<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
</TABLE>
SCHERING-PLOUGH CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
<PAGE> 2
[Schering-Plough Logo]
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 27, 1999
------------------
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 27, 1999, at 2:00 p.m. to:
(1) Elect five directors for terms of three years;
(2) Act upon the ratification of the designation of Deloitte & Touche
LLP to audit the books and accounts of the Corporation for 1999;
(3) Act upon a proposal to approve the 1999 Executive Incentive Bonus
Program; and
(4) 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
5, 1999 will be entitled to vote at the meeting, or any adjournments or
postponements thereof.
If you are a shareholder of record and plan to attend the meeting, please
detach and retain the admission ticket which is attached to your proxy card and
return the proxy card with the "Annual Meeting" box marked. If you are a
shareholder whose shares are not registered in your own name and you plan to
attend, you may obtain an admission ticket in advance by sending a written
request, with evidence of stock ownership, to the Office of the Secretary,
Schering-Plough Corporation, One Giralda Farms, Madison, New Jersey 07940.
Evidence of your stock ownership can be obtained from your bank, broker, etc.
Admission to the meeting will be on a first-come, first-served basis.
WILLIAM J. SILBEY
Secretary
Madison, New Jersey
March 10, 1999
<PAGE> 3
Schering-Plough Corporation
One Giralda Farms
Madison, New Jersey 07940-1010
March 10, 1999
------------------
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") to be voted at its Annual Meeting of Shareholders on April 27,
1999 and any adjournments or postponements thereof. The Annual Report of the
Corporation for 1998, including financial statements for the year ended December
31, 1998, and this Proxy Statement and the accompanying form of proxy are being
mailed commencing on or about March 10, 1999 to all shareholders of record as of
the close of business on March 5, 1999.
ABOUT THE MEETING
WHAT AM I VOTING ON?
- Election of five directors (Mr. Hans W. Becherer, Mr. Raul E. Cesan,
Professor Regina E. Herzlinger, Mr. Robert F. W. van Oordt and Mr. James
Wood) for terms of three years
- Ratification of the designation of Deloitte & Touche LLP to audit the
books and accounts of the Corporation for 1999
- Approval of the 1999 Executive Incentive Bonus Program
WHO IS ENTITLED TO VOTE?
Only stockholders of record at the close of business on the record date,
March 5, 1999, are entitled to vote shares held on that date at the Annual
Meeting. Each outstanding share entitles its holder to cast one vote.
HOW DO I VOTE?
Vote By Mail: Sign and date each proxy card you receive and return it in
the prepaid envelope. If you return your signed proxy but do not indicate your
voting preferences, your shares will be voted FOR the three proposals on your
behalf.
Vote By Telephone or Via Internet: If you are a shareholder of record
(that is, if you hold your stock in your own name), you may vote by telephone by
following the instructions on your proxy card. The telephone number is
toll-free, so telephone voting is at no cost to you.
If your shares are held in the name of a bank, broker or other holder of
record (i.e., in "street name"), you will receive instructions from the holder
of record that you must follow in order for your shares to be voted. Telephone
and Internet voting will be offered to shareholders owning shares through most
banks and brokers.
If you vote by telephone or via the Internet you do not need to return your
proxy card.
<PAGE> 4
CAN I CHANGE MY VOTE?
Yes. You may change your vote at any time before the proxy is exercised.
If you voted by mail, you must (a) file with the Secretary of the Corporation a
written notice of revocation or (b) timely deliver a valid, later-dated proxy.
If you voted by telephone or via the Internet, you may change your vote with a
later telephone or Internet vote, as the case may be. Attendance at the Annual
Meeting will not have the effect of revoking a proxy unless you give written
notice of revocation to the Secretary before the proxy is exercised or you vote
by written ballot at the Annual Meeting.
WHAT CONSTITUTES A QUORUM?
The presence at the Annual Meeting, in person or by proxy, of the holders
of a majority of the common shares outstanding on the record date will
constitute a quorum. As of January 31, 1999, the Corporation had outstanding and
entitled to vote at the Annual Meeting 1,472,315,748 Common Shares, par value
$.50 per share ("Common Shares").
Abstentions and broker non-votes are counted only for purposes of
determining whether a quorum is present at the meeting.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
The affirmative vote of a plurality of the votes cast at the meeting is
required for the election of directors. For the ratification of the designation
of Deloitte & Touche LLP and the approval of the 1999 Executive Incentive Bonus
Program, the affirmative vote of the holders of a majority of the shares
represented, in person or by proxy, and entitled to vote on the item will be
required.
Abstentions and broker non-votes will not be included in determining the
number of votes cast concerning any matter. Under the rules of the New York
Stock Exchange, absent instructions from the beneficial owners, brokers who hold
shares in street name for beneficial owners have the authority to vote on the
election of directors, the designation of auditors, and the 1999 Executive
Incentive Bonus Program.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
Unless you give other instructions when you vote, the persons named as
proxy holders will vote:
- FOR election of the five nominated directors
- FOR ratification of the designation of Deloitte & Touche LLP to audit the
books and accounts of the Corporation for 1999
- FOR the approval of the 1999 Executive Incentive Bonus Program
With respect to any other matter that properly comes before the Annual
Meeting, the proxy holders will vote as recommended by the Board of Directors
or, if no recommendation is given, in their own discretion.
CAN I ELIMINATE DUPLICATE MAILINGS?
Securities and Exchange Commission ("SEC") rules require the Corporation to
provide an Annual Report to shareholders who receive this Proxy Statement. If
you are a shareholder of record and have more than one account in your name or
the same address as other shareholders of record, you may authorize the
Corporation to discontinue mailings of multiple Annual Reports. To do so, mark
the appropriate box on each proxy card for which you do not wish to receive an
Annual Report or, if you are voting by telephone or via the Internet you can
give us instructions to discontinue future duplicate Annual Reports.
2
<PAGE> 5
ELECTION OF DIRECTORS
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, successors to directors whose
terms expire at that meeting shall be elected for three-year terms. Five
directors are to be elected at this Annual Meeting, to hold office for a term of
three years expiring at the 2002 Annual Meeting 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.
Biographical 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 Raul E. Cesan, who was elected by the Board effective
November 1, 1998.
NOMINEES FOR DIRECTOR
TERM TO EXPIRE 2002
<TABLE>
<CAPTION>
NOMINEE AND YEAR
FIRST ELECTED PRINCIPAL OCCUPATION
A DIRECTOR AND OTHER INFORMATION
---------------- ---------------------
<C> <S>
[Photo Hans W. Becherer] Chairman, chief executive officer and chief operating
officer of Deere & Company (manufacturer of mobile power
HANS W. BECHERER machinery and supplier of financial and health care
1989 services). Mr. Becherer, 63, has been associated with
Deere & Company since 1962. He was elected president and
chief operating officer of Deere & Company in 1987,
president and chief executive officer in 1989, and
chairman and chief executive officer in May 1990, and
assumed the duties of chief operating officer in 1996. Mr.
