COMPENSATION OF DIRECTORS
In 1999, each director of the Company who was not an officer of the
Company or a subsidiary received (a) a fee of $1,000 for each meeting of
the Board (with the exception of meetings not held at the Company's
headquarters, for which a fee of $2,000 was paid), and (b) a fee of $1,000
for each meeting of a permanent committee of the Board. For 1999, the
annual retainers for serving on the Board of Directors of the Company and
for serving as Chairman of a permanent committee were $20,000 and $4,000,
respectively. Under the 1996 Non-Employee Directors' Stock Plan, as
amended, each director receives 50% of his or her annual retainer in the
form of common stock and may also elect to receive all or a portion of the
remainder of his or her retainer in the form of common stock.
Pursuant to the 1996 Non-Employee Directors' Stock Plan (the "1996
Plan") on April 22, 1999, Messrs. Curl, Fox, Furek and Hotard and Mrs. Fore
each elected to receive all of the remainder of the retainer in stock, and
accordingly received an aggregate of 621 shares of the Company's common
stock, issued at fair market value, as such term is defined in the 1996
Plan. Messrs. Kelly, Saglio and Whitesides and Mrs. Goss each received 50%
of their retainer in stock, and accordingly received 310 shares of the
Company's common stock which were issued at fair market value, as such term
is defined in the 1996 Plan. In addition, on December 31, 1999, each
outside director was granted 300 shares of the Company's common stock
pursuant to the Company's 1994 Stock Plan for Outside Directors which were
issued at fair market value, as such term is defined in that plan. As of
December 31, 1999, the aggregate value computed as of the respective dates
of grant of the shares of the Company's common stock received by Messrs.
Curl, Fox, Furek and Hotard and Mrs. Fore was $31,760. The aggregate value
computed as of the respective dates of grant of the shares of the Company's
common stock received by Messrs. Kelly, Saglio and Whitesides and Mrs. Goss
was $21,749.
COMPENSATION OF EXECUTIVE OFFICERS
The following table contains information concerning compensation
paid or to be paid to the chief executive officer ("CEO") and the other
four most highly compensated executive officers of the Company for services
rendered to the Company and its subsidiaries during the past three
completed fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------------
ANNUAL COMPENSATION AWARDS
------------------- ------
NAME, AGE,
PRINCIPAL POSITION
AND EXPERIENCE OTHER ANNUAL(1) RESTRICTED STOCK OPTIONS ALL OTHER
WITH THE COMPANY YEAR SALARY($) BONUS($) COMPENSATION($) AWARDS($)(2) (#) COMPENSATION($)(3)
---------------- ---- --------- -------- --------------- ---------------- -------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
K. Grahame Walker, 62 1999 692,500 539,630 10,010 363,600 55,000 192,171
Chairman and
Chief Executive 1998 660,000 164,835 9,239 384,100 64,000 130,894
Officer since 1993,
President from 1997 615,563 461,670 9,025 373,438 55,000 168,321
1993 to Sept. 1999
Kathleen Burdett, 44 1999 275,500 180,330 762 170,438 17,500 54,411
Vice President and
Chief Financial 1998 261,250 57,420 692 183,700 16,000 46,535
Officer,
since 1995 1997 247,000 156,730 789 164,313 10,000 63,057
David G. Gordon, 48 1999 256,333 124,537 1,051 132,563 15,000 46,645
President and Chief
Operating Officer 1998 223,750 39,774 580 125,250 15,000 30,739
since September 1999
(Vice President and 1997 211,000 83,084 44,271 119,500 10,000 45,760
President, Nonwoven
Materials Business
1996 to Sept. 1999;
President of D&S
Plastics International
from prior to 1995
to 1996)
John D. Thompson, 50 1999 219,750 143,840 927 124,988 15,000 43,191
Senior Vice
President, 1998 211,000 44,270 0 125,250 15,000 36,588
Strategic and
Business 1997 203,125 122,050 1,020 119,500 6,000 47,531
Development
since 1995
Bruce H. Beatt, 47 1999 220,250 114,420 929 124,988 9,000 40,195
Vice President,
General Counsel 1998 209,875 36,690 857 125,250 8,000 32,424
and Secretary
since 1992 1997 201,625 106,730 608 119,500 6,000 42,399
--------------
(1) The other annual compensation reported above includes the amounts
paid by the Company to the executive officers for reimbursement
of income taxes incurred by the executive officers in connection
with the term life insurance premiums paid by the Company on the
executive officers' behalf. For David G. Gordon, the other annual
compensation reported above also includes relocation expenses of
$43,356 in 1997.
