<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant[X]
Filed by a Party other than the Registrant[ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
American Cyanamid Company
(Name of Registrant as Specified In Its Charter)
American Cyanamid Company
(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(j)(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 (1):
__________________________________________
4) Proposed maximum aggregate value of transaction:
__________________________________________
______
(1) Set forth the amount on which the filing fee is
calculated and state how it was determined.
[x] 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:
$125.00
________________________
2) Form, Schedule or Regis-
tration Statement No.:
Pre 14A
_________________________
3) Filing Party:
American Cyanamid Company
_________________________
4) Date Filed:
2/18/94
_________________________
<PAGE>
AMERICAN CYANAMID COMPANY
ONE CYANAMID PLAZA
WAYNE, NEW JERSEY 07470
Notice of Annual Meeting
of Shareholders to be held
April 18, 1994
March 8, 1994
To the Holders of Common Stock
The Annual Meeting of Shareholders of American Cyanamid Company will be
held in the Lighthouse B Room of the Sheraton Tara Hotel, 363 Maine Mall Road,
South Portland, Maine, on Monday, April 18, 1994 at 11:00 a.m., for the
following purposes:
(1) to elect three directors for terms ending in 1997;
(2) to approve an amendment to the Restated Articles of Incorporation;
(3) to approve an amendment to the Incentive Compensation Plan; and
(4) to act upon one shareholder proposal;
and to transact such other business as may properly come before the meeting or
any adjournment thereof. The descriptions of the above numbered items in the
attached proxy statement are made a part of this notice.
Only holders of Common Stock of record at the close of business on February
18, 1994, are entitled to notice of and to vote at the meeting or any
adjournment thereof.
Since no action can be taken at the meeting unless a majority of the
outstanding shares of Common Stock is represented, it is important, regardless
of the number of shares which you hold, that you be personally present or
represented by proxy at the meeting. Accordingly, if you cannot attend the
meeting, it is requested that you promptly sign and date the enclosed proxy and
mail it in the enclosed envelope, which requires no postage if mailed in the
United States.
By Order of the Board of Directors,
A. C. Brennan
Secretary
<PAGE>
AMERICAN CYANAMID COMPANY
ONE CYANAMID PLAZA
WAYNE, NEW JERSEY 07470
Proxy Statement for
Annual Meeting of Shareholders
to be held April 18, 1994
March 8, 1994
The enclosed proxy is solicited by the Board of Directors of American
Cyanamid Company and is revocable at any time before it is exercised. Revocation
may be by written notice, by furnishing a proxy subsequent in time or by
revocation made in person at the meeting. The shares represented by all properly
executed proxies received by the Company in time to be voted will be voted as
specified on the proxies, and in the absence of specific direction will be voted
for the election of directors, for the amendment to the Restated Articles of
Incorporation, for the amendment to the Incentive Compensation Plan and against
the shareholder proposal. For shareholders of record who participate in the
automatic dividend reinvestment plan or the Cyanamid Employees Savings Plan,
those shares held for the participant's account under these plans will
automatically be voted in accordance with the proxy returned by the participant
to the Company in respect of the shares of the Company which the participant
holds of record.
The cost of soliciting proxies will be borne by the Company, including
reimbursement of banks, brokerage firms, custodians, nominees and fiduciaries
for their expenses in sending proxy material to the beneficial owners of Common
Stock. The Company has retained Georgeson & Co. Inc., Wall Street Plaza, New
York, N.Y. 10005, to assist in the solicitation of proxies for a fee estimated
at $12,000, plus reimbursement of out-of-pocket expenses. In addition to the use
of the mails, proxies may be solicited by employees of the Company and Georgeson
& Co. Inc. personally, by telephone or by telefax.
Only holders of Common Stock of record at the close of business on February
18, 1994, are entitled to notice of and to vote at the meeting or any
adjournment thereof. On such date, there were outstanding 89,800,417 shares of
Common Stock, each share of which is entitled to one vote.
As of December 31, 1993, certain operating subsidiaries of The Capital
Group, Inc., located at 333 South Hope Street, Los Angeles, California 90071,
exercised investment discretion over various institutional accounts which held
5,971,150 shares of the issuer (6.64% of the outstanding class).
<PAGE>
Capital Guardian Trust Company, a bank, and one of such operating subsidiaries,
exercised investment discretion over 1,850 of said shares. Capital Research and
Management Company, a registered investment adviser, and Capital International
Limited, both operating subsidiaries, had investment discretion with respect to
5,926,300 and 43,000 shares, respectively, of the above shares.
In determining the number of votes required to approve a proposal at the
meeting, generally a shareholder's abstention constitutes neither an affirmative
nor a negative vote, but does count as a share present at the meeting. If no
specific direction is given, but the proxy is otherwise properly executed and
dated, it will be voted FOR the Election of Directors, FOR the Amendment to the
Restated Articles of Incorporation, FOR the Amendment to the Incentive
Compensation Plan and AGAINST the Shareholder Proposal.
ELECTION OF DIRECTORS
At the meeting, the Company will recommend to the shareholders the election
of three directors, A. R. Dragone, A. J. Levine and A. Wexler, for three-year
terms ending in 1997. All those nominees are currently directors of the Company.
The affirmative vote of the holders of a plurality of the shares of Common Stock
present at the meeting in person or by proxy will be required to elect a
director.
If at the time of the meeting any of such nominees is not available to
serve as a director -- an event which the Board does not anticipate -- the
proxies will be voted for the other of such nominees who are available and,
unless the Board has taken prior action to reduce its membership, for a
substitute nominee designated by the Board or its Nominating Committee. After
the election of three directors at the meeting, the Company will have eleven
directors, including eight directors whose terms currently extend beyond the
date of the meeting.
The following information is submitted concerning the nominees and other
directors of the Company whose terms of office will continue after the meeting:
Frank V. AtLee, age 53, is President of the Company and a member of the
Executive Committee. He was elected President in 1993. Mr. AtLee became a
director in 1990.
Albert J. Costello, age 58, is Chairman of the Board and Chief Executive
Officer of the Company, and is Chairman of the Executive Committee. He was
elected Chairman of the Board and Chief Executive Officer in 1993. Mr. Costello
served as President of the Company from 1990 through 1993. He became a director
in 1990. He is also a director of Cytec Industries Inc.
David M. Culver, age 69, is Chairman, CAI Capital Corporation in Montreal,
Quebec, Canada. He was a director and the Chairman and Chief Executive Officer
of Alcan Aluminium Limited until his retirement in June 1989. Mr. Culver became
a director of the Company in 1980, and is a member of the
2
<PAGE>
Compensation Committee and Chairman of the Audit Committee. He is also a
director of American Express Company, Shearson Lehman Brothers Holdings, Inc.,
and The Seagram Company Ltd.
Allan R. Dragone, age 67, is Chairman, The New York Racing Association Inc.
He retired in 1990 as Chairman of Arcadian Corporation, a fertilizer consortium.
Prior to that Mr. Dragone served as president and chief executive officer of
Akzo America, Inc. He was reelected to the Board in 1991, having previously
served as a director of the Company from February 1984 to August 1986. He is a
member of the Audit, Compensation and Nominating Committees. He is also a
director of Arcadian Corporation, General Waterworks Corporation and Wellman,
Inc.
Ronald Halstead, age 66, was Chairman of the Beecham Group p.l.c., from
1984 to 1985. Prior to that he was employed by Beecham in a variety of
managerial and executive positions. He became a director of the Company in 1986
and is a member of the Audit, Nominating and Public Responsibility Committees.
He is also a director of British Steel p.l.c., Gestetner Holdings p.l.c., and
Laurentian Financial Group p.l.c.
Arnold J. Levine, age 54, is Chairman of the Department of Molecular
Biology and Harry C. Wiess Professor of Life Sciences in the Department of
Molecular Biology at Princeton University. From 1979 to 1984, he was Chairman
and Professor of the Department of Microbiology of the School of Medicine, State
University of New York at Stony Brook. Dr. Levine became a director in 1988, and
is a member of the Nominating, Pension and Public Responsibility Committees. He
is also a director of DNX Corporation.
Paul W. MacAvoy, age 59, was named Dean of the School of Organization and
Management and the Williams Brothers Professor of Management Studies at Yale
University in 1992. He had been Dean and John M. Olin Professor of Public Policy
and Business Administration at The William E. Simon Graduate School of Business
Administration at the University of Rochester, a member of the President's
Council of Economic Advisors during the Johnson Administration, and a professor
at the Sloan School of Management at the Massachusetts Institute of Technology.
He was reelected to the Board of Directors in 1986, having previously served as
a director of the Company from August 1977 to July 1980. He is Chairman of the
Nominating Committee and a member of the Pension and Public Responsibility
Committees. He is also a director of Chase Manhattan Bank, Chase Manhattan
Corporation, Alumax Corporation and Lafarge Corporation.
