<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.142-12
W. R. GRACE & CO.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
W. R. GRACE & CO.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
/ / $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:*
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / 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>
[GRACE LOGO]
NOTICE OF ANNUAL MEETING
Notice is hereby given that the Annual Meeting of Shareholders of W. R.
Grace & Co. ("Company") will be held at the Boca Raton Marriott-Crocker Center,
5150 Town Center Circle, Boca Raton, Florida, at 10:30 a.m. on Tuesday, May 10,
1994. The purpose of the Annual Meeting is to consider and act upon:
(1) the election of seven directors for a term expiring in 1997;
(2) the ratification of the selection of Price Waterhouse as independent
accountants of the Company and its consolidated subsidiaries for
1994;
(3) the approval of the Company's 1994 Stock Incentive Plan;
(4) the approval of the Company's 1994 Stock Retainer Plan for
Nonemployee Directors;
(5) the approval of the Company's Long-Term Incentive Program;
(6) resolutions proposed by shareholders; and
(7) any other business that properly comes before the Annual Meeting.
The Board of Directors has fixed the close of business on March 21, 1994 as
the record date for the determination of shareholders entitled to notice of and
to vote at the Annual Meeting.
ROBERT B. LAMM
SECRETARY
April 11, 1994
<PAGE>
CONTENTS
<TABLE>
<S> <C>
Election of Directors........................................... 1
Board Committees and Meetings................................. 1
Nominees...................................................... 2
Directors Continuing in Office................................ 4
Executive Compensation........................................ 8
Relationships and Transactions with Management and Others..... 20
Security Ownership of Management and Others..................... 21
Management Security Ownership................................. 21
Other Security Ownership...................................... 22
Ownership and Transactions Reports............................ 22
Selection of Independent Accountants............................ 23
Approval of 1994 Stock Incentive Plan........................... 23
Approval of 1994 Stock Retainer Plan for Nonemployee
Directors...................................................... 26
Approval of Long-Term Incentive Program......................... 27
Shareholder Proposals........................................... 30
Other Matters................................................... 34
Other Business................................................ 34
Proxy and Voting Procedures................................... 34
Votes Required................................................ 34
Solicitation Procedures....................................... 34
Proposals for 1995 Annual Meeting............................. 35
Exhibit A--1994 Stock Incentive Plan............................ A-1
Exhibit B--1994 Stock Retainer Plan for Nonemployee Directors... B-1
</TABLE>
<PAGE>
PROXY STATEMENT
The Annual Meeting of Shareholders of W. R. Grace & Co. ("Company", which
may also refer to one or more subsidiaries of W. R. Grace & Co.) will be held on
May 10, 1994. The Company is furnishing this Proxy Statement in connection with
the solicitation of proxies to be used at the Annual Meeting and any
adjournments. The Company's mailing address is One Town Center Road, Boca Raton,
Florida 33486-1010. This Proxy Statement and the enclosed proxy are first being
sent to shareholders on April 11, 1994.
Only shareholders of record at the close of business on March 21, 1994 are
entitled to vote at the Annual Meeting and any adjournments. At that record
date, the following voting stocks of the Company were outstanding:
<TABLE>
<CAPTION>
VOTES PER
CLASS SHARES OUTSTANDING SHARE
- ------------------------------ ------------------ -------------
<S> <C> <C> <C> <C>
6% Preferred ............... 36,464 ............... 160
Class A Preferred ............... 16,356 ............... 16
Class B Preferred ............... 21,585 ............... 16
Common ............... 93,898,011 ............... 1
</TABLE>
See "Other Matters" for additional information concerning the voting of proxies.
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for the division of the
Board of Directors into three classes, each class to serve for a three-year
term. The term of the Class II Directors expires at the 1994 Annual Meeting;
accordingly, the shareholders will vote on the election of seven Class II
Directors to serve for a term expiring in 1997.
The names and biographies of the nominees are set forth on pages 2 and 3;
the names and biographies of the directors continuing in office are set forth on
pages 4 to 7. The nominees have been designated as such by the Board of
Directors (on the recommendation of the Nominating Committee), and it is
anticipated that all nominees will be candidates when the election is held.
However, if for any reason any nominee is not a candidate at that time, proxies
will be voted for any substitute nominee designated by the Company (except where
a proxy withholds authority with respect to the election of directors).
BOARD COMMITTEES AND MEETINGS
To facilitate independent director review, and to make the most effective
use of the directors' time and capabilities, the Board of Directors has
established various committees, including those described below. None of the
members of the following committees is an executive or former executive of the
Company or, except for Mr. Yunich (a member of the Committee on Corporate
Responsibility), a consultant to the Company.
The AUDIT COMMITTEE (1) recommends to the Board the selection of independent
accountants to audit the annual financial statements of the Company and its
consolidated subsidiaries, (2) reviews the annual financial statements and (3)
meets with the Company's senior financial officers, internal auditors and
independent accountants to review the scope and results of the audit and other
matters regarding the Company's accounting, financial reporting and internal
control systems. The members of the Committee are Messrs. Eckmann (Chairman),
Duffy, Holmes and Phipps and Dr. Frick. The Committee met five times during
1993.
The COMPENSATION, EMPLOYEE BENEFITS AND STOCK INCENTIVE COMMITTEE
("Compensation Committee") makes recommendations to the Board with respect to
the salary and annual and long-term incentive compensation of certain officers
and other high-level employees, as well as the Company's benefit plans and
arrangements generally. The Compensation Committee also administers the
Company's stock incentive
1
<PAGE>
plans and determines the recipients and terms of stock incentives granted under
those plans. The members of the Compensation Committee are Messrs. Pyne
(Chairman), Eckmann, Lynch, Macauley, Milliken and Puelicher. In 1993, the
Compensation Committee met 10 times.
The NOMINATING COMMITTEE recommends to the Board candidates for nomination
as directors of the Company. The members of the Committee are Messrs. Milliken
(Chairman), Duffy, Macauley and Wood Prince, Dr. Dacey and Mrs. Grace Sloane
Vance, a director who will be retiring effective the date of the Annual Meeting.
The Committee met once in 1993. The Committee will consider candidates
recommended by shareholders; such recommendations should be sent to the Chairman
of the Nominating Committee, c/o Robert B. Lamm, Secretary, W. R. Grace & Co.,
One Town Center Road, Boca Raton, Florida 33486-1010.
The COMMITTEE ON CORPORATE RESPONSIBILITY advises management on the
Company's role in the public sector and its responsibility with respect to
matters of public policy. The Committee did not meet in 1993. Its members are
Mrs. Vance (Chairman), Dr. Frick and Messrs. Holmes and Yunich.
The Board of Directors held 12 meetings in 1993. Each director attended 75%
or more of the meetings held by the Board and the standing Board committees on
which he served, except for Messrs. Lynch, Milliken, Puelicher and Wood Prince,
Mrs. Vance and Sir Ronald Grierson, a Class II Director not standing for
re-election at the Annual Meeting. The average attendance of directors at such
Board and committee meetings was approximately 88%.
NOMINEES
NOMINEES FOR ELECTION AS CLASS II DIRECTORS--TERM EXPIRING IN 1997
Photo
CHARLES H. ERHART, JR.
Director: 1970 to 1978 (alternate years); 1979; since 1981
Age: 68
Mr. Erhart retired as president of the Company in 1990,
having served from 1989; he had been chairman of the
Executive Committee from 1986 and vice chairman and chief
administrative officer from 1981. He joined the Company in
1950 after graduating from Yale University and became head of
the Corporate Finance Department and an assistant treasurer
in 1955, a vice president in 1963 and an executive vice
president in 1968. Mr. Erhart is a director of Chemed
Corporation, National Life Insurance Company of Vermont,
National Sanitary Supply Company, Omnicare, Inc. and
Roto-Rooter, Inc. and a trustee of Evergreens Cemetery. He is
a first cousin (by marriage) of Mr. Milliken.
Photo
VIRGINIA A. KAMSKY
Director since 1990
Age: 40
Ms. Kamsky is the founder, president and chief executive
officer of Kamsky Associates Inc., a consulting and
investment banking firm specializing in relationships with
the People's Republic of China. She is also chief executive
officer of Zhonghua Investment Management Partners, a
partnership with Oppenheimer & Co. Ms. Kamsky is a graduate
of Princeton University, a member of the Council on Foreign
Relations and the President's Committee of the Asia Society,
and a director of the National Committee on U.S.-China
Relations.
2
<PAGE>
JOHN E. PHIPPS
Director since 1975
Age: 61
Mr. Phipps is a private investor. He is chairman and a
director of John H. Phipps, Inc. and a director of The
Bessemer Group, Bessemer Securities Corporation, Bessemer
Trust Company, Bessemer Trust Company of Florida, Bessemer
Trust Company, N.A. and Ingersoll-Rand Company. Mr. Phipps is
Mr. Puelicher's son-in-law.
Photo
EBEN W. PYNE
Director since 1960
Age: 76
Mr. Pyne retired in 1982 as a senior vice president of
Citibank, N.A. He joined City Bank Farmers Trust Company
following graduation from Princeton University, was elected
president of the Bank in 1957 and became a senior vice
president of Citibank, its successor, in 1960. Mr. Pyne is a
consultant to and director of Long Island Lighting Company
and a director of US Life Corporation and Winthrop-University
Hospital. He is a trustee of The Brooklyn Museum, the City
Investing Company Liquidating Trust, The Juilliard School,
the New York Zoological Society and St. Luke's-Roosevelt
Hospital Center.
Photo
D. WALTER ROBBINS, JR.
Director: 1966-69; 1970-71; 1972-73; since 1974
Age: 74
Mr. Robbins is a consultant to the Company. He joined the
Company in 1952, became an executive vice president in 1968
and a vice chairman in 1982 and was chairman of the Executive
Committee in 1986. He received B.S. and M.S. degrees from
Indiana University. Before joining the Company, Mr. Robbins
was vice president of Continental Ore Corp. and International
Ore & Fertilizer Corporation. He is a director of Chemed
Corporation, National Sanitary Supply Co., Omnicare, Inc. and
Roto-Rooter, Inc.
Photo
WILLIAM WOOD PRINCE
Director since 1970
Age: 80
Mr. Wood Prince became vice chairman of F. H. Prince & Co.,
Inc., an investment company, in 1984, having served as its
president from 1969. Previously, he was chief executive
officer of Armour & Company. He graduated from Princeton
University and began his business career with The First
National Bank of Chicago. In 1949 he was elected president of
Union Stock Yard & Transit Company. Mr. Wood Prince is a
trustee of the Art Institute of Chicago.
Photo
DAVID L. YUNICH
Director since 1977
Age: 76
Mr. Yunich, a consultant to the Company since 1977, was
educated at Union College and Harvard Graduate School of
Business Administration. He joined R. H. Macy & Co., Inc. in
1941, became vice chairman in 1971 and retired in 1974. He
was chief executive officer of the New York Metropolitan
Transportation Authority from 1974 to 1977. Mr. Yunich is a
director of Fidelity Investments Personal Gift Fund, Fidelity
Southeast Asia Emerging Markets Fund, Inc., The Greater New
York Councils--Boy Scouts of America and River Bank America
and a trustee of Carnegie Hall Corporation.
3
<PAGE>
DIRECTORS CONTINUING IN OFFICE
CLASS III DIRECTORS--TERM EXPIRING IN 1995
Photo
HAROLD A. ECKMANN
Director since 1976
Age: 72
Mr. Eckmann retired in 1985 as chairman and chief executive
officer of Atlantic Mutual Insurance Company and Centennial
Insurance Company--The Atlantic Companies. He was educated at
the United States Merchant Marine Academy and the University
of California. Mr. Eckmann joined The Atlantic Companies in
1949 and became president in 1970 and chairman and chief
executive officer in 1976.
Photo
JAMES W. FRICK
Director since 1984
Age: 69
Dr. Frick is president of James W. Frick Associates, a
consulting firm to private colleges and universities. He is
also vice president emeritus of the University of Notre Dame,
having served the University in various capacities from 1951
to 1987, including as a member of the board of trustees. Dr.
Frick holds three degrees from Notre Dame. He is president of
the Community Foundation of St. Joseph County, Indiana, a
director of Society Bank of South Bend and Society National
Bank, Indiana, and a former member of the board of trustees
of Converse College. He also served a term as a member of the
board of the Department of Financial Institutions of the
State of Indiana.
Photo
J. PETER GRACE
Director since 1943
Age: 80
Mr. Grace is chairman of and a consultant to the Company,
having served as its chief executive officer from 1945
through 1992. He is a director of Milliken & Company,
National Sanitary Supply Company, Omnicare, Inc.,
Roto-Rooter, Inc. and Stone & Webster, Incorporated. He is
chairman and a director of Chemed Corporation, a director
emeritus of Ingersoll-Rand Company, an honorary director of
Brascan Ltd. and a trustee emeritus of Atlantic Mutual
Insurance Company. Mr. Grace served as chairman of President
Reagan's Private Sector Survey on Cost Control and is co-
chairman of the Foundation for Citizens Against Government
Waste. Mr. Grace is president of the Catholic Youth
Organization of the Archdiocese of New York and chairman of
the Council of National Trustees of the National Jewish
Center for Immunology and Respiratory Medicine.
Photo
THOMAS A. HOLMES
Director since 1989
Age: 70
Mr. Holmes was chairman, president and chief executive
officer of Ingersoll-Rand Company until his retirement in
1988, having spent his entire business career with
Ingersoll-Rand. He is a graduate of the University of
Missouri--Rolla. Mr. Holmes is a director of Arvin
Industries, Inc., Becton, Dickinson and Company and Newmont
Gold Co. and Mining Corp.
4
<PAGE>
Photo
GEORGE P. JENKINS
Director since 1976
Age: 79
Mr. Jenkins has been a consultant to the Company since his
retirement in 1980 as chairman of the board and chief
financial officer of Metropolitan Life Insurance Company,
positions he had held from 1973 and 1962, respectively. Mr.
Jenkins joined Metropolitan Life after graduating from
Princeton University and receiving an M.B.A. from Harvard
Graduate School of Business Administration. He is a director
of American Industrial Properties REIT.
Photo
PETER S. LYNCH
Director since 1989
Age: 50
Mr. Lynch became vice chairman of Fidelity Management &
Research Company in 1992, having retired in 1990 after 13
years of service as the portfolio manager of Fidelity
Magellan Fund. He spent his entire business career with
Fidelity after serving for two years as a United States Army
lieutenant, ending in 1969. Mr. Lynch is a graduate of Boston
College and holds an M.B.A. from the University of
Pennsylvania--Wharton School of Business Administration. He
is a director of Morrison Knudsen Corporation, a member of
the board of trustees of the Fidelity Group of Mutual Funds
and a director or trustee of several charitable and cultural
organizations.
Photo
ROGER MILLIKEN
Director since 1953
Age: 78
Mr. Milliken has been the chief executive officer of Milliken
& Company, textile manufacturers, since 1947. He joined
Milliken in 1939 upon graduation from Yale University. He is
a director of Mercantile Stores Company, Inc., chairman of
the Greenville/Spartanburg Airport Commission and the
Institute of Textile Technology, a member of The Business
Council and a trustee of the South Carolina Foundation of
Independent Colleges and of Wofford College. Mr. Milliken is
a first cousin (by marriage) of Mr. Erhart.
Photo
JOHN A. PUELICHER
Director: 1968-70; since 1971
Age: 73
Mr. Puelicher retired in 1992 as chairman of the board of
Marshall & Ilsley Corporation, a position he held since 1981.
He was its president, and president of M&I Marshall & Ilsley
Bank, from 1963 to 1981 and was chairman of the Bank from
1981 through 1988. He spent his entire business career with
the Bank. He received a B.A. from the University of Wisconsin
and attended Harvard Graduate School of Business
Administration. Mr. Puelicher is a director of Marshall &
Ilsley Corporation, Sentry Insurance Company and Sundstrand
Corporation and a trustee emeritus of Marquette University.
He is the father-in-law of Mr. Phipps.
5
<PAGE>
CLASS I DIRECTORS--TERM EXPIRING IN 1996
Photo
J. P. BOLDUC
Director since 1986
Age: 54
Mr. Bolduc is president and chief executive officer of the
Company. He joined the Company in 1983 as a senior vice
president and special assistant to the chairman, became an
executive vice president and chief financial officer in
February 1986 and was elected a vice chairman in November
1986. He was elected president and chief operating officer in
1990 and became chief executive officer effective January 1,
1993. Mr. Bolduc was chief operating officer of President
Reagan's Private Sector Survey on Cost Control from 1982 to
1984 and served as vice president-partner of Booz, Allen &
Hamilton from 1977 until 1983. Prior to 1977, he was an
assistant secretary of the Department of Agriculture under
Presidents Nixon and Ford. Mr. Bolduc holds a B.A. in
accounting from St. Cloud State University and has completed
graduate studies in finance, personnel and management. He is
a director of Brothers Gourmet Coffees, Inc., Marshall &
Ilsley Corporation, Newmont Gold Co. and Mining Corp.,
Sundstrand Corporation and Unisys Corporation.
Photo
GEORGE C. DACEY
Director since 1987
Age: 73
Dr. Dacey was president of Sandia National Laboratories,
engaged in government research and development, from 1981
until his retirement in 1986. He received a B.S. in
electrical engineering from the University of Illinois and a
Ph.D. in physics from the California Institute of Technology.
He began his business career as a research engineer with
Westinghouse Research Labs and later held various research
positions with the Bell System, including head of transistor
development of Bell Telephone Labs. Dr. Dacey is a director
of Milliken & Company and a former director of SunWest
Financial Services and Perkin-Elmer Corp.
Photo
EDWARD W. DUFFY
Director since 1983
Age: 67
Mr. Duffy is the retired chairman of the board and chief
executive officer of Marine Midland Banks, Inc. A graduate of
Syracuse University, Mr. Duffy served in various managerial
and executive capacities with Marine Midland and its
predecessors from 1952 until his retirement in 1983. He is a
director of Columbus McKinnon Corp., Niagara Mohawk Power
Corporation, Oneida Ltd., Utica Mutual Insurance Co. and
Utica National Life Insurance Co.
