<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 14a-11(c) or 14a-12
</TABLE>
Schering-Plough
- --------------------------------------------------------------------------------
(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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(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
LOGO
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 23, 1996
------------------
The Annual Meeting of Shareholders of Schering-Plough Corporation (the
"Corporation") will be held at the offices of the Corporation, Galloping Hill
Road, Kenilworth, New Jersey, on Tuesday, April 23, 1996, at 2:00 p.m. to:
(1) Elect four directors for terms of three years and two directors
for terms of one year;
(2) Act upon the ratification of the designation of Deloitte & Touche
LLP to audit the books and accounts of the Corporation for 1996;
and
(3) Transact such other business as may properly come before the
meeting.
Only holders of record of Common Shares at the close of business on March
1, 1996 will be entitled to vote at the meeting, or any adjournments or
postponements thereof.
WILLIAM J. SILBEY
Secretary
Madison, New Jersey
March 22, 1996
IMPORTANT
IF YOU DO NOT EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE COMPLETE,
DATE, AND SIGN THE ENCLOSED PROXY AND RETURN IT WITHOUT DELAY IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO ADDITIONAL POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE> 3
Schering-Plough Corporation
One Giralda Farms
Madison, New Jersey 07940-1000
March 22, 1996
------------------
PROXY STATEMENT
------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Schering-Plough Corporation (the
"Corporation") for use at its Annual Meeting of Shareholders on April 23, 1996
and any adjournments or postponements thereof. Shares represented at the meeting
by the enclosed proxy will be voted in accordance with any directions noted
thereon. A shareholder giving a proxy may revoke it before it is voted by giving
written notice of such revocation to the Secretary of the Corporation.
Submission of a later dated proxy will revoke any earlier dated proxy.
Attendance at the Annual Meeting by a shareholder who has given a proxy will not
have the effect of revoking it unless the shareholder gives written notice of
revocation to the Secretary before the proxy is voted or votes the shares
subject to the proxy by written ballot.
As of January 31, 1996, the Corporation had outstanding and entitled to
vote at the Annual Meeting 364,253,452 Common Shares, par value $1 per share
("Common Shares"). Each such share is entitled to one vote, and only holders of
record of Common Shares as of the close of business on March 1, 1996 will be
entitled to vote at the Annual Meeting.
The Annual Report of the Corporation for 1995, including financial
statements for the year ended December 31, 1995, was mailed commencing on or
about March 8, 1996 to all shareholders of record as of the close of business on
March 1, 1996. This Proxy Statement and the accompanying form of proxy are being
mailed to shareholders commencing on or about March 22, 1996.
<PAGE> 4
ELECTION OF DIRECTORS
PROXIES IN THE ACCOMPANYING FORM WILL BE VOTED AT THE MEETING, UNLESS
AUTHORITY TO DO SO IS WITHHELD, IN FAVOR OF THE ELECTION AS DIRECTORS OF THE
NOMINEES NAMED BELOW.
Pursuant to the Corporation's Certificate of Incorporation, the Board of
Directors is divided into three classes, the terms of which expire successively
over a three-year period. At each Annual Meeting of Shareholders, successors to
directors whose terms expire at that meeting shall be elected for three-year
terms. In 1995, the Board of Directors was expanded by two seats and, under New
Jersey law, Board members elected to new seats by the Board serve until the next
Annual Meeting of Shareholders. Six directors are to be elected at this Annual
Meeting of Shareholders, four to hold office for a term of three years expiring
at the 1999 Annual Meeting of Shareholders, and two to hold office for a term of
one year expiring at the 1997 Annual Meeting of Shareholders, and until
successors shall have been elected and qualified. In the event one or more of
the named nominees is unable to serve, the persons designated as proxies may
cast votes for other persons as substitute nominees. The Board of Directors has
no reason to believe that any of the nominees named below will be unavailable,
or, if elected, will decline to serve. Directors will be elected by a plurality
of the votes cast at the Annual Meeting. Abstentions and broker non-votes will
not be included in determining the number of votes cast.
Certain information is given below for each nominee for director, and for
each director whose term of office will continue after the Annual Meeting. All
of the nominees are presently directors and were previously elected by the
shareholders, except Patricia F. Russo and Carl E. Mundy, Jr., who were elected
to the Board effective September 1, 1995, and October 1, 1995, respectively.
NOMINEES FOR DIRECTOR
TERM TO EXPIRE 1997
<TABLE>
<CAPTION>
NOMINEE AND YEAR
FIRST ELECTED PRINCIPAL OCCUPATION
A DIRECTOR AND OTHER INFORMATION
- ----------------- ------------------------------------------------------------------------
<C> <S>
- ----------------- Retired general and former Commandant of the U.S. Marine Corps. General
[PHOTO] Mundy, 60, served as Commandant of the U.S. Marine Corps. from July
- ----------------- 1991 to July 1995. General Mundy is a director of NationsFund,
chairman of the Marine Command and Staff Foundation, a member of the
CARL E. MUNDY, JR. boards of advisors to the Navy League and to The Citadel, and a member
1995 of the Council on Foreign Relations.
- ----------------- President of AT&T Business Communications Systems (BCS), a division of
[PHOTO] AT&T Corp. (communications). Ms. Russo, 43, joined AT&T in 1981 and
- ----------------- assumed her current position in 1993. From 1990 to 1993, she was vice
president-national sales and service for BCS. She is a director of New
PATRICIA F. RUSSO Jersey Manufacturers Insurance Company, a member of The Committee of
1995 200 and participated on the New Jersey Economic Masters Planning
Commission.
</TABLE>
2
<PAGE> 5
NOMINEES FOR DIRECTOR
TERM TO EXPIRE 1999
<TABLE>
<CAPTION>
NOMINEE AND YEAR
FIRST ELECTED PRINCIPAL OCCUPATION
A DIRECTOR AND OTHER INFORMATION
- ----------------- ------------------------------------------------------------------------
<C> <S>
- ----------------- Chairman and chief executive officer of Deere & Company (a manufacturer
[PHOTO] of mobile power machinery and a supplier of financial and health care
- ----------------- services). Mr. Becherer, 60, has been associated with Deere & Company
since 1962. He was elected president and chief operating officer of
HANS W. BECHERER Deere & Company in 1987, president and chief executive officer in
1989 1989, and chairman and chief executive officer in May 1990. Mr.
Becherer is a member of the board of directors of AlliedSignal Inc.,
and a member of the Chase Manhattan Bank International Advisory
Committee. He serves on the board of trustees of the Committee for
Economic Development, and is a member of the Business Council, the
Business Roundtable, the Conference Board and the Council on Foreign
Relations.
- ----------------- Nancy R. McPherson Professor of Business Administration, Harvard
[PHOTO] Business School since 1971. Professor Herzlinger, 52, is a director of
- ----------------- C.R. Bard, Inc., Deere & Company, Manor Care Inc. and Cardinal Health,
Inc. and also serves on the board of privately held companies and
REGINA E. non-profit organizations, including the Visiting Committee for
HERZLINGER Sponsored Research of the MIT Corporation and the Audit Committee of
1992 the town of Belmont, Massachusetts.
- ----------------- Chairman of the executive board of NV Koninklijke KNP BT (producer of
[PHOTO] paper, board and packaging products; and distributor of graphic paper,
- ----------------- graphic and information systems and office products). Mr. van Oordt,
59, joined Buhrmann-Tetterode (BT) in May 1989 as a member of the
ROBERT F.W. VAN board of managing directors and was appointed president and chief
OORDT executive officer in January 1990. Mr. van Oordt assumed his current
1992 position in March 1993 after the merger of KNP, BT and VRG, three
leading Dutch based industrial corporations. Mr. van Oordt serves as
the chairman of the Supervisory Board of Nokia/NKF Cable Industries,
is a member of the Council of International Advisers of the Swiss Bank
Corporation, a member of the Supervisory Board of Greenfield Capital
Partners, a member of the Conference Board and is honorary consul
general for Finland in the Netherlands.