Vincent T. Marchesi, age 58, is Director of the Yale Center for Molecular
Medicine and Professor of Pathology, Biology and Cell Biology at the Yale
University School of Medicine. From 1973 to 1989, he was the Anthony N. Brady
Professor of Pathology and Professor of Cell Biology and Chairman of the
Department of Pathology at Yale University School of Medicine. Dr. Marchesi
became a director in 1992, and is a member of the Audit and Nominating
Committees.
3
<PAGE>
George J. Sella, Jr., age 65, retired as Chairman of the Board and Chief
Executive Officer of the Company in 1993. He became a director in 1977, and is
Chairman of the Pension Committee and a member of the Public Responsibility
Committee. Mr. Sella is also a director of Union Camp Corporation, The Equitable
Companies Incorporated and The Equitable Life Assurance Society of the United
States.
Morris Tanenbaum, age 65, retired in 1991 as a Director and Vice Chairman
of the Board of Directors and Chief Financial Officer of American Telephone and
Telegraph Company, having previously served in various other executive
capacities with that company and its subsidiary companies. He became a director
of the Company in February 1982, and is Chairman of the Compensation Committee
and a member of the Audit Committee. He is also a director of American Electric
Power Company, Inc. and Cabot Corporation.
Anne Wexler, age 64, is Chairman of The Wexler Group, consultants in
Washington, D.C., specializing in government relations and public policy, and
Vice Chairman of its parent, Hill and Knowlton. Ms. Wexler served as Assistant
to President Carter for Public Liaison and, prior to that, as Deputy Under
Secretary of Commerce. She became a director in 1987, and is Chairman of the
Public Responsibility Committee and a member of the Audit Committee. She is also
a director of the Comcast Corporation, Continental Corporation, Dreyfus Index
Fund and New England Electric System.
As of January 1, 1994, no board member or nominee individually beneficially
owned as much as 1% of the total shares of outstanding Common Stock. As of
January 1, 1994, all officers and directors as a group owned beneficially
approximately 1% of the total shares of outstanding Common Stock. The following
table sets forth, as of January 1, 1994, the total beneficial ownership of the
Company's Common Stock by each of the Company's directors, each of the
individuals serving as the Company's chief executive officer and the four other
most highly compensated executive officers during 1993:
4
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<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARE ACQUIRABLE
OWNED (EXCLUDING WITHIN 60 DAYS OF
STOCK OPTIONS) AS OF JANUARY 1, 1993, UPON
NAME JANUARY 1, 1994 EXERCISE OF OPTIONS
- ------------------------------------------------------ -------------------- ---------------------
<S> <C> <C>
F. V. AtLee........................................... 29,313(1) 46,700
D. R. Bethune......................................... 7,070(1) 18,456
A. J. Costello........................................ 32,312(1) 53,790
D. M. Culver.......................................... 1,289(2) --
A. R. Dragone......................................... 600(2) --
R. Halstead........................................... 1,889(2) --
A. J. Levine.......................................... 954(2) --
P. W. MacAvoy......................................... 1,819(2) --
V. T. Marchesi........................................ 371(2) --
T. D. Martin.......................................... 3,642(1) 18,743
W. J. Murray.......................................... 9,157(1) 19,348
G. J. Sella, Jr....................................... 72,314(1)(2) 166,200
M. Tanenbaum.......................................... 1,789(2) --
A. Wexler............................................. 1,474(2) --
All directors and officers as a group (22 persons).... 186,523(1)(2) 398,511
</TABLE>
- ------------
(1) Included as beneficially owned are shares held subject to restrictions to
assure compliance with certain conditions in the Incentive Compensation Plan
of the Company (G. J. Sella, Jr., 1,140; all directors and officers as a
group, 1,140); shares held in trust pursuant to the Company's Employees
Savings Plan, as to which shares the nominee possesses the right to vote (F.
V. AtLee, 2,561; D. R. Bethune, 488; A. J. Costello, 2,358; T. D. Martin,
425; W. J. Murray, 1,183; G. J. Sella, Jr., 5,428; all directors and
officers as a group, 17,448). Also included are rights to receive certain
shares in installments after retirement. The distribution of these shares
may be accelerated even during employment or in extraordinary circumstances
in the discretion of the Compensation Committee (F. V. AtLee, 26,752; D. R.
Bethune, 6,568; A. J. Costello, 21,909; T. D. Martin, 3,217; W. J. Murray,
7,974; G. J. Sella, Jr., 42,037; all directors and officers as a group,
125,091).
(2) Included as shares beneficially owned are an aggregate of 1,200 restricted
shares and 600 deferred shares granted to non-employee directors under the
Company's Restricted and Deferred Stock Plan for Non-Employee Directors.
5
<PAGE>
Based solely on its review of the copies of the forms received by it, the
Company believes that, during 1993 all filing requirements required under
Section 16(a) of the Securities Exchange Act of 1934 were complied with by its
directors, officers and greater than ten-percent beneficial owners.
The Audit Committee, which held three meetings during 1993, is comprised
entirely of outside directors. It considers the adequacy of the Company's
internal controls, the scope, approach, effectiveness and recommendations of the
audit performed by the independent accountants; determines and prescribes limits
upon the types of non-audit professional services that may be provided by the
independent accountants without adverse effect on the independence of such
accountants; recommends the appointment of independent accountants; considers
the scope, approach and effectiveness of the Company's Operations Audit
Department; and considers significant accounting methods adopted or proposed to
be adopted.
The Compensation Committee, which held six meetings in 1993, is comprised
entirely of outside directors. It determines the salaries of the Company's
officers, administers several compensation plans and makes recommendations
thereunder, and passes on all forms of remuneration affecting the Company's
senior management. See 'Executive Compensation' for further details.
The Nominating Committee, which held three meetings in 1993, is comprised
entirely of outside directors. It considers and makes recommendations to the
Board of persons to be nominated for election as directors by the shareholders
and to be elected by the Board to fill vacancies that arise between annual
meetings of shareholders. In addition to its own efforts to locate outstanding
nominees for the Board, such committee considers nominees recommended by
shareholders. Any such recommendation should be mailed to the Nominating
Committee, American Cyanamid Company, One Cyanamid Plaza, Wayne, N.J. 07470,
Attention, Secretary, and should include the name, address and a statement of
qualifications of the nominee, as well as the signed consent of such person to
serve if elected.
The Pension Committee, which held two meetings in 1993, establishes
policies, standards, limitations, and guidelines governing the Committee on
Investment of Pension Funds (which oversees investments of the Company's funded
benefit plans), and reviews the actions taken by such Committee.
The Public Responsibility Committee, which held three meetings in 1993,
reviews, monitors and, as it deems appropriate, advises the Board with respect
to those Company policies and practices which may affect the operation or
reputation of the Company in areas which include, but are not limited to,
occupational safety and health, environmental affairs, equal employment
opportunity, philanthropy, consumer issues and governmental relations.
The Board of Directors held six meetings during 1993, and all directors
attended at least 75% of the total meetings of the Board and its committees on
which they served.
6
<PAGE>
APPROVAL OF AMENDMENT TO THE RESTATED ARTICLES OF INCORPORATION
(ITEM NO. 2)
The Company will present to the shareholders for approval a proposal to
amend its Restated Articles of Incorporation (Articles).
At its meeting held December 21, 1993, based upon the recommendation of the
Public Responsibility Committee, the Board of Directors unanimously approved and
recommended to shareholders that a new Article Seventh (the Amendment) to the
Articles be adopted to permit the Company to hold meetings of shareholders
within or outside the State of Maine. The text of the Amendment is set forth as
Exhibit A to this proxy statement.
American Cyanamid Company is incorporated in the State of Maine and hence
governed by Maine law. One of the provisions of the Maine Business Corporation
Act requires Maine corporations to hold their meetings of shareholders within
the State, unless the articles of incorporation specifically provide that such
meetings may be held outside the State of Maine. Since the Company's Articles
are silent on this point, the Company must amend them before it can hold
meetings of shareholders outside the State of Maine.
In the event that the shareholders approve this Amendment, the Board of
Directors will be asked to amend Section 1.03 of the Company's By-Laws to make
the By-Law provision consistent with the Amendment.
VOTE REQUIRED
The affirmative vote of the holders of a majority of all outstanding shares
of Common Stock entitled to vote thereon is necessary for approval of the
amendment to the Restated Articles of Incorporation. The Board of Directors
recommends that the shareholders vote FOR the approval of the amendment to the
Restated Articles of Incorporation.
APPROVAL OF AMENDMENT TO THE INCENTIVE COMPENSATION PLAN (ITEM NO. 3)
The Company will present to the shareholders for approval a proposal to
amend the Incentive Compensation Plan.
