entitled to receive from the Company.
Pursuant to the LTIP, outstanding awards of restricted and deferred stock
become fully vested and outstanding options become immediately exercisable upon
the occurrence of a Change in Control of the Company. In addition, upon
termination of employment following a Change in Control, options will remain
exercisable for the balance of their term and, upon exercise of an option within
one year after the occurrence of a Change in Control, the optionee will be
entitled to receive, in addition to the shares of Common Stock thereby
purchased, a cash payment in respect of each such share equal to the excess, if
any, of the highest price paid or offered for the Common Stock during the
six-month period preceding the Change in Control over the market price of the
Common Stock on the date of exercise.
A Change in Control also results in the immediate vesting and payment of
benefits under the Executive Pension Benefits Plans and, in the case of certain
officers (including certain of the Named Executives), the elimination of early
retirement reductions. Participants will be made whole on an after-tax basis in
the event any excise tax becomes payable as a result of the payment of benefits
under the Executive Pension Benefits Plan.
Change in Control is defined for purposes of the LTIP, the Executive
Pension Benefits Plans and the agreements described above with certain executive
officers as the acquisition by any person, other than a member of the Hoyt
family or trusts for the benefit of or parties controlled by them, of (i) more
than 25% of the voting power of the Company's outstanding securities, (ii)
certain changes in the composition of the Company's Board of Directors, (iii)
certain business combination transactions or (iv) any other event that the Board
of Directors determines, in its discretion, would materially alter the structure
of the Company or its ownership.
COMPENSATION OF DIRECTORS
Directors, other than those who are salaried employees of the Company,
receive an annual fee of $45,000 for serving on the Board of Directors and a fee
of $500 for each meeting of the Audit Committee that they attend. Dr. Cruess and
Mr. Rinaldi each received a fee of $10,417 in fiscal 1999 for serving on a
special committee of the Board. 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 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 rendered
consulting and
10
<PAGE> 13
advisory services relating to subjects assigned to him by the Company. The
consulting agreement was terminated on September 16, 1998 upon Mr. Black's
resignation as a director. Mr. Black had received $183,333 under the consulting
agreement in fiscal 1999 prior to its termination.
REPORT ON EXECUTIVE COMPENSATION
General
The Company's Compensation Committee, consisting of Messrs. Baldwin, Cruess
(Chairman) and Rinaldi and Mrs. Garcia, 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 base salary of the Company's Chief Executive Officer and
its President are determined by the entire Board of Directors after
consideration of 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 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 and stock options are
awarded in an effort to provide a strong incentive for outstanding long-term
performance. The restricted and/or deferred stock is forfeitable generally if
the executive leaves the Company prior to four years from the date on which the
restricted and/or deferred stock was awarded or if such executive is terminated
for cause. Awards of restricted and/or deferred stock and stock options are
directly tied to the interests of the Company's shareholders, inasmuch as the
value of the restricted and/or deferred stock 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 fiscal 1999, 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 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 the LTIP, under which
certain key employees of the Company have been granted awards of restricted
and/or deferred stock and 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 fiscal 1999 consisted of salary and bonus payments. In determining
Mr. Hoyt's fiscal 1999 base salary, the Compensation Committee granted a merit
increase in annual salary of 4%.
Submitted by the Company's Board of Directors:
<TABLE>
<S> <C>
David M. Baldwin Scott C. Hoyt
Richard L. Cruess, M.D. Ralph Levine
Suzanne H. Garcia Herbert M. Rinaldi
Henry H. Hoyt, Jr. Paul A. Veteri
</TABLE>
11
<PAGE> 14
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.
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:
Alpharma Inc., Block Drug Company, Inc., Ivax Corporation, Alberto-Culver
Corporation and Del Laboratories.
[FIVE YEAR CUMULATIVE RETURN PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
CARTER-WALLACE PEER GROUP WILSHIRE 5000
-------------- ---------- -------------
<S> <C> <C> <C>
'1994' 100.00 100.00 100.00
'1995' 58.50 119.00 113.10
'1996' 82.80 136.30 149.60
'1997' 70.40 111.30 172.80
'1998' 92.90 125.10 255.30
'1999' 92.50 148.50 288.80
</TABLE>
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
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 LLP as independent auditors, the Board of Directors will consider the
selection of another accounting
12
<PAGE> 15
firm. A representative of KPMG 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 fiscal 1999. The fees paid to this firm by the
Company and its subsidiaries for auditing services were approximately $830,000
for fiscal 1999. See "BOARD OF DIRECTORS AND COMMITTEES" for information
concerning the Company's Audit Committee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS RESOLUTION. PROXIES
SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY
A CONTRARY VOTE.
PROPOSAL TO AMEND THE 1996 LONG-TERM INCENTIVE PLAN
The Board of Directors has approved, subject to the approval of the
stockholders, the amendment of the LTIP to increase the aggregate number of
shares of Common Stock that may be delivered or purchased pursuant to awards
made thereunder by 4,500,000 shares, from 4,500,000 shares to 9,000,000 shares.