Photo
CONSTANTINE L. HAMPERS
Director since 1986
Age: 61
Dr. Hampers is an executive vice president of the Company and
chairman of the board and chief executive officer of National
Medical Care, Inc. ("NMC"), a subsidiary of the Company
engaged in supplying kidney dialysis, home infusion and
respiratory therapy services and in the manufacture and sale
of dialysis and other medical products. NMC was founded by
Dr. Hampers in 1968. Prior to 1968 and for several years
thereafter, Dr. Hampers was director of artificial kidney
services at Peter Bent Brigham Hospital and assistant
professor of medicine at Harvard University School of
Medicine. He holds B.S. and M.D. degrees from the University
of Pittsburgh.
6
<PAGE>
Photo
GORDON J. HUMPHREY
Director since 1991
Age: 53
Mr. Humphrey represented the State of New Hampshire in the
United States Senate from 1979 until 1990, serving on the
Foreign Relations, Armed Services, Banking, Environment,
Energy and Judiciary Committees. Upon retiring from the
Senate, he founded The Humphrey Group, Inc., which provides
services to firms seeking to do business abroad, particularly
in the former Soviet Union. Mr. Humphrey served for four
years in the U.S. Air Force and was an airline pilot for 12
years prior to entering public service. He serves on the
boards of MK Gold Company, Petrotech, Inc. and two privately
held companies, and he is active in several charitable
organizations.
Photo
ROBERT C. MACAULEY
Director since 1985
Age: 70
Mr. Macauley founded Virginia Fibre Corporation, a producer
of corrugating medium, in 1972 and is its chairman. Following
graduation from Yale University in 1949, he held several
positions (including that of president) with M. L. Macauley
Company. From 1962 through 1972, he held executive positions
with Great Northern Paper Company and its successors. Mr.
Macauley also founded and is chairman of the AmeriCares
Foundation. He is a director of Greif Brothers Corporation.
Photo
EUGENE J. SULLIVAN
Director since 1991
Age: 73
Mr. Sullivan is chairman emeritus of Borden, Inc., having
served as its chief executive officer from 1979 until 1986.
He held various management and executive positions with
Borden from 1946 until his retirement. Mr. Sullivan is a
graduate of St. John's University and New York University
Graduate School of Business Administration, and he is a
Distinguished Professor in Residence at St. John's. He is
chairman of BNY-Hamilton Fund, vice chairman of the board of
trustees of St. John's, and a trustee of St. Francis Hospital
and the Catholic Health Association.
------------------
See "Relationships and Transactions with Management and Others" and
"Security Ownership of Management and Others" for additional information
concerning directors and nominees and/or firms with which they are associated.
7
<PAGE>
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth information concerning
the compensation of Mr. Bolduc (the Company's chief exectutive officer) and the
other four most highly compensated executive officers of the Company in 1993.
Certain information has been omitted from this table because it is not
applicable or because it is not required under Securities and Exchange
Commission rules.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------------
NAME AND
PRINCIPAL OTHER ANNUAL
POSITION YEAR SALARY BONUS COMPENSATION
- -------------------------------------- --------- -------- -------- ------------
<S> <C> <C> <C> <C>
J. P. Bolduc 1993 $800,000 $986,000 $ 9,470
President and 1992 780,000 611,000 61,030
Chief Executive Officer 1991 680,000 611,000
C. L. Hampers 1993 736,000 600,000 21,510
Executive Vice President 1992 690,250 184,000
1991 791,551 168,750
D. H. Kohnken 1993 357,000 310,000 2,372
Executive Vice President 1992 327,000 200,000 17,695
1991 313,500 180,000
B. J. Smith 1993 316,000 300,000 5,414
Executive Vice President and 1992 303,000 200,000 71,066
Chief Financial Officer 1991 290,000 180,000
J. R. Wright, Jr. 1993 385,000 212,000 1,986
Vice Chairman to 5/10/93; 1992 367,500 192,500 32,138
Executive Vice President to 12/31/93 1991 352,500 200,000
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
- ------------------------------------
AWARDS PAYOUTS
- ------------------------ ----------
ALL OTHER COMPENSATION
RESTRICTED (d)
STOCK LTIP
AWARDS(a) OPTIONS(b) PAYOUTS(c) -----------------------
<S> <C> <C> <C>
100,000 $ 389,700 $ 131,992
$ 936,038 90,000 629,100 167,233
3,780,407 365,000
70,000 1,012,000 56,152
351,525 42,500 26,468,000 58,209
37,500
50,000 157,167 29,108
429,188 37,500 150,267 32,277
473,766 86,500
40,000 176,022 32,360
273,863 37,500 308,405 54,397
416,731 85,000
166,184 37,485
314,738 35,000 222,147 45,291
1,432,808 180,000
<FN>
(a) The dollar values shown in this column were calculated by multiplying the
number of shares issued by the closing market price of the Company's Common
Stock on the date of issuance (less any amounts paid by the recipient). No
restricted shares were issued in 1993. The following table shows the
restricted shares issued in 1992, which had vesting schedules of less than
three years:
<CAPTION>
VESTING SCHEDULE
--------------------------------------------------
TOTAL SHARES
GRANTED 8/7/92 4/15/93 4/15/94 4/15/95
------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
J. P. Bolduc 22,900 5,725 5,725 5,725 5,725
C. L. Hampers 8,600 2,150 2,150 2,150 2,150
D. H. Kohnken 10,500 2,625 2,625 2,625 2,625
B. J. Smith 6,700 1,675 1,675 1,675 1,675
J. R. Wright, Jr. (a) 7,700 1,925 1,925 1,925 1,925
- --------------------
(a) All restrictions on Mr. Wright's shares terminated upon the termination of his employment on December
31, 1993.
In 1991, certain executive officers surrendered all or a portion of their stock options in exchange
for shares of Common Stock equal in value to the excess of (1) the market value of the shares subject to
the surrendered options over (2) the total exercise price of the surrendered options. Subject to certain
limited exceptions, the shares received upon such surrender may not be transferred until 1997, at which
time the transfer restrictions terminate in equal installments over the subsequent four-year period. This
transaction resulted in the acquisition of the following numbers of shares by the persons named in the
table: Mr. Bolduc -- 101,148 shares; Mr. Kohnken -- 12,676 shares; Mr. Smith -- 11,150 shares; and Mr.
Wright -- 38,336 shares.
The number and dollar values of restricted shares held at December 31, 1993 by the persons named in
the table (including the shares acquired in the 1991 transaction described above) were as follows: Mr.
Bolduc -- 112,598 shares ($4,574,294); Dr. Hampers -- 4,300 shares ($174,688); Mr. Kohnken -- 17,926
shares ($728,244); Mr. Smith -- 14,500 shares ($589,063); and Mr. Wright -- 38,336 shares ($1,557,400).
Recipients of restricted shares receive all dividends paid on such shares.
(b) The numbers in this column represent the number of shares covered by grants
of stock options. No stock appreciation rights were granted subsequent to
1990.
(c) The amounts in this column for 1992 (except for Dr. Hampers) represent (1)
the third annual installment (paid or payable in 1992) of awards under the
Company's Long-Term Incentive Program ("LTIP") for the 1987-1989 Performance
Period, and (2) the first of three annual installments of awards under the
LTIP for the 1990-1992 Performance Period; the latter payments were to have
been made in early 1993 but were made in 1992 to facilitate tax planning.
The amounts of such accelerated payments were: Mr. Bolduc -- $392,700; Mr.
Kohnken -- $150,267; Mr. Smith -- $177,472; and Mr. Wright -- $167,483. The
amounts for 1993 (except for Dr. Hampers) represent the second installment
of awards under the LTIP for the 1990-1992 Performance Period; these
payments were to have been made in early 1994 but were made in 1993 to
facilitate tax planning. Dr. Hampers did not participate in the LTIP for
either the 1987-1989 or the 1990-1992 Performance Periods.
In March 1989, the Company agreed to purchase in 1992 the 2.5% of the stock
of NMC it did not already own for approximately $27 million, subject to
NMC's achievement of certain targets relating to earnings and return on
capital; approximately 79% of such stock was owned by Dr. Hampers. However,
in December 1989, the Company purchased the stock for approximately $14
million ($13 million less than initially agreed to). In consideration for
Dr. Hampers' agreement to accelerate the transaction, the Company agreed to
make a payment to Dr. Hampers in 1993 based on NMC's earnings during the
1990-1992 period. As a result of NMC's strong performance during this period
(which exceeded the targeted earnings by nearly 55% over the three-year
period), the payment to Dr. Hampers as finally calculated amounted to
$27,480,000. In order to facilitate tax planning, the Company paid
$26,468,000 of this amount in 1992; the balance was paid in 1993.
(d) The amounts in this column for 1993 consist of the following: (1) the
actuarially determined value of Company-paid premiums on "split-dollar" life
insurance, as follows: Mr. Bolduc -- $36,289; Dr. Hampers -- $29,932; Mr.
Kohnken -- $6,689; Mr. Smith -- $10,125; and Mr. Wright -- $13,810; (2)
payments made to persons whose personal and/or Company contributions to the
Company's Salaried Employees Savings and Investment Plan would be subject to
limitations under federal income tax law, as follows: Mr. Bolduc -- $30,672;
Dr. Hampers -- $26,220; Mr. Kohnken -- $8,135; Mr. Smith -- $6,905; and Mr.
Wright -- $8,806; (3) Company contributions to such Plan of $7,075 for each
of Messrs. Bolduc, Kohnken, Smith and Wright; (4) $39,680 of imputed
interest on a loan made to Mr. Bolduc in 1987 (see "Relationships and
Transactions with Management and Others" below); and (5) interest on
involuntarily deferred payments of awards under the LTIP, as follows: Mr.
Bolduc -- $18,276; Mr. Kohnken -- $7,209; Mr. Smith -- $8,255; and Mr.
Wright -- $7,794.
</TABLE>
9
<PAGE>
STOCK OPTIONS. The following table sets forth information concerning stock
options granted in 1993, including the potential realizable value of each grant
assuming that the market value of the Company's Common Stock appreciates from
the date of grant to the expiration of the option at annualized rates of (a) 5%
and (b) 10%, in each case compounded annually over the term of the option. THESE
ASSUMED RATES OF APPRECIATION HAVE BEEN SPECIFIED BY THE SECURITIES AND EXCHANGE
COMMISSION FOR ILLUSTRATIVE PURPOSES ONLY AND ARE NOT INTENDED TO PREDICT FUTURE
PRICES OF THE COMPANY'S COMMON STOCK, WHICH WILL DEPEND UPON MARKET CONDITIONS
AND THE COMPANY'S FUTURE PERFORMANCE AND PROSPECTS. For example, the option
granted to Mr. Bolduc in 1993 would produce the pretax gain of $6,056,000 shown
in the table only if the market price of the Common Stock rises to nearly $99
per share by the time Mr. Bolduc exercises the option. Based on the number and
market price of the shares outstanding at year-end 1993, such an increase in the
price of the Common Stock would produce a corresponding aggregate pretax gain of
$5.6 billion for the Company's shareholders. Options become exercisable at the
time or times determined by the Compensation Committee; all of the options
listed below were exercisable in full at the date of grant and have exercise
prices equal to the fair market value of the Common Stock at the date of grant.
<TABLE>
<CAPTION>
1993 GRANTS
---------------------------------------------------
% OF TOTAL POTENTIAL REALIZABLE VALUE AT
SHARES OPTIONS ASSUMED ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO EXERCISE PRICE APPRECIATION FOR OPTION TERM
OPTIONS EMPLOYEES PRICE EXPIRATION ----------------------------------
NAME GRANTED IN 1993* ($/SHARE) DATE 5% 10%
- ------------------------------ ----------- ---------- --------- ----------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
J. P. Bolduc.................. 100,000 6.9 38.00 11/3/03 $ 2,390,000 $ 6,056,000
C. L. Hampers................. 70,000 4.8 38.00 11/3/03 1,673,000 4,239,200
D. H. Kohnken................. 50,000 3.4 38.00 11/3/03 1,195,000 3,028,000
B. J. Smith................... 40,000 2.7 38.00 11/3/03 956,000 2,422,400
All Shareholders.............. -- -- -- -- 2,229,183,807 5,648,789,076
Named Executive Officers'
Percentage of Realizable
Value Gained by All
Shareholders................. -- -- -- -- 0.3% 0.3%
</TABLE>
- ------------------
*In 1993, options were granted covering 1,455,225 shares of Common Stock,
including an option covering 45,000 shares granted to a consultant to the
Company.
The following table sets forth information concerning stock options
exercised in 1993, including the "value realized" upon exercise (the difference
between the total exercise price of the options exercised and the market value,
at the date of exercise, of the shares acquired), and the value of unexercised
"in-the-money" options held at December 31, 1993 (the difference between the
aggregate exercise price of all such options held and the market value of the
shares covered by such options at December 31, 1993).
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SHARES UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
NO. OF SHARES VALUE 12/31/93 12/31/93
ACQUIRED REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE ($) UNEXERCISABLE UNEXERCISABLE
- ------------------------------------------------- --------------- ----------- ----------------- ---------------
<S> <C> <C> <C> <C>
J. P. Bolduc..................................... -0- -0- 265,000/290,000 $ 605,625/$0
C. L. Hampers.................................... -0- -0- 150,000/0 $ 348,125/$0
D. H. Kohnken.................................... -0- -0- 165,500/49,000 $ 1,060,218/$0
B. J. Smith...................................... -0- -0- 115,000/47,500 $ 255,000/$0
J. R. Wright, Jr................................. -0- -0- 75,000/0 $ 145,625/$0
</TABLE>
LTIP. Under the LTIP, executive officers and other senior managers may be
granted contingent "Performance Units" under which awards may be earned based on
(1) the achievement of pretax earnings by the manager's product line (or, in the
case of corporate managers, the Company), and/or (2) shareholder
10
<PAGE>
value performance (measured by appreciation in the price of the Common Stock and
dividends paid) as compared to that of the companies in the Standard & Poor's
Industrials, during a three-year "Performance Period". It is anticipated that a
new three-year Performance Period will commence each year and that contingent
Performance Units will be granted for each such Performance Period. Performance
Units granted to employees of product lines are weighted 67% on the pretax
earnings performance of their product lines, and 33% on shareholder value
performance, during the Performance Period; Performance Units granted to
corporate employees are weighted 50% on the basis of the Company's pretax
earnings performance and 50% on the basis of shareholder value performance
during the Performance Period. In addition, the number of Performance Units
earned under the LTIP may be increased or decreased by up to 20%, at the
discretion of the Compensation Committee, based on individual performance, which
could include, among other things, an individual's performance with respect to
strategic matters (such as research and development, acquisitions, business
alliances and the like), as well as environmental and social matters.
Amounts, if any, payable with respect to Performance Units that are earned
are paid following the end of each three-year Performance Period. In keeping
with the Company's compensation philosophy of uniting executive interests with
those of the shareholders, it is currently anticipated that any such payments
for the 1993-1995 and subsequent Performance Periods will be made 50% in cash
and 50% in shares of Common Stock issued under the Company's stock incentive
plans (including the 1994 Stock Incentive Plan described below under "Approval
of 1994 Stock Incentive Plan"); however, the Compensation Committee has
authority to reduce the portion of earned Performance Units payable in Common
Stock.
The following table shows the Performance Units granted during 1993 to the
executive officers named in the Summary Compensation Table with respect to the
1993-1995 Performance Period. The Performance Units granted to Messrs. Bolduc,
Kohnken and Smith, as well as half of the Performance Units granted to Dr.
Hampers, are weighted 50%/50%, as discussed above; the remaining Performance
Units granted to Dr. Hampers are weighted 67%/33%, as discussed above.
<TABLE>
<CAPTION>
NUMBER PERFORMANCE MAXIMUM
NAME OF UNITS PERIOD THRESHOLD (A) TARGET (B) (C)
- --------------------------------------------- --------- ----------- ---------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
J. P. Bolduc................................. 25,000 1993-1995 $0 or $208,375 $1,250,000 None
C. L. Hampers................................ 17,500 1993-1995 0 or 72,931 875,000 None
D. H. Kohnken................................ 12,500 1993-1995 0 or 104,188 625,000 None
B. J. Smith.................................. 10,000 1993-1995 0 or 83,350 500,000 None
</TABLE>
- ------------------------
(a) Refers to the minimum amount payable under the LTIP with respect to the
1993-1995 Performance Period. No payment will be made unless the minimum
targeted level of pretax earnings or shareholder value performance is
achieved, and the "threshold" payments will be made if either minimum
targeted level is achieved. The threshold payments shown in the table have
been calculated on the assumption that the market price of the Common Stock
is $50 per share at the end of the 1993-1995 Performance Period, but that
the minimum targeted level of pretax earnings is not achieved.
(b) Refers to the amount payable with respect to the 1993-1995 Performance
Period if the minimum targeted levels of both pretax earnings and
shareholder value performance are achieved.
(c) Refers to the maximum amount that can be earned under the LTIP with respect
to the 1993-1995 Performance Period. The LTIP does not specify a maximum
amount that may be earned thereunder. However, the formula on which payments
under the LTIP are based is directly related to the Company's pretax
earnings and shareholder value performance; consequently, payments greater
than the "target" payments shown in the table would reflect commensurate
levels of performance by the Company.
Employees to whom Performance Units are granted also receive grants of stock
options based on the number of Performance Units granted. Information concerning
options granted to the above executive officers in 1993 appears under "Stock
Options" above.
Additional information concerning the LTIP is set forth below under
"Approval of Long-Term Incentive Program".