- ----------------- Chairman and chief executive officer of The Great Atlantic & Pacific Tea
[PHOTO] Company, Inc. ("A&P") (supermarkets). Mr. Wood, 66, has held this
- ----------------- office since 1980. From 1988 to 1993 and at other times since 1980, he
also served as president of A&P. He is a member of the board of
JAMES WOOD directors of the Food Marketing Institute, ASARCO Incorporated, and
1987 the United States Committee for UNICEF, and a member of the board of
governors of World USO.
</TABLE>
3
<PAGE> 6
DIRECTORS CONTINUING IN OFFICE
TERM TO EXPIRE 1997
<TABLE>
<CAPTION>
DIRECTOR AND YEAR
FIRST ELECTED PRINCIPAL OCCUPATION
A DIRECTOR AND OTHER INFORMATION
- ----------------- ------------------------------------------------------------------------
<C> <S>
- ----------------- Former president and director of Ingersoll-Rand Company (machinery and
[PHOTO] equipment manufacturer). Mr. Garfield, 68, served as vice chairman of
- ----------------- Ingersoll-Rand from 1974 to 1980 and as president from January 1981
DAVID C. GARFIELD until his retirement in June 1986. He is a director of ASARCO
1975 Incorporated, an Overseer of the Foundation at New Jersey Institute of
Technology, and a governor of the Iowa State University Foundation.
- ----------------- Chairman of the Board of the Corporation. Mr. Luciano, 62, joined the
[PHOTO] Corporation as senior vice president (administration) in July 1978,
- ----------------- was executive vice president (pharmaceutical operations) from July
ROBERT P. LUCIANO 1979 to September 1980, president and chief operating officer to
1978 January 1982, and president and chief executive officer until January
1984 when he assumed the additional office of chairman of the board.
He was chief executive officer and chairman from January 1986 to
December 1995. He continues as chairman. He is a director of C. R.
Bard, Inc., Merrill Lynch & Co., Inc., and AlliedSignal Inc.
- ----------------- Former chairman and chief executive officer of Stauffer Chemical
[PHOTO] Company. Mr. Morley was its chief executive officer from 1974 to 1985.
- ----------------- He was elected a director of the Corporation in January 1979, resigned
H. BARCLAY MORLEY in February 1985 and then rejoined the board in February 1987. Mr.
1979 Morley, 66, is a director of The Bank of New York Company, Inc.
</TABLE>
4
<PAGE> 7
DIRECTORS CONTINUING IN OFFICE
TERM TO EXPIRE 1998
<TABLE>
<CAPTION>
DIRECTOR AND YEAR
FIRST ELECTED PRINCIPAL OCCUPATION
A DIRECTOR AND OTHER INFORMATION
- ----------------- ------------------------------------------------------------------------
<C> <S>
- ----------------- Vice chairman and chief administrative officer of the Corporation. Mr.
[PHOTO] D'Andrade, 57, joined the Corporation as senior vice president
- ----------------- (administration) in February 1981, was executive vice president
(administration) from January 1984 to December 1995, assuming his
HUGH A. D'ANDRADE present position in January 1996. Mr. D'Andrade is a director of
1984 AutoImmune Inc. and the Biotechnology Industry Organization. He also
serves as a trustee of Drew University and as a member of the Board of
Visitors of Columbia University School of Law.
- ----------------- President and chief executive officer of the Corporation. Mr. Kogan, 54,
[PHOTO] joined the Corporation as executive vice president (pharmaceutical
- ----------------- operations) in April 1982, and was the president and chief operating
officer from January 1986 to December 1995, assuming his present
RICHARD J. KOGAN position in January 1996. Mr. Kogan is a trustee of Atlantic Mutual
1982 Insurance Company, and a director of Colgate-Palmolive Company,
National Westminster Bancorp Inc., General Signal Corporation, and
Pharmaceutical Research and Manufacturers of America. He also serves
on the board of St. Barnabas Medical Center and on the Board of
Overseers of the Stern School of Business at New York University and
is a member of the Council on Foreign Relations.
- ----------------- Chairman, president and chief executive officer of ASARCO Incorporated
[PHOTO] (non-ferrous metals producer). Mr. Osborne, 61, has served ASARCO in
- ----------------- various executive capacities since 1975. He was elected president of
ASARCO in 1982, and assumed the additional position of chairman and
RICHARD DE J. chief executive officer in 1985. Mr. Osborne is non-executive chairman
OSBORNE of the board and a director of Southern Peru Copper Corporation and a
1988 director of Grupo Mexico, S.A. de C.V., M.I.M. Holdings Limited and
The Tinker Foundation. He is a chairman and a director of the Copper
Development Association, and former chairman and a current director of
the National Mining Association and of the International Copper
Association. He is a director of the Americas Society and of the
Council of the Americas, and vice chairman and a director of the
American Australian Association. Mr. Osborne is a member of the
Council on Foreign Relations and the Economic Club of New York.
- ----------------- Chairman emeritus of Merrill Lynch & Co., Inc. (securities and
[PHOTO] investment banking). Mr. Schreyer, 68, served as chairman of the board
- ----------------- of Merrill Lynch from April 1985 through June 1993 and chief executive
officer from July 1984 through April 1992. Mr. Schreyer is currently a
WILLIAM A. director of Callaway Golf Company, Deere & Company, True North
SCHREYER Communications Inc. and Willis Corroon Group, plc. His other
1986 professional, civic and international affiliations include the Center
for Strategic and International Studies, The Enterprise Foundation,
George Bush Presidential Library Foundation and Pennsylvania State
University board of trustees.
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
DIRECTOR AND YEAR
FIRST ELECTED PRINCIPAL OCCUPATION
A DIRECTOR AND OTHER INFORMATION
- ----------------- ------------------------------------------------------------------------
<C> <S>
- ----------------- Former chairman and chief executive officer of Borden, Inc. (a worldwide
[PHOTO] producer of foods, non-food consumer products, and packaging and
- ----------------- industrial products). Mr. Ventres, 71, was executive vice president of
Borden and president of its Chemical Division from July 1983 until
R. J. VENTRES July 1985, when he became president and chief operating officer and a
1989 director. He was chief executive officer from November 1986 to
November 1991, and chairman from February 1987 until his retirement in
March 1992. Mr. Ventres is a director of Marsh & McLennan Companies,
Inc., and a trustee of St. Clare's Hospital and Health Center.
</TABLE>
6
<PAGE> 9
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Corporation has standing Finance and Audit,
Executive Compensation and Organization, Nominating, and Pension Committees,
each consisting exclusively of non-employee directors.
The members of the Finance and Audit Committee are Hans W. Becherer, David
C. Garfield, H. Barclay Morley, Richard de J. Osborne, William A. Schreyer, and
Robert F. W. van Oordt. This Committee, which held five meetings in 1995,
reviews and recommends to the Board dividend policies and actions; reviews
corporate borrowing and investment activities; reviews internal audit
activities; recommends to the Board the engagement of independent auditors;
reviews the professional services to be rendered by the independent auditors,
the scope of their audit, their fees, and the results of their engagement;
reviews insurance and risk management activities; and oversees compliance with
the Corporation's business conduct policy.
The members of the Executive Compensation and Organization Committee are H.
Barclay Morley, Richard de J. Osborne, William A. Schreyer, R. J. Ventres, and
James Wood. This Committee, responsible for approving or recommending to the
Board compensation, incentive awards, stock options, and benefit programs for
officers and senior executives of the Corporation, held four meetings during
1995.