All but 6,159 of the shares authorized pursuant to the LTIP as originally
adopted have either been issued pursuant to or are currently subject to awards
made pursuant to the LTIP. In addition, awards covering an additional 87,355
shares of Common Stock were granted during fiscal 1999 to executive officers of
the Company subject to the adoption of the proposed amendment, including options
to purchase 8,080 shares and 2,020 shares of deferred stock awarded to Mr. Hoyt,
options to purchase 5,574 shares and 1,394 shares of deferred stock awarded to
Mr. Levine, options to purchase 4,919 shares and 1,230 shares of deferred stock
awarded to Mr. Veteri, options to purchase 2,568 shares and 642 shares of
deferred stock awarded to Ms. Albright, options to purchase 2,492 shares and 623
shares of deferred stock awarded to Mr. Lang and options to purchase 69,884
shares and 17,471 shares of deferred stock awarded to executive officers of the
Company as a group, including the Named Executives. These awards are reflected
in the applicable tables under the heading "EXECUTIVE COMPENSATION AND OTHER
INFORMATION" above.
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 the grant
of stock-based incentive compensation. The Board of Directors believes that the
LTIP has benefited the Company and its stockholders and, thus, recommends that
the stockholders authorize the continuance of the LTIP by approving the proposed
increase in the number of shares of Common Stock that may be delivered or
purchased thereunder.
On June 7, 1999, the closing price of the Company's Common Stock on the New
York Stock Exchange was $18.125 per share.
The adoption of the proposal to amend the LTIP to increase the aggregate
number of shares of Common Stock that may be delivered or purchased pursuant to
awards made thereunder requires that the number of votes cast in favor of the
proposal constitute at least a majority of the votes 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 negative votes on this proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS 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.
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 proposed
to be amended will be sent to stockholders upon request.
GENERAL INFORMATION ABOUT THE LTIP
Duration of the LTIP. The LTIP will terminate on December 7, 2005 or 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
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<PAGE> 16
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 may
take any other action necessary or desirable for the administration of the LTIP.
Underlying Shares Awarded Under the LTIP. The maximum number of shares
that could be delivered or purchased under the LTIP is 9,000,000 shares of
Common Stock, subject to adjustment to preserve the value of an award in the
event of any change in the outstanding Common Stock by reason 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 were no longer subject to an
award under the LTIP, such shares would 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 shareholders 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.
AWARDS AVAILABLE UNDER THE LTIP
Pursuant to the LTIP, awards may be granted to any corporate officer of the
Company, whether or not a director. Awards shall consist of (i) options to
purchase Common Stock of the Company ("Options"), (ii) restricted stock
("Restricted Stock"), (iii) deferred stock ("Deferred Stock") or (iv) a
combination of the foregoing. There are currently 19 corporate officers, all of
whom have previously received awards under the LTIP. Except as set forth above
with respect to the awards covering 87,355 shares of Common Stock that have been
made subject to the approval of the amendment of the LTIP, it is not possible to
state in advance the number or identity of future grantees under the LTIP or any
amounts to be awarded under the LTIP as amended.
Options. Options awarded under the LTIP will be either Options intended to
qualify as 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 will be 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 or the like.
An Option may be granted for a term not to exceed ten years from the date
such Option is granted. An Incentive Stock Option awarded to an employee 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.
The price at 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; 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 shall 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. For purposes of the LTIP, the fair market value of a share of
Common Stock on a specified date is the closing price of the Common Stock on
such date on the
14
<PAGE> 17
New York Stock Exchange or, if no such sale of Common Stock occurs on such date,
the fair market value of the Common Stock as determined by the Committee in good
faith.
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 will be
exercisable only by such participant. Furthermore, any 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 any Options received
under the LTIP. If a participant's employment terminates by reason of retirement
at any time after first becoming eligible to elect an immediate retirement
benefit under the Retirement Plan or 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. The Board of
Directors may, in its discretion, waive or modify the vesting and exercisability
restrictions applicable following termination of employment but in no event may
an Option be exercised after expiration of its term. 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 grant of an Option will have no immediate tax consequences to the
participant or the Company. The exercise of a Nonstatutory Stock Option will
require the participant to include in income, as compensation, the amount by
which the fair market value of the acquired shares on the exercise date exceeds
the purchase price. Upon a subsequent sale or taxable exchange of shares
acquired upon exercise of a Nonstatutory Stock Option, a participant will
recognize 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 will be entitled to a deduction at the same time and in the same amount
as the participant is in receipt of income in connection with the exercise of a
Nonstatutory Stock Option.