Becherer is a member of the board of directors of
AlliedSignal Inc. and The Chase Manhattan Corporation. 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.
[Photo Raul E. Cesan] President and chief operating officer of the Corporation.
Mr. Cesan, 51, joined the Corporation in 1977. He was
RAUL E. CESAN president of Schering-Plough International from September
1998 1988 to December 1991, became president of Schering Labs
in January 1992 and then Executive Vice
President-Pharmaceuticals in September 1994. He assumed
his present position in November 1998. He is a director of
Frontier Corporation, and a member of the Healthcare
Leadership Council and the Healthcare Institute of New
Jersey. He also serves on the board of trustees of the
Children's Specialized Hospital, the Foundation of the
University of Medicine and Dentistry of New Jersey, and
the U.S. Council for International Business.
[Photo
Regina E. Herzlinger] Nancy R. McPherson Professor of Business Administration,
Harvard Business School since 1971. Professor Herzlinger,
REGINA E. HERZLINGER 55, is a director of Cardinal Health, Inc., C.R. Bard,
1992 Inc., Deere & Company, and Total Renal Care, Inc., and
also serves on the board of privately held companies and
non-profit organizations, including the Belmont Hill
School of Belmont, Massachusetts.
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
NOMINEE AND YEAR
FIRST ELECTED PRINCIPAL OCCUPATION
A DIRECTOR AND OTHER INFORMATION
---------------- ---------------------
<C> <S>
[Photo Robert F.W. van Former chairman of the executive board of NV Koninklijke KNP
Oordt] BT ("KNP BT") (producer of paper, board and packaging
products; and distributor of graphic paper, graphic and
ROBERT F.W. VAN information systems and office products). Mr. van Oordt,
OORDT 62, joined Buhrmann-Tetterode N.V. ("BT") in May 1989 as a
1992 member of the board of managing directors and was
appointed president and chief executive officer in January
1990. Mr. van Oordt served as chairman of KNP BT's
executive board from March 1993, following the merger of
KNP, BT and VRG, three leading Dutch-based industrial
corporations, until his retirement in April 1996. Mr. van
Oordt serves as the chairman of the Supervisory Board of
NKF Holding N.V. and is a member of the Supervisory Boards
of Rodamco N.V. and Greenfield Capital Partners. He is a
member of the Board of Directors of Nokia Group and N.V.
Union Miniere S.A. He is also Chairman of the Advisory
Council of PricewaterhouseCoopers N.V. and is a member of
the Board of Trustees of the International Bureau of
Fiscal Documentation and of the International Advisory
Board of Nijenrode University. He serves as Chairman of
the Foundation for Business in the Arts in the Netherlands
and is a member of the Conference Board.
[Photo James Wood] Chairman of the board of The Great Atlantic & Pacific Tea
Company, Inc. ("A&P") (supermarkets). Mr. Wood, 69, held
JAMES WOOD the office of chairman and chief executive officer of A&P
1987 from 1980 to 1998, and he continues as chairman of the
board. He is a member of the board of directors of ASARCO
Incorporated and the Food Marketing Institute, and a
member of the board of governors of World United Services
Organization.
</TABLE>
DIRECTORS CONTINUING IN OFFICE
TERM TO EXPIRE 2000
<TABLE>
<CAPTION>
DIRECTOR AND YEAR
FIRST ELECTED PRINCIPAL OCCUPATION
A DIRECTOR AND OTHER INFORMATION
----------------- ---------------------
<C> <S>
[Photo David C. Garfield] Former president and director of Ingersoll-Rand Company
(machinery and equipment manufacturer). Mr. Garfield, 71,
DAVID C. GARFIELD served as vice chairman of Ingersoll-Rand from 1974 to
1975 1980 and as president from January 1981 until his
retirement in June 1986. He is a director of ASARCO
Incorporated, an Overseer of the Foundation at New Jersey
Institute of Technology, and a governor of the Iowa State
University Foundation.
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
DIRECTOR AND YEAR
FIRST ELECTED PRINCIPAL OCCUPATION
A DIRECTOR AND OTHER INFORMATION
----------------- ---------------------
<C> <S>
[Photo Robert P. Luciano] Former chairman of the board of the Corporation. Mr.
Luciano, 65, was chairman and chief executive officer of
ROBERT P. LUCIANO the Corporation from January 1986 to December 1995 and
1978 served as chairman from January 1996 until his retirement
in November 1998. He is a director of AlliedSignal Inc.,
C. R. Bard, Inc., and Merrill Lynch & Co., Inc.
[Photo H. Barclay Morley] Former chairman and chief executive officer of Stauffer
Chemical Company (producer of chemicals). Mr. Morley was
H. BARCLAY MORLEY chief executive officer of Stauffer Chemical from 1974 to
1979 1985. He was elected a director of the Corporation in
January 1979, resigned in February 1985, and then rejoined
the Board in February 1987. Mr. Morley, 69, is a director
of The Bank of New York Company, Inc.
[Photo Carl E. Retired general, former commandant of the Marine Corps.
Mundy, Jr.] General Mundy, 63, entered the Marine Corps in 1953.
Appointed general officer in 1982, he held senior
CARL E. MUNDY, JR. positions of operational command and top-level management
1995 prior to appointment as commandant and Joint Chiefs of
Staff member in 1991. He led the Marine Corps and served
as military adviser to the President and Secretary of
Defense from 1991 to 1995. He is president of worldwide
operations of the United Services Organization and a
director of General Dynamics Corporation and NationsFunds.
He also serves as chairman of the Marine Corps University
Foundation, a member of the boards of advisors to the Navy
League and to The Citadel, and a member of the Council on
Foreign Relations.
[Photo Patricia F. Executive vice president, strategy, business development and
Russo] corporate operations of Lucent Technologies Inc.
(communications). Ms. Russo, 46, assumed her current
PATRICIA F. RUSSO position in January 1997, having served from 1992 to 1996
1995 as president of Lucent's Business Communications Systems
unit (formerly a unit of AT&T Corp.). She joined AT&T in
1981, and held various management and executive positions
at AT&T. She is a director of Xerox Corporation and the
New Jersey Business and Industry Association. She is also
a member of the Board of Regents of Georgetown University.
</TABLE>
5
<PAGE> 8
DIRECTORS CONTINUING IN OFFICE
TERM TO EXPIRE 2001
<TABLE>
<CAPTION>
DIRECTOR AND YEAR
FIRST ELECTED PRINCIPAL OCCUPATION
A DIRECTOR AND OTHER INFORMATION
----------------- ---------------------
<C> <S>
[Photo Hugh A. D'Andrade] Vice chairman and chief administrative officer of the
Corporation. Mr. D'Andrade, 60, joined the Corporation as
HUGH A. D'ANDRADE senior vice president (administration) in February 1981,
1984 was executive vice president (administration) from January
1984 to December 1995, and assumed his present position in
January 1996. Mr. D'Andrade is a trustee of Atlantic
Mutual Insurance Company and a director of AutoImmune Inc.
and Chitogenics, Inc. He also serves as a trustee of Drew
University and as a member of the Board of Visitors of
Columbia University School of Law.
