SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities 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
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
INTERNATIONAL FLAVORS & FRAGRANCES INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
-------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------
3) Filing Party:
-------------------------------------------------------
4) Date Filed:
-------------------------------------------------------
<PAGE>
IFF
INTERNATIONAL FLAVORS & FRAGRANCES INC.
521 WEST 57TH STREET
NEW YORK, N.Y. 10019
----------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 8, 1997
The Annual Meeting of Shareholders of International Flavors & Fragrances
Inc., a New York corporation (hereinafter called the "Company"), will be held at
the office of the Company, 521 West 57th Street, New York, New York, on
Thursday, May 8, 1997, at 10 A.M., Eastern Daylight Saving Time, to elect 12
directors for the ensuing year, to act on a proposed new stock option plan, and
to transact such other business as may properly come before the meeting or any
adjournments thereof.
Only shareholders of record at the close of business on March 25, 1997 will
be entitled to notice of and to vote at the meeting.
Admission to the meeting will be by ticket only. If you are a shareholder
of record and plan to attend, please complete and return the ticket request card
which is enclosed for such holders. If your shares are not registered in your
own name and you plan to attend, please request a ticket by writing to the
Office of the Secretary, International Flavors & Fragrances Inc., 521 West 57th
Street, New York, New York 10019. Evidence of your ownership, which you can
obtain from your bank or broker, must accompany your letter.
IF YOU DO NOT EXPECT TO ATTEND THE MEETING IN PERSON, YOU ARE REQUESTED TO
SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENCLOSED ADDRESSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors,
Stephen A. Block
Secretary
March 27, 1997
<PAGE>
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
the Company's Board of Directors (the "Board") of proxies to be used at the
Annual Meeting of Shareholders of the Company to be held on May 8, 1997 at the
principal executive office of the Company, 521 West 57th Street, New York, New
York 10019. This proxy statement and the form of proxy will be sent to
shareholders on or about March 27, 1997. In addition to solicitation by mail,
proxies may be solicited personally, by telephone or by telegram. The Company
has retained Corporate Investor Communications, Inc. to assist in such
solicitation for a fee of $7,000. The cost of soliciting proxies will be borne
by the Company.
Any shareholder who signs and returns the enclosed form of proxy may revoke
it at any time before it has been exercised, by a written instrument or by
personal attendance at the meeting.
The Company had outstanding at the close of business on December 31, 1996,
109,971,517 shares of Common Stock entitled to one vote per share. Only
shareholders of record at the close of business on March 25, 1997 will be
entitled to vote at the meeting.
ELECTION OF DIRECTORS
At the meeting 12 directors will be elected in accordance with the By-laws
of the Company, as amended, to serve for the ensuing year and until their
successors are elected and shall qualify. Except as stated below, the shares of
Common Stock represented by the proxies hereby solicited will be voted for the
election of the 12 nominees whose names are listed below, all of whom are
presently directors of the Company. Should any of such nominees be unable for
good cause to serve (which is not now anticipated), it is intended that such
shares will be voted for the balance of those named and for such substitute
nominees as the Board may recommend.
Where no qualifying note reference appears in the table below next to the
number of shares beneficially owned, as defined by Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the named
director has sole voting and investment power over all such shares.
<TABLE>
INFORMATION ABOUT NOMINEES
<CAPTION>
SHARES OF PER-
COMPANY STOCK CENTAGE
BENEFICIALLY OF
PRINCIPAL OCCUPATION DURING YEAR FIRST OWNED AS OF SHARES
LAST FIVE YEARS AND BECAME DECEMBER 31, OUT-
NAME AGE OTHER DIRECTORSHIPS HELD DIRECTOR 1996 STANDING
---- --- --------------------------- -------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Margaret Hayes Adame .... 57 President, Fashion Group International, 1993 2,000(1) (2)
an international trade organization,
since 1993; Senior Vice-President, Saks
Fifth Avenue, retailing, prior thereto;
Director, North American Watch
Corporation
Brian D. Chadbourne ..... 44 Senior Vice-President of the 1997 0 (2)
Company since January 1997;
Vice-President of the Company
September-December 1996; President
and Chief Executive Officer,
Keebler Company, a baked goods
manufacturer, a subsidiary of
United Biscuits plc 1993-1996;
Managing Director, United Biscuits
plc prior thereto.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
SHARES OF PER-
COMPANY STOCK CENTAGE
BENEFICIALLY OF
PRINCIPAL OCCUPATION DURING YEAR FIRST OWNED AS OF SHARES
LAST FIVE YEARS AND BECAME DECEMBER 31, OUT-
NAME AGE OTHER DIRECTORSHIPS HELD DIRECTOR 1996 STANDING
---- --- --------------------------- -------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Robin Chandler Duke(3)(4) ..... 73 Chairman, Population Action 1975 17,000(1) (2)
International, a not-for-profit
organization; Director,
American Home Products Corp.