If a participant 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 the
participant (a "disqualifying disposition"), the participant will realize no
compensation income and any gain or loss that the participant realizes on a
subsequent disposition of such shares will be treated as long-term capital gain
or loss. For purposes of computing the alternative minimum tax, however, the
Option generally will be treated as if it were a Nonstatutory Stock Option. If a
participant makes a disqualifying disposition, the participant will be required
to include in income, as compensation, the lesser of (i) the difference between
the purchase 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
participant may realize long or short-term capital gain or loss. The Company
will be entitled to a deduction at the same time and in the same amount as the
participant is in receipt of compensation income as a result of a
15
<PAGE> 18
disqualifying disposition. If there is no disqualifying disposition, no
deduction will be available to the Company.
Restricted Stock. Participants who receive a Restricted Stock award are
issued a certificate in respect of the shares of Common Stock covered by such
award that is registered in the name of such participant and bears an
appropriate legend referring to the terms, conditions and restrictions of the
award. Such certificate may, in the Committee's discretion, be placed in escrow
pending the vesting or forfeiture of such Restricted Stock.
A participant who is awarded Restricted Stock will, subject to certain
limitations, have all of the rights of a shareholder of the Company, including
the right to vote shares. Cash dividends paid with respect to shares of
Restricted Stock will be deferred and will be 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 at the end of the four-year period commencing with
the date of an award if the participant shall have remained in the employ of the
Company throughout such period. If a participant's employment terminates by
reason of retirement, death or permanent disability, such participant's
Restricted Stock will vest 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 will
be forfeited. If a participant's employment terminates under any other
circumstances, Restricted Stock held by such participant will vest 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 shall be forfeited. The Board of Directors may, in its
discretion, waive or modify the vesting restrictions applicable to Restricted
Stock following termination of employment.
Deferred Stock. Deferred Stock represents the Company's unfunded promise
to transfer shares of Common Stock in the future. Upon the vesting of a Deferred
Stock award, a participant will be 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.
Prior to the vesting of shares of Deferred Stock, a participant will not be
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.
An amount equal to 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.
Deferred Stock vests at the end of the four-year period commencing with the
date of such award if the participant shall have remained in the employ of the
Company throughout such period. If a participant's employment terminates by
reason of retirement, death or permanent disability, such participant's Deferred
Stock will vest 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), Deferred Stock held by such participant will be
forfeited. If a participant's employment terminates under any other
circumstances, Deferred Stock held by such participant will vest with respect to
a number of shares determined by multiplying the total number of shares covered
by the Deferred 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 Deferred Stock shall
be forfeited. The Board of Directors may, in its discretion, waive or modify the
vesting restrictions applicable to Deferred Stock following termination of
employment.
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<PAGE> 19
CHANGE IN CONTROL
Upon the occurrence of a Change in Control (as defined in the LTIP),
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 over (ii) the fair market value on the
date of exercise of the shares of Common Stock purchased upon such exercise. 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.
OTHER BUSINESS
The Board of Directors is not aware of any matter other those referred to
above that may be presented for action at the Meeting. If any other matter
should be presented, the persons named as proxies will vote on such matter in
accordance with their best judgment.
SUBMISSION OF STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Stockholder proposals for presentation at the Company's 2000 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 18, 2000 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, 1999 (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 18, 1999
17
<PAGE> 20
P R O X Y CARTER-WALLACE, INC.
ANNUAL MEETING OF STOCKHOLDERS, JULY 20, 1999
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. that the undersigned is
entitled to vote at the Annual Meeting of Stockholders to be held on July 20,
1999, 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).
(Continued and to be dated and signed on the reverse side)
CARTER-WALLACE, INC.
P.O. BOX 11068
NEW YORK, NY 10203-0068
--------------
--------
| |
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS (1), (2) AND (3).
(1) Election of Directors: FOR all nominees
listed below
WITHHOLD AUTHORITY to vote *EXCEPTIONS -----
for all nominees listed below | X |
-----
Nominees: D.M. Baldwin, R. L. Cruess, M.D., S.H. Garcia, H.H. Hoyt, Jr.,
S.C. Hoyt, R. Levine, H.M. Rinaldi, P.A. Veteri
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
*Exceptions
---------------------------------------------------------------------
(2) Proposal to ratify the appointment of KPMG LLP as independent auditors for
the Company for the current fiscal year.
FOR AGAINST ABSTAIN
(3) Proposal to amend the Company's 1996 Long-Term Incentive Plan to increase
the number of shares of Common Stock that may be delivered or purchased
pursuant to awards made thereunder.
FOR AGAINST ABSTAIN
Change of Address and
or Comments Mark Here
(Please sign exactly as name appears. If stock
is registered in two names, both should sign.)
DATED: , 1999
----------------------------------
| SIGNED:
| ---------------------------------------
|
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SIGN, DATE AND RETURN THE VOTES MUST BE INDICATED
PROXY CARD PROMPTLY USING (X) IN BLACK OR BLUE INK. X
THE ENCLOSED ENVELOPE.