(2) The restricted stock awards reported above, which were made
pursuant to the 1999 Plan in 1999, show the dollar value of such
awards on the date of grant. As of December 31, 1999, the
aggregate number and value of restricted shares held by the named
executive officers are as follows: K. Grahame Walker -- 51,434
shares, $2,044,502; Kathleen Burdett -- 21,142 shares, $840,395;
David G. Gordon -- 11,460 shares, $455,535; John D. Thompson -
14,796 shares, $588,141 and Bruce H. Beatt -- 13,972 Shares,
$555,387. Unless and until the restricted shares are forfeited,
dividends will be paid on such shares. Additional information
regarding the restricted shares issued to the named executive
officers is set forth below under the heading "Long Term
Incentive Plan -- Awards in Last Fiscal Year."
(3) The other compensation reported above for all executive officers
is composed of five principal components: (a) the contribution
payable under the Dexter ESPRIT Plan, (b) the benefit payable
under the Amended and Restated Retirement Equalization Plan, and
(c) term life insurance premiums. The respective amounts for each
of the named executive officers are as follows: K. Grahame Walker
-- $19,378, $160,820 and $11,966; Kathleen Burdett -- $19,232,
$34,319 and $860; David G. Gordon -- $19,286, $26,103 and $1,256;
John D. Thompson -- $19,259, $22,824 and $1,108; and Bruce H.
Beatt -- $19,151, $19,934 and $1,110.
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table discloses information concerning
individual grants of stock options made during the last completed fiscal
year to the executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
POTENTIAL REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
FOR OPTION TERM
--------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION 5% 10%
NAME GRANTED (#) FISCAL YEAR ($/SHARE) DATE ($)(A) ($)(A)
---- ------------ ------------ ---------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
K. Grahame Walker 18,333 7.7% $37.7188 April 22, 2005 $235,176 $533,533
18,333 7.7% $37.7188 April 22, 2006 $281,509 $656,037
18,334 7.7% $37.7188 April 22, 2007 $330,178 $790,833
Kathleen Burdett 5,833 2.4% $37.7188 April 22, 2005 $ 74,826 $169,754
5,833 2.4% $37.7188 April 22, 2006 $ 89,586 $208,731
5,834 2.4% $37.7188 April 22, 2007 $105,065 $251,648
David G. Gordon 5,000 2.1% $37.7188 April 22, 2005 $ 64,140 $145,512
5,000 2.1% $37.7188 April 22. 2006 $ 76,777 $178,922
5,000 2.1% $37.7188 April 22, 2007 $ 90,045 $215,674
John D. Thompson 3,000 1.3% $37.7188 April 22, 2005 $ 38,484 $ 87,307
3,000 1.3% $37.7188 April 22. 2006 $ 46,066 $107,353
3,000 1.3% $37.7188 April 22, 2007 $ 54,027 $129,404
Bruce H. Beatt 3,000 1.3% $37.7188 April 22, 2005 $ 38,484 $ 87,307
3,000 1.3% $37.7188 April 22. 2006 $ 46,066 $107,353
3,000 1.3% $37.7188 April 22, 2007 $ 54,027 $129,404
-------------
(a) The five percent and ten percent rates of appreciation were set
by the Securities and Exchange Commission and are not intended to
forecast future appreciation of the Company's common stock.
</TABLE>
The option grants described in the foregoing table were made pursuant to
the 1999 Plan. On April 22, 1999, three grants of stock options were made
to each of the above-named executive officers. The first grant will vest on
April 22, 2000, the second grant will vest on April 22, 2001, and the third
grant will vest on April 22, 2002. All grants become exercisable without
regard to any performance-based conditions upon vesting. All options expire
five years after vesting. The exercise price for all options granted in
1999 under the 1999 Plan is the fair market value per share of the
Company's common stock on the date of grant and is not subject to change.