PRINCIPAL FEATURES OF THE INCENTIVE COMPENSATION PLAN
1. The Incentive Compensation Plan provides for incentive compensation for
the executive group of the Company currently consisting of 12 officers and 36
other employees. Incentive compensation for these individuals is determined by
the Compensation Committee of the Board of Directors and is payable solely from
the Incentive Compensation Amount which is also determined by the
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Compensation Committee. The Incentive Compensation Amount cannot exceed 11% of
reported Consolidated Net Income of the Company and its subsidiaries, excluding
any Incentive Compensation Amount (on a net after-tax basis) included in
Consolidated Net Income and after deduction of dividends payable on any
outstanding preferred stock (no shares of preferred stock are outstanding) and
an amount equal to 6% of Average Common Stock Equity (an amount equal to the sum
of (i) the aggregate stated or par value of the average net number of shares of
common stock of the Company outstanding during such year and (ii) the average
capital surplus and the average earned surplus (earnings employed in the
business) of the Company and subsidiaries on a consolidated basis for such
year). In the discretion of the Compensation Committee, any unused portion of
the Incentive Compensation Amount may be carried forward and added to the
Incentive Compensation Amount for any of the five succeeding fiscal years. The
Compensation Committee may adjust the earnings per share target upward or
downward. Its policy is to do so only in consideration of unusual events not
related solely to current year operations. The Compensation Committee may also
change the Incentive Compensation Amount for any year, by adjusting Consolidated
Net Income upward or downward, to eliminate in whole or in part the effects of
any item deemed by the Committee in its discretion to be extraordinary or
unusual or not to be reflective of the earnings on which incentive compensation
should be based. In the event that the Compensation Committee makes such
adjustment, it may also recalculate Average Common Stock Equity in such other
years as it deems appropriate consistent with such adjustment to Consolidated
Net Income.
2. The Plan is administered by the Compensation Committee, which is
comprised entirely of outside directors, appointed by the Board. The Committee
is authorized to construe and interpret the Plan.
3. The Plan currently provides for two basic types of incentives: (i)
annual incentives (current allotments) which, unless deferred, are payable in
cash, generally shortly after the close of the year to which the allotment
relates to the extent that earnings per share in the current year meet or exceed
specified objectives set by the Compensation Committee, and (ii) long-term
incentives (performance allotments) which are payable in cash (unless deferred)
after the applicable performance period (currently four years), to the extent
that earnings per share in the last year of such performance period meet or
exceed specified objectives set by the Compensation Committee. The Compensation
Committee requires that performance allotment payouts in excess of 70% of the
award be credited to the individual's common stock account under the Plan (See
paragraph 4). Allotments can be paid only to the extent of the Incentive
Compensation Amount for the then current year plus any unused carry-forward.
4. The Committee may require that all or any portion of a current allotment
or performance allotment be deferred as a contingent award. Amounts so deferred
will be credited to a common stock
8
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account maintained by the Company in the name of the participant. The number of
shares of Common Stock of the Company to be credited to a participant's common
stock account for a deferred current allotment will be determined by dividing
the dollar amount of the award by the average closing price of the Common Stock
as reported on the New York Stock Exchange Consolidated Tape for a prescribed
period shortly prior to the date on which the amount deferred is determined. The
number of shares credited to any common stock account will be adjusted to
reflect stock dividends, stock splits, combinations or other changes.
5. A recipient may elect to have all or a portion of any award, otherwise
payable in cash, deferred and credited to a common stock account or deferred
cash account under the Plan.
6. Common stock accounts and deferred cash accounts are not funded, but are
maintained in book entry form.
7. Common stock accounts and deferred cash accounts are credited,
respectively, with dividend equivalents on full or partial shares and interest
equivalents at prime rate. Recipients may request current payment of dividend
equivalents.
8. Unless payment is accelerated by the Compensation Committee in its
discretion, common stock accounts and deferred cash accounts are paid out over
60 quarters following termination of employment.
PROPOSED AMENDMENT
At its meeting held December 21, 1993, based upon the recommendation of the
Compensation Committee which is comprised entirely of outside directors, the
Board of Directors approved, subject to shareholder approval, an amendment to
the Incentive Compensation Plan. This amendment provides prospectively, in lieu
of performance allotments denominated in dollars, for payment, in shares of the
Company's Common Stock, of long-term incentive grants under the Plan to the
extent that specified objectives set by the Compensation Committee prior to the
performance period were met or exceeded. These shares will be valued at a price
determined by applying a compound increase to fair market value at the date of
such performance grants. The objectives include any one of, or any combination
of, the following: earnings per share, return on equity, return on assets,
economic value added, market value added and cash flow return on investment. The
effect of this amendment will be to encourage officers and other members of the
key management group to increase their equity ownership of the Company. In
addition, the value of the award of the Company's Common Stock is tied directly
not only to achievement of the specified objectives but also to the amount of
increase in the value of the Company's Common Stock.
9
<PAGE>
In addition, the Compensation Committee has set new stock ownership
guidelines for the key management group. The requirement currently mandates that
an executive must, within five years of becoming a participant in the Plan (or
by December 31, 1998, if later) acquire and retain Company Common Stock as a
multiple of base salary in the following amounts: chief executive
officer -- four times, president -- three times, members of the Executive
Committee -- two times, and all other key managers eligible for performance
shares -- one time. This requirement may be satisfied by any combination of
Company Common Stock held outright or held as deferred compensation in a common
stock account under the Incentive Compensation Plan or held in another benefit
plan. Shares subject to currently exercisable employee options do not satisfy
the requirement. In the event that an executive to whom performance share awards
are otherwise payable, does not own common stock in the minimum amount required
such payment will be deferred, credited to a participant's common stock account
and paid out over 60 quarters following termination of employment.
The amended Plan is effective for performance share awards made in 1994 and
thereafter. Performance share awards payable in February, 1998 based upon
earnings per share in 1997 were granted in February, 1994, subject to
shareholder approval of this Amendment. In the event the amendment to the
Incentive Compensation Plan is not approved by the shareholders, the Company
will continue to use targets based on dollar amounts to named executive officers
and other members of the executive group under the current Plan.
If this Plan had been in effect for 1990 (the most recent year which would
have resulted in a payout for 1993), the following tabulation summarizes the
benefits or amounts which would have been received by or allocated to each of
the individuals serving as the Company's chief executive officers and the four
other most highly compensated executive officers had those individuals been in
those positions during the entire performance period of this hypothetical
illustration:
10
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NEW PLAN BENEFITS
INCENTIVE COMPENSATION PLAN HYPOTHETICAL ILLUSTRATION
<TABLE>
<CAPTION>
NO. OF VALUE OF
PERFORMANCE STOCK PRICE PERFORMANCE
NAME AND POSITION SHARES AT PAYOUT SHARES
- ---------------------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
A. J. Costello 5,714 $51.068 $ 291,803
Chairman and CEO....................................................
F. V. AtLee 3,428 $51.068 $ 175,061
President...........................................................
D. R. Bethune 1,504 $51.068 $ 76,806
Group Vice President................................................
T. D. Martin 1,504 $51.068 $ 76,806
Vice President and CFO..............................................
W. J. Murray 1,504 $51.068 $ 76,806
Group Vice President................................................
G. J. Sella, Jr. 0 -- 0
Retired Chairman and CEO............................................
Executive Officers.................................................... 15,158 $51.068 $ 774,089
Non-Executive Director Group.......................................... 0 -- 0
All Officers and Other Members of Executive Group..................... 31,779 $51.068 $ 1,622,877
</TABLE>
VOTE REQUIRED
The affirmative vote of the holders of a majority of all outstanding shares
of common stock entitled to vote thereon is necessary for approval of the
amendment to the Incentive Compensation Plan. The Board of Directors recommends
that the shareholders vote FOR the approval of the amendment to the Incentive
Compensation Plan.
SHAREHOLDER PROPOSAL (ITEM NO. 4)
The Company has received one shareholder proposal for inclusion in this
proxy statement. The proposal is substantially similar to the proposal which was
rejected by shareholders at the 1993 Annual Meeting of Shareholders. The
proposal is set forth below, together with the proponent's statement in support
of the proposal and the Company's statement in opposition. The affirmative vote
of the holders of a majority of the shares of Common Stock present at the
meeting will be required for passage of the resolution.
11
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE RESOLUTION.
PROPOSAL NO. 4: CONFIDENTIAL BALLOT
The New York City Fire Department Pension Fund, owning 82,200 shares of
Common Stock of the Company, has given notice that it intends to present for
action at the Annual Meeting the following resolution:
'RESOLVED, that the shareholders of the Corporation request that the board
of directors adopt and implement a policy requiring all proxies, ballots and
voting tabulations that identify how shareholders voted be kept confidential,
except when disclosure is mandated by law, such disclosure is expressly
requested by a shareholder or during a contested election for the board of
directors, and that the tabulators and the inspectors of election be independent
and not the employees of the Corporation.
STATEMENT IN SUPPORT
'The confidential ballot is fundamental to the American political system.
The reason for this protection is to ensure that voters are not subjected to
actual or perceived coercive pressure. We believe that it is time that this
fundamental principle of the confidential ballot be applied to public
corporations.
'Many excellent companies use confidential voting. None have reported any
difficulty reaching quorums or meeting supermajority vote requirements and those
surveyed reported that the added cost of implementing confidentiality was
negligible.
'Strong support was shown at the last annual meeting when 36% of the votes
were cast in favor of this proposal.