11
<PAGE>
PENSION ARRANGEMENTS. Salaried employees of designated units of the Company
who are 21 or older and who have one or more years of service are eligible to
participate in the Company's Retirement Plan for Salaried Employees. Under this
basic retirement plan, pension benefits are based upon (1) the employee's
average annual compensation for the 60 consecutive months in which his
compensation is highest during the last 180 months of continuous participation
and (2) the number of years of the employee's credited service. For purposes of
this basic retirement plan, compensation generally includes nondeferred base
salary and annual incentive compensation (bonus) awards; however, for 1993
federal income tax law limited to $235,840 the annual compensation on which
benefits under this plan may be based.
The Company also has a Supplemental Executive Retirement Plan under which a
covered employee will receive the full pension to which he would be entitled in
the absence of the above and other federal income tax law limitations. In
addition, this supplemental plan recognizes deferred base salary and annual
incentive compensation awards and, in some cases, periods of employment with the
Company during which an employee was ineligible to participate in the basic
retirement plan. An employee will generally be eligible to participate in the
supplemental plan if he has an annual base salary of at least $75,000 and is
earning credited service under the basic retirement plan.
The following table shows the annual pensions payable under the basic and
supplemental plans for different levels of compensation and years of credited
service. The amounts shown have been computed on the assumption that the
employee retired at age 65 on January 1, 1994, with benefits payable on a
straight life annuity basis. Such amounts are subject to (but do not reflect) an
offset of 1.25% of the employee's primary Social Security benefit at retirement
age for each year of credited service under the basic and supplemental plans.
<TABLE>
<CAPTION>
FINAL YEARS OF CREDITED SERVICE
AVERAGE ANNUAL ----------------------------------------------------------------------
COMPENSATION 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
---------------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
$ 100,000.............................. $ 15,000 $ 22,500 $ 30,000 $ 37,500 $ 45,000 $ 52,500
200,000.............................. 30,000 45,000 60,000 75,000 90,000 105,000
300,000.............................. 45,000 67,500 90,000 112,500 135,000 157,000
400,000.............................. 60,000 90,000 120,000 150,000 180,000 210,000
500,000.............................. 75,000 112,500 150,000 187,500 225,000 262,500
600,000.............................. 90,000 135,000 180,000 225,000 270,000 315,000
700,000.............................. 105,000 157,500 210,000 262,500 315,000 367,500
800,000.............................. 120,000 180,000 240,000 300,000 360,000 420,000
900,000.............................. 135,000 202,500 270,000 337,500 405,000 472,500
1,000,000............................. 150,000 225,000 300,000 375,000 450,000 525,000
1,100,000............................. 165,000 247,500 330,000 412,500 495,000 577,500
1,200,000............................. 180,000 270,000 360,000 450,000 540,000 630,000
1,300,000............................. 195,000 292,500 390,000 487,500 585,000 682,500
1,400,000............................. 210,000 315,000 420,000 525,000 630,000 735,000
1,500,000............................. 225,000 337,500 450,000 562,500 675,000 787,500
1,600,000............................. 240,000 360,000 480,000 600,000 720,000 840,000
1,700,000............................. 255,000 382,500 510,000 637,500 765,000 892,500
1,800,000............................. 270,000 405,000 540,000 675,000 810,000 945,000
</TABLE>
At year-end 1993, Messrs. Bolduc, Kohnken, Smith and Wright had 10, 25, 19
and 3 years of credited service, respectively, under the basic retirement plan.
For purposes of that plan, the 1993 compensation of such executive officers was
as follows: Mr. Bolduc -- $1,176,425; Mr. Kohnken -- $495,000; Mr. Smith --
$430,000; and Mr. Wright -- $505,375. Dr. Hampers is not covered by the basic or
supplemental plan; his accrued annual benefit at age 65 under the NMC retirement
plan (in which he is an inactive participant) was approximately $116,000 at
year-end 1993. The Company has agreed to provide additional pension benefits to
Mr. Bolduc and Dr. Hampers (see "Employment Agreements" below).
12
<PAGE>
DIRECTORS' COMPENSATION AND CONSULTING ARRANGEMENTS. At the present time,
each nonemployee director receives $3,000 for each Board meeting and $900 for
each committee meeting attended, except that committee chairmen receive $1,200
for each committee meeting attended. In addition, an annual retainer of $12,000
is paid to the Chairmen of the Audit and Compensation Committees. The Company
plans to implement a new compensation program for nonemployee directors, to be
effective July 1, 1994. Under this new program, (1) each nonemployee director
will receive an annual retainer of $24,000, payable in shares of the Company's
Common Stock (subject to shareholder approval of the 1994 Stock Retainer Plan
for Nonemployee Directors discussed below); (2) the Chairmen of the Audit and
Compensation Committees will receive annual cash retainers of $12,000, and the
Chairmen of the Nominating Committee and the Committee on Corporate
Responsibility will receive annual cash retainers of $2,000; and (3) each
nonemployee director will receive $2,000 in cash for each Board meeting and
$1,000 for each committee meeting attended (except that committee chairmen will
receive $1,200 per committee meeting).
Nonemployee directors are reimbursed for expenses they incur in attending
Board and committee meetings, and the Company maintains business travel accident
insurance coverage for them. In addition, nonemployee directors (other than
those with whom the Company has consulting arrangements, described below)
receive a fee of $1,000 per day for work performed at the Company's request.
Under both the current and new compensation programs, a director may defer
payment of all or part of the fees he receives for attending Board and committee
meetings. The amounts deferred (plus an interest equivalent) are payable to him
or his heirs or beneficiaries in a lump sum or in quarterly installments over
two to 20 years following a date specified by the director. The interest
equivalent on amounts deferred is computed at the higher of (1) the prime rate
plus two percentage points and (2) 120% of the prime rate, in either case
compounded semiannually. This program provides for the payment of additional
survivors' benefits in certain circumstances.
The Company also has a retirement plan under which a person who has been a
nonemployee director for at least five years will receive annual payments of
$24,000 for a period equal to the length of his service as a nonemployee
director (but not more than 15 years) after he ceases to be eligible to receive
directors' fees. In the event of a director's death, payments are made to his
surviving spouse.
The Company has consulting agreements with Kamsky Associates Inc. (of which
Ms. Kamsky is president and chief executive officer) relating to the Company's
interests in the Far East. The agreements expire in 1998 (subject to earlier
termination) and provide for monthly fees of $25,000, plus additional payments
based on the extent to which the Company establishes certain business
relationships in the Far East. In 1993, the Company paid fees totalling $345,000
under these consulting agreements.
During 1993, Mr. Humphrey was paid performance-based fees totaling $85,000
under a consulting agreement with the Company relating to business opportunities
in the former Soviet Union.
The Company has consulting arrangements with Mr. Jenkins (relating to
pension investment management), Mr. Robbins (relating to pension investment
management and divestitures) and Mr. Yunich (relating to corporate investments)
under which they earned fees of $200,000, $585,000 and $306,000, respectively,
for 1993. In 1993, the Company also granted a stock option covering 45,000
shares of Common Stock to Mr. Robbins (in his capacity as a consultant). The
exercise price and other terms of the option were the same as those granted to
executive officers (see "Stock Options" above). In addition, Messrs. Robbins and
Yunich have severance agreements with the Company (see "Severance Agreements"
below).
Upon his retirement at year-end 1992, the Company entered into a consulting
agreement with Mr. Grace under which he receives a monthly consulting fee of
$50,000. The agreement expires on December 31, 1994, but provides for automatic
one-year extensions unless either party gives notice that the agreement is not
to be extended.
EMPLOYMENT AGREEMENTS. The Company has employment agreements with Mr.
Bolduc and Dr. Hampers. Mr. Bolduc's agreement (as restated in 1993) provides
for his employment as Chief Executive Officer of the Company through July 1998
(subject to earlier termination in certain circumstances), but
13
<PAGE>
provides for automatic one-year extensions unless either party gives notice that
the agreement is not to be extended. The agreement also provides that Mr. Bolduc
will be nominated for election as a director during the term of the agreement.
Under the agreement, Mr. Bolduc is entitled to participate in all incentive
compensation and bonus plans maintained by the Company for its senior executives
and to participate in all benefit plans available to employees generally, as
well as to the following: an annual base salary of at least $800,000; an annual
incentive compensation award (bonus) equal to at least 50% of his base salary
for the relevant year; an annual grant of options covering at least 30,000
shares of Common Stock; and an annual supplementary pension equal to the sum of
the amounts payable annually under the Company's basic and supplemental
retirement plans (see "Pension Arrangements" above), but in no event less than
50% of Mr. Bolduc's "pensionable compensation" (annual base salary and annual
incentive compensation, without giving effect to any voluntary deferrals) during
specified periods of his employment. The agreement also provides for payments in
the case of Mr. Bolduc's disability or death or the termination of his
employment with or without cause; in the latter case, Mr. Bolduc would be
entitled to receive 150% of his annual base salary for the remaining term of the
agreement, subject to a reduction of up to 50% for income he earns for personal
services following the termination of his employment by the Company.
Dr. Hampers' employment agreement provides for his employment as an
Executive Vice President of the Company and head of its health care business
through March 1996; at that time, he has the right to become a consultant to the
Company for a five-year period for an annual consulting fee equal to 50% of his
annual base salary, subject to cost-of-living adjustments. Under the agreement,
Dr. Hampers is entitled to an annual base salary of at least $675,000, subject
to increases of at least 9% every 18 months, and to participate in the Company's
annual incentive compensation (bonus) program. The agreement also provides for
benefits generally available to senior executives of the Company, as well as the
use of a corporate aircraft (and an option to purchase the aircraft at its fair
market value upon the termination of his employment or consulting relationship).
Further, the agreement entitles Dr. Hampers to a supplementary annual pension
benefit equal to the amount by which (1) the lesser of (a) $300,000 or (b) three
times his actual annual pension benefit exceeds (2) such actual pension benefit,
subject to certain cost-of-living adjustments. The agreement prohibits Dr.
Hampers from engaging in certain competitive activities during its term and for
three years thereafter and provides for the continuation of compensation in the
event his employment terminates other than for cause.
The Company previously had an employment agreement with Mr. Wright, which
was to have expired in July 1997 but which was terminated in connection with his
resignation (effective December 31, 1993). Under the terms of such termination,
the Company agreed to pay Mr. Wright monthly severance payments of $48,125
through July 1997 (subject to reduction for income he earns for personal
services following the termination of his employment by the Company) and an
incentive compensation award (bonus) of at least $192,500 for 1993. The other
terms of Mr. Wright's termination (including the cancellation of options
covering 140,000 shares of Common Stock) were governed by the terms of the
Company's benefit plans and programs.
SEVERANCE AGREEMENTS. The Company has severance agreements with all of its
executive officers, as well as its other officers and Messrs. Robbins and Yunich
(in their capacity as consultants). Each agreement provides that in the event of
the involuntary termination of the individual's employment or consulting
services or a material reduction in his authority or responsibility, in either
case without cause, following a change in control of the Company, he will
receive a severance payment equal to 2.99 times his average annual taxable
compensation or consulting fees for the five years preceding the change in
control, plus certain additional benefits, subject to reduction in certain cases
to prevent the recipient from incurring liability for excise taxes and the
Company from incurring nondeductible compensation expense. Mr. Bolduc and Dr.
Hampers may instead elect to receive the payments provided for under their
employment agreements, if applicable. For purposes of these severance
agreements, a change in control would occur upon the acquisition of 20% or more
of the Company's Common Stock or the failure of Company-nominated directors to
constitute a majority of any class of the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. The current
members of the Compensation Committee are Messrs. Pyne (Chairman), Eckmann,
Lynch, Macauley, Milliken and Puelicher. Prior to
14
<PAGE>
the 1993 Annual Meeting, Messrs. Erhart and Yunich were also members of the
Committee. Mr. Erhart was the Company's president until August 1990. Mr.
Milliken is the chief executive officer of Milliken & Company, which sold
approximately $230,000 of products to the Company, and purchased approximately
$50,000 of products from the Company, during 1993. Further, until April 1993,
Mr. Bolduc was a member of the compensation committee of Marshall & Ilsley
Corporation, of which Mr. Puelicher (a member of the Company's Compensation
Committee) is a director and the retired chairman of the board.
PERFORMANCE COMPARISON. The following graph and table compare the
cumulative total shareholder return on the Company's Common Stock from December
31, 1988 through December 31, 1993 with the Standard & Poor's 500 Stock Index
and the Standard & Poor's Specialty Chemicals Index (both of which include the
Company), as well as the Standard & Poor's Chemicals Index, using data supplied
by the Compustat Services unit of Standard & Poor's Corporation. The Company has
elected to compare its performance to both the Chemicals and Specialty Chemicals
Indices in view of its diversified nature in the past. However, the Company is
in the process of implementing a strategic restructuring program, focused, in
part, on selling noncore businesses and concentrating on a group of core
specialty chemical and health care businesses. Accordingly, the Company may in
the future decide that comparisons to a different group or groups of companies
would be more appropriate. The comparisons reflected in the graph and table are
therefore not intended to forecast the future performance of the Common Stock
and may not be indicative of such future performance. The graph and table assume
an investment of $100 in the Common Stock and each index on December 31, 1988,
as well as the reinvestment of dividends.
[GRAPHIC]
<TABLE>
<CAPTION>
DECEMBER 31, 1988 1989 1990 1991 1992 1993
- --------------------------------------------------------------------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
W. R. Grace & Co........................................................... 100 132 101 175 185 194
S&P 500 Stock Index........................................................ 100 132 128 166 179 197
S&P Specialty Chemicals Index.............................................. 100 122 117 165 175 200
S&P Chemicals Index........................................................ 100 129 110 143 157 175
</TABLE>
15
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE. The Board of Directors approves all
compensation decisions with respect to the Company's executive officers,
including the chief executive officer, and other executives whose annual base
salaries exceed $250,000, based upon the recommendations of the Compensation
Committee, except that all actions under the Company's stock incentive plans are
approved solely by the Compensation Committee and reported to the Board. The
Compensation Committee is comprised of directors who are not, and have never
been, employees of the Company or any of its subsidiaries and who have no
consulting arrangements or other significant relationships with the Company.
This Report describes the Company's performance-based compensation
philosophy and executive compensation program, as approved by the Compensation
Committee. In particular, it discusses the compensation decisions and
recommendations made by the Compensation Committee in 1993 regarding Mr. Bolduc,
the President and Chief Executive Officer of the Company, and the four other
executive officers whose compensation is disclosed above (collectively referred
to in this Report as the "executive officers").
Executive Compensation Philosophy and Program Components
The Company's executive compensation program is structured to enable the
Company to compete effectively with other firms in attracting, motivating and
retaining executives of the calibre needed to ensure the Company's future growth
and profitability. This program consists of base salary and, if warranted,
annual incentive compensation (paid in cash) and long-term incentives in the
form of stock and cash. These compensation components are intended to (1)
stimulate executive performance that benefits the Company and its shareholders
by increasing shareholder value, (2) reward executive performance with
competitive levels of compensation, and (3) unite executive and shareholder
interests.
Background
In 1992, management (in consultation with the Compensation Committee) began
a comprehensive review of the Company's executive officer compensation program
with the assistance of a leading compensation consulting firm. This firm
consults periodically with management and the Compensation Committee on matters
pertaining to the strategy, structure and administration of the program. As a
result of this review, certain modifications were made to the program in 1993 to
further strengthen the linkage between executive compensation, Company and
individual performance and shareholder interests. This review is continuing in
1994 as the result of the restructuring of the Company's businesses and the
resultant reorganizations and changes in certain executive responsibilities. It
is expected that the current program will be strengthened further by this review
and that compensation for executives will become even more performance-and
formula-driven.
The strategy that is continuing to evolve from this review is expected, over
time, to position executive base salaries at the 50th percentile among those for
companies with sales of $3 to $10 billion*; at present, certain executives' base
salaries are above the 50th percentile, and others' are below that level. In
order to attract and retain a world-class executive team, however, the
Compensation Committee believes that the combination of salary and annual and
long-term incentive opportunities should result in total compensation at the
75th percentile when specific performance objectives are met and when
significant individual contributions are made to support the Company's
initiatives to grow and enhance shareholder value.
In accordance with its strategy, the Company, beginning in 1991, has placed
less emphasis on base salaries and other fixed forms of compensation and greater
emphasis on performance-based compensation, consisting of compensation based on
(1) total Company and/or product line performance and (2) individual
performance, including achievements with respect to matters involving corporate
strategy and the creation of shareholder value (such as research and
development, acquisitions, business alliances and the like), as
- ------------------
*These companies are not identical to those included in the performance graph
indices appearing above (although a number of them are included in one or more
of such indices) because the firms with which the Company compares itself with
respect to executive compensation and competition for executive talent are not
necessarily the same as those with which it competes for product market share
or shareholders' investments.
16
<PAGE>
well as environmental and social matters. Consequently, the total compensation
of executive officers will reach the 75th percentile level only to the extent
that targeted Company and individual performance levels are achieved.
As part of its continuing review, the Compensation Committee is studying the
implications of 1993 tax legislation (effective in 1994) that limits to $1
million the amount that may be deducted by a publicly held company (such as the
Company) as compensation expense with respect to the compensation paid each year
to each of its five most highly paid executive officers. Under this legislation,
compensation will not be counted towards the $1 million deductibility limitation
if specified conditions are satisfied, including that the compensation is
performance-based and is approved by a committee of disinterested directors and
by the shareholders. Regulations to implement and clarify such legislation were
issued (in proposed form) in December 1993.
While final regulations are not expected to be issued until later this year
at the earliest (and the Company can give no assurance as to the content of such
final regulations, whenever issued, or the Company's ability to comply
therewith), the Company intends to qualify its executive compensation plans,
where appropriate, as performance-based plans and thereby not be subject to the
$1 million deductibility limitation.
The following sections of this Report describe the compensation program for
executive officers as in effect in 1993 and the manner in which the Compensation
Committee and the Board reached their determinations as to performance-based
compensation.
Base Salary
As part of its strategy to place more emphasis on performance-based
incentive compensation than on salaries, effective in January 1993 the Company
imposed a one-year freeze on the salaries of all United States and Canadian
employees, including the executive officers, whose annual base salaries exceeded
$100,000. No increases in base salary were implemented for 1993 subsequent to
the effective date of the freeze for any of the executive officers whose
compensation is reported above.