[Photo Richard Jay Kogan] Chairman and chief executive officer of the Corporation. Mr.
Kogan, 57, joined the Corporation as executive vice
RICHARD JAY KOGAN president (pharmaceutical operations) in April 1982, was
1982 president and chief operating officer from January 1986 to
December 1995, and president and chief executive officer
from January 1996 to November 1998 when he assumed his
present position. Mr. Kogan is a director of
Colgate-Palmolive Company and The Bank of New York
Company, Inc., and a director and former chairman of
Pharmaceutical Research and Manufacturers of America. He
also serves on the boards of St. Barnabas Corporation and
Medical Center and on the Board of Trustees of New York
University and is a member of the Business Roundtable and
the Council on Foreign Relations.
[Photo Donald L. Miller] Chief executive officer and publisher of Our World News
(newspapers). Mr. Miller, 67, founded Our World News in
DONALD L. MILLER 1995 and has served as chief executive officer and
1997 publisher since its inception. He served as vice president
of employee relations of Dow Jones & Company from 1986 to
1995. He is a director of The Bank of New York Company,
Inc. and the Jackie Robinson Foundation. He also serves on
the boards of trustees of Pace University and the
Meadowlands Hospital, and is chairman emeritus of
Associated Black Charities of New York. Mr. Miller served
as a Deputy Assistant Secretary of Defense from 1971 to
1973.
[Photo Richard de J. Chairman and chief executive officer of ASARCO Incorporated
Osborne] (non-ferrous metals producer). Mr. Osborne, 64, has served
ASARCO in various executive capacities since 1975. He was
RICHARD DE J. elected president of ASARCO in 1982, and chairman and
OSBORNE chief executive officer in 1985. Mr. Osborne is
1988 non-executive chairman of the board and a director of
Southern Peru Copper Corporation, and a director of The
BFGoodrich Company, Birmingham Steel Corporation, NACCO
Industries, Inc. and The Tinker Foundation. He is former
chairman and director of the International Copper
Association, the Copper Development Association, the
Silver Institute and the National Mining Association. He
is the treasurer and a director of the Americas Society
and the Council of the Americas. Mr. Osborne is a member
of the Council on Foreign Relations and the Economic Club
of New York.
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
DIRECTOR AND YEAR
FIRST ELECTED PRINCIPAL OCCUPATION
A DIRECTOR AND OTHER INFORMATION
----------------- ---------------------
<C> <S>
William A. Schreyer Chairman emeritus of Merrill Lynch & Co., Inc. (securities
and investment banking). Mr. Schreyer, 71, served as
WILLIAM A. SCHREYER chairman of the board of Merrill Lynch from April 1985
1986 through June 1993 and chief executive officer from July
1984 through April 1992. Mr. Schreyer is currently a
director of Callaway Golf Company, Deere & Company, and
Iridium World Communications Ltd. He is also a director
and member of the executive committee of AEA Investors
Inc. His other professional, civic and international
affiliations include the Center for Strategic and
International Studies and the George Bush Presidential
Library Foundation. He is a trustee emeritus of
Pennsylvania State University.
</TABLE>
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Corporation has a standing Finance,
Compliance and Audit Committee, Executive Compensation and Organization
Committee, Pension Committee and Nominating and Corporate Governance Committee,
each consisting exclusively of non-employee directors.
FINANCE, COMPLIANCE AND AUDIT COMMITTEE
MEMBERS: Mr. Garfield (Chair), Mr. Becherer, Mr. Morley, Mr. Osborne, Mr.
Schreyer, and Mr. van Oordt.
NUMBER OF MEETINGS IN 1998: Five
FUNCTIONS:
- Reviews and recommends to the Board dividend policies and actions
- Oversight of corporate borrowing and investment activities
- Oversight of 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 and meets regularly with the independent auditors
- Oversight of litigation, insurance and risk management activities
- Oversight of compliance with business conduct policy
The independent auditors have unrestricted access to the Committee.
EXECUTIVE COMPENSATION AND ORGANIZATION COMMITTEE
MEMBERS: Mr. Wood (Chair), Mr. Becherer, Mr. Morley, Mr. Osborne, and Mr.
Schreyer
NUMBER OF MEETINGS IN 1998: Four
FUNCTIONS:
- Responsible for approving or recommending to the Board compensation,
incentive awards, stock options, and benefit programs for officers and
senior executives of the Corporation
- Makes recommendations to the Board concerning executive organizational
matters
7
<PAGE> 10
PENSION COMMITTEE
MEMBERS: Professor Herzlinger (Chair), Mr. Miller, General Mundy, Ms.
Russo, and Mr. Wood
NUMBER OF MEETINGS IN 1998: Four
FUNCTIONS:
- Responsible for general oversight of the investment of funds under
employee benefit plans
- Establishes investment policies for funds under employee benefit plans
- Reviews the performance of managers and trustees of employee benefit
plans
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
MEMBERS: Mr. Morley (Chair), Mr. Becherer, Mr. Schreyer, and Mr. van Oordt
NUMBER OF MEETINGS IN 1998: Three
FUNCTIONS:
- Reviews and makes recommendations to the Board with respect to the
composition of the Board and the election and re-election of directors
- Assesses periodically the functioning of the Board
- Reviews and makes recommendations to the Board concerning director
compensation
The Committee will consider shareholder recommendations for directors.
Shareholder 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
occupation or 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
SEC, and a consent to serve, if elected, of the nominee. A nomination not made
in accordance with this procedure would be void.
BOARD MEETINGS AND ATTENDANCE OF DIRECTORS
The Board of Directors held nine meetings in 1998. All directors attended
more than 75% of the aggregate of (i) the total number of meetings of the Board
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 chairperson 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 Directors' 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.
8
<PAGE> 11
Under the Directors' Deferred Stock Equivalency Program, each non-employee
director (other than Mr. Luciano) is also credited annually with a $25,000
deferred payment in a Corporation stock equivalency account, which is valued as
if invested in the Corporation's Common Shares. Upon termination of service as a
director, the value of a director's deferred account is payable in cash, at the
director's election, in installments or in a lump sum.
Non-employee directors also receive an annual award of 2200 Common Shares
under the Directors' Stock Award Plan.
SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS
Set forth below is information with respect to beneficial ownership of the
Common Shares of the Corporation as of January 31, 1999 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............................................ 25,200
Rodolfo C. Bryce............................................ 181,332(b)(c)
Raul E. Cesan............................................... 971,461(b)
Joseph C. Connors........................................... 520,502(b)(c)
Hugh A. D'Andrade........................................... 605,724(b)
David C. Garfield........................................... 103,845(c)
Regina E. Herzlinger........................................ 13,309
Richard Jay Kogan........................................... 991,584(b)
Robert P. Luciano........................................... 1,046,636(b)
Donald L. Miller............................................ 4,409
H. Barclay Morley........................................... 43,996
Carl E. Mundy, Jr........................................... 9,800
Richard de J. Osborne....................................... 57,127
Patricia F. Russo........................................... 9,800
William A. Schreyer......................................... 28,400
Robert F. W. van Oordt...................................... 6,000
James Wood.................................................. 90,800
All directors and executive officers as a group including
those above (27).......................................... 6,413,621(b)(c)
</TABLE>
- ---------------
(a) The total for each individual is less than 0.2%, and for the group is less
than 0.5%, of the outstanding Common Shares of the Corporation (including
shares which could be acquired within 60 days of January 31, 1999 through
the exercise of outstanding options or the distribution of shares under the
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, 1999
through the exercise of employee stock options or the distribution of shares
under the Corporation's Stock Incentive Plans as follows: Mr. Bryce
(163,280); Mr. Cesan (740,120); Mr. Connors (422,460); Mr. D'Andrade
(463,880); Mr. Kogan (761,600); Mr. Luciano (704,000); all directors and
executive officers as a group (4,534,160).
(c) Does not include shares owned by family members and as to which beneficial
ownership is disclaimed as follows: Mr. Bryce, 136 shares; Mr. Connors,
13,880 shares; Mr. Garfield, 16,000 shares; one other executive officer,
4,310 shares.
9
<PAGE> 12
COMMON SHARE EQUIVALENTS
The following table sets forth the number of Common Share equivalents
credited as of January 31, 1999 to the accounts of the Corporation's
participating non-employee directors under the Directors' Deferred Compensation
Plan and under the Directors' Deferred Stock Equivalency Program, including
dividends credited. Under both, payments are made in cash following termination
of service as a director depending on the market value of the Common Shares of
the Corporation at that time. For additional information, see "Directors'
Compensation" above.
<TABLE>
<CAPTION>
TOTAL
-------
<S> <C>
Hans W. Becherer............................................ 11,059
David C. Garfield........................................... 23,469
Regina E. Herzlinger........................................ 28,193
Donald L. Miller............................................ 1,798
H. Barclay Morley........................................... 12,641
Carl E. Mundy, Jr........................................... 3,720
Richard de J. Osborne....................................... 7,737
Patricia F. Russo........................................... 11,847
William A. Schreyer......................................... 123,984
Robert F. W. van Oordt...................................... 39,194
James Wood.................................................. 113,646
-------
Total....................................................... 377,288
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Set forth below is certain information with respect to those persons who
are known to the Corporation to own beneficially more than five percent of the
Corporation's outstanding Common Shares, as of February 16, 1999.
<TABLE>
<CAPTION>
COMMON SHARES
NAME AND ADDRESS BENEFICIALLY PERCENT
OF BENEFICIAL OWNER OWNED OF CLASS
- ------------------- ------------- --------
<S> <C> <C>
FMR Corp............................................ 96,904,522(a) 6.6%
82 Devonshire Street
Boston, MA 02109
</TABLE>
- ---------------
(a) As reported on Amendment No. 1 to Schedule 13G filed with the Securities and
Exchange Commission on February 16, 1999. This number includes 87,358,078
shares beneficially owned by Fidelity Management & Research Company, a
wholly-owned subsidiary of FMR Corp., as a result of acting as investment
advisor to various investment companies; 8,299,214 shares beneficially owned
by Fidelity Management Trust Company, a wholly-owned subsidiary of FMR
Corp., as a result of its serving as investment manager of certain
institutional accounts; and 1,216,830 shares beneficially owned by Fidelity
International Limited as a result of its providing investment advisory and
management services to various non-U.S. investment companies and certain
institutional investors. Edward C. Johnson 3d, Chairman of FMR Corp., and
Abigail P. Johnson, a Director of FMR Corp., also are listed on the Schedule
13G as beneficially owning the 96,904,522 Common Shares of the Corporation,
because they exercise dispositive power over the shares.
10
<PAGE> 13
SUMMARY COMPENSATION TABLE
The following table sets forth compensation of the six most highly
compensated executive officers of the Corporation, including the Chief Executive
Officer, for the fiscal year ended December 31, 1998 ("Fiscal 1998").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------
AWARDS
ANNUAL COMPENSATION -----------------------------
--------------------------------------- SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL RESTRICTED STOCK UNDERLYING ALL OTHER
POSITION IN 1998 YEAR SALARY BONUS COMPENSATION(a) AWARDS(b) OPTIONS COMPENSATION(c)
------------------ ---- ---------- ---------- --------------- ---------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard Jay Kogan...... 1998 $1,100,000 $1,648,000 -- $7,930,000 352,000 $287,741
Chairman of the Board 1997 900,000 1,342,000 -- 4,121,000 352,000 229,910
and Chief Executive 1996 900,000 1,080,000 -- 2,905,500 304,000 204,445
Officer
Raul E. Cesan.......... 1998 $ 691,667 $ 583,500 -- $1,708,000 85,200 $140,262
President and Chief 1997 537,500 375,000 -- 887,600 85,200 112,069
Operating Officer 1996 475,000 317,000 -- 894,000 48,800 97,048
Hugh A. D'Andrade...... 1998 $ 640,000 $ 448,000 -- $1,708,000 85,200 $157,936
Vice Chairman and 1997 601,500 419,500 -- 887,600 85,200 142,992
Chief Administrative 1996 563,125 376,000 -- 894,000 64,000 126,769
Officer
Rodolfo C. Bryce....... 1998 $ 447,500 $ 282,000 -- $1,433,500 70,800 $113,766
Executive Vice
President 1997 418,750 263,000 -- 744,950 70,800 99,437
HealthCare Products 1996 387,500 227,000 -- 536,400 22,800 99,527
Joseph C. Connors...... 1998 $ 437,000 $ 275,500 -- $1,433,500 70,800 $ 99,656
Executive Vice
President 1997 416,000 261,000 -- 744,950 70,800 92,240
and General Counsel 1996 400,000 240,000 -- 759,900 34,700 88,438
Robert P. Luciano*..... 1998 $1,037,750 $1,090,000 $68,281 $ 0 0 $313,337
Retired Chairman of 1997 1,211,400 1,266,000 60,005 4,121,000 352,000 317,628
the Board 1996 1,178,400 1,178,500 69,946 2,905,500 352,000 286,018
</TABLE>
- ---------------
* Mr. Luciano retired as an officer of the Corporation effective November 1,
1998.
(a) Includes non-cash compensation in the amount of $60,781 in 1998, $52,505 in
1997, and $63,946 in 1996 for transportation provided by the Corporation.
(b) In February 1998 restricted stock awards were granted to Mr. Kogan for
208,000 shares, to Mr. Cesan for 44,800 shares, to Mr. D'Andrade for 44,800
shares, to Mr. Bryce for 37,600 shares, and to Mr. Connors for 37,600
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 19.