The 1999 Plan permits the grant of stock appreciation rights in tandem with
options or as freestanding awards.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The table set forth below discloses certain information
concerning the exercise of stock options during the last completed fiscal
year by the executive officers named in the Summary Compensation Table as
well as certain information concerning the number and value of unexercised
options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AND SARS
OPTIONS AND SARS AT FY-END($)(A)
AT FY-END(#)
---------------- ----------------
SHARES
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED UNEXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
K. Grahame Walker.. 21,666 $196,869 101,500 / 116,001 $1,003,634 / $291,618
Kathleen Burdett.. 4,000 $ 16,167 19,333 / 31,501 $174,212 / 68,261
David G. Gordon... 414 $ 4,428 29,586 / 28,334 $300,610/ $63,183
John D. Thompson.. 2,000 $ 10,062 13,000 / 16,334 $132,427/ $37,906
Bruce H. Beatt.... 2,666 $ 21,434 12,834 / 16,334 $130,041/ $37,906
----------
(a) The value of unexercised options was determined using the closing
price of the Company's common stock as of December 31, 1999.
</TABLE>
LONG TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR
The table set forth below discloses certain information concerning
the grant of restricted shares of the Company's common stock during the
last completed fiscal year to the executive officers named in the Summary
Compensation Table. The grants were made pursuant to the 1999 Plan.
<TABLE>
<CAPTION>
LONG TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR
NUMBER OF PERFORMANCE ESTIMATED FUTURE PAYOUTS UNDER
SHARES, OR OTHER NON-STOCK PRICE-BASED PLANS
UNITS PERIOD UNTIL ------------------------------------------------------
OR OTHER MATURATION OR THRESHOLD(B) TARGET(C) MAXIMUM(C)
NAME RIGHTS PAYOUT(A) (# OF SHARES) (# OF SHARES) (# OF SHARES)
----- --------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
K. Grahame Walker 9,600 April 22, 2002 2,400 9,600 9,600
Kathleen Burdett 4,500 April 22, 2002 1,125 4,500 4,500
David G. Gordon 3,500 April 22, 2002 875 3,500 3,500
John D. Thompson 3,300 April 22, 2002 825 3,300 3,300
Bruce H. Beatt 3,300 April 22, 2002 825 3,300 3,300
--------------
(a) The restricted shares reported in this table were granted to the
named executive officers on April 22, 1999, and are subject to two
types of restrictions: (a) restrictions based on the achievement by
the Company of certain financial targets during the three year
period commencing on January 1, 1999 and ending on December 31,
2001 ("performance target restrictions"), and (b) restrictions
based on continuous employment by the Company over specified
periods of time ("time-lapse restrictions"). Seventy-five percent
of the restricted shares granted to each executive officer are
subject to both performance target restrictions and time-lapse
restrictions. The remaining twenty-five percent are subject solely
to time- lapse restrictions, which will lapse if the executive
officer remains in the Company's employment through the date set
forth in this column.
(b) If the Company fails to achieve at least 85% of the financial
targets established for the performance target restrictions, then
all the shares subject to performance target restrictions will be
forfeited. Thus, the "Threshold" amount shown in this column is the
number of restricted shares which are subject solely to time-lapse
restrictions.
(c) The "Target" amount reflects the number of shares for which the
performance restrictions will lapse if the Company achieves 100% of
the financial targets. No additional shares will be awarded if the
Company achieves more than 100% of the financial targets.
Accordingly, the "Maximum" amount is the same as the "Target"
amount.
</TABLE>
PENSION PLANS
The Company maintains the Dexter Pension Plan for the employees of
certain business units. Employees are eligible to participate in the
pension plan after one year of service and after attaining age 21 and
become fully vested after five years of service. The annual benefit payable
upon normal retirement is equal to the sum of: (i) 1.5% of a participant's
average compensation times the participant's years of service prior to
January 1, 1976; (ii) 1% of the participant's average annual compensation
times the participant's years of service after December 31, 1975; and (iii)
.5% of the participant's average annual compensation in excess of Social
Security covered compensation times the participant's years of service
after December 31, 1975. For purposes of calculating the annual benefit, a
participant shall be credited with no more than 35 years of service. The
annual benefit payable upon normal retirement (age 65) is reduced or
increased, respectively, if the participant elects an early or postponed
retirement. Mr. Walker, while employed by a business unit of the Company,
participated in the pension plan. The estimated annual benefit payable
under the pension plan to Mr. Walker upon normal retirement is $47,018. Ms.
Burdett, Mr. Gordon, Mr. Thompson and Mr. Beatt are not participants in the
Company's pension plan.
John D. Thompson, while an employee of Life Technologies, Inc.