'It is our belief that all shareholders need the protection of a
confidential ballot no less than voters in political elections. While there is
no imputation that management has acted coercively, the existence of this
possibility is sufficient to justify confidentiality.
'This resolution would permit shareholders to voluntarily disclose their
vote to management by expressly requesting such disclosure on their proxy cards.
Additionally, shareholders may disclose their vote to any other person they
choose. This resolution would merely restrict the ability of the Corporation to
have access to the vote of its shareholders without their specific consent.
'Many shareholders believe confidentiality of ownership is ensured when
shares are held in street or nominee name. This is not always the case.
Management has various means of determining actual (beneficial) ownership. For
instance, proxy solicitors have elaborate databases that can match account
numbers with the identity of some owners. Moreover, why should shareholders have
to transfer their shares to nominees in an attempt to maintain confidentiality?
In our opinion, this resolution is the only way to ensure a secret ballot for
all shareholders irrespective of how they choose to hold their shares.
12
<PAGE>
'We believe that confidential voting is one of the most basic reforms
needed in the proxy voting system and that the system must be free of the
possibility of pressure and the appearance of retaliation.
'We hope that you would agree and vote FOR this proposal.'
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS RESOLUTION.
The Board of Directors believes this proposal is not in the best interests
of the Company or its shareholders. The Company has, for many years,
efficiently, economically and with complete integrity, tabulated proxies in a
manner entirely consistent with high business and ethical standards. The Company
believes continuation of this method of tabulation is cost-effective and
represents prudent management.
The Company is in compliance with current federal and state proxy
regulations. These regulations, prepared by experienced and independent experts,
establish standards of conduct for proxy solicitation. The Maine Business
Corporation Act, which, together with federal law, governs proxy solicitation
and tabulations of the Company (a Maine corporation), requires the appointment
of an inspector of elections to supervise the tabulation of proxies and
generally obligates the inspector to conduct the voting with fairness to all
shareholders. It does not require confidential voting. The Board believes that
current, traditional standards that have proved to be workable and perfectly
efficacious in practice should not be uprooted by a proponent which desires to
formulate its own code of procedures. The proponent does not allege that the
Company is now acting or has ever acted in a coercive manner with respect to the
tabulation of proxies. Therefore, the desire of the proponent to impose complex
and costly changes to supplant the Company's current method of issuance and
tabulation of proxies, which is in full compliance with federal and state law,
neither of which mandates confidential voting, seems unnecessary and wasteful,
especially in light of the Company's cost containment efforts.
The proponent's analogy to political elections is totally misplaced.
Political elections feature a campaign period, with speech rebutting speech, in
which the entire voting population can participate. There is plenty of time in a
political election to argue for positions, to rebut those arguments and to
dispute the rebuttal, all the while measuring the reaction of the electorate.
The secret ballot in a political election supports the integrity of this vital
First Amendment process of full examination of argument on the issues before the
entire electorate. A corporate election is conducted very differently. The
proponent of a position (the Board of Directors), has only one chance, with one
document, to reach and persuade the voters -- the proxy statement. Like the
person running for political office, the Board deserves a chance to gauge the
reaction to its arguments by the shareholders of the Company. The only practical
way to do that is by reviewing proxies as they are returned. To require that
proxies remain confidential is to remove from the corporate voting process the
one mechanism that allows the
13
<PAGE>
free exchange of views common in a political election, since otherwise the Board
of Directors will have no idea of what the shareholders are thinking. Speech no
longer rebuts speech; the proponent of a nominee for a director or a course of
action has only the single opportunity to communicate with the shareholders of
the Company and no opportunity to address any of the proponent's concerns, if
confidentiality is the rule. It appears to the Board that such a proceeding is
precisely contrary to the principles of the American political system which the
proponent raised as an analogy.
Many of the shareholders who choose to hold their stock in their own names
use the proxy card to express their views on a multitude of issues of interest
to them or explain their votes to management. The proxy card becomes, for them,
a convenient, cost-free way to communicate with the Company. The Company
appreciates and considers these expressions of shareholder opinion and would
regret any change which might discourage this means of communication from the
shareholders. The Company reviews these communications and responds to questions
and issues raised by shareholders as appropriate.
Particularly in light of the Securities and Exchange Commission regulations
encouraging shareholder communications on proxy issues, the Board of Directors
and management believe that the Company should not only have the right, but in
certain circumstances has the obligation, to be informed with regard to
shareholder voting. When an issue critical to the Company's policies, viability
or vitality is involved, the Board of Directors, which has the mandate to
oversee the activities of the Company, believes that the Company has not only
the right, but the duty, to campaign effectively on behalf of its vision of the
Company's future. Changing our existing proxy system to the method suggested by
the proponent would put the Company at a decided disadvantage in contested
matters because, unlike an opponent, the Company could no longer campaign
effectively as it could no longer identify shareholder positions on the matter.
Further, the Company is deprived of an opportunity to insure that its
shareholders understand the Company's position.
The Board believes the current free choice proxy system best serves the
interests of the Company's shareholders. The Board, therefore, sees no need for
the adoption of this proposal and recommends shareholders vote AGAINST this
proposal.
EXECUTIVE COMPENSATION
The following tabulation summarizes compensation paid to the Chief
Executive Officers (CEO) and the four other most highly compensated executive
officers for services rendered in all capacities in 1991, 1992 and 1993 to the
Company and its subsidiaries:
14
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
AWARDS PAYOUTS
------------------------- --------
ANNUAL COMPENSATION SECURITIES LONG-
(1)(2) RESTRICTED UNDERLYING TERM
NAME AND --------------------- STOCK OPTIONS/ INCENTIVE ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS AWARDS(3) SARS PAYOUTS COMPENSATION(4)
- ------------------------------ ---- -------- -------- ---------- ---------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
A. J. Costello
Chairman and CEO.......... 1993 $525,000 $329,649 $0 43,500 $214,190 $ 7,075
President................. 1992 $450,000 $300,971 $0 18,278 $278,025 $ 6,866
President................. 1991 $410,000 $261,117 $0 18,500 $285,206
F. V. AtLee
President................. 1993 $443,750 $260,197 $0 20,900 $145,196 $ 7,075
Executive Vice
President............... 1992 $408,333 $266,097 $0 11,206 $221,100 $ 6,866
Executive Vice
President............... 1991 $383,333 $218,617 $0 11,400 $258,375
D. R. Bethune (5)
Group Vice President...... 1993 $325,000 $156,660 $0 7,600 $ 84,985 $ 7,075
Group Vice President...... 1992 $300,000 $146,558 $0 4,570 $143,963 $ 6,866
T. D. Martin
Vice President and CFO.... 1993 $255,750 $121,771 $0 7,600 $ 80,954 $ 7,075
Vice President and CFO.... 1992 $240,750 $127,531 $0 6,637 $121,688 $ 6,866
Vice President and CFO.... 1991 $225,917 $116,961 $0 6,700 $ 91,152
W. J. Murray (5)
Group Vice President...... 1993 $245,000 $139,572 $0 7,600 $ 80,860 $ 7,075
Group Vice President...... 1992 $206,250 $ 95,082 $0 4,134 $134,063 $ 6,187
G. J. Sella, Jr. (6)
Retired Chairman and CEO.. 1993 $225,000 $141,559 $0 0 $328,125 $ 6,746
Chairman and CEO.......... 1992 $808,333 $625,771 $0 34,800 $544,500 $ 6,866
Chairman and CEO.......... 1991 $781,250 $528,120 $0 28,700 $616,125
</TABLE>
- ------------
(1) Includes amounts earned in fiscal year, whether or not deferred.
(2) There was no disclosable 'Other Annual Compensation' paid, payable or
accrued to any of the named executive officers during 1993, except for Mr.
Sella who has imputed income of $80,043 attributable to off-site office
expenses incurred after his retirement.
(3) No restricted stock was granted in 1991, 1992 or 1993. None of the named
executive officers holds restricted stock, except for Mr. Sella who holds
1,140 shares, all of which were awarded in 1968, 1969 and 1970. The value of
the restricted stock as of the end of the last completed fiscal year is
$14,953. The restricted stock does not carry nor is it entitled to the
payment of any dividend (other than dividends in common stock of the
Company).
(4) The amount listed for each named executive officer consists entirely of
Company matching contributions to the Employees Saving Plan.
(5) Messrs. Bethune and Murray were elected executive officers of the Company in
1992.
(6) Mr. Sella retired as Chairman of the Board and Chief Executive Officer of
the Company on March 31, 1993.