and River Bank
Richard M. Furlaud(4) ......... 73 Chairman of the Board of Trustees, 1990 54,250(1) (2)
The Rockefeller University, an
institution of higher learning;
Retired President, Bristol-Myers
Squibb Company
Eugene P. Grisanti(5) ......... 67 Chairman of the Board and 1979 1,540,647(1)(6) 1.4%
President of the Company
Thomas H. Hoppel .............. 66 Vice-President and Chief Financial 1993 56,972(1) (2)
Officer of the Company
Herbert G. Reid(3) ............ 70 Retired; formerly Executive Vice- 1978 15,000(7) (2)
President and Director,
Schlumberger Limited, oil field
services and electronics
George Rowe, Jr.(3)(4) ........ 75 Attorney; member of the law firm 1994 9,325,428(1)(6) 8.5%
of Fulton, Rowe, Hart & Coon
Stanley M. Rumbough, Jr. (4) .. 76 Investments and business 1964 32,000(1) (2)
development; Director, CUC
International Inc.
Henry P. van Ameringen ........ 66 President, van Ameringen 1961 7,352,443(1)(6) 6.7%
Foundation, Inc., a charitable
foundation; formerly
Vice-President, International
Flavors & Fragrances (Europe)
Hendrik C. van Baaren ......... 57 Senior Vice-President of the 1991 68,564(1) (2)
Company
William D. Van Dyke, III ...... 65 Senior Vice-President, Smith 1973 7,837,458(1)(8) 7.1%
(3)(4) Barney Inc., stockbrokers
</TABLE>
- ------------
(1) Pursuant to Rule 13d-3 under the Exchange Act the number of shares of
Common Stock of the Company beneficially owned by Messrs. Grisanti, Hoppel,
and van Baaren and by non-employee directors includes (where applicable)
shares which he or she has (or will have 60 days after such date) the right
to acquire under stock options granted by the Company. The respective
numbers of such shares are 151,921 for Mr. Grisanti, 18,889 for Mr. Hoppel,
50,666 for Mr. van Baaren, 12,000 for each of Ms. Duke and Messrs. Furlaud,
Rumbough, van Ameringen and Van Dyke, and 1,000 for each of Ms. Adame and
Mr. Rowe.
(2) Less than .1%.
3
<PAGE>
(3) Member of Executive Committee.
(4) Has held this position for more than the last five years.
(5) Chairman of the Executive Committee.
(6) The numbers of shares of Common Stock of the Company beneficially owned by
Messrs. Rowe, Grisanti and van Ameringen listed above, and the numbers of
shares beneficially owned by Messrs. Rowe, van Ameringen and Henry G.
Walter, Jr. listed in the table on page 15, include holdings of the
following trusts and foundations. Messrs. Rowe, van Ameringen and Walter
are the trustees of three trusts, and Messrs. Rowe and Walter are trustees
under another trust established under the will of A. L. van Ameringen which
hold 1,767,225 shares and 1,382,498 shares, respectively. Messrs. Rowe and
van Ameringen are officers of the van Ameringen Foundation, Inc., which
owns 1,626,131 shares. Messrs. Rowe, Walter and van Ameringen are three of
the eight directors of that foundation. Messrs. Rowe and van Ameringen are
co-executors of an estate holding 678,633 shares and Mr. Rowe is the
executor of another estate holding 883,879 shares. Mr. Rowe is an officer
of two other charitable foundations which own 1,267,614 shares. Messrs.
Rowe, Grisanti and Walter are the directors of each of those two
foundations. Messrs. Rowe and Walter are also trustees of eight trusts
holding an aggregate of 794,364 shares. Messrs. Rowe and Walter are the
trustees of one trust and two of three trustees of another trust holding an
aggregate of 50,391 shares for the benefit of certain family members of Mr.