At December 31, 1998, the total number and value of undistributed shares,
all of which are vested, for the named executive officers were: Mr. Kogan
416,000 shares ($22,984,000); Mr. Cesan 97,280 shares ($5,374,720); Mr.
D'Andrade 97,280 shares ($5,374,720); Mr. Bryce 235,520 shares
($13,012,480); and Mr. Connors 81,920 shares ($4,526,080). Shares awarded
are distributable in five equal annual installments, except for a special
grant to Mr. Bryce in September 1994 of 160,000 shares which will vest and
become distributable in September 1999. Under the terms of the Corporation's
Stock Incentive Plans, 272,000 vested but undistributed shares held by Mr.
Luciano were distributed following his retirement (value on distribution
date, $14,875,000). 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
1998, Mr. Kogan ($165,000 and $122,741); Mr. Cesan ($103,750 and $36,512);
Mr. D'Andrade ($96,000 and $61,936); Mr. Bryce ($67,125 and $46,641); Mr.
Connors ($65,550 and $34,106); and Mr. Luciano ($155,663 and $157,674); for
1997 Mr. Kogan ($135,000 and $94,910); Mr. Cesan ($80,625 and $31,444); Mr.
D'Andrade ($90,225 and $52,767); Mr. Bryce ($62,813 and $36,624); Mr.
Connors ($62,400 and $29,840); and Mr. Luciano ($181,710 and
11
<PAGE> 14
$135,918); for 1996, Mr. Kogan ($135,000 and $69,445); Mr. Cesan ($71,250
and $25,798); Mr. D'Andrade ($84,469 and $42,300); Mr. Bryce ($58,125 and
$41,402); Mr. Connors ($60,000 and $28,438); and Mr. Luciano ($176,760 and
$109,258).
EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
Mr. Kogan has an agreement which provides for his employment as Chairman of
the Board and Chief Executive Officer through December 31, 2000 at an annual
base salary of not less than $1,100,000. 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. Cesan has an agreement which provides for his employment as President
and Chief Operating Officer through October 31, 2003 at an annual base salary of
not less than $850,000. Mr. Cesan's agreement provides that his employment is
automatically extended on a yearly basis, but not beyond October 30, 2012,
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 provides for his employment as Vice Chairman of the Board and
Chief Administrative Officer through December 31, 2000 at an annual base salary
of not less than $640,000. Mr. D'Andrade's agreement provides that his
employment is automatically extended on a yearly basis, but not beyond November
30, 2003, unless either he or the Corporation gives notice to terminate the
agreement at least six months before its scheduled expiration date. If for any
reason other than cause the Corporation elects to terminate the employment of
Mr. Kogan, Mr. Cesan 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 (as defined below), he is
generally entitled to (a) receive a lump sum equal to two times (I) his annual
base salary and (II) the highest of his annual bonus and profit-sharing 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 highest of his annual
bonus and profit-sharing 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" 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, as well as Mr.
Luciano's agreement, provides for retirement benefits as described in the
Pension Plan Table on page 14. After retirement, Messrs. Kogan and Luciano are
entitled to an office and certain executive level services, including
transportation and security services.
Mr. Connors has an agreement 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, he 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 Control. If his 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
12
<PAGE> 15
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 he 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, he 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.
Mr. Bryce retired on December 31, 1998. Under an agreement providing for
his service as an executive officer through December 31, 1998, Mr. Bryce
forfeited all undistributed stock awards and all unvested stock options except:
a special stock award of 160,000 shares granted in September 1994 which will be
distributed in September 1999; 7,520 shares awarded in February 1998 and
distributed in February 1999; and 14,160 stock options granted in February 1998
which vested in February 1999.
Under the Corporation's Stock Incentive Plans, stock awards and stock
options granted to the named executive officers may vest and be cashed out upon
a Change of Control.
OPTION TABLES
The following tables provide information with respect to stock options
granted to or exercised by the named executive officers during Fiscal 1998 and
the fiscal year-end value of options held by such officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS VALUE
---------------------------------------------------- ----------------
NUMBER OF
SECURITIES % OF TOTAL
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>
Richard Jay Kogan.................... 352,000 3.2% $38.125 2/22/08 $4,568,168
Raul E. Cesan........................ 85,200 0.8 38.125 2/22/08 1,105,704
Hugh A. D'Andrade.................... 85,200 0.8 38.125 2/22/08 1,105,704
Rodolfo C. Bryce..................... 70,800 0.6 38.125 2/22/08 918,825
Joseph C. Connors.................... 70,800 0.6 38.125 2/22/08 918,825
Robert P. Luciano.................... 0 0.0 -- -- 0
</TABLE>
- ---------------
(a) Options are for a term of 10 years and became exercisable after one year on
February 24, 1999. The exercise price of the option is the market value of
the Common Shares on the date of grant. After the occurrence of a Change of
Control, options become exercisable and may be cashed out for a period of 60
days. Although permitted under the plan, no standard stock appreciation
rights were granted in tandem with the options. Options granted to Messrs.
Kogan, Cesan, D'Andrade and Connors are transferable in accordance with the
terms of the Corporation's Stock Incentive Plans.
(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 February
28, 1998 (2.02%); volatility of the Common Shares based on monthly total
returns for the three years ended February 28, 1998 (0.2495); an annualized
risk-free interest rate of 5.16%; and an option term of 10 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 $19.1 billion, of which
the value of the
13
<PAGE> 16
named officers' options would be 0.05%. 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.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-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(a)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard Jay Kogan..... 576,000(b) $18,350,996 784,000 264,000(c) $34,936,988 $ 9,355,000
Raul E. Cesan......... 48,000 1,794,000 645,960 645,200 30,253,392 24,104,050
Hugh A. D'Andrade..... 505,600 22,331,064 412,320 42,600(c) 18,111,984 729,525
Rodolfo C. Bryce...... 48,000 1,948,499 141,600 486,800 5,874,187 20,702,450
Joseph C. Connors..... 25,280 1,189,740 344,140 434,800 15,503,883 16,472,698
Robert P. Luciano..... 1,216,000(b) 51,779,986 704,000(d) 0 32,834,982 0
</TABLE>
- ---------------
(a) Based on the closing price of Common Shares on the New York Stock Exchange
on December 31, 1998 of $55.25.
(b) Does not include stock options granted in February 1997 which were
transferred and exercised in accordance with the terms of the Corporation's
1997 Stock Incentive Plan (Mr. Kogan 176,000 options; Mr. Luciano 308,000
options). After transfer, these stock options were no longer beneficially
owned by the executive officer.
(c) Does not include stock options granted in February 1998 which were
transferred in accordance with the terms of the Corporation's 1997 Stock
Incentive Plan (Mr. Kogan 88,000 options; Mr. D'Andrade 42,600). After
transfer, these stock options were no longer beneficially owned by the
executive officer.