The members of the Nominating Committee are Hans W. Becherer, H. Barclay
Morley, William A. Schreyer, and Robert F. W. van Oordt. The Committee held
three meetings in 1995. This Committee is responsible for reviewing and making
recommendations to the Board with respect to the composition of the Board and
the election and re-election of directors, and will consider shareholder
recommendations for directors; such recommendations should be forwarded by the
shareholder to the Secretary of the Corporation with biographical data about the
recommended individual. The By-laws of the Corporation provide a formal
procedure for nominations by shareholders of director candidates. A shareholder
intending to make such a nomination is required to deliver to the Secretary of
the Corporation, not less than 30 days prior to a meeting called to elect
directors, a notice with the name, age, business and residence addresses and
principal employment of, and number of shares of stock of the Corporation owned
by, such nominee, such other information regarding the nominee as would be
required in a proxy statement prepared in accordance with the proxy rules of the
Securities and Exchange Commission, and a consent to serve, if elected, of the
nominee. A nomination not made in accordance with this procedure would be void.
The members of the Pension Committee are Regina E. Herzlinger, Carl E.
Mundy, Jr., Patricia F. Russo, R. J. Ventres, and James Wood. This Committee,
which held three meetings in 1995, has general oversight responsibility for the
investment of funds under the employee benefit plans of the Corporation,
including establishing investment policies and reviewing the performance of
managers and trustees for the plans.
BOARD MEETINGS AND ATTENDANCE OF DIRECTORS
The Board of Directors held ten meetings in 1995. All directors attended
more than 75% of the aggregate of (i) the total number of meetings of the Board
of Directors held while they were members, and (ii) the total number of meetings
held by all Committees of the Board on which they served as members.
DIRECTORS' COMPENSATION
Employee directors receive no fees for services rendered in their capacity
as directors. Non-employee directors receive an annual retainer of $39,000, a
fee of $1,000 per meeting for each board meeting and for each committee meeting
attended, and a $1,000 per diem fee for special assignments. The chairman of
each Committee receives an additional fee of $1,000 for each meeting. Directors
may elect to defer until termination of service as a director all or a portion
of such fees under a Deferred Compensation Plan. Amounts deferred are, at the
director's election, valued as if invested in the Corporation's Common Shares or
in a simple interest fund and are payable in cash in installments or in a lump
sum.
Upon their initial election or any re-election to the Board, non-employee
directors are awarded Common Shares of the Corporation at the rate of 400 shares
for each year (or portion thereof) of the term to which the director is elected.
During 1995, Messrs. Osborne, Schreyer and Ventres were each granted 1,200
shares and
7
<PAGE> 10
General Mundy and Ms. Russo were each granted 400 shares (such share amounts
give effect to the two for one stock split in 1995).
Directors who are not entitled to receive employee pension benefits from
the Corporation or its subsidiaries are covered by a nonfunded pension plan
under which an eligible director who retires at or after age 72 with at least
five years' service, or because of sickness or disability with at least ten
years' service, receives annually for life the annual retainer in effect at the
time of his/her retirement. An eligible director who retires because of sickness
or disability with at least five but less than ten years' service receives a
proportionately reduced benefit.
LEGAL PROCEEDINGS
In June 1994 a group of nine chain food stores that operate pharmacies
commenced an action against three mail order pharmacies and 16 drug
manufacturers in the United States District Court for the Northern District of
Illinois. The complaint alleges price discrimination and a conspiracy to
restrain trade by jointly refusing to sell prescription drugs at discounted
prices to the plaintiffs, who seek treble damages in an unspecified amount and
an injunction against the allegedly unlawful conduct. The Corporation is one of
the defendants in this action, and A&P is one of the plaintiffs. Mr. Wood, a
director, is chairman and chief executive officer of A&P. Mr. Wood does not
participate in any review or deliberation by the Board of Directors relating to
this action.
SECURITY OWNERSHIP
The Corporation is not aware of any person who is the beneficial owner of
more than five percent of the Corporation's outstanding Common Shares.
Set forth below is information with respect to beneficial ownership of the
Common Shares of the Corporation as of January 31, 1996 by each director,
certain executive officers and by all directors and executive officers of the
Corporation as a group:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES(A)
- ---------------------------------------------------------------------------------- ---------
<S> <C>
Hans W. Becherer.................................................................. 4,800
Donald R. Conklin................................................................. 291,310(b)(c)
Hugh A. D'Andrade................................................................. 244,241(b)
David C. Garfield................................................................. 37,200(c)
Regina E. Herzlinger.............................................................. 1,800
Harold R. Hiser, Jr. ............................................................. 345,818(b)
Richard J. Kogan.................................................................. 381,318(b)
Robert P. Luciano................................................................. 536,842(b)
H. Barclay Morley................................................................. 8,894
Carl E. Mundy, Jr................................................................. 400
Richard de J. Osborne............................................................. 12,226
Patricia F. Russo................................................................. 400
William A. Schreyer............................................................... 16,400
Robert F. W. van Oordt............................................................ 2,600
R. J. Ventres..................................................................... 10,000
James Wood........................................................................ 21,200
All directors and executive officers as a group including those above(27)......... 2,509,170(b)(c)
</TABLE>
- ---------------
(a) The total for each individual is less than 0.2%, and for the group is less
than 0.7%, of the outstanding Common Shares of the Corporation (including
shares which could be acquired within 60 days of January 31, 1996 through
the exercise of outstanding options or the distribution of shares under the
8
<PAGE> 11
Corporation's Stock Incentive Plans). The information shown is based upon
information furnished by the respective directors and executive officers.
(b) Includes shares which could be acquired within 60 days of January 31, 1996
through the exercise of employee stock options or the distribution of shares
under the Corporation's Stock Incentive Plans as follows: Mr. Conklin
(257,140); Mr. D'Andrade (171,580); Mr. Hiser (337,290); Mr. Kogan
(312,800); Mr. Luciano (466,400); all directors and executive officers as a
group (2,029,928).
(c) Does not include shares owned by family members and as to which beneficial
ownership is disclaimed as follows: Mr. Conklin, 800 shares; Mr. Garfield,
7,200 shares; one other executive officer, 3,470 shares.
SUMMARY COMPENSATION TABLE
The following table sets forth compensation of the five most highly
compensated executive officers of the Corporation, including the Chief Executive
Officer for the fiscal year ended December 31, 1995 ("Fiscal 1995").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------
AWARDS
ANNUAL COMPENSATION ----------------------------
--------------------------------------- SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL RESTRICTED STOCK UNDERLYING ALL OTHER
POSITION IN 1995 YEAR SALARY BONUS COMPENSATION(A) AWARDS(B) OPTIONS COMPENSATION(C)
- ----------------------- ----- ----------- ----------- --------------- ---------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert P. Luciano...... 1995 $ 1,140,700 $ 1,227,500 $72,455 $3,125,000 88,000 $ 289,072
Chairman and Chief 1994 1,102,100 1,172,000 73,470 1,550,250 88,000 215,405
Executive Officer 1993 1,070,000 947,000 52,824 1,378,000 88,000 178,294
Richard J. Kogan....... 1995 $ 802,500 $ 691,000 -- $1,250,000 60,000 $ 195,192
President and Chief 1994 768,000 598,500 -- 954,000 60,000 149,151
Operating Officer 1993 735,000 551,000 -- 848,000 60,000 125,484
Hugh A. D'Andrade...... 1995 $ 537,750 $ 386,500 -- $ 625,000 21,600 $ 127,086
Executive Vice 1994 514,625 364,500 -- 477,000 21,780 96,810
President 1993 492,500 335,500 -- 424,000 22,400 82,361
Administration
Donald R. Conklin...... 1995 $ 538,250 $ 386,500 -- $ 625,000 21,600 $ 112,099
Executive Vice 1994 515,000 365,000 -- 477,000 21,800 90,572
President 1993 492,500 326,000 -- 424,000 22,400 80,364
HealthCare Products
Harold R. Hiser, Jr.... 1995 $ 473,075 $ 340,000 -- $ 937,500 18,400 $ 130,997
Executive Vice 1994 441,475 313,000 -- 477,000 18,690 93,939
President 1993 422,500 288,000 -- 424,000 19,000 75,576
Finance
</TABLE>
- ---------------
(a) Includes non-cash compensation in the amount of $66,455 in 1995, $67,470 in
1994 and $46,824 in 1993 for transportation provided by the Corporation.