Walter. Mr. Walter is one of two trustees of another trust for the benefit
of a family member holding 3,744 shares. Mr. Rowe is sole trustee of a
trust holding 750 shares and is one of three trustees of another trust
holding 4,000 shares and Mr. Walter is one of two trustees of another trust
holding 2,907 shares. Messrs. Rowe, Walter and van Ameringen are trustees
of three additional trusts each holding 285,981 shares. Mr. van Ameringen
is also a trustee of a charitable trust holding 537,974 shares. The number
of shares beneficially owned by Mr. Grisanti listed above includes 273,033
shares with respect to which he has sole voting and investment power and
1,267,614 shares with respect to which he has shared voting and investment
power. The number of shares with respect to which Messrs. Rowe and van
Ameringen have sole voting and investment power and shared voting and
investment power is set forth in the table on page 15.
(7) All of the shares beneficially owned by Mr. Reid listed above are shares
over which he has shared voting and investment power.
(8) The number of shares beneficially owned by Mr. Van Dyke listed above
includes 12,957 shares with respect to which he has sole voting and
investment power and 7,824,501 shares over which he has shared voting and
investment power, including the holdings of the trust referred to in
footnote 2 on page 15, three other trusts and a foundation. Such number
does not include the beneficial interest of Mr. Van Dyke's wife in 129,426
shares owned directly by her. Mr. Van Dyke disclaims any beneficial
interest in any such shares.
All of the above nominees except Mr. Chadbourne were elected by the
shareholders at the 1996 annual meeting. Mr. Chadbourne was elected a director
effective January 1, 1997. During 1996 the Board of Directors held six meetings.
The Company has an Audit Committee which held two meetings and a Stock Option
and Compensation Committee which held four meetings in 1996. The Audit
Committee, consisting of Messrs. Furlaud, Reid and Van Dyke, oversees the
financial operations of the Company and the Company's relationship with its
independent accountants. The Stock Option and Compensation Committee, consisting
of Messrs. Furlaud, Rumbough and Van Dyke, oversees the Company's various
compensation arrangements, determines the stock options to be granted to
employees under the Company's stock option plans and the executive bonuses to be
granted under the Company's executive bonus plans, and makes recommendations to
the Board as to the salaries to be paid to the executive officers of the
Company. The Company does not have a nominating committee.
The Company has amended its By-laws to provide that each director whose
service on the Board begins on or after January 1, 1997 must retire effective as
of the Annual Meeting of Shareholders following the year in which his or her
72nd birthday occurs. Each director serving on December 31, 1996 must retire
effective as of the Annual Meeting of Shareholders following the year in which
his or her 78th birthday occurs.
4
<PAGE>
I. SUMMARY COMPENSATION
The following table sets forth information in respect of the compensation
of the Chairman and President and each of the other four most highly compensated
executive officers of the Company for 1994, 1995 and 1996.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------- -------------
(A) (B) (C) (D) (E) (F)
SECURITIES ALL OTHER
NAME AND UNDERLYING COMPEN-
PRINCIPAL SALARY BONUS OPTIONS SATION
POSITION YEAR ($) ($)(1) (#) ($)(2)(3)
--------- ---- ------ ------- --------- ---------
<S> <C> <C> <C> <C> <C>
Eugene P. Grisanti .......................... 1996 $890,000 $222,500 40,000 $36,636
Chairman of the Board 1995 850,000 425,000 75,000 34,287
and President 1994 770,000 385,000 75,000 30,324
Hugh R. Kirkpatrick ......................... 1996 486,982 118,750 25,000 16,730
Senior Vice-President 1995 453,102 176,000 50,000 15,382
and Director 1994 410,338 200,000 50,000 13,790
Hendrik C. van Baaren ....................... 1996 481,077 116,250 35,000 15,786
Senior Vice-President 1995 440,263 255,000 50,000 14,362
and Director 1994 397,505 192,500 50,000 12,839
Rudolf Merz ................................. 1996 348,100 87,025 10,000 --
Vice-President 1995 351,500 139,770 15,000 --
1994 297,000 120,000 15,000 --
Thomas H. Hoppel ............................ 1996 310,290 75,000 20,000 11,911
Vice-President, Chief Financial Officer 1995 286,049 137,500 35,000 10,769
and Director 1994 260,057 125,000 35,000 9,499
</TABLE>
- -----------
(1) Under the Company's Management Incentive Compensation Plan.