(d) Does not include 44,000 stock options granted in February 1997 which were
transferred in accordance with the terms of the Corporation's 1997 Stock
Incentive Plan. After transfer, these stock options were no longer
beneficially owned by the executive officer.
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>
$ 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. Retirement benefits
under the Corporation's nonqualified plans are payable on an annuity basis or on
a present value lump sum basis at the election of the executive. Covered
compensation consists of salary and bonus which, for the named executive
officers, is shown in the Summary Compensation Table on page 11. The credited
years of service as of December 31, 1998 are: Mr. Bryce (18 years); Mr. Cesan
14
<PAGE> 17
(21 years); Mr. Connors (21 years); Mr. D'Andrade (17 years); and Mr. Kogan (16
years). As of his retirement date of November 1, 1998, Mr. Luciano had 20 years
of credited service.
Under their employment agreements referred to on page 12, each of Messrs.
Kogan, Cesan and D'Andrade 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. Kogan's, Mr. Cesan's
or Mr. D'Andrade'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 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. Kogan, Mr. Cesan or Mr. D'Andrade
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. Under his employment agreement, Mr. Luciano was
entitled to receive a minimum annual benefit of 55% of final average annual
compensation, and his wife was entitled to a minimum annual survivor's benefit
of 45% of such final average annual compensation after his death. Retirement
benefits provided to Messrs. Cesan, D'Andrade, Kogan and Luciano under their
employment agreements are payable on an annuity basis or on a present value lump
sum basis at the election of the executive. Mr. Luciano elected to receive his
retirement benefits under the nonqualified plans and his employment agreement on
a present value lump sum basis. Under his agreement described on page 13, Mr.
Bryce, age 52, is entitled to retirement benefits under the Corporation's
retirement plans as though he had retired at age 55.
15
<PAGE> 18
PERFORMANCE GRAPH
COMPARISON OF CUMULATIVE TOTAL RETURN
FOR THE FIVE YEARS ENDED DECEMBER 31, 1998
[SCHERING-PLOUGH PERFORMANCE LINE GRAPH]
<TABLE>
<CAPTION>
SCHERING-PLOUGH COMPOSITE PEER
CORP. GROUP S&P 500 INDEX
<S> <C> <C> <C>
1993 $100 $100 $100
1994 111 114 101
1995 169 185 139
1996 204 232 170
1997 397 359 227
1998 714 521 292
</TABLE>
The graph above assumes a $100 investment on December 31, 1993, 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., Pharmacia & Upjohn, Inc., and Warner-Lambert Company.
Pharmacia & Upjohn, Inc. was created by the merger of Pharmacia and The Upjohn
Company in November 1995. The graph above assumes that the initial investment in
The Upjohn Company common stock was subsequently converted into Pharmacia &
Upjohn, Inc. common stock in the merger.
16
<PAGE> 19
COMPENSATION COMMITTEE REPORT
PRINCIPLES AND PROGRAM
The Corporation's executive compensation program is designed to serve the
Corporation's broader strategic goals of profitable growth and the creation of
long-term shareholder value. The program is fundamentally a pay for performance
program designed to:
- ensure the Corporation's ability to attract and retain superior
executives
- strongly align the interests of the Corporation's executives with those
of its shareholders
- provide a compensation package that balances individual contributions and
overall business results
The Executive Compensation and Organization Committee (the "Committee") is
responsible for setting the Corporation's executive compensation policy. The
Committee consists of five directors who are not employees of the Corporation
and are not eligible to participate in the Corporation's executive compensation
programs.
In determining executive compensation, the Committee evaluates both the
total compensation package and its individual elements. As part of its review,
the Committee considers compensation data for companies which represent direct
competitors for executive talent. The data, which is developed by established,
independent compensation consultants, 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") and other pharmaceutical and consumer
products companies, including some for which public information is not
available. The selection of the Corporation's principal compensation consultant
is ratified annually by the Committee.
TOTAL COMPENSATION
An executive's total compensation consists of three elements: base salary,
an annual incentive bonus, and long-term equity-based compensation (stock
options and restricted stock awards).
BASE SALARY
The Committee assesses a number of factors in fixing the salary of the
executive officers (including those named in the proxy statement). Those factors
typically include: the responsibility of the individual's 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 the case of executive officers with responsibility for
a particular business unit, the Committee also considers the unit's financial
results. Non-financial indicators may 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.
Each year, the Committee reviews with the Chief Executive Officer his
performance ratings of the other executive officers (with the exception of Mr.
Luciano who served as Chairman until his retirement on November 1, 1998), and
evaluates compensation levels against levels at the competitor companies.
Established and independent compensation consultants are used to confirm that
salary levels are within the range of the competitor companies. To ensure that
compensation policy for 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.
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. In fixing the salaries of the executive officers
for 1998, 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.
17
<PAGE> 20
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 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 or her 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 under the program formula.
However, the Committee may not increase the amount of any incentive bonus award
determined under the program formula. In no event may an incentive bonus award
for any year to any covered executive officer exceed the maximum award specified
in the program.
In 1998 the Corporation met or exceeded each of the pre-tax earnings, basic
earnings per share growth, and return on equity goals. Pre-tax earnings from
continuing operations increased by 22%, basic earnings per share from continuing
operations grew by 22%, and return on equity equaled 52%. The Committee has
certified that the performance goals and the other material terms of the
executive incentive bonus program were satisfied for 1998. In accordance with
the program formula the cash awards of all of the executive officers were
greater than their target awards.
The amount of cash awards to the executive officers who are not covered by
the executive incentive bonus program also bears a significant relationship to
corporate performance. The Committee awards bonuses to these officers based
principally on the same performance goals used in the executive incentive bonus
program, 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, except for one officer whose goals include his business unit's
performance. In awarding a bonus to these executive officers, the Committee also
considers the non-financial factors reflected in an individual's performance
rating. However, those non-financial factors cannot constitute the basis for
more than 25% of the target bonus award.
EQUITY-BASED COMPENSATION
Under the 1997 Stock Incentive Plan, which was approved by shareholders,
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
executive officers with that of the shareholders, as any appreciation in the
price of the stock will benefit all shareholders commensurately. This is
particularly true in the case of the restricted stock awards, because they are
18
<PAGE> 21
distributed over a five-year period. Also, the five-year distribution period for
the restricted stock awards serves as an inducement for the officers to remain
with the Corporation.
The Committee sets fixed guidelines for the size of stock option grants and
restricted stock awards for each executive grade level within the Corporation,
other than that of Mr. Kogan, based on the competitive compensation data used to
determine salary. Under the guidelines, the Committee grants stock options and
restricted stock awards to each executive officer, except Mr. Kogan, in
specified amounts based on the officer's executive grade level and individual
performance rating. 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, 1998 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 generally first exercisable
after one year and generally are exercisable for a term of ten years. However,
the actual value of any options granted will depend entirely on the extent to
which the Corporation's Common Shares have appreciated in value at the time the
options are exercised.