(b) In February 1995 restricted stock awards were granted to Mr. Luciano for
80,000 shares, to Mr. Kogan for 32,000, to each of Messrs. D'Andrade and
Conklin for 16,000 shares, and to Mr. Hiser for 24,000 shares. The vesting
of such awards was subject to the attainment of a performance goal, which
has been satisfied. See "Compensation Committee Report -- Equity-Based
Compensation -- Restricted Stock Awards" on page 17. At December 31, 1995,
the total number and value of undistributed shares, all of which are vested,
for the named executive officers were: Mr. Luciano 132,000 shares
($7,227,000); Mr. Kogan 64,000 shares ($3,504,000); Mr. D'Andrade 32,000
shares ($1,752,000); Mr. Conklin 32,000 shares ($1,752,000); and Mr. Hiser
40,000 shares ($2,190,000). Shares awarded are distributable in five equal
annual installments, and cash equivalent to the amount of all dividends on
the Corporation's Common Shares is paid on all undistributed shares.
(c) Consists of, respectively, contributions under the profit-sharing plans of
the Corporation, and the cost of executive life and medical insurance: for
1995, Mr. Luciano ($171,105 and $117,967); Mr. Kogan ($120,375 and $74,817);
Mr. D'Andrade ($80,663 and $46,423); Mr. Conklin ($80,738 and $31,361); and
Mr. Hiser ($70,961 and $60,036); for 1994, Mr. Luciano ($165,315 and
$50,090); Mr. Kogan ($115,200 and $33,951); Mr. D'Andrade ($77,194 and
$19,616); Mr. Conklin ($77,250 and $13,322);
9
<PAGE> 12
and Mr. Hiser ($66,221 and $27,718); and for 1993, Mr. Luciano ($160,500 and
$17,794); Mr. Kogan ($110,250 and $15,234); Mr. D'Andrade ($73,875 and
$8,486); Mr. Conklin ($73,875 and $6,489); and Mr. Hiser ($63,375 and
$12,201).
EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
Mr. Luciano has an agreement which provided for his employment as Chairman
of the Board and Chief Executive Officer through December 31, 1995 and provides
for his employment from January 1, 1996 until November 1, 1998 as Chairman of
the Board and Chairman of the Executive Committee at an annual base salary and
annual bonus of not less than his average annual base salary and average annual
bonus for the three years ended December 31, 1995. Mr. Kogan has an agreement
which provided for his employment as President and Chief Operating Officer
through December 31, 1995 and provides for his employment as President and Chief
Executive Officer from January 1, 1996 through December 31, 2000 at an annual
base salary of not less than $900,000. Mr. Kogan's agreement provides that his
employment is automatically extended for successive two-year periods thereafter,
but not beyond June 30, 2006, unless either he or the Corporation gives notice
to terminate the agreement at least six months before its scheduled expiration
date. Mr. D'Andrade has an agreement which provided for his employment as
Executive Vice President through December 31, 1995 and provides for his
employment as Vice Chairman of the Board and Chief Administrative Officer from
January 1, 1996 through December 31, 2000 at an annual base salary of not less
than $553,500. Mr. D'Andrade's agreement provides that his employment is
automatically extended on a yearly basis, but not beyond November 30, 2003,
unless he or the Corporation gives notice to terminate the agreement at least
thirty days before its scheduled expiration date. If for any reason other than
cause the Corporation elects to terminate the employment of Mr. Kogan or Mr.
D'Andrade on any scheduled expiration date of his agreement (other than the last
such date), his employment will be deemed to have been terminated by the
Corporation without cause for purposes of the severance and retirement benefits
described below.
Under each agreement described above, if the executive's employment is
terminated (i) by reason of death or disability, (ii) by the Corporation without
cause, or (iii) by the executive for good reason or within a 30-day period
following the first anniversary of a change of control, he is generally entitled
to (a) receive a lump sum equal to two times (I) his annual base salary and (II)
the higher of his most recent incentive compensation and profit-sharing awards
and the average of such awards for the three preceding years, and (b) continue
in the Corporation's welfare benefit plans for three years. If the executive
remains employed through the first anniversary of a change of control, the
executive is entitled to a special bonus equal to (i) his annual base salary and
(ii) the higher of his most recent incentive compensation and profit-sharing
awards and the average of such awards for the three preceding years. If his
employment terminates for any of the reasons enumerated above and the special
bonus has not been paid, then his severance payment is increased by an amount
equal to the special bonus. If his employment is terminated by reason of death
or disability, the lump sum payment will equal the present value of the death or
disability benefits payable under the Corporation's benefit plans and programs,
if greater than the total severance payment otherwise payable under the
employment agreement. A change of control ("Change of Control") is generally
defined for purposes of these agreements as (i) the acquisition of 20% or more
of the Common Shares, (ii) a change in a majority of the Board of Directors,
unless approved by the incumbent directors (other than as a result of a
contested election) and (iii) certain reorganizations, mergers, consolidations,
liquidations or dissolutions. If any payment or distribution by the Corporation
to the executive is determined to be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code, he is entitled to receive from the
Corporation a payment on an after-tax basis equal to the excise tax imposed.
Additionally, each agreement provides for retirement benefits as described in
the Pension Plan Table on page 12 and Mr. Luciano's agreement provides for an
office and certain senior executive level services after retirement, including
transportation.
Messrs. Conklin and Hiser have agreements with the Corporation that will
trigger a period of employment of three years or to age 65, if sooner, upon a
Change of Control or upon a termination of employment by the Corporation in
anticipation of a Change of Control. During the employment period the executive
is entitled to receive an annual base salary at his highest rate during the
twelve months prior to the Change of Control and an annual bonus equal to his
highest bonus for the three years prior to the Change of
10
<PAGE> 13
Control. If the executive's employment is terminated during the employment
period (i) by the Corporation other than for cause or disability or (ii) by the
executive for good reason or during a 30-day period following the first
anniversary of the Change of Control, he is entitled to receive a lump sum equal
to three times (a) his annual base salary plus (b) his highest annual bonus
during the preceding year and the three years prior to the change of control
plus (c) his highest profit-sharing award during the three years prior to
termination. However, if the executive will attain age 65 less than three years
from his date of termination, he will receive a proportionately reduced amount.
In the event of such a termination of employment, the executive is also entitled
to (i) receive in a lump sum a supplemental pension amount based on three years
of deemed employment after termination or to age 65, if sooner, and (ii)
continue in the Corporation's welfare benefit plans for three years or to age
65, if sooner. If any payment or distribution by the Corporation to the
executive is determined to be subject to the excise tax imposed by Section 4999
of the Internal Revenue Code, he is entitled to receive from the Corporation a
payment on an after-tax basis equal to the excise tax imposed.