(2) For the year 1996, the following amounts were paid or set aside by the
Company in respect of individual officers listed in the above compensation
table under the Company's Retirement Investment Fund Plan, a defined
contribution plan, and the Company's unfunded Supplemental Retirement
Investment Plan: Mr. Grisanti, $26,723, Mr. Kirkpatrick, $14,273, Mr. van
Baaren, $13,973 and Mr. Hoppel, $9,023.
(3) For the year 1996, the following amounts were imputed under the tax law as
compensation to the executive officers listed in the above compensation
table in consideration of life insurance coverage of such persons under the
Company's Executive Death Benefit Program: Mr. Grisanti, $9,913, Mr.
Kirkpatrick, $2,457, Mr. van Baaren, $1,813 and Mr. Hoppel, $2,888. No
participant in such Program has or will have any interest in the cash
surrender value of the underlying insurance policies.
5
<PAGE>
II. OPTION GRANTS IN 1996
The following table shows all grants of options in 1996 to the executive
officers named in the Summary Compensation table. The Company's option plans do
not provide for the grant of stock appreciation rights (SARs).
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- -----------------------------------------------------------------------------------------
(A) (B) (C) (D) (E) (F)
NUMBER % OF TOTAL
OF SHARES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES OR BASE
GRANTED IN FISCAL PRICE EXPIRATION GRANT DATE PRESENT
NAME (#) (1) YEAR ($/SH)(2) DATE VALUE ($)(3)
---- --------- --------- --------- ----------- -------------------
<S> <C> <C> <C> <C> <C>
E. P. Grisanti ................. 40,000 6.5 48.125 5/9/06 $555,600
H. R. Kirkpatrick .............. 25,000 4.1 48.125 5/9/06 347,250
H. C. van Baaren ............... 35,000 5.7 48.125 5/9/06 486,150
R. Merz ........................ 10,000 1.6 48.125 5/9/06 138,900
T. H. Hoppel ................... 20,000 3.2 48.125 5/9/06 277,800
</TABLE>
- -----------
(1) All options were granted on May 9, 1996. Such options become exercisable in
three equal installments 24, 36 and 48 months, respectively, after the date
of grant.
(2) All options were granted at the market price on the date of grant.
(3) The Company used the Black-Scholes model of option valuation to determine
grant date present value. The actual value, if any, an executive may
realize will depend on the excess of the stock price over the exercise
price on the date the option is exercised, so that there is no assurance
the value realized by an executive will be at or near the value estimated
by the Black-Scholes model. The estimated values under that model are based
on arbitrary assumptions as to variables such as interest rates, stock
price volatility, future dividend yield and the time of exercise. For these
reasons, the Company does not agree that the Black-Scholes model can
properly determine the value of an option. The assumptions used by the
Company are as follows: a grant date stock price and an exercise price of
$48.125 per share; an option term of 10 years; a stock price volatility
based on the calendar year closing prices of the Company's Common Stock
(plus dividends) for the period December 31, 1986 through December 31,
1996; a dividend yield of 2.7% (the average dividend yield for the 12-month
period ending May 31, 1996, calculated by dividing the dividends paid
during the one-year period prior to the option grant by the grant date
stock price); and a risk-free interest rate of 7.08% (the yield on the date
of grant on the U.S. Government Zero Coupon Bond with a maturity closest to
the option term).
6
<PAGE>
III. OPTIONS EXERCISED IN 1996 AND OPTION VALUES AT DECEMBER 31, 1996
The following table provides information as to options exercised in 1996 by
each of the executive officers named in the Summary Compensation table and the
value of options held by such executive officers at December 31, 1996 measured
in terms of the closing price of the Common Stock in consolidated trading on
December 31, 1996.
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
NUMBER OF VALUE OF UNEXERCISED
SECURITIES IN-THE-MONEY
UNDERLYING OPTIONS AT
UNEXERCISED FY-END($)
OPTIONS AT
FY-END (#)
SHARES ACQUIRED VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) ($) UNEXERCISABLE UNEXERCISABLE
---- --------------- --------------- ------------- -----------------
<S> <C> <C> <C> <C>
E. P. Grisanti ..................... -- -- 126,921/195,000 1,848,561/669,750
H. R. Kirkpatrick .................. 17,200 248,088 49,466/128,334 438,306/475,806
H. C. van Baaren ................... 62,000 906,820 33,666/135,334 299,424/449,436
R. Merz ............................ 15,000 442,350 40,000/42,000 455,865/151,530
T. H. Hoppel ....................... 36,777 517,336 8,889/88,334 80,001/297,906
</TABLE>
DIRECTORS' COMPENSATION
Directors who are not employees of the Company receive an annual retainer
of $15,000 and a fee of $750 for each meeting of the Board or committee
attended, except that when a committee meeting is held on the date of a Board
meeting a fee of only $500 is paid. Through 1999, on the date of the annual
meeting of shareholders, such directors also receive automatic annual stock
option grants of 3,000 shares of Common Stock under the Company's 1990 Stock
Option Plan for Non-Employee Directors. On May 9, 1996, each non-employee
director received an option for 3,000 shares at $48.125 per share.