15
<PAGE>
The following tabulation shows, as to the named executive officers and as
to the shareholders, information with respect to stock options, all of which
were granted with stock appreciation rights in tandem therewith:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------------
% OF
TOTAL
NUMBER OF OPTIONS/ POTENTIAL
SECURITIES SARS REALIZABLE VALUE AT ASSUMED
UNDERLYING GRANTED TO EXERCISE ANNUAL RATES OF STOCK PRICE
OPTIONS/ EMPLOYEES OR BASE APPRECIATION FOR OPTION TERM
SARS IN FISCAL PRICE EXPIRATION ---------------------------------------
NAME GRANTED(1) YEAR(2) ($/SH.) DATE 0% 5% 10%
- ----------------------------------- ---------- ---------- -------- ---------- --- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
A. J. Costello..................... 43,500 4.63% $52.00 4/19/2003 $ 0 $ 1,422,560 $ 3,605,045
F. V. AtLee........................ 20,900 2.23% $52.00 4/19/2003 $ 0 $ 683,483 $ 1,732,079
D. R. Bethune...................... 7,600 0.81% $52.00 4/19/2003 $ 0 $ 248,539 $ 629,847
T. D. Martin....................... 7,600 0.81% $52.00 4/19/2003 $ 0 $ 248,539 $ 629,847
W. J. Murray....................... 7,600 0.81% $52.00 4/19/2003 $ 0 $ 248,539 $ 629,847
G. J. Sella, Jr.(3)................ 0 0 0 -- $ 0 $ 0 $ 0
All Shareholders(4)................ -- -- -- -- $ 0 $2,944,160,220 $7,461,079,961
Current CEO Gain As a % of All
Shareholders..................... -- -- -- -- 0.0% 0.048% 0.048%
Above Officers As a % of All
Shareholders..................... -- -- -- -- 0.0% 0.097% 0.097%
All Officers As a % of All
Shareholders..................... -- -- -- -- 0.0% 0.132% 0.132%
</TABLE>
- ------------
(1) Options covering 1,923 shares were granted as Incentive Stock Options to
each of the named executive officers and are exercisable after one year from
date of grant. The remaining options are Non-Qualified Options -- one-third
of which are exercisable after one year from date of grant, another
one-third exercisable after two years from date of grant and the remaining
one-third exercisable after three years from date of grant. The term of the
options is ten years.
(2) Based on options covering 939,040 shares granted to a total of approximately
1,400 employees during 1993.
(3) Mr. Sella was not granted any securities, underlying options or SARs.
(4) Total dollar gains based on the assumed annual rates of appreciation shown
here and calculated on 90,028,540 outstanding shares as of December 31,
1993.
16
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS HELD AT IN-THE MONEY OPTIONS/SARS AT
SHARES FISCAL YEAR END FISCAL YEAR END
ACQUIRED VALUE ----------------------------- --------------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE(1) UNEXERCISABLE
- ---------------------- ----------- -------- ----------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
A. J. Costello........ 0 $ 0 53,790 60,188 $ 36,825 $ 0
F. V. AtLee........... 0 $ 0 46,700 30,506 $ 36,825 $ 0
D. R. Bethune......... 0 $ 0 18,456 12,514 $ 4,031 $ 0
T. D. Martin.......... 0 $ 0 18,743 12,594 $ 19,688 $ 0
W. J. Murray.......... 0 $ 0 19,348 11,756 $ 27,044 $ 0
G. J. Sella, Jr.(3)... 17,192 $519,926 166,200 0 $ 381,713 $ 0
</TABLE>
- ------------
(1) Total value of options based on fair market value of Company stock of
$50.1875 as of December 31, 1993. The exercise price cannot be lowered
during the term of the option.
(2) No unexercisable options/SARs were in the money at fiscal year end.
(3) All shares acquired on exercise by Mr. Sella were acquired subsequent to his
retirement on March 31, 1993.
LONG -TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PERFORMANCE OR ESTIMATED FUTURE PAYOUTS
SHARES, UNITS OTHER PERIOD UNDER NON-STOCK PRICE-BASED PLANS
OR OTHER UNTIL MATURATION ---------------------------------
NAME RIGHTS(1) OR PAYOUT THRESHOLD TARGET MAXIMUM
- ---------------------------------------- ------------- ----------------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
A. J. Costello.......................... $ 463,125 4 years $ 2,286 $463,125 $926,250
F. V. AtLee............................. $ 278,438 4 years $ 1,615 $278,438 $556,876
D. R. Bethune........................... $ 125,000 4 years $ 725 $125,000 $250,000
T. D. Martin............................ $ 125,000 4 years $ 725 $125,000 $250,000
W. J. Murray............................ $ 125,000 4 years $ 725 $125,000 $250,000
G. J. Sella, Jr......................... $ 475,000 4 years $ 861 $148,438 $296,876
</TABLE>
- ------------
(1) Performance Allotments are granted, the payment of which is predicated upon
the achievement of corporate performance goals, specifically earnings per
share in the last year of the performance period. The achievement of
approximately 66% of this goal will result in payment of the threshold
amount, 100% of goal in payment of the target amount, while attaining
approximately 120% of the goal will result in payment of the maximum amount.
No payment will be made if less than 66% of the goal is achieved. The
Compensation Committee of the Board of Directors may adjust the goal, in its
discretion, at any time prior to the end of the first quarter of the final
year of the performance period.
17
<PAGE>
BOARD COMPENSATION COMMITTEE REPORT
The Company's executive compensation policies for its officers are part of
its Salary Administration Program which is applicable to all salaried employees.
Under this Program, it is solely the responsibility of the Compensation
Committee of the Board of Directors, which is comprised entirely of outside
directors, to set an officer's annual compensation by determining his or her
base salary and short-term and long-term target incentive levels and actual
incentive payments. The Compensation Committee believes that the Company's
competition for executive talent is not limited to those companies identified in
the Performance Graph as the combined indices of Standard & Poor's Healthcare
Diversified Index and Chemicals Index. In order to ensure that the Company's
compensation levels are competitive, the Company uses both peer group surveys
and surveys provided by independent compensation consultants such as TPF&C, a
Towers Perrin Company, to determine the market criteria for its officers. The
consultant surveys include executive compensation surveys for companies with
sales of $3 billion to $6 billion and pharmaceutical/consumer goods surveys. The
sixteen companies in the peer group (other than the Company) that are surveyed
individually were selected by the Compensation Committee because they are major
competitors in the pharmaceutical and agricultural chemical industries: Abbott
Laboratories, Bristol-Myers Squibb Company, Ciba-Geigy Corporation, E. I. du
Pont de Nemours and Company, Eli Lilly and Company, Glaxo Inc., Johnson &
Johnson, Merck and Co., Inc., Monsanto Company, Pfizer Inc., Rhone-Poulenc Rorer
Inc., Schering-Plough Corporation, SmithKline Beecham Corporation, The Upjohn
Company, Warner-Lambert Company, and Wyeth-Ayerst Laboratories. Survey data is
analyzed and the entire compensation structure for each officer is measured to
ensure peer competitiveness. Once these market criteria have been determined,
the objective of the Compensation Committee is to ensure that executive
compensation is closely tied to shareholder value. To achieve that objective,
the Committee sets base salary somewhat below the average of its surveys and
uses an incentive structure that provides above average compensation for
excellent growth in shareholder value and below average compensation for less
than average growth. The Committee takes into consideration the recommendations
of an outside expert on compensation matters and the recommendations of
management. This places more emphasis on the incentive portion of the
compensation plan.
BASE SALARY
In determining base salary under the Salary Administration Program, each
position in the Company is assigned a 'job level' and each level is assigned a
range of base salaries, based on the average paid base salary rates in the
competitor comparison described above, with base salary midpoints being set
somewhat below the average of the competitor group. Individual salary within the
range is a function of experience and performance. The Compensation Committee
considers the competitiveness of the entire compensation package when
determining base salary ranges. A major
18
<PAGE>
element of this determination is the base salary ranges of the competitor
companies. Individual performance is not weighed in setting base salary ranges.
The determination of individual salaries for the named executive officers within
these ranges is based upon competitive data and the individual executive's
contributions.
ANNUAL INCENTIVE COMPENSATION
The Salary Administration Program also provides short-term incentives in
the form of annual cash incentives. The target level for the annual incentives
is set as a percentage of individual salary for each eligible employee. This
percentage increases as the job level increases; thus, for higher level
employees, such as officers, annual incentives will constitute a greater portion
of total compensation. As in the case of base salary, the target levels for
named executive officers and other members of the executive group are set
somewhat below the average of the competitor group for average performance with
the opportunity to earn well above the average for above average performance.
This places emphasis on excellent performance. The actual amount of a named
executive officer's current annual incentive is determined by the Compensation
Committee based on an evaluation of individual performance, which would include
the achievement of established budget targets, the development of personnel, the
achievement of strategic management goals, new product introductions and the
extent to which earnings objectives have been met. Once an individual's annual
incentive has been determined, it is subject to an overall companywide
adjustment directly relating to the extent to which the Company met, exceeded or
fell short of its overall earnings per share target for compensation purposes as
set each year by the Compensation Committee. Annual incentives may range from 0
to 200% of target based upon successfully achieving pre-determined goals and
individual performance. If a named executive officer's performance fails to meet
minimum requirements, he or she will receive no annual incentive. The
Compensation Committee has the power to adjust the earnings per share target
upward or downward. Its policy is to do so only in consideration of unusual
events not related solely to current year operations. In 1993, earnings per
share targets were adjusted for both the annual incentive plan and the long-term
incentive plan (as described below) to exclude the financial impact of (i) the
cumulative effect of accounting changes pertaining to adoption by the Company of
Statement of Financial Accounting Standards No. 106, 'Employer's Accounting for
Postretirement Benefits Other Than Pensions' and Statement of Financial
Accounting Standards No. 109, 'Accounting for Income Taxes'; (ii) the global,
companywide restructuring of the Company's businesses, primarily the medical
business; (iii) discontinued operations related to the spin-off of the Company's
chemicals and plant food businesses; and (iv) the one-time costs and charges
associated with transactional matters such as the write-off of acquired
in-process research and development resulting from the acquisition of 53.5% of
Immunex Corporation.