RESTRICTED STOCK AWARDS -- Under the 1997 Stock Incentive Plan,
shareholders approved performance goals for restricted stock awards for certain
senior executive officers, including the Chief Executive Officer and the other
executive officers named in the proxy statement. The vesting of any restricted
stock award to a covered executive officer is subject to the attainment of the
performance goal for earnings per share growth, return on equity or pre-tax
earnings described above under "Annual Incentive Bonus." The awards are assigned
a dollar value based on the share price at the time the award is made. If the
Corporation meets any one of the performance goals, the stock award vests and
the shares are distributable ratably over five years. The Committee has
certified that all of the performance goals were satisfied for 1998.
The vesting of restricted stock awards for the Corporation's executive
officers who are not covered by the restricted stock award program 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.
COMPENSATION OF THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER FOR 1998
In setting Mr. Kogan's base salary, the Committee evaluates the same
factors which it considers in establishing the salary levels of the executive
officers generally, as well as the limitations of Section 162(m) of the Internal
Revenue Code relating to deductibility of certain executive compensation. In
addition, the Committee considers the status of Mr. Kogan as the Corporation's
most senior officer and the important role he has in achieving overall corporate
goals. In granting stock options and restricted stock awards to Mr. Kogan, the
Committee sets no fixed guideline, but takes into consideration his total
compensation package and competitive compensation data, overall corporate
financial performance, his role in attaining those results, and the number of
options and stock awards previously granted, although no particular weighting is
assigned to any factor.
Mr. Kogan was awarded a base salary of $1,100,000 for 1998, compared with
$900,000 in 1997. The base salary awarded to Mr. Kogan was set at competitive
levels, while establishing an overall compensation structure tied to corporate
performance.
Mr. Kogan is subject to a long-term employment contract. The Committee
believes that given Mr. Kogan's record, his status in the industry, and his
experience and leadership, his contract significantly benefits the Corporation
and the shareholders by securing Mr. Kogan's services as Chairman of the Board
and Chief Executive Officer for the future and by encouraging him to focus on
the long-term strategic interests of the Corporation.
19
<PAGE> 22
In accordance with the executive incentive bonus program formula, Mr. Kogan
received a bonus of $1,648,000 for 1998, which was greater than his target
award. In 1998, the Committee granted Mr. Kogan 352,000 stock options and a
restricted stock award for 208,000 shares, which is the same as 1997.
INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the Internal Revenue Code 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.
Qualifying performance-based compensation is not subject to the deduction limit
if certain requirements are met. The Committee has structured the annual
incentive bonus, deferred compensation 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
Hans W. Becherer
H. Barclay Morley
Richard de J. Osborne
William A. Schreyer
DESIGNATION OF AUDITORS
Upon the recommendation of the Finance, Compliance 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, 1999, 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.
20
<PAGE> 23
APPROVAL OF 1999 EXECUTIVE INCENTIVE BONUS PROGRAM
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally provides that public companies may not deduct compensation
paid to the chief executive officer or any of the four most highly compensated
officers ("Covered Employees") to the extent it exceeds $1,000,000 in any one
tax year, unless the payments are made based upon the attainment of objective
performance goals that are approved by shareholders.
For more than 20 years, the Corporation has maintained the Executive
Incentive Plan (the "Incentive Plan") to (a) improve corporate and individual
performance through financial incentives which provide rewards to employees
whose activities most significantly affect the profitability of the Corporation;
(b) support the planning efforts of the Corporation and encourage cooperation
and group effort toward the attainment of corporate goals; and (c) help attract
and retain outstanding executives and managers. Under the Incentive Plan, awards
have been based on financial and non-financial performance targets. In 1994,
when Section 162(m) became effective, the Board of Directors adopted and
shareholders approved an executive incentive bonus program which utilized only
objective performance criteria for determining the maximum bonus awards for
Covered Employees and certain other senior executives.
Under Section 162(m), shareholder approval of the 1994 bonus program helped
to preserve the ability of the Corporation to deduct cash bonuses for Covered
Employees until 1999. The Executive Compensation and Organization Committee (the
"Committee") of the Board of Directors has adopted the 1999 Executive Incentive
Bonus Program (the "1999 Bonus Program"), subject to shareholder approval, to
continue to preserve the potential tax deductibility of these cash bonuses. Like
the 1994 bonus program, the 1999 Bonus Program will use only objective
performance goals as the criteria for determining maximum bonus awards for
participants. All senior executives are eligible to be designated as
participants in the 1999 Bonus Program. The participants in the 1999 Bonus
Program currently include the Chairman of the Board and Chief Executive Officer,
the President and Chief Operating Officer, the Vice Chairman and Chief
Administrative Officer, the Executive Vice Presidents, the President of
Schering-Plough Research Institute and the President of Schering Laboratories, a
total of seven individuals.
The amount of a senior executive's incentive bonus award for any calendar
year will be based upon performance goals relating to one or more of the
following: earnings per share, return on equity or profit before taxes.
Shareholder approval of the 1999 Bonus Program will constitute approval of these
performance goals for purposes of qualifying cash bonuses to Covered Employees
for deductibility under Section 162(m).
The 1999 Bonus Program will be administered by the Committee under the
Incentive Plan. The Committee is comprised entirely of "outside directors" as
defined in Section 162(m) and the regulations thereunder. Each calendar year,
the Committee will establish fixed percentages of base salary as target
incentive bonus awards ("Target Awards") for each senior executive participating
in the 1999 Bonus Program. Depending on the degree of achievement, if any, of
the performance goals, the actual cash bonus award that is earned by a senior
executive may be equal to, greater than, or less than his or her Target Award.
The Committee may, in its discretion, reduce the amount of the incentive bonus
award determined pursuant to the provisions of the 1999 Bonus Program when the
Committee's consideration of subjective 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 1999 Bonus
Program. Furthermore, in no event may an incentive bonus award for any calendar
year to any participant exceed $5,000,000. While the amount of the incentive
bonus that may be awarded to any 1999 Bonus Program participant for any calendar
year cannot be determined, the Corporation believes that if the 1999 Bonus
Program had been in effect for 1998, the executive officers in the Summary
Compensation Table would have received bonuses in approximately the same amounts
as are shown in the Table for 1998.
Cash bonus awards for a calendar year will be payable to the 1999 Bonus
Program participants following the close of such year, but not earlier than the
date on which the Committee certifies in writing the degree to which the
applicable performance goals have been achieved. A senior executive may elect
either to receive an award currently, or to have any part of an award deferred.
Deferred amounts will be valued as if invested in any of a selection of fixed
income, money market, and equity funds and/or the Corporation's Common Shares.
21
<PAGE> 24
Approval of the 1999 Bonus Program, including the performance goals
described above, must receive the affirmative vote of the holders of a majority
of the shares represented, in person or by proxy, at the Annual Meeting.
Abstentions and broker non-votes will not be included in determining the number
of votes cast.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR THE APPROVAL OF THE 1999 BONUS PROGRAM.