("LTI"), participated in the LTI Pension Plan. Mr. Thompson is fully vested
in the LTI Pension Plan. Under the LTI Pension Plan, normal retirement age
is 65, and actuarially reduced benefits are available to participants who
are age 55 and have ten years of service. In general, under the LTI Pension
Plan, the participant accrues an annual retirement benefit equal to 1% of
the participant's final five-year average LTI compensation times the number
of years of service credited after October 31, 1975. Eligible compensation
is defined as salary, hourly wages, bonus and commissions. The estimated
annual benefit payable to Mr. Thompson under the LTI Pension Plan upon
normal retirement is $23,201.
The Company has a supplemental retirement plan intended to provide
retirement benefits, supplementing those provided under other plans, to
certain executive officers and key employees. The executive officers named
in the Summary Compensation Table are participants in the supplemental
retirement plan. Upon retirement, participants are entitled to receive an
annual benefit equal to 55% of their average final compensation (the annual
average of (a) salaries, and (b) cash incentive payments, during the
highest 60 consecutive calendar months of a participant's last ten years as
a participant in the plan) less all other retirement benefits received
(including the full primary Social Security benefit and all retirement
benefits from other Company-related plans and plans of other employers).
Unless otherwise stipulated by the Board of Directors, such annual benefit
will be reduced ratably for employment of less than, and will not be
increased for employment of more than, 20 years of service with the
Company.
The following table shows the estimated annual benefit (prior to an
offset for other retirement benefits received) which participants are
entitled to receive under the supplemental retirement plan, on a straight
life annuity basis assuming retirement at age 65 in the indicated
compensation classification with certain years of service. If the annual
retirement benefits payable to a participant under other Company-related
plans and plans of other employers (plus his or her primary Social Security
benefit) exceed the annual retirement benefit shown in the table, the
participant will instead receive the benefits payable under those other
plans.
AVERAGE YEARS OF SERVICE
FINAL ---------------------------------------------------
COMPENSATION 15 20 25 30 35
------------ -- -- -- -- --
$125,000 $51,563 $68,750 $68,750 $68,750 $68,750
150,000 61,875 82,500 82,500 82,500 82,500
175,000 72,188 96,250 96,250 96,250 96,250
200,000 82,500 110,000 110,000 110,000 110,000
225,000 92,813 123,750 123,750 123,750 123,750
250,000 103,125 137,500 137,500 137,500 137,500
300,000 123,750 165,000 165,000 165,000 165,000
350,000 144,375 192,500 192,500 192,500 192,500
400,000 165,000 220,000 220,000 220,000 220,000
450,000 185,625 247,500 247,500 247,500 247,500
500,000 206,250 275,000 275,000 275,000 275,000
The number of credited years of service as of December 31, 1999 is
34 for K. Grahame Walker, 18 for Kathleen Burdett, 24 for David G. Gordon,
21 for John D. Thompson and 9 for Bruce H. Beatt.
SEVERANCE AGREEMENTS
The Company has entered into agreements with the executive officers
named in the Summary Compensation Table and with certain other executive
officers and key employees of the Company which, in the event of a change
of control, as such term is defined in the agreements, provide for certain
benefits. Agreements entered into by the Company and the executive officers
named in the Summary Compensation Table provide for benefits in the
following circumstances:
o involuntary termination of the individual's employment
within 395 days of the occurrence of the change in control
for reasons other than death, permanent disability,
attainment of age 65 or cause;
o resignation within 395 days of the occurrence of the change
of control for good reason; and
o resignation for any reason during the thirty-day period
immediately preceding the expiration of the severance
period.