19
<PAGE>
LONG-TERM INCENTIVE COMPENSATION
The long-term portion of incentive compensation consists of performance
allotments denominated in dollars and stock option grants. Performance allotment
target levels for named executive officers and other members of the executive
group are set somewhat below the average of the competitor group, again to place
emphasis on excellent performance. The payout of performance allotments is
determined solely by the extent to which the Company's earnings growth over a
four-year performance period (currently as measured by earnings per share in the
fourth year) meets, exceeds or falls short of performance targets established by
the Compensation Committee at the beginning of the performance period. (See
Amendment to the Incentive Compensation Plan.) To provide incentives for
outstanding performance, awards of performance allotments may range from 0 to
200% of target based solely upon earnings per share achievement in the fourth
year of the performance period. The payout of performance allotments will only
be made provided the named executive officer or other member of the executive
group remains an employee for the entire performance period, unless the
Compensation Committee determines otherwise.
The named executive officers and other key employees also receive annual
grants of stock options covering the Company's Common Stock. The number of
options granted is based upon a valuation of option grants by competitor
companies and is set somewhat below the average of the competitor group. The
price of the option is based on the market price at the date of grant and the
number of options granted is determined by the individual's job level. The
extent to which the individual realizes any gain is, therefore, directly related
to increases in the price of the Company's Common Stock and hence, the increase
in shareholder value, during the period of the option.
The Company will present to the shareholders a proposal to amend the
Incentive Compensation Plan to grant performance shares instead of dollar
amounts. In the event the Amendment to the Incentive Compensation Plan is not
approved by the shareholders, the Company will continue to use targets based on
dollar amounts to named executive officers and other members of the executive
group under the current Plan.
The Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to the
Internal Revenue Code. Section 162(m) limits the deductibility of compensation
paid to top executives of public companies to $1,000,000, unless it is directly
tied to specific performance goals previously approved by shareholders. This cap
applies to all compensation paid in taxable years beginning on or after January
1, 1994. The transition rules applicable to Section 162(m) provide transition
relief to plans already approved by shareholders. This transition relief will
last until the date the plan is materially modified, the date it expires, the
date all the stock is issued under it or the first shareholder meeting after
December 31, 1996.
The Company has not determined whether to exempt either base salary or
annual cash incentive from Section 162(m) of the Internal Revenue Code. It is
not anticipated that base salary and annual
20
<PAGE>
cash incentive of any of the named executive officers will exceed $1,000,000 in
1994. The Company believes that its stock option and long-term incentive plans
comply with the transition rules applicable to Section 162(m).
In determining Mr. Costello's base salary for 1993, the Compensation
Committee set his salary in the lowest quartile of the peer group companies
previously specified because of his recent promotion and short tenure in the
position.
Each year, the Compensation Committee establishes a corporate earnings per
share objective for the purpose of determining annual current incentive
compensation for named executive officers and other key employees. (The
five-year history of the earnings per share actually achieved is detailed in the
Performance Graph section.) At year's end, performance against this and other
non-financial objectives such as progress in accomplishing strategic
restructuring plans is evaluated by the Compensation Committee for the Chief
Executive Officer and each of the named executive officers.
For 1993, the Compensation Committee determined that the major performance
objectives have been met or exceeded by the Chief Executive Officer and the
other named executive officers. These objectives included the spin-off of the
Company's chemicals and plant food businesses by distributing all the
outstanding shares of Common Stock of Cytec Industries Inc., the acquisition of
53.5% of Immunex Corporation, the acquisition of Shell Petroleum Company Limited
international crop protection business, initiation of the strategic
restructuring of the Company's businesses, primarily the medical business, and
substantially meeting budgeted continuing operations objectives even in a
difficult economic environment. As a result annual incentive compensation was
awarded to the Chief Executive Officer in the amount of 103% of target and for
other named executive officers between 103% and 124% of target. All named
executive officers (and all other persons receiving performance allotment
payouts) received a performance allotment payout at 75% of target as detailed in
the Summary Compensation Table. The below target payout was the result of lower
earnings than the objective that had been established at the time of grant
(1990). Options granted in early 1993 were based upon the competitor surveys and
are detailed in the Summary Compensation Table.
Compensation Committee
David M. Culver
Allan R. Dragone
Morris Tanenbaum, Chairman
21
<PAGE>
PERFORMANCE GRAPH
The performance graph compares the yearly cumulative total shareholder
return on the Company's Common Stock with the yearly cumulative total
shareholder return for (a) the Standard & Poor's 500 Composite Index (S & P 500)
and (b) the combined indices of Standard & Poor's Healthcare Diversified Index
(consisting of Abbott Laboratories, American Cyanamid Company, American Home
Products Corporation, Bristol-Myers Squibb Company, Imcera Group Inc., Johnson &
Johnson and Warner-Lambert Company) and Chemicals Index (consisting of Air
Products and Chemicals, Inc., Dow Chemical Company, E. I. du Pont de Nemours and
Company, The B.F. Goodrich Company, Hercules Incorporated, Monsanto Company, NL
Industries, Praxair, Inc., Quantum Chemical Corporation, Rohm and Haas Company
and Union Carbide Corporation), weighted according to stock market
capitalization as of each measure point for the members of the combined group,
for the period beginning January 1, 1989 through December 31, 1993. The
companies in the combined indices reflect both the diversified health care and
chemical aspects of the Company's business during the period 1988-1993.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
American Cyanamid ............... 100 118 118 149 136 123
S & P 500 ....................... 100 133 128 166 179 197
Combined S&P Healthcare
Diversified and Chemicals
Indices........................ 100 132 140 199 185 187
BASE 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93
</TABLE>
22
<PAGE>
AMERICAN CYANAMID COMPANY CUMULATIVE GROWTH
IN EARNINGS PER SHARE FROM CONTINUING OPERATIONS
(1988 = 100 OR $2.30 EPS)
<TABLE>
<S> <C>
AVERAGE ANNUAL GROWTH
RATE. 1988-93=11.0%.
REFLECTS GROWTH IN EPS
FROM CONTINUING OPERA-
TIONS USING 1988 AS THE
BASE YEAR. SPECIAL COSTS
OF M$512 NET AFTER TAX,
EQUIVALENT TO $5.69 EPS [GROWTH GRAPH-DESCRIBED IN CAPTION AT LEFT]
ASSOCIATED WITH THE
WRITE-OFF OF ACQUIRED
IMMUNEX IN-PROCESS RE-
SEARCH AND DEVELOPMENT
AND THE GLOBAL COMPANY-
WIDE RESTRUCTURING PRO-
GRAM HAVE BEEN ADDED
BACK TO 1993 EPS FROM
CONTINUING OPERATIONS.
SPECIAL COSTS OF M$67
NET AFTER TAX,
EQUIVALENT TO $0.70 EPS,
ASSOCIATED WITH PLANS TO
CURTAIL AND CONSOLIDATE
CERTAIN PRODUCT LINES
AND FOR INCREASED
ENVIRONMENTAL
REMEDIATION, HAVE BEEN
ADDED BACK TO 1990. EPS
FROM CONTINUING OPERA-
TIONS.
</TABLE>
The above graph compares the Company's growth in earnings per share from
continuing operations with the investment performance of the Company's Common
Stock versus the S & P 500 and the Standard & Poor's Healthcare Diversified
Index and Chemicals Index combined over the five-year period, 1989 to 1993. The
performance graph assumes that $100 was invested on January 1, 1989, at the
prior day's closing market price, in Company Common Stock and in each of the
Standard & Poor's indices. The graph shows that while the Company's earnings per
share from continuing operations have grown 68% during that period, the total
return which includes the change in stock price on the $100 investment has grown
only 23%. The comparison demonstrates that the Company's strong earnings
performance is not reflected in the market's valuation of its common stock.
Through the end of 1993, the Company continued to emerge from a history of
operating businesses with lower rates of profitability than many companies
included in its comparative index.
During 1993, the Company announced several significant strategic decisions,
each designed to more firmly establish the Company in the life sciences
business. In June, the Company acquired a
23
<PAGE>
53.5% equity interest in Immunex Corporation. In August, the Company announced
its intention to acquire the international agricultural business of Shell, and
in December, finalized the bulk of this transaction. In October, the Company
announced a global restructuring program, primarily in the medical business.
Finally, in December, the Company substantially completed the spin-off of its
chemical business as Cytec Industries Inc. to the Company's shareholders. The
distribution of Cytec shares to Company shareholders actually took place in
January 1994, completing the Company's transition to the life sciences.