OPTION TABLES
The following tables provide information with respect to stock options
granted to or exercised by the named executive officers during Fiscal 1995 and
the fiscal year-end value of options held by such officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------
NUMBER OF GRANT DATE
SECURITIES % OF TOTAL VALUE
UNDERLYING OPTIONS GRANTED ----------------
OPTIONS TO EMPLOYEES IN EXERCISE EXPIRATION GRANT DATE
NAME GRANTED(A) FISCAL YEAR PRICE DATE PRESENT VALUE(B)
- ------------------------------- ---------- --------------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Robert P. Luciano.............. 88,000 4.6% $39.0625 2/26/05 $1,140,480
Richard J. Kogan............... 60,000 3.1 39.0625 2/26/05 777,600
Hugh A. D'Andrade.............. 21,600 1.1 39.0625 2/26/05 279,936
Donald R. Conklin.............. 21,600 1.1 39.0625 2/26/05 279,936
Harold R. Hiser, Jr............ 18,400 1.0 39.0625 2/26/05 238,464
</TABLE>
- ---------------
(a) Options are for a term of 10 years and became exercisable after one year on
February 28, 1996. The exercise price of the option is the market value of
the Common Shares on the date of grant. Limited stock appreciation rights
accompany the options and only become exercisable for a period of 30 days
after the occurrence of a Change of Control. Although permitted under the
plan, no standard stock appreciation rights were granted in tandem with the
options.
(b) The valuation calculations are solely for purposes of compliance with the
rules and regulations promulgated under the Securities Exchange Act of 1934,
as amended, and are not intended to forecast possible future appreciation,
if any, of the Corporation's stock price. The grant date present value is
derived by using the Black-Scholes option pricing model with the following
assumptions: the average dividend yield for the three years ended December
31, 1994 (2.76%); volatility of the Common Shares based on monthly total
returns for the three years ended December 31, 1994 (0.2054); an annualized
risk-free interest rate of 7.5%; and an option term of ten years. If the
named officers should realize the grant date values shown in the table, the
equivalent value of the appreciation of all Common Shares of the Corporation
outstanding on the grant date would be approximately $4.8 billion, of which
the value of the named officers' options would be 0.06%. This valuation
model was not adjusted for risk of forfeiture or the vesting restrictions of
the options, and does not necessarily represent the fair market value of
individual options. Options will have no actual value unless, and only to
the extent that, the price of the Common Shares appreciates from the grant
date to the exercise date.
11
<PAGE> 14
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED UNEXERCISED IN-THE-
SHARES OPTIONS AT FY-END MONEY OPTIONS AT FY-END
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert P. Luciano......... 128,000 $3,283,000 352,000 208,000 $ 9,581,000 $ 5,753,000
Richard J. Kogan.......... 100,000 2,783,750 240,000 180,000 6,532,500 5,313,750
Hugh A. D'Andrade......... 60,000 2,028,750 143,580 141,600 4,097,826 4,711,350
Donald R. Conklin......... 0 0 229,140 141,600 7,066,191 4,711,350
Harold R. Hiser, Jr....... 48,000 1,269,000 194,090 138,400 6,155,119 4,661,150
</TABLE>
PENSION PLAN TABLE
The approximate total annual benefits payable upon retirement at age 65 in
specified compensation and years of service classifications are shown in the
following table.
<TABLE>
<CAPTION>
HIGHEST AVERAGE ANNUAL APPROXIMATE ANNUAL BENEFIT
COMPENSATION FOR ANY PERIOD ------------------------------------------------------------------
OF 60 CONSECUTIVE MONTHS DURING 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
LAST 120 MONTHS OF EMPLOYMENT OF SERVICE OF SERVICE OF SERVICE OF SERVICE OF SERVICE
- ------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
$800,000..................... $ 280,000 $ 320,000 $ 360,000 $ 400,000 $ 440,000
1,000,000..................... 350,000 400,000 450,000 500,000 550,000
1,200,000..................... 420,000 480,000 540,000 600,000 660,000
1,600,000..................... 560,000 640,000 720,000 800,000 880,000
2,000,000..................... 700,000 800,000 900,000 1,000,000 1,100,000
2,200,000..................... 770,000 880,000 990,000 1,100,000 1,210,000
2,400,000..................... 840,000 960,000 1,080,000 1,200,000 1,320,000
2,600,000..................... 910,000 1,040,000 1,170,000 1,300,000 1,430,000
2,800,000..................... 980,000 1,120,000 1,260,000 1,400,000 1,540,000
3,000,000..................... 1,050,000 1,200,000 1,350,000 1,500,000 1,650,000
</TABLE>
The table above reflects benefits on a life annuity basis and amounts
payable are not subject to Social Security or other offset. Covered compensation
consists of salary and bonus which, for the named executive officers, is shown
in the Summary Compensation Table on page 9. The credited years of service as of
December 31, 1995 for such named individuals are: Mr. Conklin (34 years); Mr.
D'Andrade (14 years); Mr. Hiser (14 years); Mr. Kogan (13 years); and Mr.
Luciano (17 years).
Under his employment agreement referred to on page 10, Mr. Luciano is
entitled to receive a minimum annual benefit of 55% of final average annual
compensation upon retirement, and his wife is entitled to a minimum annual
survivor's benefit of 45% of such final average annual compensation after his
death. If his employment is terminated at any time (a) by the Corporation
without cause or for disability, or (b) by him for good reason or within the
30-day period following the first anniversary of a Change of Control, he would
be entitled to receive a supplemental pension benefit determined as though he
had continued in employment for three years following the date of termination.
In the event of Mr. Luciano's death during the term of his employment agreement,
his surviving spouse will be entitled to receive a supplemental pension benefit
determined as though he had continued in employment for three years following
the date of his death. Under their employment agreements referred to on page 10,
each of Messrs. D'Andrade and Kogan is entitled to receive a minimum annual
benefit of 55% of final average annual compensation upon retirement at or after
age 62, and his wife is entitled to a minimum annual survivor's benefit of 45%
of such final average annual compensation after his death. If either Mr.
D'Andrade's or Mr. Kogan's employment is terminated at any time (a) by the
Corporation without cause or for disability, or (b) by him for good reason or
within the 30-day period following the first anniversary of a Change of Control,
he would be entitled to the same minimum
12
<PAGE> 15
annual pension and his wife would be entitled to the same minimum annual
survivor's benefit as though he had retired at or after age 62. In the event of
the death of Mr. D'Andrade or Mr. Kogan during the term of his employment
agreement, his surviving spouse will be entitled to receive a minimum annual
survivor's benefit of 45% of his final average annual compensation.
PERFORMANCE GRAPH
COMPARISON OF CUMULATIVE TOTAL RETURN
FOR THE FIVE YEARS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
SCHERING- COMPOSITE
MEASUREMENT PERIOD PLOUGH COR- PEER GROUP S&P 500 IN-
(FISCAL YEAR COVERED) PORATION INDEX DEX
<S> <C> <C> <C>
1990 100 100 100
1991 152 159 130
1992 151 133 140
1993 167 122 155
1994 185 138 157
1995 282 220 216
</TABLE>
The graph above assumes a $100 investment on December 31, 1990, and
reinvestment of all dividends, in the Corporation's Common Shares, the S&P 500
Index, and a composite peer group of the following drug and health care
companies: Abbott Laboratories, American Home Products Corporation,
Bristol-Myers Squibb Company, Johnson & Johnson, Eli Lilly and Company, Merck &
Co., Inc., Pfizer Inc., and Warner-Lambert Company. The Upjohn Company, which
was included in the peer group in prior years, merged with another company in
1995 and has been deleted from the peer group.
13
<PAGE> 16
COMPENSATION COMMITTEE REPORT
PRINCIPLES AND PROGRAM
The Corporation's executive compensation program is fundamentally a pay for
performance program. It is designed to:
- target executive compensation at a level sufficient to ensure the
Corporation's ability to attract and retain superior executives;
- motivate those executives to advance shareholder interests with
compensation plans that are tied to the Corporation's operating and
market performance; and
- provide a compensation package that balances individual contributions and
overall business results.