In such circumstances, the employee shall be entitled to a severance
payment equal to a certain percentage (200% in the case of the executive
officers named in the Summary Compensation Table) of (i) the employee's
base salary at the time of termination or resignation, and (ii) the highest
annual incentive compensation paid in any of the three full years
immediately prior to the change of control. In addition, the employee will
be entitled to a continuation of certain employee welfare benefits for a
certain period (two years in the case of the executive officers named in
the Summary Compensation Table) provided by the Company on the date of the
change in control, and the employee will be credited with a certain number
of additional years of service (two in the case of the executive officers
named in the Summary Compensation Table) for retirement income plan
purposes. The employees are also entitled to receive additional payments,
if necessary, to reimburse the employee for (i) any legal expenses, plus
interest thereon, incurred in enforcing or defending a severance agreement,
and (ii) any excise tax liability that may be imposed by reason of Section
4999 of the Internal Revenue Code. For purposes of the severance
agreements, the term "change of control" generally means:
o a person acquires beneficial ownership of 19% or more of the
Company's common stock;
o certain changes in the composition of a majority of the
Company's board of directors from such composition on
September 20, 1999, except such changes approved by
two-thirds of such directors;
o except as otherwise specifically provided for in the
agreements the Company is reorganized, merged, consolidated
or sells, or otherwise disposes of substantially all of its
assets; or
o approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
The provisions of the severance agreements will therefore be
triggered if the Connecticut District Court were to uphold the validity of
the Board Size Bylaw Proposal and the Additional Directors Election
Proposal and each such proposal were to receive the legally requisite vote
for approval by the Dexter shareholders. See the discussion under the
headings "Proxy Statement" and "Certain Litigation."
REPORT OF COMPENSATION & ORGANIZATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation & Organization Committee ("Compensation
Committee") is responsible for, among other things, establishing the
compensation policies applicable to executive officers of the Company. The
Compensation Committee is composed exclusively of outside directors. There
are presently five members: Robert M. Furek, Chairman, Henrietta Holsman
Fore, Bernard M. Fox, Martha Clark Goss and Edgar G. Hotard.
OVERALL POLICY
The Company's executive compensation program is designed to be
linked to corporate performance and return to shareholders. Of particular
importance to the Company is its ability to grow and enhance its long-term
competitiveness. Shorter term performance, although scrutinized by the
Compensation Committee, stands behind the issue of furthering the Company's
strategic goals. To this end, the Company has developed an overall
compensation strategy and specific compensation plans that tie a
significant portion of executive compensation to the Company's success in
meeting specified performance goals and to growth of the Company's stock
price. The overall objectives of this strategy are to attract and retain
the best possible executive talent, to motivate these executives to achieve
the goals inherent in the Company's business strategy, to link executive
and shareholder interests through equity-based plans and to provide a
compensation package that recognizes individual contributions as well as
overall business results.
Each year the Compensation Committee conducts a full review of the
Company's executive compensation program. This review includes a
comprehensive evaluation, based on compensation surveys prepared by
independent compensation consultants, of the competitiveness of the
Company's compensation program and a comparison of the Company's executive
compensation to a peer group of public corporations (the "Compensation Peer
Group") which, in the view of the Compensation Committee, represent the
Company's most direct competitors for executive talent. There are currently
17 companies in the Compensation Peer Group, which is subject to occasional
change as the Company or its competitors change their focus, merge or are
acquired, or as new competitors emerge. It is the Compensation Committee's
policy to target overall compensation for executive officers of the Company
at a level which is at the median paid for such positions by the
Compensation Peer Group. A variety of other factors, however, including
position and time in position, experience, and both company performance and
individual performance, will have an impact on individual compensation
amounts.
The Compensation Committee believes that the Compensation Peer
Group represents the group of companies for which remuneration data is
available that compete most directly with the Company for executive talent.
It should be noted that, while there are overlaps, the Compensation Peer
Group is composed of a different group of companies than is contained in
either of the indices used in the performance graph contained in this proxy
statement.
The Compensation Committee approves the compensation of the
executive officers of the Company, including the individuals whose
compensation is detailed in this proxy statement, and reviews the
compensation policies and pay practices employed with respect to all the
Company's other executive-level employees. This is designed to ensure
consistency throughout the executive compensation program.
The key elements of the Company's executive compensation program in
1999 consisted of base salary, annual incentive compensation and long term
incentive compensation in the form of stock options and restricted stock
awards. The Compensation Committee's policies with respect to each of these
elements, including the basis for the compensation awarded to the CEO, are
discussed below. In addition, while the elements of compensation described
below are considered separately, the Compensation Committee takes into
account the full compensation package afforded by the Company to the
individual, including pension benefits, supplemental retirement benefits,
severance plans, insurance and other benefits, as well as the programs
described below.
BASE SALARIES
Base salaries for executive officers are established by evaluating,
on an annual basis, the performance of such individuals (which evaluation
involves management's consideration of such factors as responsibilities of
the position held, contribution toward achievement of the strategic plan,
attainment of specific individual objectives, interpersonal managerial
skills and civic involvement), and by reference to the marketplace for
executive talent, including a comparison to base salaries for comparable
positions at companies within the Compensation Peer Group.