As contemplated, the freeze was discontinued by the Board, effective January
1, 1994, upon the recommendation of the Compensation Committee. In 1994, it is
anticipated that salaries of executives subject to the freeze may be reviewed at
18-month intervals. Pending developments arising out of the continuing review of
the Company's executive compensation program in 1994, the Compensation Committee
may propose salary increases for executive officers in cases where, in its
judgment, such increases are warranted on the basis of (1) individual
performance (as evaluated by the Compensation Committee in its discretion), (2)
salaries paid to executives in comparable positions in other companies with
annual sales of $3 to $10 billion, and (3) other factors that the Compensation
Committee deems relevant at the time. It is expected that the 1994 salary
increases for executive employees (employees whose salaries exceed $100,000),
including the executive officers, will average approximately 4.5% of their
current salaries on an annualized basis. Based on data furnished by its
consulting firm, the Compensation Committee believes that this rate of increase
is in line with executive salary increases among companies with annual sales of
$3 to $10 billion.
Annual Incentive Compensation
In 1993, certain changes were made by the Compensation Committee and the
Board to the annual incentive compensation component of the Company's executive
compensation program; the Compensation Committee considers these changes part of
its continuing progress toward strengthening performance-based executive pay.
The changes involved the establishment of incentive compensation "pools" that,
for 1993, were generated on the basis of pretax earnings performance versus
targets and, with respect to certain product lines, the extent to which 1993
pretax income exceeded that of 1992. Awards to individual executives were
allocated from the formula-based incentive compensation pools.
The factors that the Compensation Committee took into consideration in
proposing individual awards for the executive officers (other than Mr. Bolduc,
whose compensation is discussed below) were (1) that the Company's 1993 pretax
income performance (excluding special items in both years) was 2% (or $7.5
million) higher than the target and 14.4% (or $47.7 million) higher than 1992
pretax income and (2) the Company's
17
<PAGE>
performance compared to previously targeted specific objectives, consisting
primarily of (a) substantial progress in reorganizing the Company's staff
functions to support the globalization of its core product lines, (b) the
divestment of over $500 million of noncore businesses and the resulting
realignment of capital to core businesses (including through acquisitions), and
(c) the reduction of debt and related interest expense. In addition, in
determining Dr. Hampers' award, the Compensation Committee took into
consideration the 1993 pretax income performance of the Company's health care
business, which exceeded the target by 3% (or $6.8 million) and 1992 pretax
income by 40.3% (or $71.0 million), and the progress made in achieving the
Company's objectives of globalizing its health care business and maximizing its
industry leadership position.
Based on these considerations, the Board, upon the recommendation of the
Compensation Committee, approved awards for the executive officers (other than
Mr. Bolduc) ranging from 55.1% to 94.9% of their 1993 annual base salary rates.
Long-Term Incentives
The long-term incentive component of the Company's total executive
compensation program, which is described elsewhere in this Proxy Statement,
provides for the annual grant of contingent Performance Units and stock options.
Such grants provide opportunities for significant rewards based on performance
versus pre-established pretax income and shareholder value performance targets
(in the case of Performance Units) and on increases in the price of the
Company's Common Stock (in the case of options).
In 1993, the executive officers listed above (except for Mr. Wright, whose
employment terminated at year-end 1993), and certain other key individuals, were
granted Performance Units for the 1993-1995 Performance Period and stock
options. With respect to the recipients of these grants, including the executive
officers, the number of contingent Performance Units granted and the number of
shares of stock covered by options granted were based on the Compensation
Committee's evaluation of each individual's ability to contribute to the
achievement of the specific performance targets discussed above. While no formal
method was used in making such evaluation, the Compensation Committee believes
that such awards were commensurate with the ability of the recipients to impact
the Company's performance.
The Company's LTIP is described elsewhere in the Proxy Statement. As noted
in such descriptions, Performance Units granted to employees of product lines
are weighted 67% on the pretax earnings performance of their product lines, and
33% on the Company's shareholder value performance; Performance Units granted to
corporate employees are weighted 50% on the basis of the Company's pretax
earnings performance and 50% on the basis of the Company's shareholder value
performance. This weighting is intended to reflect the respective
responsibilities of the Company's product line and corporate managers. However,
half of Dr. Hampers' Performance Units are weighted 67%/33%, and his remaining
Performance Units are weighted 50%/50%, reflecting his responsibilities as both
a product line manager (with respect to the Company's health care business) and
a corporate manager (as an Executive Vice President with policy-making
responsibilities on a Company-wide basis). The Compensation Committee determined
these weightings and approved the targeted levels for product line and Company
performance based on its assessment of the extent to which the approved
weightings and targeted levels would act as challenging -- but realizable --
incentives for senior managers.
The first payment under the Performance Unit awards, if earned, would be
made in 1996 for the 1993-1995 Performance Period. It is anticipated that
payments of any earned Performance Units will be made 50% in cash and 50% in
shares of Common Stock issued under the Company's stock incentive plans;
however, the Compensation Committee has authority to reduce the portion of
earned Performance Units payable in Common Stock. Payment of a portion of any
earned Performance Units in stock is intended to unite the interests of
executives with those of shareholders by placing a significant portion of the
executives' compensation at risk, as experienced by the shareholders.
While there is no maximum amount payable with respect to the Performance
Units that may be earned by an individual, there is no assurance that any such
Units will be earned, since the specified pretax earnings or shareholder value
performance thresholds must be achieved in order for there to be any payments.
18
<PAGE>
Compensation of the Chief Executive Officer
Mr. Bolduc's 1993 compensation was determined in accordance with the
philosophy and program components discussed above. This determination consisted
of (1) a subjective assessment of Mr. Bolduc's effectiveness in leading the
Company and strategically positioning it to successfully compete globally in the
21st Century, and (2) his achievements to date with respect to the Company's
financial performance and restructuring and the Company's performance relative
to the specific targets discussed above.
Mr. Bolduc's annual incentive compensation award for 1993 was $986,000. This
amount exceeded his 1992 award by $375,000, or 61.4%, and was made from the pool
generated by the Company's 1993 pretax income performance (which, as noted
above, exceeded the target by 2%, or $7.5 million, and 1992 pretax income by
14.4%, or $47.7 million). Mr. Bolduc's award was not determined in accordance
with a precise formula. Rather, the Compensation Committee considered Mr.
Bolduc's leadership in directing the significant accomplishments achieved under
the Company's strategic plan and continued growth in earnings. These
accomplishments include the divestment of over $500 million of noncore
businesses; the resulting realignment of capital to core businesses (including
acquisitions amounting to over $350 million in 1993); a reduction of $100
million in debt, resulting in a reduction of the Company's debt-to-capital ratio
to 52.9% at year-end 1993 as compared to 54.4% at year-end 1992 and a related
reduction in interest expense; the implementation of global task forces,
resulting in 75 major initiatives expected to yield substantial reductions in
production and general and administrative expenses, all as reported in the
Company's 1993 Annual Report to Shareholders. The effects of these
accomplishments were reflected in the increase of 13.3% in operating earnings
per share for 1993 as compared to 1992.
Under the long-term incentive component of the executive compensation
program, Mr. Bolduc was granted 25,000 Performance Units with respect to the
1993-1995 Performance Period, and a stock option covering 100,000 shares of the
Company's Common Stock. The size of these grants was determined by the
Compensation Committee on the basis of the following factors (as well as those
considered in determining Mr. Bolduc's annual incentive compensation award): (1)
the Company's defined strategic goals; (2) the anticipated degree of difficulty
in achieving those goals; (3) the potential shareholder value to be derived from
achieving them; and (4) the future positioning of the Company for competitive
global advantage.
Mr. Bolduc has an employment agreement with the Company, the terms of which
are summarized elsewhere in this Proxy Statement.
COMPENSATION, EMPLOYEE BENEFITS AND
STOCK INCENTIVE COMMITTEE
Eben W. Pyne, CHAIRMAN
Harold A. Eckmann
Peter S. Lynch
Robert C. Macauley
Roger Milliken
John A. Puelicher
19
<PAGE>
RELATIONSHIPS AND TRANSACTIONS WITH MANAGEMENT AND OTHERS
The Company and its subsidiaries have engaged in the following
transactions with directors and executive officers of the Company and/or
businesses with which they are associated. Information regarding consulting
arrangements with certain directors appears above under "Executive
Compensation--Directors' Compensation and Consulting Arrangements".
COMMERCIAL TRANSACTIONS. During 1992, the Company purchased approximately
$230,000 of products from, and made sales of approximately $50,000 to, Milliken
& Company (of which Mr. Milliken is chief executive officer).
LOANS TO OFFICERS. In 1987 and 1989, a subsidiary of the Company made
interest-free loans of $400,000 and $1 million, respectively, to Messrs. Bolduc
and Wright in connection with their previous relocations to the New York City
area. The loans are payable in 1997 and 1999, respectively (or earlier under
certain circumstances).
LEGAL PROCEEDINGS; INSURANCE. In 1990, Dr. Hampers consented to the entry
of a misdemeanor finding and to the payment of a fine for his importation of
skins of endangered species in violation of federal law.
The Company maintains director and officer liability insurance covering
directors and officers of the Company and its subsidiaries. Such insurance is
currently provided by Corporate Officers' and Directors' Assurance Ltd., X.L.
Insurance Company Ltd., Gulf Insurance Company and A.C.E. Insurance Company Ltd.
under contracts dated November 4, 1993. The annual premiums for such insurance
total approximately $1.2 million.
20
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS
MANAGEMENT SECURITY OWNERSHIP
The following tables set forth the Common and Preferred Stocks of the
Company beneficially owned at February 1, 1994 by each director and nominee, by
each of the executive officers named in the Summary Compensation Table set forth
under "Election of Directors--Executive Compensation" above (other than Mr.
Wright, who was not an executive officer at February 1, 1994), and by directors
and executive officers as a group. The tables include shares owned by (1) those
persons and their spouses, minor children and certain relatives, (2) trusts and
custodianships for their benefit and (3) trusts and other entities as to which
the persons have the power to direct the voting or investment of securities
(including shares as to which the persons disclaim beneficial ownership). The
Common Stock table includes shares in accounts under the Company's Salaried
Employees Savings and Investment Plan and shares covered by currently
exercisable stock options; it does not reflect shares covered by unexercisable
stock options (see "Election of Directors-- Executive Compensation--Stock
Options" above). The bracketed figures in the tables indicate the percentage of
the class represented by the shares shown (if over 1%), based on the shares
outstanding at March 21, 1994. The Common and Preferred Stocks owned by
directors and executive officers as a group (excluding option shares) represent
approximately 6.6% of the voting power of all the Company's stock outstanding at
March 21, 1994.
COMMON STOCK
<TABLE>
<CAPTION>
AMOUNT/NATURE
OF OWNERSHIP
--------------
<S> <C> <C>
J. P. Bolduc....................... 277,718
265,000 (O)
G. C. Dacey........................ 200
E. W. Duffy........................ 1,400
H. A. Eckmann...................... 1,833
C. H. Erhart, Jr................... 98,716
3,100 (T,S)
J. W. Frick........................ 3,872
J. P. Grace........................ 491,326
187,307 (T,S)
626,668 (O)
R. H. Grierson..................... 5,400
C. L. Hampers...................... 8,600
50,000 (T)
150,000 (O)
T. A. Holmes....................... 2,500
G. J. Humphrey..................... 100
G. P. Jenkins...................... 200
V. A. Kamsky....................... 1,000
D. H. Kohnken...................... 37,532
165,500 (O)
P. S. Lynch........................ 5,500
R. C. Macauley..................... 1,000
<CAPTION>
AMOUNT/NATURE
OF OWNERSHIP
--------------
<S> <C> <C>
R. Milliken........................ 200
1,072 (T)
9,467 (T,S)
J. E. Phipps....................... 1,000
10,000 (T)
J. A. Puelicher.................... 2,000
6,570 (T)
E. W. Pyne......................... 1,840
1,000 (T)
18,000 (T,S)
D. W. Robbins, Jr.................. 41,039 (T)
135,000 (O)
B. J. Smith........................ 37,260
115,000 (O)
E. J. Sullivan..................... 1,600
G. S. Vance........................ 400
W. Wood Prince..................... 1,000
37,996 (T,S)
D. L. Yunich....................... 1,000
Various directors, executive
officers and others, as Trustees.. 18,730 (T,S)
Directors and executive officers as
a group........................... 1,120,501 [1.2%]
109,681 (T)
255,870 (T,S)
1,913,468 (O)
</TABLE>
(FOOTNOTES APPEAR ON FOLLOWING PAGE)
21
<PAGE>
PREFERRED STOCKS
<TABLE>
<CAPTION>
AMOUNT/NATURE OF OWNERSHIP
----------------------------------------------------------------
CLASS A
6% PREFERRED PREFERRED
------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
C. H. Erhart, Jr.................................. 42
J. P. Grace....................................... 427 (T,S) [1.2%] 531 (T,S) [3.2%]
E. W. Pyne........................................ 38 (T,S)
Various directors, executive officers and others,
as Trustees...................................... 21,637 (T,S) [59.3%] 725 (T,S) [4.4%]
Various directors, executive officers and others,
as members of the Retirement Board of the W. R.
Grace & Co. Retirement Plan for Salaried
Employees........................................ 9,648 (T,S) [26.5%]
Directors and executive officers as a group....... 42 1,256 (T,S) [7.7%]
31,750 (T,S) [87.0%]
<CAPTION>
CLASS B
PREFERRED
---------------------------------
<S> <C> <C> <C>
C. H. Erhart, Jr..................................
J. P. Grace....................................... 542 (T,S) [2.5%]
E. W. Pyne........................................
Various directors, executive officers and others,
as Trustees...................................... 985 (T,S) [4.6%]
Various directors, executive officers and others,
as members of the Retirement Board of the W. R.
Grace & Co. Retirement Plan for Salaried
Employees........................................ 959 (T,S) [4.4%]
Directors and executive officers as a group....... 2,506 (T,S) [11.6%]
</TABLE>
- ------------
(O) Shares covered by stock options exercisable on or within 60 days after
February 1, 1994.
(T) Shares owned by trusts and other entities as to which the person has the
power to direct voting and/or investment.
(S) Shares as to which the person shares voting and/or investment power with
others.
The above tables do not include shares held by Fidelity Management &
Research Company and its affiliated mutual funds (see "Other Security Ownership"
below). Mr. Lynch is vice chairman of Fidelity Management & Research Company and
a trustee of the Fidelity Group of Mutual Funds. However, he disclaims
beneficial ownership of such shares and has advised the Company that he does not
participate in and is not responsible for investment and voting decisions with
respect to such shares. Further, Mr. Lynch has advised the Company that he has
served and will continue to serve as a director in his individual capacity and
not as a representative or deputy of Fidelity Management & Research Company or
any related entity.
OTHER SECURITY OWNERSHIP
The Company has been advised that at December 31, 1993, College Retirement
Equities Fund (730 Third Avenue, New York, New York 10017-3206) held 7,870,300
shares of Common Stock, or 8.4% of the Common Stock outstanding on March 21,
1994; Delaware Management Company, Inc. (1818 Market Street, Philadelphia,
Pennsylvania 19103) and affiliated mutual funds held 8,088,345 shares of Common
Stock, or 8.6% of the Common Stock outstanding on March 21, 1994; and FMR Corp.
(82 Devonshire Street, Boston, Massachusetts 02108) and affiliated mutual funds
held 10,098,496 shares of Common Stock, or 10.8% of the Common Stock outstanding
on March 21, 1994. In addition, at March 21, 1994, Namanco & Co. (P.O. Box 426
Exchange Place Station, 69 Montgomery Street, Jersey City, New Jersey 07303) was
the record owner of 2,722 shares of Class A Preferred Stock, or 16.6% of the
Class A Preferred Stock outstanding, and 4,951 shares of Class B Preferred
Stock, or 22.9% of the Class B Preferred Stock outstanding.
OWNERSHIP AND TRANSACTIONS REPORTS
Under Section 16 of the Securities Exchange Act of 1934, the Company's
directors, certain of its officers, and beneficial owners of more than 10% of
the outstanding Common Stock are required to file reports with the Securities
and Exchange Commission and the New York Stock Exchange concerning their
ownership of and transactions in Common Stock; such persons are also required to
furnish the Company with copies of such reports. Based solely upon the reports
and related information furnished to the Company, the Company believes that all
such filing requirements were complied with in a timely manner during and with
respect to 1993.
22
<PAGE>
SELECTION OF INDEPENDENT ACCOUNTANTS
On the recommendation of the Audit Committee, the Board of Directors has
selected the firm of Price Waterhouse to be the independent accountants of the
Company and its consolidated subsidiaries for 1994. Although the submission of
this matter for shareholder ratification at the Annual Meeting is not required
by law or the Company's By-laws, the Board is nevertheless doing so to determine
the shareholders' views. If the selection is not ratified, the Board will
reconsider its selection of independent accountants.
Price Waterhouse has acted as independent accountants of the Company and its
consolidated subsidiaries since 1906. Its fees and expenses for the 1993 audit
are expected to be approximately $2.8 million. In addition, Price Waterhouse
performed special audits and reviews in connection with certain acquisitions and
divestments, consulted with the Company on various matters and performed other
services for the Company in 1993 (including audits of the financial statements
of certain employee benefit plans and certain units of the Company) for fees and
expenses totaling approximately $3.8 million. A representative of Price
Waterhouse will attend the Annual Meeting, will be available to answer questions
and will have an opportunity to make a statement if he wishes to do so. Members
of the Audit Committee are also expected to attend.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE SELECTION
OF PRICE WATERHOUSE.
APPROVAL OF 1994 STOCK INCENTIVE PLAN
For many years, the Company has had plans providing for the grant of options
and other forms of Common Stock incentives to incentivize key employees and
consultants to put forth their maximum efforts on the Company's behalf. In the
opinion of the Compensation Committee and the Board of Directors, these plans
help to unite the interests of key employees and consultants with those of the
shareholders and have been of substantial value in attracting, motivating and
retaining the most highly qualified employees and consultants, who can
contribute significantly to the Company's growth and profitability.