To meet those objectives, the program has both cash and equity
elements -- base salary, an annual incentive bonus, and long-term equity-based
compensation. In determining executive compensation, the Executive Compensation
and Organization Committee (the "Committee") evaluates both the total
compensation package and its individual elements. As part of its review, the
Committee considers compensation data, developed by established and independent
compensation consultants, for companies which represent the Corporation's direct
competitors for executive talent. The data includes information on those drug
and health care companies within the peer index used in the performance graph in
the proxy statement (the "Peer Group"), other pharmaceutical and consumer
products companies, including some for which public information is not
available, and other industrial companies with which competition for executives
exists. The selection of the Corporation's principal compensation consultant is
ratified annually by the Committee.
The Committee believes that executive compensation should serve the broader
strategic goals of the Corporation and thereby promote the creation of long-term
shareholder value.
CASH-BASED COMPENSATION
SALARY -- The Committee assesses a number of factors in fixing the salary
of the executive officers (including the five most highly compensated), such as
the responsibility of the particular position, the individual's performance, the
Corporation's overall financial performance, certain non-financial indicators of
corporate performance, and the business and inflationary climate. In addition,
in the case of executive officers with responsibility for a particular business
unit, the Committee considers such unit's financial results. Non-financial
indicators can include, among other things, strategic developments for which an
executive officer has responsibility (such as acquisitions or product approvals
and development), or managerial performance (such as succession planning,
resource allocation and social responsibility). The evaluation of an executive's
non-financial indicators is reflected in his performance rating, as is the case
for all employees.
Each year, the Committee reviews with the Chief Executive Officer his
performance ratings of the other executive officers, and evaluates compensation
levels against levels at the competitor companies. Established and independent
compensation consultants are used to confirm that the salary levels at the
Corporation are within the competitor companies' range. To ensure that
compensation policy for the top executive officers is consistent with overall
Corporation results and executive compensation strategies, the Committee reviews
the compensation awarded to the approximately 90 most highly compensated
executives.
14
<PAGE> 17
Based on the Committee's evaluation of these same factors and the
limitations of Section 162(m) of the Internal Revenue Code relating to the
deductibility of certain executive compensation, Mr. Luciano, the Corporation's
Chief Executive Officer in 1995, was awarded a base salary of $1,140,700 for
1995, reflecting the Committee's determination of an inflationary increase over
his 1994 salary level. Mr. Luciano is subject to a long-term employment
contract, which exempts his salary from the limitation imposed by Section
162(m). The Committee believes that given Mr. Luciano's record, his status in
the industry, and his experience and leadership, such contract significantly
benefits the Corporation and the shareholders by securing Mr. Luciano's services
for the future and by encouraging him to focus on the long-term strategic
interests of the Corporation.
The Committee targets salaries of the Corporation's executive officers to
fall within a range above the median but below the high end of the salary levels
at the competitor companies. The base salary awarded to Mr. Luciano for 1995 was
at the high end of the range, reflecting his and the Corporation's long-term
performance as well as changes in compensation levels at the competitor
companies. In fixing the salaries of Mr. Luciano and the other executive
officers for 1995, the Committee considered the Corporation's overall financial
performance and the non-financial indicators reflected in individual performance
ratings, although no particular weighting was assigned to any specific aspect of
corporate performance or other factor.
ANNUAL INCENTIVE BONUS -- The Executive Incentive Plan, the Corporation's
bonus plan, allows the Committee to make annual cash awards to the executive
officers based on certain financial and non-financial indicators of corporate
performance.
In 1994 the shareholders approved the executive incentive bonus program,
including performance goals, for certain senior executive officers, including
the Chief Executive Officer and the other executive officers named in the proxy
statement. This program provides that the amount of the cash incentive bonus
that the Committee may award under the Executive Incentive Plan to these
executive officers for any year is determined by a formula that measures the
Corporation's pre-tax earnings, earnings per share growth, and return on equity
for the year against corresponding performance goals established by the
Committee. The performance goal for pre-tax earnings for any year is the
Corporation's income before income taxes for such year as approved by the
Committee. The performance goal for earnings per share growth for any year is
the average of the First Call Corporation consensus projected earnings per share
growth of the Peer Group for their corresponding fiscal year. The performance
goal for return on equity for any year is the average return on equity of the
Peer Group for the five consecutive years ending with the second year prior to
the commencement of such year.
The Committee has fixed specified percentages of base salary as target
incentive bonus awards for the covered executive officers, and each performance
goal has been assigned a one-third weighting toward the attainment of the target
award. To the extent that earnings per share growth, return on equity and
pre-tax earnings are equal to, greater than or less than, the corresponding
performance goal, the actual cash incentive bonus award of a covered executive
officer may be equal to, greater than or less than, his target award. Earnings
per share, return on equity and pre-tax earnings are based upon amounts reported
in the Corporation's financial statements in its Annual Report to shareholders,
as adjusted for accounting changes and other special items set forth in the
executive incentive bonus program and certified by the Corporation's independent
auditors. The Committee may, in its discretion, reduce the amount of the
incentive bonus award determined pursuant to the program formula when the
Committee's consideration of other factors, such as its judgment of an
individual's performance, so warrants. However, the Committee may not increase
the amount of any incentive bonus award determined pursuant to the program
formula, and in no event may an incentive bonus award for any year to any
covered executive officer exceed the maximum award specified in the program.
15
<PAGE> 18
In 1995 the Corporation exceeded each of the pre-tax earnings, earnings per
share growth, and return on equity goals. Pre-tax earnings from continuing
operations increased by 14%, earnings per share from continuing operations grew
by 18%, and adjusted return on equity equaled 63%. The Committee has certified
that the performance goals and the other material terms of the executive
incentive bonus program were satisfied for 1995. In accordance with the program
formula Mr. Luciano received a bonus of $1,227,500 for 1995, which was greater
than his target award. Also in accordance with the program formula the cash
awards of the other covered executive officers were greater than their target
awards.
The amount of cash awards to the Corporation's executive officers who are
not covered by the executive incentive bonus program also bears a significant
relationship to corporate financial performance. The Committee awards bonuses to
these executive officers based principally on the extent to which the
performance goals described above are achieved, with the pre-tax earnings goal
assigned a weighting of 35%, and the earnings per share growth and return on
equity goals each assigned a 20% weighting. As in the case of the decisions
concerning salary, in awarding a bonus to these executive officers the Committee
also considers the non-financial factors reflected in the performance evaluation
and described above under "Salary." Such non-financial factors, however, cannot
constitute the basis for more than 25% of the target bonus award.
EQUITY-BASED COMPENSATION
Under the Stock Incentive Plan, which was adopted pursuant to shareholder
approval, the Committee may grant stock options and restricted stock awards to
the executive officers and other key employees. The Committee believes that the
Corporation's long-term equity-based compensation aligns the interest of the
executive officers with that of the shareholders, as any appreciation in the
price of the stock will benefit all shareholders commensurately, and
particularly in the case of the restricted stock awards which are received by
the executive officers over time. Additionally, the restricted stock awards,
since they vest over a five-year period, can serve as an inducement for the
officers to remain with the Corporation. In determining awards of equity-based
compensation the Committee focuses on multi-year trend data and targets such
awards to fall within a range above the median but below the high end of the
equity-based compensation levels at the competitor companies. Average awards to
the executive officers during the three years ended December 31, 1995 fell
within the range, however average awards during 1995 to the executive officers
fell near the high end of the range, principally owing to appreciation in the
market price of the Common Shares.