In establishing the CEO's base salary, the Compensation Committee
took into account the salaries of chief executive officers at companies
within the Compensation Peer Group and the CEO's leadership in shaping and
implementing the strategy of the Company to become focused on the
technologies and markets that will generate future earnings growth. Based
upon this evaluation, the Compensation Committee established a base salary
of $700,000 for the period commencing April 1, 1999 and ending March 31,
2000, an increase of 4.5% over the $670,000 base salary paid to him during
the immediately preceding 12 month period.
ANNUAL INCENTIVE COMPENSATION
Annual incentive compensation accounts for a significant percentage
of each executive officer's compensation. Executive officers of the Company
(other than the CEO) participate in the Company's Executive Incentive
Compensation Plan, and the CEO participates in the Company's Senior
Management Executive Incentive Plan, which was designed to conform with the
requirements of Internal Revenue Code Section 162(m). (These plans are
collectively referred to herein as the EIC Plans.) The EIC Plans are
designed to compensate executives for performance that increases
shareholder value over time, and are reviewed annually by the Compensation
Committee.
Each of the EIC Plans has two performance components: (1) corporate
and/or business unit financial performance and (2) an assessment of the
executive's individual performance. Each year the Compensation Committee
reviews the specific financial measures to be used and approves the target
payout amounts for all executive officers of the Company. The target
payouts are determined by reference to each executive's job classification
as determined pursuant to a Hay point system. The Hay point system
evaluates jobs according to the knowledge required to do the job, the
intensity of thinking needed to solve the problems commonly faced, and the
accountability of the position. In 1999, the sole financial measure for
corporate financial performance, which was approved by the Compensation
Committee, was earnings per share. The financial measures used in 1999 for
individual businesses, on the other hand, included several from a variety
of factors, such as sales growth, growth in operating earnings, and return
on investment. These factors were weighted differently for each business to
reflect the corporate management's assessment of those issues that were in
need of emphasis, all in accordance with the Company's strategic plan.
The four most highly compensated executive officers other than the
CEO were eligible to receive incentive compensation payouts in 1999 of
specified amounts of their base salaries in the event that financial
performance targets were fully achieved. Such payouts were subject to
further adjustment, up or down, based upon management's assessment of
individual performance. Based upon these factors, the actual payout amounts
for these individuals ranged from approximately 49% to approximately 65% of
their base salaries. The assessment of management as to the performance of
these individuals did not result in a significant (over 10%) reduction or
increase in the amount of the payout.
The CEO was eligible to receive an incentive compensation payout in
1999 equal to 75% of his base salary in the event that financial
performance targets were fully achieved (or more if they were exceeded).
There was no reduction or increase in the CEO's incentive compensation
payout based on an assessment of the CEO's individual performance. Because
earnings per share slightly exceeded the targeted amount established by the
Compensation Committee for 1999, a target that, in the opinion of the
Compensation Committee, was aggressive and required significant efforts on
the part of the CEO, the CEO's actual payout was approximately 78% of his
base salary, or $539,630. This represents an increase from the $164,835 of
incentive compensation paid to the CEO in 1998, when the targeted goals
were not met.
It should be emphasized that the Company's EIC Plans are
pay-for-performance plans and, as a result, payments under such plans vary
from year to year depending upon the Company's financial performance. In
years in which performance targets have been met, such as 1999, there has
been a full payout of incentive compensation to the CEO. In years in which
the targets have not been met, on the other hand, such as 1998, such
payouts have been reduced.
Because the purpose of the EIC Plans is to reward performance that
increases shareholder value over time, the Compensation Committee requires
that the overall corporate return to shareholders, apart from unusual
items, exceeds the cost of capital for the Company as a whole before any
executive incentive compensation is paid. There are also minimum thresholds
established for payouts to corporate and business unit employees.
STOCK OPTIONS
The third component of executive compensation is the Company's
stock option program, pursuant to which the Company has granted to
executive officers and other senior management options to purchase shares
of its common stock. Stock options are granted with an exercise price equal
to the market price of the common stock on the date of grant, vest over
three years and expire five years from the date of vesting.
A total of 240,000 options were granted to executive officers and
other senior management in 1999 under the 1999 Long Term Incentive Plan
("1999 Plan"), 55,000 of which were granted to the CEO and 50,500 of which
were granted (in the aggregate) to the four other executive officers named
in the Summary Compensation Table. The number of stock options granted in
1999 were determined by reference to the long term compensation for
comparable positions at companies within the Compensation Peer Group and
based upon an assessment of individual performance.