EMPLOYMENT AGREEMENTS
All salaried employees of the Company including the named executive
officers sign an employment agreement on the Company's standard form. Each
agreement provides for the initial salary the Company shall pay to the employee
for the services performed by the employee, the confidentiality and non-use of
information which is proprietary to the Company, assignment of inventions and
improvements which the employee may invent or produce and termination of
employment by both the employee and the Company. The notice of termination
period for salaried employees including the named executive officers ranges from
one month to six months (depending on the standard form in use at the time),
except in the case of termination for cause, when no prior notice is required.
The agreement provides that, for one year after termination of employment with
the Company, the employee shall not engage in work or other activity involving a
product or process similar to a product or process on which he or she worked for
the Company at any time during the period of two years immediately prior to
termination of employment, if such work or activity is then competitive with
that of the Company, unless otherwise given a release in writing by an officer
of the Company to engage in such work or activity. In certain circumstances, the
Company may be obligated to continue paying the former employee his or her base
salary in order to invoke the non-competition provisions.
The Board of Directors has adopted an executive income continuity plan to
reinforce and encourage the continuing attention, dedication and loyalty of
executives in the senior management group without the distraction of concern
over the possibility of involuntary or constructive termination of employment
resulting from unforeseen developments, by providing income continuity for a
limited period. The plan provides for payments to members upon termination of
employment, unless such termination is (i) on account of death or retirement,
(ii) by the Company for disability or cause, or (iii) by the member without good
reason (as defined in the plan -- generally, actions by the Company inconsistent
with the participant's status or with the Company's traditional compensation
policies). Members of the plan consist of the chairman, the president, the
corporate vice presidents, and such other employees as are designated by the
Executive Committee. In general, the plan provides for payments upon termination
of employment, in the case of the executive officers, and in the case of other
members meeting certain age and service requirements, of two times annual salary
plus two
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<PAGE>
times target annual incentive (current allotment under the Incentive
Compensation Plan), in 24 monthly installments, and in the case of other members
annual salary plus target annual incentive, in 12 monthly installments. The plan
also provides for certain miscellaneous payments, including relocation payments,
legal fees, and expenses incurred in seeking new employment. The benefits of
this Plan are not available to any employee who is then currently eligible to
receive a benefit under the Supplemental Employees Retirement Plan or, in any
event, for any period beyond the employee's sixty-fifth birthday.
Under agreements approved by the Compensation Committee and the Board of
the Directors, if any one of a number of events potentially affecting the
control of the Company occurs, all deferred stock awards and deferred cash
awards held by certain members of key management (including all persons named in
the Summary Compensation Table) will be cancelled and the fair market value
thereof will be paid promptly in cash, and the Compensation Committee may
authorize payment, to the extent it deems equitable, of outstanding performance
allotments held by such persons.
The Board of Directors has adopted a Compensation Taxation Equalization
Plan providing for the payment to any employee, officer or director who becomes
subject to the tax imposed by Section 4999 of the Internal Revenue Code of
reimbursement for the tax, plus all taxes imposed upon the reimbursement. A 20%
excise tax applies to compensatory payments (i) the present value of which
equals or exceeds three times the 'base amount' of the recipient, and (ii) that
are contingent upon change 'in the ownership or effective control' of the
Company. The 'base amount' is the average annual compensation included in
taxable income over the five-year period ending before the year during which the
change in the ownership or effective control occurs.
COMPENSATION UNDER RETIREMENT PLAN
The following Pension Plan Table shows the estimated aggregate annual
benefits payable under the Company's retirement program consisting of the
Employees Retirement Plan, ERISA Excess Retirement Plan and Supplemental
Employees Retirement Plan, assuming retirement at or projected to age 65 (normal
retirement age) to persons in the earnings ranges recognized for pension
purposes, and with the number of years credited for purposes of pension benefits
shown, on a single life annuity basis:
25
<PAGE>
PENSION PLAN TABLE
<TABLE>
<CAPTION>
EMPLOYEE'S
ANNUAL EARNINGS
USED FOR YEARS OF SERVICE
COMPUTATION --------------------------------------------------------------------------------------
OF BENEFITS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS 45 YEARS
- --------------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$200,000 $ 50,100 $ 66,800 $ 83,500 $100,200 $116,900 $133,600 $150,300
$250,000 $ 62,625 $ 83,500 $104,375 $125,250 $146,125 $167,000 $187,875
$350,000 $ 87,675 $116,900 $146,125 $175,350 $204,575 $233,800 $263,025
$450,000 $112,725 $150,300 $187,875 $225,450 $263,025 $300,600 $338,175
$550,000 $137,775 $183,700 $229,625 $275,550 $321,475 $367,400 $413,325
$650,000 $162,825 $217,100 $271,375 $325,650 $379,925 $434,200 $488,475
$750,000 $187,875 $250,500 $313,125 $375,750 $438,375 $501,000 $563,625
$850,000 $212,925 $283,900 $354,875 $425,850 $496,825 $567,800 $638,775
$950,000 $237,975 $317,300 $396,625 $475,950 $555,275 $634,600 $713,925
</TABLE>
Amounts shown in the above table would be reduced by a portion of primary
social security payments for which a person would be eligible at age 65. In
addition, the normal form of benefit payment under the program would require the
further reduction of amounts shown in the table pursuant to an actuarially based
formula to provide a benefit to a surviving spouse upon the employee's death
following retirement equal to 50% of the reduced benefit.
Compensation included in the Pension Plan Table consists of the base
salaries and target portion of the bonus (annual cash incentive) reported for
the named executive officers in the Summary Compensation Table. Mr. Martin
receives a pension differential, provided he is in the employ of the Company
when he reaches the age of 60, equal to the amount by which the pension Mr.
Martin is entitled to receive from the Company's Employees Retirement Plan and
Supplemental Employees Retirement Plan, if elected a member, is less than 40% of
his average earnings during the three years out of the final 10 years of his
employment during which such earnings are the highest, provided that he shall
elect to have his pension commence immediately upon retirement.
The Company's retirement program for employees consists of its Employees
Retirement Plan, an actuarially funded plan subject to the provisions of the
Employees Retirement Income Security Act of 1974, as amended (ERISA), and its
unfunded ERISA Excess Retirement Plan and Supplemental Employees Retirement
Plan, both of which are exempt from certain of the provisions of ERISA. All of
the plans are non-contributory defined benefit plans. The unfunded plans for
active employees have related 'Rabbi' trusts (i.e., trusts the assets of which
remain available to satisfy claims of the Company's creditors) which have not
been funded. The Company has no current plans for funding these trusts.
26
<PAGE>
The Board of Directors has authorized 'Rabbi' trust agreements to fund
benefits payable to certain currently retired employees under the Supplemental
Employees Retirement Plan and the ERISA Excess Plan. One trust has been funded
through the purchase of annuities. The other has not yet been established.
The Employees Retirement Plan covers all domestic employees of the Company
and the employees of many of its domestic subsidiaries. Retirement benefits are
determined by aggregating percentages of earnings (as defined) throughout an
individual's career, but retirement benefits so calculated are subject to a
minimum of 1.67% of average annual earnings (as defined) paid in cash for those
five calendar years of the employee's final ten calendar years of employment in
which the employee's earnings were the highest, multiplied by the employee's
number of years of service, reduced by a partial social security offset. Since
this plan is subject to ERISA, there are maximum limitations on pensions
payable. There is no actuarial reduction for early retirement at age 62 or older
after twenty years of service. Employees are 100% vested after five years of
service. If the plan is terminated, or merged with another plan, within three
years following a 'change in control' (as defined in the plan), any remaining
funds, after providing for all fixed and contingent liabilities, must be applied
to provide proportionately increased benefits to participants.
The ERISA Excess Retirement Plan provides a supplemental pension for all
affected employees equal to the difference between the pension as calculated
under the Employees Retirement Plan (without reference to the ERISA maximum
limitation) and the lower maximum pension permitted under federal law to be paid
from the Employees Retirement Plan.
In addition, the Compensation Committee of the Board of Directors may elect
an employee a member of the Supplemental Employees Retirement Plan. A member of
the Supplemental Employees Retirement Plan is entitled upon retirement (but not
before the first day of the month following the member's 60th birthday or such
earlier date as may be determined by the Compensation Committee, in the case of
officers, or by the Executive Committee, in the case of other members) to a
supplemental pension equal to the difference between the aggregate pensions
payable under the Employees Retirement Plan and the ERISA Excess Retirement Plan
and an amount calculated in the same manner as is the pension under the
Employees Retirement Plan, but without regard to the limitations on maximum
pensions mandated by ERISA, and with the following modifications: (i) for
pension calculation purposes, such member is deemed to have continued employment
and earnings for five additional years, but not beyond age 65 unless a different
period is specified by the Compensation Committee (in the case of officers) or
the Executive Committee (in the case of other members), and (ii) average annual
earnings are those for the highest three of the last ten years (including years
in which such member is deemed to have continued earnings and employment under
clause (i), above).