On the recommendation of the Compensation Committee, the Board has approved
and is recommending that the shareholders approve the 1994 Stock Incentive Plan
("Stock Incentive Plan"), to enable the Company to remain competitive in the
recruitment, motivation and retention of executives and other key persons. The
text of the Stock Incentive Plan is attached as Exhibit A to this Proxy
Statement; the following summary of the Stock Incentive Plan is qualified in its
entirety by reference to such text.
Under the Stock Incentive Plan, stock incentives may be granted to key
employees and consultants, including directors who are employees or consultants;
as used below, "employees" includes consultants and "employment" includes the
rendering of services as a consultant. Stock incentives under the Stock
Incentive Plan can be granted in the form of stock options, stock awards or a
combination of the two. Such incentives will be granted on such terms and
conditions, and for such consideration, as the Compensation Committee
determines. See "Election of Directors--Executive Compensation" above for
information concerning stock incentives granted to certain executive officers.
STOCK OPTIONS
The Stock Incentive Plan permits the Company to grant options to key
employees to purchase Common Stock at an exercise price equal to not less than
100% of the fair market value of the Common Stock on the date the option is
granted. The maximum term of an option is ten years and one month from the date
of grant. The exercise price is payable in cash, by surrendering previously
acquired Common Stock with a fair market value equal to the exercise price, or a
combination of the two. Each option is exercisable at such time or times as the
option may specify, as determined by the Compensation Committee. In general, an
option terminates three months after the optionee ceases to be an employee,
except that it terminates (1) immediately, if the employee resigns without the
consent of the Compensation Committee or if his employment is terminated for
cause and (2) three years after death, incapacity or retirement.
The Stock Incentive Plan authorizes the grant of "incentive stock options"
(which are accorded special tax treatment under Section 422A of the Internal
Revenue Code, as discussed below), as well as options that do not qualify as
incentive stock options ("nonstatutory stock options"). Incentive stock options
may not be granted to consultants.
23
<PAGE>
The Stock Incentive Plan authorizes the Company to cancel an option to the
extent it is exercisable and either (1) pay the holder of the option cash equal
to the excess of the fair market value of the shares covered by the option over
their exercise price on the date of exercise, (2) transfer to the holder Common
Stock with a fair market value equal to such excess, or (3) pay such excess
partly in cash and partly in Common Stock; this right to cancel an option is
referred to as a "stock appreciation right" or "SAR". Although the Stock
Incentive Plan permits the granting of SARs, no SARs have been granted since
1990, and the Compensation Committee does not expect to grant any SARs in the
future.
Under the Stock Incentive Plan, an outstanding option may be amended by the
Compensation Committee, provided that the holder of the option agrees to any
amendment that would adversely affect the option and that the option as so
amended is consistent with the Stock Incentive Plan. It will not be possible to
amend an outstanding option granted under the Stock Incentive Plan to reduce the
exercise price. The Stock Incentive Plan does not preclude the surrender of an
outstanding option and the grant of a new option with a lower exercise price, so
long as the exercise price of the new option is not less than 100% of the fair
market value of the Common Stock on the date of grant; however, the Company has
never implemented any such surrenders, and the Compensation Committee has no
intention of doing so in the future.
STOCK AWARDS
The Stock Incentive Plan permits the Company to grant stock awards to key
employees. A stock award is an issuance of shares of Common Stock or an
undertaking to issue such shares in the future. Shares subject to a stock award
are valued at not less than 100% of their fair market value on the date the
award is granted, whether or not they are subject to restrictions.
If the shares subject to a stock award are not issued at the time of grant,
payments may be made, in cash or in shares of Common Stock, of amounts not
exceeding the dividends that would have been paid if the shares awarded had been
issued at the time of grant.
It is intended that stock awards would be (1) made contingent upon the
attainment of one or more specified performance objectives and/or (2) subject to
restrictions on the sale or other disposition of the stock award for a period of
three or more years. However, stock awards covering up to 3% of the shares
issuable under the Stock Incentive Plan may be granted without regard to the
limitations in clause (1) or clause (2) of the preceding sentence.
The foregoing outlines certain features of stock awards required or
permitted under the Stock Incentive Plan; however, stock awards may contain
other permitted terms.
At the present time, the Company does not have a restricted share award or
similar program. However, it is anticipated that 50% of any payments earned
under the LTIP will be paid in shares of Common Stock issued under the Stock
Incentive Plan or another stock incentive plan of the Company (see "Election of
Directors--Executive Compensation--LTIP" for additional information).
LIMITATIONS
Up to 3,000,000 shares of Common Stock (subject to adjustment for stock
splits, stock dividends and the like) may be issued pursuant to stock incentives
under the Stock Incentive Plan; this represents 3.2% of the Common Stock
outstanding as of March 21, 1994. Shares not issued pursuant to stock incentives
because of their termination or for other reasons, and shares issued pursuant to
stock incentives and subsequently reacquired by the Company, will again be
available for grants under the Stock Incentive Plan.
In addition, (1) no more than 10% of the total number of shares issuable
under the Stock Incentive Plan may be subject to options granted to any one
person; (2) no more than 15% of such shares may be subject to stock incentives
granted to any one person; and (3) no more than 3% in the aggregate of such
shares may be subject to stock incentives granted to all persons who are
consultants to the Company and/or one or more subsidiaries at the time the
relevant stock incentive is granted. In addition, the Stock Incentive Plan
imposes certain limitations upon the grant of "incentive stock options".
24
<PAGE>
TAX TREATMENT OF STOCK INCENTIVES
Under the present provisions of the Internal Revenue Code ("Code") and
regulations thereunder, the federal income tax treatment of stock incentives
under the Stock Incentive Plan is as follows:
OPTIONS. An employee has no taxable income upon the grant of an option. The
tax consequences of exercising an option will depend upon whether the option is
(1) an "incentive stock option" or "ISO" or (2) a nonstatutory stock option or
"NSO".
An employee will generally have no taxable income upon the exercise of an
ISO if he remains employed by the Company or a subsidiary at all times (except
in the case of death) from the date of grant until three months before the date
of exercise (or one year before the date of exercise in the case of a disabled
employee). If the Common Stock acquired pursuant to the exercise of an ISO is
not disposed of until after two years following the date of grant and one year
following the date the Common Stock is issued to him, he will have no taxable
income until he sells the Common Stock and then will realize long-term capital
gain or loss equal to the difference between the sales price and the exercise
price. Under these circumstances, the Company would generally not receive a tax
deduction at the time of either exercise or sale.
Unlike an ISO, the exercise of an NSO results in taxable income. Except as
described below, upon exercise of an NSO or an SAR (whether for cash or Common
Stock) an employee will have taxable compensation equal to the excess of the
market price on the date of exercise over the exercise price.
STOCK AWARDS. Except as described below, an employee realizes no taxable
income by reason of the grant of a stock award until the date on which shares
are issued to him (or, if such shares are subject to a substantial risk of
forfeiture, the date on which such shares are vested); he is then deemed to
receive taxable compensation equal to the excess of the fair market value of the
shares on such date over their purchase price, if any. If an employee makes an
election under Section 83(b) of the Code when he is issued restricted shares
under a stock award, he will have taxable compensation equal to such excess on
the date of issuance.
OTHER TAX CONSIDERATIONS. An employee's tax basis for the Common Stock
received upon the exercise of an option or issued under a stock award will be
the price paid therefor, if any, plus the amount of related taxable
compensation. If Common Stock acquired through the exercise of an NSO or SAR or
issued under a stock award is sold, the employee will realize a capital gain (or
loss) equal to the amount by which the proceeds of the sale exceed (or are less
than) his basis for such Common Stock.
Subject to federal tax legislation, enacted in 1993, that may limit the
Company's ability to deduct compensation in excess of $1 million per year paid
to the executive officers named in the Summary Compensation Table, in instances
where an employee has taxable compensation, the Company or a subsidiary will
generally be entitled to a tax deduction in the amount of such compensation.
ACCOUNTING TREATMENT OF STOCK INCENTIVES
No expense is incurred when an option not containing an SAR is granted or
exercised, so long as the exercise price equals the fair market value of the
Common Stock on the date of grant. The Company's tax deduction described above
in the case of NSOs is reported as an adjustment to shareholders' equity. With
respect to an option containing an SAR, compensation expense is incurred when
the fair market value of the Common Stock exceeds the exercise price; this
expense is reported over the term of the option and is periodically adjusted to
reflect changes in such value.
Stock awards result in compensation expense based on the fair market value
of the shares covered by the awards, the timing and recording of which depend on
the terms of the individual award.
The Financial Accounting Standards Board is considering proposals to revise
the accounting treatment of stock compensation plans.
GENERAL
It is contemplated that authorized but unissued shares of Common Stock will
be used under the Stock Incentive Plan, but shares held by the Company may also
be used for purposes of the Stock Incentive Plan.
25
<PAGE>
As indicated above, the Stock Incentive Plan will be administered by the
Compensation Committee.
It is not possible to state which key employees will be granted stock
incentives under the Stock Incentive Plan or the value or number of shares
subject to any particular stock incentive, since these matters will be
determined by the Compensation Committee in the future based on an individual's
ability to contribute to the Company's profitability, growth and success.
However, subject to such considerations, the Company would expect to continue
granting incentives to key employees in executive, operating, administrative,
professional and technical positions on a basis generally comparable to prior
grants. As of March 21, 1994, there were 9 executive officers, 28 other officers
and 663 other current and former employees holding options and/or shares under
such plans and approximately 6.5 million shares available for grants thereunder.
Information concerning stock incentives held by the Company's executive officers
is set forth under "Election of Directors--Executive Compensation" and "Security
Ownership of Management and Others-- Management Security Ownership".
The Stock Incentive Plan permits certain variations from the terms described
above in the case of grants of stock incentives to foreign employees and in the
case of the assumption of, or the grant of options in substitution for, options
held by employees of acquired companies. The Stock Incentive Plan may be amended
or terminated by the Board of Directors upon the recommendation of the
Compensation Committee without shareholder approval, except as specified in
Section 13 of the Stock Incentive Plan.
No preemptive rights are applicable to the shares covered by the Stock
Incentive Plan. The cash proceeds to be received by the Company in connection
with stock incentives granted under the Stock Incentive Plan are expected to be
used for general corporate purposes.
The Stock Incentive Plan is being submitted for shareholder approval in
accordance with the laws of the State of New York (in which the Company is
incorporated) and to comply with rules of the Securities and Exchange Commission
and the New York Stock Exchange. The Stock Incentive Plan will not become
effective unless and until it is approved by the shareholders (see "Other
Matters--Votes Required" below). If the Stock Incentive Plan is not approved by
the shareholders, the Company will reconsider the alternatives available with
respect to stock incentives and other forms of long-term, performance-based
compensation.
------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE STOCK INCENTIVE
PLAN.
APPROVAL OF 1994 STOCK RETAINER PLAN FOR NONEMPLOYEE DIRECTORS
As discussed above under "Election of Directors--Executive
Compensation--Directors' Compensation and Consulting Arrangements", the Company
plans to implement a new compensation program for nonemployee directors, to be
effective July 1, 1994. Among other things, this new program contemplates that
each nonemployee director will receive an annual retainer of $24,000, payable in
shares of the Company's Common Stock. The payment of an annual retainer to
nonemployee directors in shares of Common Stock is expected to further unite the
interests of the Board of Directors with those of the Company's shareholders and
to be of substantial value in attracting, motivating and retaining the most
highly qualified nonemployee directors.
Accordingly, the Board has approved and is recommending that the
shareholders approve the 1994 Stock Retainer Plan for Nonemployee Directors
("Retainer Plan") for this purpose. The text of the Retainer Plan is attached as
Exhibit B to this Proxy Statement; the following summary of the Retainer Plan is
qualified in its entirety by reference to such text.
The Retainer Plan provides that, beginning on July 1, 1994, and on each
subsequent July 1 through July 1, 1999, each person serving as a nonemployee
director will be paid a retainer consisting of a whole number of shares of
Common Stock equal to the quotient obtained by dividing (1) $24,000 ("Retainer
Amount") by (2) the fair market value of the Common Stock on such July 1; any
fractional share resulting from such calculation will be rounded upwards to the
next whole share. The Retainer Amount will be proportionately decreased with
respect to a person whose service as a nonemployee director commenced subsequent
to January 1 of such calendar year and increased for a person whose service as a
nonemployee director commenced subsequent to July 1 of the prior calendar year.
No shares will be issued in a calendar
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year to a nonemployee director who, prior to July 1 of such calendar year, is
removed from the Board for cause (as provided in the Company's Certificate of
Incorporation) or voluntarily terminates service prior to retirement under the
directors' retirement plan (see "Election of Directors--Executive Compensation--
Directors' Compensation and Consulting Arrangements"). However, once shares are
issued to a nonemployee director under the Retainer Plan, they are not forfeited
upon the director's termination of service, regardless of the reason for such
termination.
As defined in the Retainer Plan, a nonemployee director is an individual not
employed by the Company or any subsidiary.
LIMITATIONS
Up to 66,000 shares of Common Stock (subject to adjustment for stock splits,
stock dividends and the like) may be issued pursuant to the Retainer Plan. This
number of shares is expected to be sufficient to pay retainers to nonemployee
directors through July 1, 1999; the Retainer Plan does not provide for the
payment of retainers with respect to any period after July 1, 1999.
TAX TREATMENT OF RETAINERS
Under the present provisions of the Code, a nonemployee director will
realize taxable compensation equal to the fair market value of the shares
delivered in payment of his annual retainer. Such nonemployee director's tax
basis for such shares will be the amount of such taxable compensation. If such
shares are subsequently sold, the nonemployee director will realize a capital
gain (or loss) equal to the amount by which the proceeds of the sale exceed (or
are less than) his basis for such Common Stock.
The Company will generally be entitled to a tax deduction in the amount of
the taxable compensation realized by the nonemployee director.
ACCOUNTING TREATMENT OF RETAINERS
The issuance of shares in payment of annual retainers will result in
compensation expense based on the fair market value of such shares.
GENERAL
It is contemplated that authorized but unissued shares of Common Stock will
be used under the Retainer Plan, but shares held by the Company may also be used
for purposes of the Retainer Plan.
The Retainer Plan may be amended or terminated by the Board of Directors
upon the recommendation of the Compensation Committee without shareholder
approval, except as specified in Section 9 of the Retainer Plan (which
effectively prohibits the amendment of the Retainer Plan more than once every
six months in a manner that would affect the formula by which shares of Common
Stock are issued to nonemployee directors thereunder).
The Retainer Plan is being submitted for shareholder approval in accordance
with the laws of the State of New York and to comply with rules of the
Securities and Exchange Commission and the New York Stock Exchange. The Retainer
Plan will not become effective unless and until it is approved by the
shareholders (see "Other Matters--Votes Required" below). If the Retainer Plan
is not approved by the shareholders, the Company will reconsider the
alternatives available with respect to the compensation of nonemployee
directors.
------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE RETAINER PLAN.
APPROVAL OF LONG-TERM INCENTIVE PROGRAM
As described above (see "Election of Directors--Executive
Compensation--LTIP"), the LTIP provides for the grant to executive officers and
other senior managers of contingent "Performance Units" under
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<PAGE>
which awards may be earned based on (1) the achievement of pretax earnings
targets by the manager's product line (or, in the case of corporate managers,
the Company), and/or (2) shareholder value performance (measured by appreciation
in the price of the Common Stock and dividends paid) as compared to that of the
companies in the Standard & Poor's Industrials, during a three-year "Performance
Period". It is anticipated that a new three-year Performance Period will
commence each year and that contingent Performance Units will be granted for
each such Performance Period. Performance Units granted to employees of product
lines are weighted 67% on the pretax earnings performance of their product
lines, and 33% on shareholder value performance, during the Performance Period;
Performance Units granted to corporate employees are weighted 50% on the basis
of the Company's pretax earnings performance and 50% on the basis of shareholder
value performance during the Performance Period. In addition, the number of
Performance Units earned under the LTIP may be increased or decreased by up to
20%, at the discretion of the Compensation Committee, based on individual
performance, which could include, among other things, an individual's
performance with respect to strategic matters (such as research and development,
acquisitions, business alliances and the like), as well as environmental and
social matters.
Amounts, if any, payable with respect to Performance Units that are earned
will be paid following the end of each three-year Performance Period. In keeping
with the Company's compensation philosophy of uniting executive interests with
those of the shareholders, it is currently anticipated that any such payments
will be made 50% in cash and 50% in shares of Common Stock issued under the
Company's stock incentive plans, including the 1994 Stock Incentive Plan
described above under "Approval of 1994 Stock Incentive Plan"; however, the
Compensation Committee has authority to reduce the portion of earned Performance
Units payable in Common Stock.
Performance Units will be forfeited in the case of (1) voluntary resignation
prior to age 55 or voluntary retirement prior to age 62, in either case without
the consent of the Compensation Committee, during the Performance Period and (2)
termination for cause. In all other cases of termination of employment during
the Performance Period, a participant will receive a pro rata number of the
Performance Units earned; similarly, Performance Units will be granted on a pro
rata basis to any person who begins participating in the LTIP after the
beginning of a Performance Period.
Payments of earned Performance Units will not be included as compensation
for purposes of the Company's basic and supplemental retirement plans or other
employee benefit plans.
Employees to whom Performance Units are granted also receive grants of stock
options based on the number of Performance Units granted (see "Election of
Directors--Executive Compensation--Stock Options" above).
CALCULATION OF PERFORMANCE UNITS EARNED
As noted above, Performance Units may be earned to the extent that, during
the Performance Period, (1) the manager's product line (or, in the case of
corporate managers, the Company) achieves a pretax earnings target specified by
or under the authority of the Compensation Committee ("Earnings Target"), and/or
(2) the Company's shareholder value performance (measured by appreciation in the
price of the Common Stock and dividends paid) reaches a specified level as
compared to that of the companies in the Standard & Poor's Industrials
("Shareholder Value Performance"). The following is a summary of the manner in
which Performance Units may be earned with respect to Earnings Targets and
Shareholder Value Performance.