STOCK OPTIONS -- The Committee relies on a valuation of stock options
provided by independent compensation consultants using as a basis for valuation
the Black-Scholes methodology. Stock options are awarded with an exercise price
equal to the market price at the time of grant, are first exercisable after one
year and generally are exercisable for a term of ten years. The Committee sets
guidelines for the size of stock option grants to each of the executive officers
except for Mr. Luciano, and for Mr. Kogan, who served as the Corporation's Chief
Operating Officer in 1995, based on the performance evaluation and competitive
compensation data used to determine salary. In the case of Messrs. Luciano and
Kogan, because of their status as the Corporation's most senior officers and the
important role they have in achieving overall corporate goals, the Committee in
granting stock options to them sets no fixed guideline, but takes into
consideration their total compensation package and competitive compensation
data, overall corporate financial performance, Messrs. Luciano's and Kogan's
role in attaining such results, and the number of options previously granted,
although no particular weighting is assigned to any factor. The Committee does
not consider any specific corporate performance goal in determining whether to
grant stock options or the size of the grants. However, the actual value of any
such options will depend entirely on the extent to which the Corporation's
Common Shares shall have appreciated in value at the time the options are
exercised. In 1995 the Committee granted Mr. Luciano 88,000 stock options, the
same number of options granted in each of 1994 and 1993.
16
<PAGE> 19
RESTRICTED STOCK AWARDS -- In 1993 the Committee adopted the restricted
stock award program, including performance goals, for certain senior executive
officers, including the Chief Executive Officer and the other executive officers
named in the proxy statement. This program requires that the vesting of any
restricted stock award to a covered executive officer be made subject to the
attainment of the performance goal for earnings per share growth or return on
equity described above under "Cash-Based Compensation -- Annual Incentive Bonus"
for the year in which the award is made. In setting the size of restricted stock
awards for the covered executive officers, the Committee takes into account the
applicable data and factors that the Committee considers in determining the size
of stock option grants to such officers. The awards are assigned a dollar value
based on the share price at the time the award is made. If the Corporation meets
either one of the performance goals, the stock award vests and the shares are
distributable ratably over five years. The Committee has certified that both of
the performance goals were satisfied for 1995. In 1995 the Committee made a
restricted stock award to Mr. Luciano for 80,000 shares, compared with 52,000
shares awarded in each of 1994 and 1993. The award to Mr. Luciano in 1995
reflected the Committee's consideration of the factors described above under
"Stock Options," in particular, Mr. Luciano's role in attaining the
Corporation's long-term financial results.
The Committee sets guidelines for the size of restricted stock awards for
the Corporation's executive officers who are not covered by the restricted stock
award program based on the performance evaluation and competitive compensation
data used to determine salary. Vesting of these awards is not subject to a
performance condition. The awards are assigned a dollar value based on the share
price at the time the award is made and are distributable ratably over five
years.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to public companies for compensation over $1,000,000
paid to the Chief Executive Officer and the four other most highly compensated
executive officers for 1994 and thereafter. Qualifying performance-based
compensation is not subject to the deduction limit if certain requirements are
met. The Committee has restructured the annual incentive bonus and long-term
equity-based compensation programs for its most senior executives so that such
bonuses and restricted stock awards should constitute qualifying
performance-based compensation under Section 162(m). The Committee also
recognizes that unanticipated future events, such as a change of control of the
Corporation or a change in executive personnel, could result in a disallowance
of compensation deductions under Section 162(m). Moreover, the Committee may
from time to time award compensation that is non-deductible under Section 162(m)
when in the exercise of the Committee's business judgment such award would be in
the best interests of the Corporation.
EXECUTIVE COMPENSATION AND
ORGANIZATION COMMITTEE
James Wood, Chairman
H. Barclay Morley
Richard de J. Osborne
William A. Schreyer
R. J. Ventres
17
<PAGE> 20
DESIGNATION OF AUDITORS
Upon the recommendation of the Finance and Audit Committee, the Board of
Directors has designated Deloitte & Touche LLP to audit the books and accounts
of the Corporation for the year ending December 31, 1996, and will offer a
resolution at the meeting to ratify the designation. Deloitte & Touche LLP has
been the principal auditor of the Corporation since the Corporation was formed
in 1970. Representatives of Deloitte & Touche LLP will be present at the meeting
to respond to appropriate questions, and they will have an opportunity, if they
desire, to make a statement.
OTHER BUSINESS
The By-laws of the Corporation provide a formal procedure for bringing
business before the Meeting. A shareholder proposing to present a matter before
the Meeting is required to deliver to the Secretary of the Corporation, not less
than 30 nor more than 60 days prior to the Meeting (or in the event that less
than 40 days' notice or prior public disclosure of the date of the Meeting is
given or made, not later than the close of business on the 10th day following
such notice or disclosure), a notice with a brief description of the business
desired to be brought, the name and address of the shareholder and the number of
shares of the Corporation's stock the shareholder beneficially owns, and any
material interest of the shareholder in such business. If such procedures are
not complied with, the proposed business shall not be transacted at the Meeting.
The Board of Directors knows of no other business which will be presented
at the meeting. If, however, other matters are properly presented, the persons
named in the enclosed proxy will vote the shares represented thereby in
accordance with their best judgment.
SOLICITATION OF PROXIES
The Corporation has retained Kissel-Blake, Inc. to solicit proxies for a
fee of $13,000, plus reasonable out-of-pocket expenses. Solicitation of proxies
will be undertaken through the mail, in person and by telecommunications and may
include solicitation by officers and employees of the Corporation. Costs of
solicitation will be borne by the Corporation.
1997 ANNUAL MEETING OF SHAREHOLDERS
If any shareholder intends to present a proposal for consideration at the
1997 Annual Meeting of Shareholders, such proposal must be received by the
Corporation not later than November 22, 1996 for inclusion in the Corporation's
proxy statement for such meeting.
18
<PAGE> 21
[SCHERING-PLOUGH LOGO}
SCHERING-PLOUGH CORPORATION
One Giralda Farms
Madison, NJ 07940
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD APRIL 23, 1996
Dear Shareholder:
The Annual Meeting of Shareholders of Schering-Plough Corporation (the
"Corporation") will be held at the offices of the Corporation, Galloping Hill
Road, Kenilworth, New Jersey, on Tuesday, April 23, 1996, at 2:00 p.m. to:
1. Elect four directors for terms of three years and two directors for
terms of one year;
2. Act upon the ratification of the designation of Deloitte & Touche LLP
to audit the books and accounts of the Corporation for 1996; and
3. Transact such other business as may properly come before the meeting.
Only holders of record of Common Shares at the close of business on March
1, 1996 will be entitled to vote at the meeting, or any adjournment or
postponement thereof.
To be sure that your vote is counted, we urge you to complete and sign the
proxy voting instructions card below, detach it from this letter, and return it
in the postage paid envelope enclosed in this package. The giving of such proxy
does not affect your right to vote in person if you attend the meeting. The
prompt return of your signed proxy will aid the Corporation in reducing the
expense of additional proxy solicitation.
Admission to the meeting will be by ticket only. If you are a stockholder
of record and plan to attend, please detach and bring this letter to the meeting
as an admission ticket. If you are a stockholder whose shares are not registered
in your own name and you plan to attend, please bring evidence of your stock
ownership to the meeting, which you can obtain from your bank, broker, etc.
Seating in the main auditorium will be on a first-come, first serve basis.
William J. Silbey
Secretary
March 22, 1996
DETACH PROXY CARD HERE
/ /
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 AND 2.
1. Election of Directors
FOR all nominees / / WITHHOLD AUTHORITY to vote / / *EXCEPTIONS / /
listed below for all nominees listed below.
Nominees: Hans W. Becherer, Regina E. Herzlinger, Robert F.W. van Oordt,
James Wood for 3-year terms; Carl E. Mundy, Jr., Patricia F. Russo for 1-year
terms. (INSTRUCTION: 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. Ratification of Designation of Independent Auditors
FOR / / AGAINST / / ABSTAIN / /
THIS PROXY WILL BE VOTED FOR ITEMS 1 AND 2, UNLESS INSTRUCTIONS TO THE CONTRARY
ARE INDICATED.
Address change and/or
comments please mark here. / /
(Please sign exactly as name or names
appear hereon. Full title of one signing
in representative capacity should be
clearly designated after signature.