These plans provide for normal post-retirement payment options and for
normal survivors' benefit options in the event of death prior to retirement,
including a Company-paid surviving spouse benefit.
27
<PAGE>
Survivors' benefits for members of the Supplemental Employees Retirement Plan
and for those included in groups specified by the Compensation Committee or the
Executive Committee and who meet specified age and service requirements, are
based on service determined as described in the preceding paragraph, with
additional service credited of five years but not beyond age 65.
Earnings, as utilized for the retirement program, consist of (i) regular
fixed compensation for the employee's normal work period in the form of salary
or wages (prior to reduction on account of any election specified in Sections
125, 127, 129 or 401(k) of the Internal Revenue Code); (ii) extra compensation
or cash awards customarily paid to full time salesmen or sales representatives
whether or not based on sales; and (iii) incentive compensation (other than
performance allotments) paid in cash under any incentive compensation plan
adopted by the Board during each calendar year up to a maximum amount of 33-1/3%
of such regular fixed compensation for each such calendar year. Under the
Supplemental Employees Retirement Plan, a member is credited, for the year of
retirement or death during employment and for subsequent years for which an
employee is deemed to have continued employment and earnings, with 100% of the
target incentive compensation (excluding performance allotments) applicable to
such member's salary level as of the date of such member's retirement or death,
in lieu of any credit under clause (iii) above for such years. Covered earnings
for 1993 (salary rate at September 1, 1993, plus covered incentive compensation
accrued in 1992 and paid in 1993, with years of service through 1993) for the
four persons named in the Summary Compensation Table who are not members of the
Supplemental Employees Retirement Plan were approximately: Mr. AtLee $600,000
(27 years); Mr. Bethune $426,667 (24 years); Mr. Martin $342,667 (5 years); and
Mr. Murray $340,000 (26 years). Covered earnings for the person named in the
Summary Compensation Table who is a member of the Supplemental Employees
Retirement Plan, which would have been utilized had he retired at December 31,
1993, assuming the Compensation Committee took no action to designate a period
ending prior to age 65 during which they would be deemed to have continued
employment with the same earnings (with years of service projected to age 65),
would have been Mr. Costello $880,000 (43 years).
DIRECTORS' COMPENSATION
Directors who are employees are not entitled to extra compensation by
reason of their directorships or their attendance at meetings of the Board, any
committee thereof, or of the shareholders. Directors who are not employees of
the Company or of any of its subsidiaries are paid a retainer of $20,000 per
year. Such directors also receive annual retainers while chairmen ($4,000 each,
except Nominating, $2,000) or members ($2,000 each, except Nominating, $1,000)
of committees of the Board. Each such director is also paid a fee of $1,000 for
attendance at a meeting of the Board and the committee meetings on the same day,
and $500 for attendance on any other day at committee meetings or at a meeting
of shareholders.
28
<PAGE>
Pursuant to the Restricted and Deferred Stock Plan for Non-Employee
Directors, non-employee directors receive an annual grant of 200 shares of
Common Stock on the date of each annual meeting of shareholders, either in the
form of restricted stock (with restrictions lapsing after the next annual
meeting) or as deferred stock (with restrictions lapsing after the next annual
meeting, but which is distributed in the year following termination of Board
service). A person who becomes a non-employee director between annual meetings
will receive a pro-rated grant, but if a grant would be less than 40 shares no
grant will be made.
Under an arrangement available to all non-employee directors, compensation
for services as a director may be deferred until after retirement from the
Board, when it will be paid together with interest equivalents accrued at the
prime lending rate during the period of deferral. No director deferred his or
her director's fees in 1993 under such arrangement.
Under the Non-Employee Directors Retirement Plan, a person who has both
been a director and not been an employee for at least thirty-six months is
entitled, upon termination of membership on the Board of Directors at retirement
age (as determined under policies of the Board from time to time) or for other
reasons contemplated by the Plan (including circumstances related to a 'change
in control', as defined), to an annual benefit equal to the then current
retainer paid to non-employee directors (exclusive of retainers paid for
chairmanship of or membership on any committee of the Board) plus the value of
the most recent grant under the Restricted and Deferred Stock Plan for
Non-Employee Directors, in quarterly installments for a period of time equal to
the number of calendar quarters (not in excess of 40) during which such person
was a director and not an employee of the Company or any subsidiary. This
unfunded plan has a related 'Rabbi' trust which is not funded. The Company has
no current plans for funding this trust.
Other personal benefit-type compensation for the entire group of directors
and officers is not individually significant or reportable.
INFORMATION CONCERNING INDEPENDENT PUBLIC ACCOUNTANTS
The independent certified public accounting firm of KPMG Peat Marwick has
audited the Company's accounts for all years since 1916, and at its meeting on
February 15, 1994, the Board of Directors selected such firm for the 1994 audit.
The audit services include examination of annual financial statements and review
of quarterly financial information.
A representative of KPMG Peat Marwick is expected to be present at the
meeting, and will have an opportunity to make a statement and to respond to
appropriate questions.
TIMELY SUBMISSION OF SHAREHOLDER PROPOSALS
It is anticipated that the 1995 annual meeting of shareholders will be held
on April 17, 1995. Proposals which shareholders intend to present at such
meeting must be received by the Company at
29
<PAGE>
its executive offices in Wayne, New Jersey, by November 8, 1994, for inclusion
in its proxy statement and proxy relating to that meeting.
ADMISSION TO ANNUAL MEETING
The 1994 Annual Meeting of Shareholders will be held at 11:00 a.m. on
Monday, April 18, 1994 at South Portland, Maine. Admission to the meeting is
limited to shareholders of the Company or their properly designated
representatives. One admission ticket to the meeting will be sent to each
shareholder who requests a ticket by filling out and returning to the Company
the Request for Admission Ticket enclosed with the proxy materials. In order to
provide time to forward an admission ticket, please return your Request for
Admission Ticket form as soon as possible. Only ticket-holders will be admitted
to the Annual Meeting.
OTHER MATTERS
The management knows of no further business intended to be presented to the
meeting, but if any further business properly comes before the meeting, the
persons named in the enclosed form of proxy will vote all proxies in accordance
with their best judgment.
A. C. Brennan
Secretary
30
<PAGE>
EXHIBIT A
TEXT OF PROPOSED AMENDMENT TO
RESTATED ARTICLES OF INCORPORATION
Seventh: The Company may hold meetings of shareholders within or outside
the State of Maine.
31
<PAGE>
['RECYCLED' LOGO]
PRINTED ON RECYCLED PAPER
AMERICAN CYANAMID COMPANY
ONE CYANAMID PLAZA
WAYNE, NEW JERSEY 07470
[LOGO]
NOTICE
OF
1994
ANNUAL MEETING
AND
PROXY STATEMENT
<PAGE>
APPENDIX
Graphic and Image Information:
Performance graph on page 22 of the paper format.
Growth graph on page 23 of the paper format.
<PAGE>
AMERICAN CYANAMID COMPANY PROXY
ONE CYANAMID PLAZA, WAYNE, NEW JERSEY 07470
This Proxy is Solicited on Behalf of the Board of Directors for Annual Meeting
of Shareholders, April 18, 1994.
The undersigned appoints A.J. Costello, T.D. Martin, J.S. McAuliffe, and
P.B. Webster, or any one or more of them acting in the absence of others,
proxies, each with full power of substitution, to vote all shares of Common
Stock of the Company which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Shareholders of the Company to be
held on April 18, 1994, and at any adjournment thereof, as set forth on the
reverse hereof, all as more fully set forth in the accompanying proxy statement,
and in their discretion upon such other matters as may properly come before the
meeting.
INDICATE VOTE AND SIGN ON THE REVERSE SIDE.
THIS PROXY, IF PROPERLY EXECUTED AND DATED, WILL BE VOTED AS SPECIFIED ON THE
REVERSE SIDE HEREOF. IF NO SPECIFIC DIRECTION IS GIVEN, IT WILL BE VOTED FOR
ITEM NOS. 1, 2 AND 3 AND AGAINST SHAREHOLDER PROPOSAL NO. 4.
(Continued on other side)
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE 'FOR' ITEM NOS. 1, 2 AND 3.
1. Election of Directors. Nominees: A.R. Dragone, A.J. Levine and A. Wexler.
(INSTRUCTION: to withhold authority to vote on any nominee, write that
nominee's name on the line below.)
[ ] FOR all nominees (except as written to the contrary.)
[ ] VOTE WITHHELD from all nominees.
2. Amendment to Restated Articles of Incorporation
[ ] FOR [ ] AGAINST [ ]ABSTAIN
3. Amendment to Incentive Compensation Plan
[ ] FOR [ ] AGAINST [ ]ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE 'AGAINST'
ITEM NO. 4.
4. Confidential Ballot [ ] FOR [ ] AGAINST [ ] ABSTAIN
Dated: ...............................
Signature: ...........................
Signature: ...........................
Please sign exactly as printed on this
proxy. When signing as attorney,
executor, administrator, trustee or
guardian, give title.