EARNINGS TARGET. If the product line (or the Company) does not achieve at
least 90% of the Earnings Target, the portion of each Performance Unit relating
to the Earnings Target ("Earnings Component") will not be earned, and the
participant will receive no payment with respect thereto; as indicated above,
the Earnings Component amounts to 67% of each Performance Unit for product line
employees and 50% for corporate employees. If the product line (or the Company)
achieves 90% of the Earnings Target, the participant will earn 33% of the
Earnings Component. For each one-tenth of a percentage point of the Earnings
Target achieved above the 90% level, the participant will earn an additional
0.67% of the Earnings
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Component, up to 100% of the Earnings Component if 100% of the Earnings Target
is achieved. Further, the participant will earn an additional 1.2% of the
Earnings Component for each one-tenth of a percentage point achieved by his
product line (or the Company) above 100% of the Earnings Target.
SHAREHOLDER VALUE PERFORMANCE. As discussed above, the portion of each
Performance Unit relating to the Company's Shareholder Value Performance
("Shareholder Value Component") amounts to 33% for product line employees and
50% for corporate employees. If the Company's Shareholder Value Performance
during the Performance Period ranks below the 50th percentile of all companies
comprising the Standard & Poor's Industrials at both the beginning and the end
of the Performance Period, the Shareholder Value Component will not be earned,
and the participant will receive no payment with respect thereto. If the
Company's Shareholder Value Performance ranks at the 50th percentile of such
companies at the end of the Performance Period, the participant will earn 33% of
the Shareholder Value Component. For each one-tenth of a percentile by which the
Company's Shareholder Value Performance at the end of the Performance Period
ranks above the 50th percentile level, the participant will earn an additional
0.44% of the Shareholder Value Component, up to 100% of the Shareholder Value
Component if the Company's Shareholder Value Performance at the end of the
Performance Period ranks at the 65th percentile of such companies. Further, the
participant will earn an additional 1.2% of the Shareholder Value Component for
each one-tenth of a percentile above such 65th percentile.
ADJUSTMENTS. The LTIP is intended to relate to the Company's ongoing
businesses; consequently, Performance Units are expected to be earned based on
the Company's core businesses, as constituted at the beginning of the
Performance Period. However, adjustments of Earnings Targets may be made by or
under the authority of the Compensation Committee in the case of certain
divestments of business units, transfers of business units from one product line
to another, and gains or losses resulting from unbudgeted extraordinary events.
In addition, the Compensation Committee may make certain adjustments to
Performance Units (including reducing the length of a Performance Period) in the
event of a change in control of the Company. For purposes of the LTIP, a change
in control of the Company would occur upon the acquisition of 20% or more of the
Company's Common Stock or the failure of Company-nominated directors to
constitute a majority of any class of the Board of Directors.
TAX TREATMENT OF PERFORMANCE UNITS
Under the present provisions of the Code, a participant who receives payment
with respect to earned Performance Units will realize taxable compensation equal
to the amount of such payment. To the extent that such payment is made in shares
of Common Stock as described above, the recipient's taxable compensation will
equal the fair market value of the shares so delivered, and the participant's
tax basis for such shares will be the amount of such taxable compensation. If
such shares are subsequently sold, the participant will realize a capital gain
(or loss) equal to the amount by which the proceeds of the sale exceed (or are
less than) his basis for such shares.
Subject to federal tax legislation, enacted in 1993, that may limit the
Company's ability to deduct compensation in excess of $1 million per year paid
to the executive officers named in the Summary Compensation Table, the Company
will generally be entitled to a tax deduction in the amount of the taxable
compensation realized by a participant in the LTIP.
ACCOUNTING TREATMENT OF PERFORMANCE UNITS
The payment of Performance Units will result in compensation expense; to the
extent such payment is made in shares of Common Stock, the amount of such
expense will equal the fair market value of the shares so delivered.
GENERAL
The LTIP will be administered by the Compensation Committee, which will be
responsible for approving (1) the performance measurements and objectives for
each Performance Unit (E.G., the Earnings Target applicable to each product
line); (2) the terms of future Performance Periods; (3) the persons to whom
Performance Units are granted; and (4) the number of Performance Units granted
to each such person. In
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<PAGE>
addition, the Compensation Committee will be responsible for determining any
adjustments of the components of any Performance Unit, as discussed above under
"Calculation of Performance Units Earned -- Adjustments". The Compensation
Committee has determined that certain information concerning the Company's
strategic objectives (including Earnings Targets) and the calculation of awards
under the LTIP constitutes confidential business information, the disclosure of
which in this Proxy Statement would have an adverse effect on the Company.
It is not possible to state which employees will be granted Performance
Units under the LTIP, the terms of such Performance Units or the amounts that
may be earned pursuant thereto, since these matters will be determined by the
Compensation Committee in the future based on an individual's ability to
contribute to the Company's growth and profitability. However, subject to such
considerations, the Company would expect to continue granting contingent
Performance Units to high-level managers in executive, operating,
administrative, professional and technical positions on a basis generally
comparable to prior grants. At March 21, 1994, a total of 397,800 Performance
Units relating to the 1993-1995 Performance Period were held by 9 executive
officers, 26 other officers, and 199 other current and former employees
worldwide.
The LTIP is being submitted for shareholder approval in connection with
federal tax legislation, enacted in 1993, limiting the Company's ability to
deduct compensation in excess of $1 million per year paid to the executive
officers named in the Summary Compensation Table; such limitation may not apply
to certain performance-based compensation arrangements (such as the LTIP)
approved by shareholders. If the LTIP is not approved by the shareholders (see
"Other Matters--Votes Required" below), the Company will reconsider the
alternatives available with respect to long-term, performance-based
compensation.
------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE LTIP.
SHAREHOLDER PROPOSALS
The National Benevolent Association of the Christian Church (Disciples of
Christ) (222 S. Downey Avenue, P.O. Box 1986, Indianapolis, Indiana 46206) and
The Sinsinawa Dominicans (561 Village Green Drive, #275, Mobile, Alabama
36609-1403), who state that they respectively own 4,000 shares and 200 shares of
Common Stock, have informed the Company that they will cause the following
resolution to be presented at the Annual Meeting. In addition, The Sisters of
the Humility of Mary (105 Webster Avenue, Morgantown, West Virginia 26505), who
state that they own 45 shares of Common Stock (but who are ineligible to submit
a shareholder proposal under the rules of the Securities and Exchange
Commission) have indicated that they support such proposal.
"WHEREAS WE BELIEVE:
"The responsible implementation of sound environmental policy
increases long-term shareholder value by increasing efficiency,
decreasing clean-up costs, reducing litigation, and enhancing public
image and product attractiveness;
"Adherence to public standards for environmental performance gives a
company greater public credibility than is achieved by following
standards created by industry alone. In order to maximize public
credibility and usefulness, such standards also need to reflect what
investors and other stakeholders want to know about the environmental
records of their companies;
"Standardized environmental reports will provide shareholders with
useful information which allows comparisons of performance against
uniform standards and comparisons of progress over time. Companies can
also attract new capital from investors seeking investments that are
environmentally responsible, responsive, progressive, and which minimize
the risk of environmental liability.
"AND WHEREAS:
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<PAGE>
"The Coalition for Environmentally Responsible Economies (CERES) --
which comprises large institutional investors with $150 billion in
stockholdings (including shareholders of this Company), public interest
representatives, and environmental experts -- consulted with dozens of
corporations and produced comprehensive public standards for both
environmental performance and reporting. Over 50 companies have endorsed
the CERES Principles -- including Sun Company, a Fortune-500 company --
to demonstrate their commitment to public environmental accountability.
"In endorsing the CERES Principles, a company commits to work toward:
<TABLE>
<S> <C> <C>
1. Protection of the 4. Energy 7. Environmental
biosphere conservation restoration
2. Sustainable use 5. Risk reduction 8. Informing the public
of 6. Safe products and 9. Management commitment
natural resources services 10. Audits and reports
3. Waste reduction &
disposal
</TABLE>
"The full text of the CERES Principles and the accompanying CERES
Report Form are available from CERES, 711 Atlantic Avenue, Boston, MA
02110, tel: 617/451-0927.
"Concerned investors are asking the Company to be publicly accountable
for its environmental impact, including collaboration with this
corporate, environmental, investor, and community coalition to develop
(a) standards for environmental performance and disclosure; (b)
appropriate goals relative to these standards; (c) evaluation methods
and tools for measurement of progress toward these goals; and (d) a
format for public reporting of this progress.
"We believe this request is consistent with regulation adopted by the
European Community for companies' voluntary participation in verified
and publicly-reported eco-management and auditing.
"RESOLVED: Shareholders request the Company to endorse the CERES
Principles as a commitment to be publicly accountable for its
environmental impact."
These shareholders give the following reasons in support of this
resolution:
"We invite the Company to endorse the CERES Principles by (1) stating
its endorsement in a letter signed by a senior officer; (2) committing
to implement the Principles; and (3) annually completing the CERES
Report. Endorsing these Principles complements rather than supplants
internal corporate environmental policies and procedures.
"We believe that without this public scrutiny, corporate environmental
policies and reports lack the critical component of adherence to
standards set not only by management but also by other stakeholders.
Shareholders are asked to support this resolution, to encourage our
Company to demonstrate environmental leadership and accountability for
its environmental impact."
THE BOARD OF DIRECTORS RECOMMENDS VOTING AGAINST THIS PROPOSAL.
The Board of Directors believes that adoption of the CERES principles would
result in unnecessary costs and administrative burdens, as well as duplication
of existing government and industry initiatives, without increasing the
Company's commitment to environmental protection or enhancing shareholder value.
Additionally, the CERES principles contain requirements that the Board believes
are not applicable to or appropriate for the Company.
Several years ago, the Company's chemical operations adopted the Chemical
Manufacturers Association "Responsible Care" principles -- a comprehensive
program that has, as its primary goal, improvements in the areas of health,
safety and environmental quality. In 1993, the principles and codes of this
program were extended to Company product lines worldwide under the name
"Commitment to Care." The Commitment to Care program will be implemented over
the next three years, culminating in a fully operational
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<PAGE>
program that will include internal reporting and auditing by Grace's
Environmental, Health and Safety audit department. The Board believes that the
Commitment to Care program is superior to the CERES principles, particularly
because it is tailored to the Company's operations.
Despite its policies, programs and procedures, the Company -- like other
companies of its size and complexity, as well as companies engaged in the
chemical business for many years -- is and has been the subject of various
environmental proceedings and claims relating to its activities in the past.
However, the Board believes that the Company's adoption and implementation of
the Commitment to Care program and other environmental initiatives evidence its
resolve to operate in an environmentally responsible manner. Specifically, the
Board believes the Commitment to Care program fully and appropriately addresses
the statement of purpose of the CERES principles: "to encourage voluntary
corporate commitment to environmental programs."
Moreover, while the Board supports the spirit of the CERES principles, it is
seriously concerned that the principles are not suitable for the Company (I.E.,
in many instances, the principles focus on matters of concern to other
industries, such as the petroleum industry, or do not reflect the specialized
nature of the Company's current operations) and are subject to continuously
changing interpretations and standards (as evidenced by the revision of the
principles in 1992 and by recently negotiated individual agreements customized
to address the concerns of companies that have agreed to endorse the CERES
principles). Negotiating such changes would result in significant expenditures
of time and money without yielding results better than those achieved through
the Company's existing policies, programs and procedures and its commitment to
Responsible Care and Commitment to Care.
--------------
The Sisters of Providence (Saint Mary-of-the-Woods, Indiana 47876-1089) and
Immaculate Heart Missions, Inc. (4651 North 25th Street, Arlington, Virginia
22207), who state that they respectively own 9,000 and 5,200 shares of Common
Stock, have informed the Company that they will cause the following resolution
to be presented at the Annual Meeting:
"WHEREAS international trade has a significant impact on the environment and on
people's ability to meet basic needs;
"WHEREAS the socially-concerned proponents of this resolution have pursued
implementation of environmental standards and socially responsible
conduct in the maquiladora workplace for more than five years and
firmly believe there is a need for strict, enforceable standards of
conduct for corporations operating in Canada, Mexico and the United
States.
"WHEREAS in past years, over twenty U.S. corporations have been urged to adopt
standards of conduct relative to their maquiladora operations in
Mexico:
These standards address:
- Responsible practices for handling hazardous wastes and protecting
the environment: Corporations must be guided by the principle that they
will follow regulations setting forth high standards of environmental
protection and secure the best possible protection of the environment.
- Health and safety practices: Corporations must be guided by the
principle that they will follow regulations setting forth high
standards of occupational safety and health.
- Fair employment practices and standard of living: Corporations must
respect workers' basic rights and human dignity.
- Community impact: Corporations must recognize social responsibility
to communities in which they locate facilities and promote community
economic development and improvements in quality of life.
"WHEREAS the United Nations Declaration of Human Rights states everyone has the
right to "just and favorable conditions of work," "protection against
unemployment," "equal pay for equal
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<PAGE>
work," "just and favorable remuneration ensuring ... an existence worth
of human dignity," and "join trade unions" (Article 23) "rest and
leisure, including reasonable limitation of working hours," (Article
24) "a standard of living adequate for health and well being." (Article
25)
WHEREAS debate in the U.S., Canada and Mexico about the North American Free
Trade Agreement (NAFTA) exposed major problems with the maquiladora
industry. These include severe environmental problems resulting from
corporate irresponsibility, major workplace hazards and wages at such
low levels as to be inadequate to feed an employee's family. U.S.
officials responded by drafting side agreements on labor and the
environment. We urge official corporate policy to correct past problems
and chart a new course for the future.
"THEREFORE BE IT RESOLVED the shareholders request the Board of Directors to
institute as official corporate policy that as our company continues or expands
its business in Mexico, it will evaluate the environmental and human rights
context in which we operate. The policy should include:
"1.
Prepare a publicly available plan explaining how we will improve work
conditions, health benefits, vocational training and salaries to
economically and socially responsible levels.
"2.
Disclose policies to prevent environmental harm, repair damaged
environment where corporate practices may have caused destruction and
prevent cross border dumping of toxic wastes.
"3.
Publish plans and progress in supporting infrastructure needs and
community economic development.
"4.
Support the establishment of a council, with equal representation from
Canada, Mexico and the United States, to monitor progress in raising the
standards of labor, health and environment to meet goals for sustainable
economic development."
THE BOARD OF DIRECTORS RECOMMENDS VOTING AGAINST THIS PROPOSAL.
The Board of Directors believes that it is inappropriate and unnecessary to
prepare and publish the plans and take the other actions requested by this
proposal. Although the subject matter of the proposal is important, the Board
believes that the Company should neither fund studies that do not serve the
Company's business objectives nor devote the substantial corporate resources
necessary to lead new initiatives relating to the North American Free Trade
Agreement and the revision of Mexican labor law. Established legal forums are
available for such purposes, and the proposed initiatives are not significantly
related to the Company's business or enhancement of shareholder value. The
latter concern is particularly appropriate in this case, as the Company has only
one "maquiladora" facility, which accounted for less than 0.1% of the Company's
total assets and consolidated sales and revenues in each of 1992 and 1993.
The Board also believes that the proposal is unnecessary, inasmuch as the
Company's one Mexican production facility is operated in a manner consistent
with the concerns expressed in the proposal. Environmental, health, safety and
employment practices and community relations are integral components of the
facility's day-to-day operations. In each of these areas, the facility's
standards and procedures are similar to comparable U.S. facilities of the
Company. For example, the Company provides ongoing training to inform employees
of health and safety requirements; monitors air quality to assure that required
standards are met or exceeded; provides training in human relations techniques;
and continuously reviews and evaluates compensation and benefits programs. The
Company is also dedicated to providing a work environment free from
discrimination or harassment of any type, and the Human Resources staff
participates directly in the protection of employees' rights.
The environmental, health, safety and employment practices at the Company's
"maquiladora" facility meet or exceed the standards provided by applicable laws
and regulations. Consequently, the Board believes that the Company should not
undertake the preparation and publication of the requested plans or devote the
substantial corporate resources necessary to initiate, support and sustain a
multilateral council as requested by the proposal.
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OTHER MATTERS
OTHER BUSINESS
The Company does not know of any other business that will be presented for
consideration at the Annual Meeting. However, if any other business should come
before the Annual Meeting, the persons named in the enclosed proxy (or their
substitutes) will have discretion to act in accordance with their best judgment.
PROXY AND VOTING PROCEDURES
The enclosed proxy covers the shares held of record by a shareholder at the
close of business on March 21, 1994. In addition, if the shareholder has an
account under the Company's dividend reinvestment plan that is registered in an
identical manner to shares held of record, the proxy also covers shares in that
account.
The proxy enables a shareholder to vote on the proposals covered by this
Proxy Statement. The shares represented by each valid proxy received in a timely
manner will be voted in accordance with the choices indicated on the proxy. A
proxy may be revoked by written notice to the Company prior to the Annual
Meeting, or at the Annual Meeting before it is voted.
The Company has adopted a policy that all proxies, ballots and other voting
materials that identify the votes of specific shareholders are to be kept
permanently confidential, except as required by law. The policy provides that
access to such materials is limited to the vote tabulators and the independent
inspectors of voting, who must certify compliance with such policy.
VOTES REQUIRED
Under the laws of the State of New York (in which the Company is
incorporated), the election of directors requires the affirmative vote of a
majority of the voting power of the shares represented at the Annual Meeting;
the ratification of the selection of independent accountants and approval of the
Retainer Plan, the LTIP and the shareholder proposals require the affirmative
vote of a majority of the votes cast thereon at the Annual Meeting; and approval
of the Stock Incentive Plan requires the affirmative vote of a majority of the
voting power of all shares outstanding. In addition, under the rules of the New
York Stock Exchange, the Retainer Plan must, in effect, be approved by the
affirmative vote of a majority of the voting power of all shares outstanding.