RESTRICTED STOCK AWARDS
The final component of executive compensation is restricted stock,
which the Company granted in 1999 to executive officers and other senior
management under the 1999 Plan.
A total of 60,000 shares of restricted stock were granted to
executive officers and other senior management in 1999, 9,600 of which were
granted to the CEO and 14,600 of which were granted (in the aggregate) to
the four other executive officers named in the Summary Compensation Table.
The number of restricted stock awards granted in 1999 were determined by
reference to the long term compensation for comparable positions at
companies within the Compensation Peer Group and based upon an assessment
of individual performance.
Restricted stock awards are intended to align the interests of
executives with those of the shareholders. The shares of restricted stock
issued to executive officers and other senior management in 1999 are
subject to two types of restrictions: (a) restrictions based on the
achievement by the Company of certain financial performance targets during
the three year period commencing on January 1, 1999 and ending on December
31, 2001 ("performance target restrictions") and (b) restrictions based on
continuous employment of the recipient over a specified period of time
("time- lapse restrictions"). Seventy-five percent of the restricted shares
issued in 1999 are subject to both performance target restrictions and
time-lapse restrictions. The remaining 25 percent of the restricted shares
are subject solely to time-lapse restrictions. This approach is intended to
incentivize the creation of shareholder value over the long term.
In 1995, the Compensation Committee established guidelines for
ownership of Dexter common stock by executive officers. Under these
guidelines, each executive officer is expected to own, within three years
of becoming an executive officer, Dexter common stock with a value of
between two to four times his or her base salary, depending upon the
individual's position with the Company. As of December 31, 1999, these
ownership guidelines have been met.
DEDUCTIBILITY OF COMPENSATION
Internal Revenue Code Section 162(m), which was added to the
Internal Revenue Code by the Omnibus Budget Reconciliation Act of 1993,
limits the amount of compensation a corporation may deduct as a business
expense. That limit, which applies to up to five executives individually,
is $1 million per individual, per year, subject to certain specified
exceptions. All compensation payments in 1999 to the five executive
officers named in the Summary Compensation Table will be fully deductible.
The Company has procedures in place to assure that compensation paid to
executive officers continues to be fully deductible in the future.
CONCLUSION
Through the programs described above, a very significant portion of
the Company's executive compensation is linked directly to individual and
corporate performance and stock price appreciation over the long term. The
Compensation Committee intends to continue and strengthen the policy of
linking executive compensation to corporate performance and returns to
shareholders, recognizing that the fluctuations of the business cycle from
time to time may result in an imbalance for a particular period.
Compensation & Organization Committee
Robert M. Furek, Chairman
Henrietta Holsman Fore
Bernard M. Fox
Martha Clark Goss
Edgar G. Hotard
PERFORMANCE GRAPH
The following graph shows how an initial investment of $100 in the
Company's common stock would have compared to an equal investment in the
S&P 500 Index or in the S&P Specialty Chemicals Index over the five-year
period beginning December 31, 1994 and ending December 31, 1999. The graph
reflects reinvestment of all dividends.
NOTE: The total shareholder return shown on the graph below is not
necessarily indicative of future returns on the Company's common stock.
COMPARISON OF FIVE YEAR
CUMULATIVE TOTAL SHAREHOLDER RETURN
(ASSUMING AN INVESTMENT OF $100 ON DECEMBER 31, 1993)
DEXTER CORPORATION PERFORMANCE GRAPH
S&P Specialty
Dexter Corporation S&P 500 Index Chemicals Index
------------------ ------------- ---------------
1994 $100.00 $100.00 $100.00
1995 $112.73 $137.58 $131.44
1996 $156.70 $169.17 $134.81
1997 $218.11 $225.60 $166.94
1998 $164.05 $290.08 $142.17
1999 $213.33 $351.12 $157.37
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is composed of five members: Robert M.
Furek, Chairman, Henrietta Holsman Fore, Bernard M. Fox, Martha Clark Goss,
and Edgar G. Hotard. None of the members of the Compensation Committee is
an officer, employee or former officer or employee of the Company or its
subsidiaries. In 1999, none of the members of the Compensation Committee
had any relationship requiring disclosure in accordance with Item 402(j)(3)
of Regulation S-K of the SEC.