Names of all joint holders should be
written even if signed by only one.)
Dated: , 1996
----------------------------
----------------------------------------
SIGNATURE
----------------------------------------
SIGNATURE
VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK. / /
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE> 22
- --------------------------------------------------------------------------------
[SCHERING-PLOUGH CORPORATION LOGO]
SCHERING-PLOUGH CORPORATION
One Giralda Farms
Madison, NJ 07940
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD APRIL 23, 1996
Dear Shareholder:
The Annual Meeting of Shareholders of Schering-Plough Corporation (the
"Corporation") will be held at the offices of the Corporation, Galloping Hill
Road, Kenilworth, New Jersey, on Tuesday, April 23, 1996, at 2:00 p.m. to:
1. Elect four directors for terms of three years and two directors for
terms of one year;
2. Act upon the ratification of the designation of Deloitte &Touche LLP
to audit the books and accounts of the Corporation for 1996; and
3. Transact such other business as may properly come before the meeting.
Only holders of record of Common Shares at the close of business on March
1, 1996 will be entitled to vote at the meeting, or any adjournment or
postponement thereof.
To be sure that your vote is counted, we urge you to complete and sign the
proxy card below, detach it from this letter, and return it in the postage paid
envelope enclosed in this package. The giving of such proxy does not affect your
right to vote in person if you attend the meeting. The prompt return of your
signed proxy will aid the Corporation in reducing the expense of additional
proxy solicitation.
Admission to the meeting will be by ticket only. If you are a stockholder
of record and plan to attend, please detach and bring this letter to the meeting
as an admission ticket. If you are a stockholder whose shares are not registered
in your own name and you plan to attend, please bring evidence of your stock
ownership (which you can obtain from your bank, broker, etc.) to the meeting.
Seating will be on a first-come, first-serve basis.
William J. Silbey
Secretary
March 22, 1996
<PAGE> 23
DETACH PROXY CARD HERE
- -
/ /
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 AND 2.
1. Election of Directors
FOR all nominees
listed below /X/
WITHHOLD AUTHORITY to vote
for all nominees listed below. /X/
*EXCEPTIONS /X/
Nominees: Hans W. Becherer, Regina E. Herzlinger, Robert F.W. van Oordt, James
Wood for 3-year terms; Carl E. Mundy, Jr., Patricia F. Russo for 1-year terms.
(INSTRUCTION: 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. Ratification of Designation of Independent Auditors
FOR /X/ AGAINST /X/ ABSTAIN /X/
THIS PROXY WILL BE VOTED FOR ITEMS 1 AND 2, UNLESS INSTRUCTIONS TO THE CONTRARY
ARE INDICATED.
Address change and/or
comments please mark here. /X/
(Please sign exactly as name or names appear hereon. Full title of one signing
in representative capacity should be clearly designated after signature. Names
of all joint holders should be written even if signed by only one.)
Dated:____________________________________________________________________, 1996
________________________________________________________________________________
SIGNATURE
________________________________________________________________________________
SIGNATURE
VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
- --------------------------------------------------------------------------------
<PAGE> 24
CAPITAL ACCUMULATION PLANS
OF
SCHERING-PLOUGH
VOTING INSTRUCTIONS
Under the Capital Accumulation Plans of the Corporation (the "Plans"), you
may direct the voting of the shares credited to your accounts under the Plans at
the Corporation's Annual Meeting of Shareholders on April 23, 1996. The number
of shares shown on the reverse side represents the total share holdings you have
in the Plans in which you participate.
Enclosed is a copy of the Notice of Annual Meeting and Proxy Statement
describing the items to be presented at the meeting. If no direction is given,
shares will be voted FOR items 1 and 2.
UNLESS YOU SIGN AND RETURN THE CARD, YOUR SHARES CANNOT BE VOTED.
----------------------
To: Vanguard Fiduciary Trust Company as Trustee.
In accordance with the provisions of the Plans, I hereby direct that, at
the Annual Meeting of Shareholders of Schering-Plough Corporation on April 23,
1996, and at all adjournments or postponements thereof, the number of Common
Shares of Schering-Plough Corporation credited to my accounts under the Plans
and entitled to vote at said meeting shall be voted or caused to be voted as
specified.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
SCHERING-PLOUGH CORPORATION
P.O. BOX 11213
NEW YORK, N.Y. 10203-0213
<PAGE> 25
[SCHERING-PLOUGH LOGO]
SCHERING-PLOUGH CORPORATION
One Giralda Farms
Madison, NJ 07940
RE: PROXY VOTING INSTRUCTIONS TO
VANGUARD FIDUCIARY TRUST COMPANY
Dear Capital Accumulation Plan Participant:
The Annual Meeting of Shareholders of Schering-Plough Corporation (the
"Corporation") will be held at the offices of the Corporation, Galloping Hill
Road, Kenilworth, New Jersey, on Tuesday, April 23, 1996, at 2:00 p.m. to:
1. Elect four directors for terms of three years and two directors for
terms of one year;
2. Act upon the ratification of the designation of Deloitte & Touche LLP
to audit the books and accounts of the Corporation for 1996; and
3. Transact such other business as may properly come before the meeting.
To be sure that the shares credited to your Company Stock Account(s) are
voted in accordance with your wishes, we urge you to complete and sign the
voting instruction card below, detach it from this letter, and return it in the
postage paid envelope enclosed in this package.
William J. Silbey
Secretary
March 22, 1996
DETACH PROXY CARD HERE
/ /
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSALS:
1. Election of Directors
FOR all nominees / / WITHHOLD AUTHORITY to vote / / *EXCEPTIONS / /
listed below for all nominees listed below.
Nominees: Hans W. Becherer, Regina E. Herzlinger, Robert F.W. van Oordt,
James Wood for 3-year terms; Carl E. Mundy, Jr., Patricia F. Russo for 1-year
terms. (INSTRUCTION: 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. Ratification of Designation of Independent Auditors
FOR / / AGAINST / / ABSTAIN / /
THIS PROXY WILL BE VOTED FOR ITEMS 1 AND 2, UNLESS INSTRUCTIONS TO THE CONTRARY
ARE INDICATED.
Address change and/or
comments please mark here. / /
Dated: , 1996
-------------------------------
-------------------------------------------
SIGNATURE
VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK. / /
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE> 26
- --------------------------------------------------------------------------------
ADMISSION TICKET
SCHERING-PLOUGH CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
APRIL 23, 1996 AT 2:00 P.M.
GALLOPING HILL ROAD
KENILWORTH, NEW JERSEY
- -------------------------------------------------------------------------------
SCHERING-PLOUGH CORPORATION -- PROXY
SOLICITED BY BOARD OF DIRECTORS
FOR
ANNUAL MEETING OF SHAREHOLDERS -- APRIL 23, 1996
The undersigned appoints HUGH A. D'ANDRADE, RICHARD J. KOGAN, AND ROBERT P.
LUCIANO, or any one or more of them, attorneys and proxies with power of
substitution to vote all of the Common Shares of SCHERING-PLOUGH CORPORATION
standing in the name of the undersigned at the Annual Meeting of Shareholders on
April 23, 1996, and at all adjournments or postponements thereof, upon the
matters set forth in the Notice and Proxy Statement of said meeting, receipt of
which is acknowledged.
The shares represented by this proxy will be voted as directed by the
Shareholder. IF YOU WISH TO VOTE IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE
BOARD OF DIRECTORS, YOU MAY SIGN ON THE REVERSE SIDE AND MAIL IN THE ENVELOPE
PROVIDED. If no direction is given, shares will be voted FOR items 1 and 2.
Specific choices may be made on the reverse side.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
SCHERING-PLOUGH CORPORATION
P.O. BOX 11371
NEW YORK, N.Y. 10203-0371
- --------------------------------------------------------------------------------