Under New York law, abstentions and votes withheld, as well as "non-votes",
are counted in determining the number of shares represented at the Annual
Meeting, but are not voted for the election of directors, or for or against
other proposals submitted to the shareholders, and are not deemed "cast" by
shareholders. However, abstentions and "non-votes" may have the effect of
negative votes for purposes of the approval of the Stock Incentive Plan and the
Retainer Plan under Rule 16b-3 of the Securities and Exchange Commission, which
Rule accords certain beneficial treatment under Section 16 of the Securities
Exchange Act of 1934 to securities issued under such Plans.
SOLICITATION PROCEDURES
Proxies will be solicited primarily by mail; however, employees of the
Company may also solicit proxies in person or otherwise. In addition, the
Company has retained D. F. King & Co., Inc. to solicit proxies by mail,
telephone and/or otherwise and will pay such firm a fee estimated at $13,000,
plus reasonable expenses, for these services. Certain holders of record (such as
brokers, custodians and nominees) are being requested to distribute proxy
materials to beneficial owners and to obtain such beneficial owners'
instructions concerning the voting of proxies. The Company will pay all costs of
the proxy solicitation, and will reimburse brokers and other persons for the
expenses they incur in sending proxy materials to beneficial owners and
compensate them for such services in accordance with the rules of the New York
Stock Exchange.
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PROPOSALS FOR 1995 ANNUAL MEETING
Any shareholder wishing to submit a proposal for inclusion in the Proxy
Statement for the 1995 Annual Meeting pursuant to the shareholder proposal rules
of the Securities and Exchange Commission should submit the proposal in writing
to Robert B. Lamm, Secretary, W. R. Grace & Co., One Town Center Road, Boca
Raton, Florida 33486-1010. The Company must receive a proposal by December 12,
1994, in order to consider it for inclusion in the 1995 Proxy Statement.
In addition, the Company's By-laws require that shareholders give advance
notice and furnish certain information to the Company in order to bring a matter
of business before an annual meeting or to nominate a person for election as a
director. Any communications relating to those By-law provisions should be
directed to Mr. Lamm at the above address.
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EXHIBIT A
W. R. GRACE & CO.
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1994 STOCK INCENTIVE PLAN
1. PURPOSES: The purposes of this Plan are (a) to enable Key Persons to
have incentives related to Common Stock, (b) to encourage Key Persons to
increase their interest in the growth and prosperity of the Company and to
stimulate and sustain constructive and imaginative thinking by Key Persons, (c)
to further the identity of interests of Key Persons with the interests of the
Company's shareholders, and (d) to induce the service or continued service of
Key Persons and to enable the Company to compete with other organizations
offering similar or other incentives in obtaining and retaining the services of
the most highly qualified individuals.
2. DEFINITIONS: When used in this Plan, the following terms shall have the
meanings set forth in this section 2.
BOARD OF DIRECTORS: The Board of Directors of the Company.
CESSATION OF SERVICE (OR WORDS OF SIMILAR IMPORT): When a person ceases to
be an employee of, or consultant to, the Company or a Subsidiary; provided,
however, in the case of an Incentive Stock Option, "cessation of service" (or
words of similar import) shall mean when a person ceases to be an employee of
the Company or a Subsidiary.
CODE: The Internal Revenue Code of 1986, as amended.
COMMITTEE: The Compensation, Employee Benefits and Stock Committee of the
Board of Directors of the Company or any other committee designated by such
Board of Directors to administer stock incentive and stock option plans of the
Company and its subsidiaries generally or this Plan specifically.
COMMON STOCK: The common stock of the Company, par value $1.00 per share, or
such other class of shares or other securities or property as may be applicable
pursuant to the provisions of section 8.
COMPANY: W. R. Grace & Co., a New York corporation.
FAIR MARKET VALUE: (a) The mean between the high and low sales prices of a
share of Common Stock in New York Stock Exchange Composite Transactions on the
applicable date, as reported in THE WALL STREET JOURNAL or another newspaper of
general circulation, or, if no sales of shares of Common Stock were reported for
such date, for the next preceding date for which such sales were so reported, or
(b) the fair market value of a share of Common Stock determined in accordance
with any other reasonable method approved by the Committee.
INCENTIVE STOCK OPTION: A stock option that states that it is an incentive
stock option and that is intended to meet the requirements of Section 422A of
the Code and the regulations thereunder applicable to incentive stock options,
as in effect from time to time.
ISSUANCE (OR WORDS OF SIMILAR IMPORT): The issuance of authorized but
unissued Common Stock or the transfer of issued Common Stock held by the Company
or a Subsidiary.
KEY EMPLOYEE: An employee of the Company or a Subsidiary who is a Key
Person.
KEY PERSON: An employee of, or consultant to, the Company or a Subsidiary
who, in the opinion of the Committee, has contributed or can contribute
significantly to the growth and successful operations of the Company or one or
more Subsidiaries. The grant of a Stock Incentive to an employee or consultant
shall be deemed a determination by the Committee that such person is a Key
Person.
NON-STATUTORY STOCK OPTION: An Option that is not an Incentive Stock Option
or another form of statutory stock option (within the meanings of sections 422,
423 and 424 of the Code and the regulations thereunder, as in effect from time
to time).
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OPTION: An option granted under this Plan to purchase shares of Common
Stock.
PLAN: The 1994 Stock Incentive Plan of the Company herein set forth, as the
same may from time to time be amended.
RULE 16B-3: Rule 16b-3 of the Securities and Exchange Commission (or any
successor provision in effect at the applicable time).
SERVICE: Service to the Company or a Subsidiary as an employee or
consultant. "To serve" has a correlative meaning.
STOCK AWARD: An issuance of shares of Common Stock or an undertaking (other
than an Option) to issue such shares in the future.
STOCK INCENTIVE: A stock incentive granted under this Plan in one of the
forms provided for in section 3.
SUBSIDIARY: A corporation (or other form of business association) of which
shares (or other ownership interests) having 50% or more of the voting power
regularly entitled to vote for directors (or equivalent management rights) are
owned, directly or indirectly, by the Company; provided, however, that in the
case of an Incentive Stock Option, the term "Subsidiary" shall mean a Subsidiary
(as defined by the preceding clause) that is also a "subsidiary corporation" as
defined in section 425(f) of the Code and the regulations thereunder, as in
effect from time to time.
3. GRANTS OF STOCK INCENTIVES:
(a) Subject to the provisions of this Plan, the Committee may at any time
and from time to time grant Stock Incentives under this Plan to, and
only to, Key Persons; provided, however, that Incentive Stock Options may be
granted to, and only to, Key Employees.
(b) The Committee may grant a Stock Incentive to be effective at a
specified future date or upon the future occurrence of a specified
event. For the purposes of this Plan, any such Stock Incentive shall be
deemed granted on the date it becomes effective. An agreement or other
commitment to grant a Stock Incentive that is to be effective in the future
shall not be deemed the grant of a Stock Incentive until the date on which
such Stock Incentive becomes effective.
(c) Stock Incentives may be granted in the form of:
(i)
a Stock Award, or
(ii)
an Option, or
(iii)
a combination of a Stock Award and an Option.
4. STOCK SUBJECT TO THIS PLAN:
(a) Subject to the provisions of paragraph (c) of this section 4 and the
provisions of section 8, the maximum number of shares of Common Stock
that may be issued pursuant to Stock Incentives granted under this Plan
shall not exceed 3,000,000 shares of Common Stock.
(b) Authorized but unissued shares of Common Stock and issued shares of
Common Stock held by the Company or a Subsidiary, whether acquired
specifically for use under this Plan or otherwise, may be used for purposes
of this Plan.
(c) If any shares of Common Stock subject to a Stock Incentive shall not
be issued and shall cease to be issuable because of the termination,
in whole or in part, of such Stock Incentive or for any other reason, or if
any such shares shall, after issuance, be reacquired by the Company or a
Subsidiary for any reason, such shares shall no longer be charged against
the limitation provided for in paragraph (a) of this section 4 and may again
be made subject to Stock Incentives.
(d) Of the total number of shares specified in paragraph (a) of this
section 4 (subject to adjustment as specified therein), during the
term of this Plan as defined in section 9, (i) no more than 10% may be
subject to Options granted to any one Key Person, (ii) no more than 15% may
be subject to
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Stock Incentives granted to any one Key Person, and (iii) no more than 3% in
the aggregate may be subject to Stock Incentives granted to all Key Persons
who are consultants to the Company and/or one or more Subsidiaries at the
date the relevant Stock Incentive is granted.
5. STOCK AWARDS: Except as otherwise provided in section 12, Stock
Incentives in the form of Stock Awards shall be subject to the following
provisions:
(a) For purposes of this Plan, all shares of Common Stock subject to a
Stock Award shall be valued at not less than 100% of the Fair Market
Value of such shares on the date such Stock Award is granted, regardless of
whether or when such shares are issued pursuant to such Stock Award and
whether or not such shares are subject to restrictions affecting their
value.
(b) Shares of Common Stock subject to a Stock Award may be issued to a
Key Person at the time the Stock Award is granted, or at any time
subsequent thereto, or in installments from time to time. In the event that
any such issuance shall not be made at the time the Stock Award is granted,
the Stock Award may provide for the payment to such Key Person, either in
cash or shares of Common Stock, of amounts not exceeding the dividends that
would have been payable to such Key Person in respect of the number of
shares of Common Stock subject to such Stock Award (as adjusted under
section 8) if such shares had been issued to such Key Person at the time
such Stock Award was granted. Any Stock Award may provide that the value of
any shares of Common Stock subject to such Stock Award may be paid in cash,
on each date on which shares would otherwise have been issued, in an amount
equal to the Fair Market Value on such date of the shares that would
otherwise have been issued.
(c) The material terms of each Stock Award shall be determined by the
Committee. Each Stock Award may be evidenced by a written instrument
consistent with this Plan. It is intended that a Stock Award would be (i)
made contingent upon the attainment of one or more specified performance
objectives and/or (ii) subject to restrictions on the sale or other
disposition, for a period of three or more years, of the Stock Award or the
shares subject thereto; provided that (x) a Stock Award may include
restrictions and limitations in addition to those provided for herein and
(y) of the total number of shares specified in paragraph (a) of section 4
(subject to adjustment as specified therein), up to 3% may be subject to
Stock Awards not subject to clause (i) or clause (ii) of this sentence.
(d) A Stock Award shall be granted for such lawful consideration as may
be provided for therein.
6. OPTIONS: Except as otherwise provided in section 12, Stock Incentives
in the form of Options shall be subject to the following provisions:
(a) Subject to the provisions of paragraph (f) of this section 6, the
purchase price per share of Common Stock shall be not less than 100%
of the Fair Market Value of a share of Common Stock on the date the Option
is granted. The Option may provide for the purchase price to be paid (i) in
cash, or (ii) in shares of Common Stock (including shares issued pursuant to
a Stock Award granted subject to restrictions as provided for in paragraph
(c) of section 5), or (iii) in a combination of cash and such shares. Any
shares of Common Stock delivered to the Company in payment of the purchase
price shall be valued at their Fair Market Value on the date of exercise. No
certificate for shares of Common Stock shall be issued upon the exercise of
an Option until the purchase price for such shares has been paid in full.
(b) If so provided in the Option, the Company shall, upon the request of
the holder of the Option and at any time and from time to time,
cancel all or a portion of the Option then subject to exercise and either
(i) pay the holder an amount of money equal to the excess, if any, of the
Fair Market Value, at such time or times, of the shares subject to the
portion of the Option so canceled over the purchase price for such shares,
or (ii) issue shares of Common Stock to the holder with a Fair Market Value,
at such time or times, equal to such excess, or (iii) pay such excess by a
combination of money and shares.
(c) Each Option may be exercisable in full at the time of grant, or may
become exercisable in one or more installments and at such time or
times or upon the occurrence of such events, as may be specified in the
Option, as determined by the Committee. Unless otherwise provided in the
written
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instrument provided in paragraph (g) of this section 6, an Option, to the
extent it is or becomes exercisable, may be exercised at any time in whole
or in part until the expiration or termination of such Option.
(d) Each Option shall be exercisable during the life of the holder only
by him and, after his death, only by his estate or by a person who
acquires the right to exercise the Option by will or the laws of descent and
distribution. An Option, to the extent that it shall not have been exercised
or canceled, shall terminate as follows after the holder ceases to serve:
(i) if the holder shall voluntarily cease to serve without the consent for
the Committee or shall have his service terminated for cause, the Option
shall terminate immediately upon cessation of service; (ii) if the holder
shall cease to serve by reason of death, incapacity or retirement under a
retirement plan of the Company or a Subsidiary, the Option shall terminate
three years after the date on which he ceased to serve; and (iii) except as
provided in the next sentence, in all other cases the option shall terminate
three months after the date on which the holder ceased to serve unless the
Committee shall approve a longer period (which approval may be given before
or after cessation of service) not to exceed three years. If the holder
shall die or become incapacitated during the three-month period (or such
longer period as the Committee may approve) referred to in the preceding
clause (iii), the Option shall terminate three years after the date on which
he ceased to serve. A leave of absence for military or governmental service
or other purposes shall not, if approved by the Committee (which approval
may be given before or after the leave of absence commences), be deemed a
cessation of service within the meaning of this paragraph (d).
Notwithstanding the foregoing provisions of this paragraph (d) or any other
provision of this Plan, no Option shall be exercisable after expiration of a
period of ten years and one month from the date the Option is granted. Where
a Non-Statutory Stock Option is granted for a term of less than ten years
and one month, the Committee may, at any time prior to the expiration of the
Option, extend its term for a period ending not later than ten years and one
month from the date the Option was granted. Such an extension shall not be
deemed the grant of a new Option under this Plan.
(e) No Option nor any right thereunder may be assigned or transferred
except by will or the laws of descent and distribution, unless
otherwise provided in the Option.
(f) An Option may, but need not, be an Incentive Stock Option. All shares
of Common Stock that may be made subject to Stock Incentives under
this Plan may be made a subject to Incentive Stock Options; provided that
(i) no Incentive Stock Option may be granted more than ten years after the
effective date of this Plan, as provided in section 9, (ii) the purchase
price per share of Common Stock subject to an Incentive Stock Option shall
be not less than 100% of the Fair Market Value of a share of Common Stock on
the date such Incentive Stock Option is granted, and (iii) the aggregate
Fair Market Value (determined as of the time an Incentive Stock Option is
granted) of the shares subject to each installment becoming exercisable for
the first time in any calendar year under Incentive Stock Options granted,
on or after January 1, 1987 (under all plans, including this Plan, of his
employer corporation and its parent and subsidiary corporations), to the Key
Employee to whom such Incentive Stock Option is granted, shall not exceed
$100,000.
(g) The material terms of each Option shall be determined by the
Committee. Each Option shall be evidenced by a written instrument
consistent with this Plan. An Option may include restrictions and
limitations in addition to those provided for in this Plan.
(h) Options shall be granted for such lawful consideration as may be
provided for in the Option.
7. COMBINATION OF STOCK AWARDS AND OPTIONS: Stock Incentives authorized by
paragraph (c)(iii) of section 3 in the form of combinations of Stock Awards and
Options shall be subject to the following provisions:
(a) A Stock Incentive may be a combination of any form of Stock Award and
any form of Option, provided, however, that the terms and conditions
of such Stock Incentive pertaining to a Stock Award are consistent with
section 5 and the terms and conditions of such Stock Incentive pertaining to
an Option are consistent with section 6.
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(b) Such combination Stock Incentive shall be subject to such other terms
and conditions as may be specified therein including, without
limitation, a provision terminating in whole or in part a portion thereof
upon the exercise in whole or in part of another portion thereof.
(c) The material terms of each combination Stock Incentive shall be
determined by the Committee. Each combination Stock Incentive shall
be evidenced by a written instrument consistent with this Plan.
8. ADJUSTMENT PROVISIONS:
(a) In the event that any reclassification, split-up or consolidation of
the Common Stock shall be effected, or the outstanding shares of
Common Stock are, in connection with a merger or consolidation of the
Company or a sale by the Company of all or a part of its assets, exchanged
for a different number or class of shares of stock or other securities or
property of the Company or for shares of the stock or other securities or
property of any other corporation or person, or a record date for
determination of holders of Common Stock entitled to receive a dividend
payable in Common Stock shall occur, (i) the number and class of shares or
other securities or property that may be issued pursuant to Stock Incentives
thereafter granted, (ii) the number and class of shares or other securities
or property that have not been issued under outstanding Stock Incentives,
(iii) the purchase price to be paid per share or other unit under
outstanding Stock Incentives, and (iv) the price to be paid per share or
other unit by the Company or a Subsidiary for shares or other securities or
property issued pursuant to Stock Incentives that are subject to a right of
the Company or a Subsidiary to re-acquire such shares or other securities or
property, shall in each case be equitably adjusted as determined by the
Committee.
(b) In the event that any spin-off or other distribution of assets of the
Company to its shareholders shall occur, (i) the number and class of
shares or other securities or property that may be issued pursuant to Stock
Incentives thereafter granted, (ii) the number and class of shares or other
securities or property that have not been issued under outstanding Stock
Incentives, (iii) the purchase price to be paid per share or other unit
under outstanding Stock Incentives, and (iv) the price to be paid per share
or other unit by the Company or a Subsidiary for shares or other securities
or property issued pursuant to Stock Incentives that are subject to a right
of the Company or a Subsidiary to re-acquire such shares or other securities
or property, may in each case be equitably adjusted as may be determined by
the Committee.
(c) In the event of a merger or consolidation of the Company in which the
Common Stock is converted into the right to receive a specified
amount of cash per share (the "merger price"), then each Option outstanding
immediately prior to the effective time of such merger or consolidation (the
"effective time") shall be treated as follows: (i) each such Option having a
per share purchase price equal to or greater than the merger price shall
terminate at the effective time and be of no further force and effect,
without the making of any payment to the holder of such Option; and (ii)
each such Option having a per share purchase price less than the merger
price shall terminate at the effective time and be of no further force and
effect, and the holder of such Option shall be paid in case, as promptly as
practicable following the effective time, an amount equal to the product of
(A) the excess of the merger price over the per share purchase price of such
Option times (B) the number of shares covered by such Option immediately
prior to the effective time.