OTHER BUSINESS
The By-laws of the Corporation provide a formal procedure for bringing
business before the Annual Meeting. A shareholder proposing to present a matter
before the Annual Meeting is required to deliver to the Secretary of the
Corporation, not less than 90 days nor more than 120 days prior to the first
anniversary of the preceding year's Annual Meeting (or in the event that the
date of the Annual Meeting is more than 30 days before or more than 60 days
after such anniversary date, not earlier than the 120th day prior to the Annual
Meeting and not later than the later of the 90th day prior to the Annual Meeting
or the 10th day following the day on which public announcement of the date of
such meeting is first made by the Corporation), a notice with a brief
description of the business desired to be brought, the reasons for conducting
such business, 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 these procedures are not
complied with, the proposed business will not be transacted at the Annual
Meeting. Such By-law provisions are not intended to affect any rights of
shareholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
Pursuant to Rule 14a-4 under the Exchange Act, if a shareholder notifies
the Corporation after January 29, 2000 of an intent to present a proposal at the
Corporation's 2000 Annual Meeting (and for any reason the proposal is voted upon
at that Annual Meeting), the Corporation's proxy holders will have the right to
exercise discretionary voting authority with respect to the proposal, if
presented at the meeting, without including information regarding the proposal
in its proxy materials.
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, a division of Shareholder
Communications Corp., to solicit proxies for a fee of $16,000, 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.
2000 ANNUAL MEETING OF SHAREHOLDERS
If any shareholder intends to present a proposal for consideration at the
2000 Annual Meeting of Shareholders, such proposal must be received by the
Corporation not later than November 10, 1999 for inclusion, pursuant to Rule
14a-8 under the Exchange Act, in the Corporation's proxy statement for such
meeting.
22
<PAGE> 25
SCHERING-PLOUGH CORPORATION--PROXY
SOLICITED BY BOARD OF DIRECTORS
FOR
ANNUAL MEETING OF SHAREHOLDERS--APRIL 27, 1999
The undersigned appoints RAUL E. CESAN, HUGH A. D'ANDRADE, AND RICHARD JAY
KOGAN, 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 27, 1999, 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 no direction is given, shares will be voted FOR Items 1, 2 and
3.
(Continued and to be signed on the reverse side)
<PAGE> 26
THIS PROXY WILL BE VOTED FOR ITEMS 1, 2 AND 3 UNLESS INSTRUCTIONS TO THE
CONTRARY ARE INDICATED.
(PLEASE MARK BOXES [-] OR [X] IN BLUE OR BLACK INK.)
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSALS:
- ----------------------------------------------------------------------------------------------------------------------------
1. Election of Directors 2. Ratification of Designation of Independent Auditors
Nominees are: Hans W. Becherer, Raul E. Cesan, Regina E. FOR [ ] AGAINST [ ] ABSTAIN [ ]
Herzlinger, Robert F.W. van Oordt, James Wood for 3-year
terms.
(To withhold authority to vote for any individual 3. Approval of the 1999 Executive Incentive Bonus Program
nominee, draw a line through the nominee's name above.)
FOR [ ] AGAINST [ ] ABSTAIN [ ]
FOR [ ] WITHHELD [ ]
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
DATED: , 1999
-------------------
-------------------------------
SIGNATURE(S) OF SHAREHOLDER(S)
(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.)
PLEASE COMPLETE, DATE, SIGN AND MAIL PROXY CARD IN THE ENVELOPE PROVIDED.
POSTAGE NOT NECESSARY IF MAILED IN THE UNITED STATES.
<PAGE> 27
[SCHERING-PLOUGH LETTERHEAD]
ADMISSION TICKET
1999 ANNUAL MEETING OF SHAREHOLDERS
Dear Shareholder:
The Annual Meeting of Shareholders of Schering-Plough Corporation will be
held at the offices of the Corporation, Galloping Hill Road, Kenilworth, New
Jersey, on Tuesday, April 27, 1999 at 2:00 p.m.
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. Alternatively, you can vote by telephone by
following the instructions on the opposite side of this proxy card. The giving
of such proxy does not affect your right to vote in person if you attend the
meeting. Your prompt reply 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. Admission will be on a first come, first served basis.
William J. Silbey
Secretary
March 10, 1999
DETACH PROXY CARD HERE IF YOU ARE NOT
VOTING BY TELEPHONE
- --------------------------------------------------------------------------------
SCHERING-PLOUGH CORPORATION-PROXY
SOLICITED BY BOARD OF DIRECTORS
FOR
ANNUAL MEETING OF SHAREHOLDERS-APRIL 27, 1999
The undersigned appoints Raul E. Cesan, Hugh A. D'Andrade and Richard Jay
Kogan, 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 27, 1999, 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 ENCLOSED
ENVELOPE PROVIDED. If no direction is given, shares will be voted FOR items 1, 2
and 3. 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
<PAGE> 28
[SCHERING-PLOUGH LOGO]
SCHERING-PLOUGH
Schering-Plough Corporation VOTE BY TELEPHONE
One Giralda Farms 24 HOURS A DAY, 7 DAYS A WEEK
Madison, NJ 07940
TELEPHONE
1-800-574-7051
AVAILABLE IN U.S. ONLY
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand
when you call. You will be prompted to enter your control number, located in
the box below, and then follow the simple directions. Telephone voting will
close at 5:00 PM Eastern time on Monday, April 26, 1999.
Your telephone vote authorizes the named proxies to vote your shares in the
same manner as if you marked, signed and returned the proxy card.
If you have submitted your proxy by telephone there is no need for you to mail
back your proxy.
CALL TOLL-FREE TO VOTE CONTROL NUMBER FOR
1-800-574-7051 TELEPHONE VOTING
DETACH PROXY CARD HERE IF YOU ARE NOT
VOTING BY TELEPHONE
<TABLE>
<CAPTION>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1, 2 AND 3.
<S> <C> <C> <C>
1. Election of Directors FOR all nominees X WITHHOLD AUTHORITY to vote X *EXCEPTIONS X
listed below for all nominees listed below
Nominees for 3-year terms: 1-Hans W. Becherer; 2-Raul E. Cesan; 3-Regina E. Herzlinger; 4-Robert F.W. van Oordt; 5-James Wood
(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 3. Approval of 1999 Executive Incentive Bonus Program
FOR X AGAINST X ABSTAIN X FOR X AGAINST X ABSTAIN X
This proxy will be voted FOR Items 1, 2 and 3, unless Mark if you: X Do not wish to receive the Annual Report
instructions to the contrary are indicated. for this account
X Wish to receive the Annual Report and
Proxy Statement electronically in the future
X Have an address change and/or comments
(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 over if signed by only one.)
Dated:___________________________________________________ 1999
______________________________________________________________
Signature
______________________________________________________________
Signature
Votes MUST be indicated
(X) in Black or Blue ink.
</TABLE>
Please Detach Here
You Must Detach This Portion of the Proxy Card
Before Returning it in the Enclosed Envelope