9. TERM: This Plan shall be deemed adopted and shall become effective on
the date it is approved by the shareholders of the Company. No Stock Incentives
shall be granted under this Plan after April 30, 2004.
10. ADMINISTRATION:
(a) This Plan shall be administered by the Committee. No director shall
be designated as or continue to be a member of the Committee unless
he shall at the time of designation and at all times during service as a
member of the Committee be a "disinterested person" within the meaning of
Rule 16b-3. The Committee shall have full authority to act in the matter of
selection of Key Persons and in granting Stock Incentives to them and such
other authority as is granted to the Committee by this Plan.
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(b) The Committee may establish such rules and regulations, not
inconsistent with the provisions of this Plan, as it deems necessary
to determine eligibility to be granted Stock Incentives under this Plan and
for the proper administration of this Plan, and may amend or revoke any rule
or regulation so established. The Committee may make such determinations and
interpretations under or in connection with this Plan as it deems necessary
or advisable. All such rules, regulations, determinations and
interpretations shall be binding and conclusive upon the Company, the
Subsidiaries, its shareholders and its directors, officers, consultants and
employees, and upon their respective legal representatives, beneficiaries,
successors and assigns, and upon all other persons claiming under or through
any of them.
(c) Members of the Board of Directors and members of the Committee acting
under this Plan shall be fully protected in relying in good faith
upon the advice of counsel and shall incur no liability in the performance
of their duties except as otherwise provided by applicable law.
11. GENERAL PROVISIONS:
(a) Nothing in this Plan or in any instrument executed pursuant hereto
shall confer upon any person any right to continue in the service of
the Company or a Subsidiary, or shall affect the right of the Company or of
a Subsidiary to terminate the service of any person with or without cause.
(b) No shares of Common Stock shall be issued pursuant to a Stock
Incentive unless and until all legal requirements applicable to the
issuance of such shares have, in the opinion of counsel to the Company, been
complied with. In connection with any such issuance the person acquiring the
shares shall, if requested by the Company, give assurances, satisfactory to
counsel to the Company, in respect of such matters as the Company or a
Subsidiary may deem desirable to assure compliance with all applicable legal
requirements.
(c) No person (individually or as a member of a group), and no
beneficiary or other person claiming under or through him, shall have
any right, title or interest in or to any shares of Common Stock allocated
or reserved for the purposes of this Plan or subject to any Stock Incentive
except as to such shares of Common Stock, if any, as shall have been issued
to him.
(d) In the case of a grant of a Stock Incentive to a Key Person of a
Subsidiary, such grant may provide for the issuance of the shares
covered by the Stock Incentive to the Subsidiary, for such consideration as
may be provided, upon the condition or understanding that the Subsidiary
will transfer the shares to the Key Person in accordance with the terms of
the Stock Incentive.
(e) In the event the laws of a country in which the Company or a
Subsidiary has employees prescribe certain requirements for stock
incentives to qualify for advantageous tax treatment under the laws of that
country (including, without limitations, laws establishing options analogous
to Incentive Stock Options), the Committee may, for the benefit of such
employees, amend, in whole or in part, this Plan and may include in such
amendment additional provisions for the purposes of qualifying the amended
plan and Stock Incentives granted thereunder under such laws; provided,
however, that (i) the terms and conditions of a Stock Incentive granted
under such amended plan may not be more favorable to the recipient than
would be permitted if such Stock Incentive had been granted under this Plan
as herein set forth, (ii) all shares allocated to or utilized for the
purposes of such amended plan shall be subject to the limitations of section
4, and (iii) the provisions of the amended plan may restrict but may not
extend or amplify the provisions of sections 9 and 13.
(f) The Company or a Subsidiary may make such provisions as it may deem
appropriate for the withholding of any taxes that the Company or a
Subsidiary determines it is required to withhold in connection with any
Stock Incentive.
(g) Nothing in this Plan is intended to be a substitute for, or shall
preclude or limit the establishment of continuation of, any other
plan, practice or arrangement for the payment of compensation or benefits to
directors, officers, employees or consultants generally, or to any class or
group of such persons, that the Company or any Subsidiary now has or may
hereafter put into effect, including, without limitation, any incentive
compensation, retirement, pension, group insurance, stock purchase, stock
bonus or stock option plan.
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12. ACQUISITIONS: If the Company or any Subsidiary should merge or
consolidate with, or purchase stock or assets or otherwise acquire the whole or
part of the business of, another entity, the Company, upon the approval of the
Committee, (a) may assume, in whole or in part and with or without modifications
or conditions, any stock incentives granted by the acquired entity to its
directors, officers, employees or consultants in their capacities as such, or
(b) may grant new Stock Incentives in substitution therefor. Such assumed or
substitute stock incentives may contain terms and conditions inconsistent with
the provisions of this Plan (including the limitations set forth in paragraph
(d) of section 4), including additional benefits for the recipient, provided
that, if such assumed or substitute stock incentives are Incentive Stock
Options, such terms and conditions are permitted under the plan of the acquired
entity. For the purposes of any applicable plan provision involving time or a
date, a substitute stock incentive shall be deemed granted as of the date of the
grant of the original stock incentive by the acquired entity.
13. AMENDMENTS AND TERMINATION:
(a) This Plan may be amended or terminated by the Board of Directors upon
the recommendation of the Committee; provided that, without the
approval of the shareholders of the Company, no amendment shall be made
which (i) causes this Plan to cease to comply with Rule 16b-3 or applicable
law, (ii) permits any person who is not a Key Person to be granted a Stock
Incentive (except as otherwise provided in section 12), (iii) amends the
provisions of paragraph (d) of section 4, paragraph (a) of section 5 or
paragraph (a) or paragraph (f) of section 6 to permit shares to be valued
at, or to have a purchase price of, respectively, less than the percentage
of Fair Market Value specified therein, (iv) amends section 9 to extend the
date set forth therein, or (v) amends this section 13.
(b) No amendment or termination of this Plan shall adversely affect any
Stock Incentive theretofore granted, and no amendment of any Stock
Incentive granted pursuant to this Plan shall adversely affect such Stock
Incentive, without the consent of the holder thereof.
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EXHIBIT B
W. R. GRACE & CO.
------------------
1994 STOCK RETAINER PLAN FOR NONEMPLOYEE DIRECTORS
1. PURPOSES: The purposes of this Plan are (a) to further the identity of
interests of nonemployee directors of the Company with the interests of the
Company's shareholders, (b) to stimulate and sustain constructive and
imaginative thinking by such nonemployee directors, and (c) to induce the
service or continued service of the most highly qualified individuals to serve
as nonemployee directors of the company.
2. DEFINITIONS: When used in this Plan, the following terms shall have the
meanings set forth in this section 2.
Board of Directors: The Board of Directors of the Company.
Code: The Internal Revenue Code of 1986, as amended.
Common Stock: The common stock of the Company, par value $1.00 per share, or
such other class of shares or other securities or property as may be applicable
pursuant to the provisions of Section 6.
Company: W. R. Grace & Co., a New York corporation.
Fair Market Value: (a) The mean between the high and low sales prices of a
share of Common Stock in New York Stock Exchange Composite Transactions for the
applicable date, as reported in THE WALL STREET JOURNAL or another newspaper of
general circulation, or, if no sales of shares of Common Stock were reported for
such date, for the next preceding date for which such sales were so reported, or
(b) the fair market value of a share of Common Stock determined in accordance
with any other reasonable method.
issuance (or words of similar import): The issuance of authorized but
unissued Common Stock or the transfer of issued Common Stock held by the Company
or a Subsidiary.
nonemployee director: An individual, not employed by the Company or a
Subsidiary, who is serving as a director of the Company.
Plan: The 1994 Stock Retainer Plan for Nonemployee Directors herein set
forth, as the same may from time to time be amended.
Rule 16b-3: Rule 16b-3 of the Securities and Exchange Commission (or any
successor provision in effect at the applicable time).
service: Service to the Company as a nonemployee director. "To serve" has a
correlative meaning.
Stock Retainer: An issuance of shares of Common Stock in payment of an
annual retainer for service as a nonemployee director.
Subsidiary: A corporation (or other form of business association) of which
shares (or other ownership interests) having 50% or more of the voting power
regularly entitled to vote for directors (or equivalent management rights) are
owned, directly or indirectly, by the Company.
3. ELIGIBILITY AND PARTICIPATION: All nonemployee directors are eligible
to participate in the Plan and each such director will participate as described
in section 5.
4. STOCK SUBJECT TO THIS PLAN:
(a) Subject to the provisions of paragraph (c) of this section 4 and the
provisions of section 6, the maximum number of shares of Common Stock
that may be issued pursuant to Stock Retainers under this Plan shall not
exceed 66,000 shares of Common Stock.
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(b) Authorized but unissued shares of Common Stock and issued shares of
Common Stock held by the Company or a Subsidiary, whether acquired
specifically for use under this Plan or otherwise, may be used for purposes
of this Plan.
(c) If any shares of Common Stock issued pursuant to a Stock Retainer
shall, after issuance, be reacquired by the Company for any reason,
such shares shall no longer be charged against the limitation provided for
in paragraph (a) of this section 4 and may again be issued pursuant to Stock
Retainers.
5. STOCK RETAINERS: Stock Retainers shall be subject to the following
provisions:
(a) For the purposes of this Plan, all shares of Common Stock issued
pursuant a Stock Retainer shall be valued at not less than 100% of
the Fair Market Value of such shares on the effective date as of which such
Stock Retainer is paid, regardless of when such shares are actually issued
to the nonemployee director and whether or not such shares are subject to
restrictions that affect their value.
(b) Except as provided in paragraph (c) of this section 5, effective as
of July 1, 1994, and on each following July 1 through July 1, 1999,
each person serving as a nonemployee director on such July 1 will, for
service as such, be paid a Stock Retainer consisting of a whole number of
shares of Common Stock equal to the quotient obtained by dividing (i)
$24,000 (the "Retainer Amount") by (ii) the Fair Market Value of a share of
Common Stock on such July 1. To the extent that such calculation does not
result in a whole number of shares, the fractional share shall be rounded
upwards to the next whole number so that no fractional shares shall be
issued.
(c) (i) In the event that a Stock Retainer is to be paid, effective July
1 of any calendar year, to a person who shall have commenced service
as a nonemployee director subsequent to January 1 of such calendar year, the
Retainer Amount shall be proportionately reduced to reflect the percentage
of such calendar year prior to such commencement of service.
(ii)In the event that a Stock Retainer is to be paid, effective July
1 of any calendar year, to a person who shall have commenced
service as a nonemployee director subsequent to July 1 of the prior
calendar year, the Retainer Amount shall be proportionately increased to
reflect the percentage of the prior calendar year during which such
nonemployee director served as such.
(d) The shares referred to in paragraph (b) of this section 5 shall be
delivered to each nonemployee director as soon as practicable
following each July 1 during the term of this plan. After the delivery of
the shares, each nonemployee director shall have all the rights of a
shareholder with respect to such shares (including the right to vote such
shares and the right to receive all dividends paid with respect to such
shares).
(e) No shares will be issued in a calendar year to a nonemployee director
who, prior to July 1 of such calendar year, is removed for cause, as
specified in the Company's Certificate of Incorporation, as the same may be
amended, or who voluntarily terminates service prior to retirement under the
Company's Retirement Plan for Outside Directors, as the same may be amended.
6. ADJUSTMENT PROVISIONS:
(a) In the event that any reclassification, split-up or consolidation of
the Common Stock shall be effected, or the outstanding share of
Common Stock are, in connection with a merger or consolidation of the
Company or a sale by the Company of all or a part of its assets, exchanged
for a different number or class of shares of stock or other securities or
property of the Company or for shares of the stock or other securities or
property of any other corporation or person, or a record date for
determination of holders of Common Stock entitled to receive a dividend
payable in Common Stock shall occur, (i) the number and class of shares that
may be issued pursuant to Stock Retainers thereafter paid, and (ii) the
number and class of shares that have not been issued under effective Stock
Retainers, shall in each case be equitably adjusted.
(b) In the event that any spin-off or other distribution of assets of the
Company to its shareholders shall occur, the number and class of
shares that may be issued pursuant to Stock Retainers thereafter paid shall
be equitably adjusted as determined by the Board of Directors.
B-2
<PAGE>
7. TERM: This Plan shall be deemed adopted and shall become effective on
the date it is approved by the shareholders of the Company. No Stock Retainers
shall be paid under this Plan with respect to any period beginning after July 1,
1999.
8. GENERAL PROVISIONS:
(a) Nothing in this Plan or in any instrument executed pursuant hereto
shall confer upon any person any right to continue to serve as a
nonemployee director of the Company.
(b) No shares of Common Stock shall be issued pursuant to a Stock
Retainer unless and until all legal requirements applicable to the
issuance of such shares have, in the opinion of counsel to the Company, been
complied with. In connection with any such issuance, the person acquiring
the shares shall, if requested by the Company, give assurances, satisfactory
to counsel to the Company, in respect of such matters as the Company or a
Subsidiary may deem desirable to assure compliance with all applicable legal
requirements.
(c) No person (individually or as a member of a group), and no
beneficiary or other person claiming under or through him, shall have
any right, title or interest in or to any shares of Common Stock allocated
or reserved for the purposes of this Plan or subject to any Stock Retainer
except as to such shares of Common Stock, if any, as shall have been issued
to him.
(d) Nothing in this Plan is intended to be a substitute for, or shall
preclude or limit the establishment or continuation of, any other
plan, practice or arrangement for the payment of compensation or benefits to
nonemployee directors that the Company now has or may hereafter put into
effect.
9. AMENDMENTS AND TERMINATION:
(a) This Plan may be terminated, suspended or amended at any time by the
Board of Directors upon the recommendation of its Compensation,
Employee Benefits and Stock Incentive Committee; provided, however, that (i)
no amendment shall become effective without the approval of the shareholders
of the Company to the extent shareholder approval is required in order to
comply with Rule 16b-3, and (ii) neither the Retainer Amount, nor any other
provision of this Plan affecting the number of shares of Common Stock
receivable pursuant to a Stock Retainer or the frequency with which Stock
Retainers are paid, shall be amended or otherwise modified more than once
every six months, except as may be necessary or appropriate to comport with
the Code or the Employee Retirement Income Security Act, as either of the
same may be amended, or the rules and regulations promulgated thereunder.
(b) No termination, suspension or amendment of this Plan shall adversely
affect any Stock Retainer theretofore paid.
B-3
<PAGE>
W. R. Grace & Co.
One Town Center Road
Boca Raton, Florida 33486-1010
<PAGE>
GRACE PROXY
For the Annual Meeting of Shareholders of W. R. Grace & Co., to be held at 10:30
a.m. on May 10, 1994, at the Boca Raton Marriott-Crocker Center, 5150 Town
Center Circle, Boca Raton, Florida.
The undersigned hereby appoints R. B. Lamm, P. B. Martin and B. J. Smith as
agents to act and vote on behalf of the undersigned at the Annual Meeting of
Shareholders of W. R. Grace & Co., to be held on May 10, 1994, and any
adjournments. As more fully described in the Proxy Statement for the Meeting,
such agents (or their substitutes) are directed to vote as indicated on the
reverse side and are authorized to vote in their discretion upon any other
business that properly comes before the meeting.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
Please mark, date and sign your proxy on the reverse side.
In addition, please let us know below whether you can attend the Annual Meeting
and if you have any comments or questions.
ANNUAL MEETING OF SHAREHOLDERS
/ / Yes, I plan to attend the Annual Meeting.
/ / No, I cannot attend.
COMMENTS________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
<PAGE>
PLEASE MARK YOUR CHOICE LIKE THIS /X/ IN BLUE OR BLACK INK.
_____________ _____________ _____________ _____________
Common 6% Preferred A Preferred B Preferred
_______________________________________________________________________________
THE DIRECTORS RECOMMEND A VOTE FOR PROPOSALS 1, 2, 3, 4 AND 5.
1. Election of Directors
For all nominees listed Withhold authority
below (except as to vote for all
marked to the FOR nominees listed WITHHOLD
contrary below) / / below / /
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, STRIKE A LINE
THROUGH THE NOMINEE'S NAME BELOW.)
CLASS II (THREE-YEAR TERM) C. H. Erhart, Jr., V. A. Kamsky, J. E. Phipps,
E. W. Pyne, D. W. Robbins, Jr., W. Wood Prince,
D. L. Yunich
_______________________________________________________________________________
IF NO CHOICE IS SPECIFIED, THE SHARES WILL BE VOTED FOR PROPOSALS 1, 2, 3, 4 AND
5 AND AGAINST PROPOSALS 6 AND 7. PLEASE DATE AND SIGN AND RETURN PROMPTLY.
_______________________________________________________________________________
FOR AGAINST ABSTAIN
2. Ratification of selection of Price Waterhouse / / / / / /
as independent accountants.
3. Approval of 1994 Stock Incentive Plan. / / / / / /
4. Approval of 1994 Stock Retainer Plan / / / / / /
for Nonemployee Directors.
5. Approval of Long-Term Incentive Program. / / / / / /
________________________________________________________________
THE DIRECTORS RECOMMEND A VOTE AGAINST PROPOSALS 6 AND 7.
FOR AGAINST ABSTAIN
6. Shareholder Proposal
(CERES Principles) / / / / / /
7. Shareholder Proposal
(Mexican operation) / / / / / /
Date:___________ Signature:______________________ Signature:___________________
Please sign EXACTLY as name or names appear above. When signing on behalf of a
corporation, estate, trust or another shareholder, please give its full name and
state your full title or capacity or otherwise indicate that you are authorized
to sign.
(SEE REVERSE SIDE FOR COMMENTS.)