The Company has established a Directors' Deferred Compensation Plan under
which directors may defer all or a portion of their cash compensation until
retirement or another specified date. Deferred amounts credited to a director's
plan account earn interest at the interest rates applicable from time to time to
deferred compensation awards under the Company's Management Incentive
Compensation Plan.
As part of its overall program of charitable contributions, the Company has
established the Director Charitable Contribution Program. Under the Program, the
Company has purchased life insurance policies on the lives of participating
directors and is the owner and sole beneficiary of the policies. After the death
of a covered director, the Company will donate $500,000 to one or more
qualifying charitable organizations designated by the director and $500,000 to
The IFF Foundation. Individual directors derive no financial benefit from the
Program since all deductions relating to the contributions accrue solely to the
Company. The Program should have no long-term cost to the Company.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS
Mr. Grisanti is employed under a contract dated as of January 1, 1997 as an
executive at a salary of $930,000 per annum unless the Board shall have fixed a
higher salary, for the period (the "executive period") which commenced on
January 1, 1997 and which may be terminated at any time thereafter with or
without cause, by either the Company or Mr. Grisanti on written notice to the
other. If the contract is not terminated on or before December 31, 2001, it will
7
<PAGE>
expire on that date. Under the contract Mr. Grisanti may share, as determined by
the Board, in any incentive compensation, bonus, stock option or other employee
benefit plans, programs or policies of the Company. The contract provides that,
after termination of the executive period, Mr. Grisanti will serve part-time in
a consulting capacity for a period of ten years. During that consulting period,
Mr. Grisanti will receive an annual fee of $150,000 per year.
Mr. Grisanti was granted an award of 250,000 shares of restricted stock
under the contract, effective January 1, 1997. Because the shares are
"restricted", they may not be sold, pledged or otherwise transferred until the
applicable restriction period on a given installment of the award has lapsed.
The restriction period extends to February 28, 1998 with respect to one-fifth of
the shares covered by the award and to each succeeding February 28 through and
including February 28, 2002 with respect to each additional one-fifth of such
shares. Mr. Grisanti has the right to vote the shares of, and receive dividends
on, the restricted stock. All or a portion of the shares are subject to
forfeiture under certain circumstances, including termination by either party,
with or without cause, of Mr. Grisanti's employment, and the failure of the
Company to attain either of the alternative performance goals either for an
installment period or subsequently during the term of the contract.
Each installment of the award is subject to the attainment of one of two
alternative performance goals, one based on the Company's net income and the
other on its return on equity. If a performance goal is not attained for an
installment period under either alternative, the shares awarded with respect to
that installment period will remain held in custody until the end of a
succeeding installment period, and the performance goal for the former
installment period or periods as well as for the latter installment period will
be deemed attained if either performance goal is attained for the combined
former and any later installment period or periods. Notwithstanding the
foregoing, a performance goal for any installment period will be deemed attained
if the performance goal is attained for the combined first installment period
and all subsequent installment periods. If a performance goal for any
installment period is not attained as provided above, that installment of the
award will be forfeited. In order to maintain the deductibility under Section
162(m) of the Internal Revenue Code of the amount of the award, any amendment
which would change either alternative performance goal, or the maximum award
payable, is subject to shareholder approval.
Hugh R. Kirkpatrick has decided to retire from the employ of the Company.
In connection therewith, the Company has entered into an agreement with Mr.
Kirkpatrick, dated as of July 22, 1996. Pursuant to that agreement, Mr.
Kirkpatrick resigned as Senior Vice-President and President, Fragrance Division,
and as a Director of the Company on December 31, 1996. He will continue as an
employee until January 1, 1998 at his 1996 annual salary of $475,000, but will
receive no incentive compensation in respect of 1997. On January 1, 1998, Mr.
Kirkpatrick will retire. For 1998, in lieu of his pension Mr. Kirkpatrick will
receive salary continuation payments aggregating $475,000. Commencing January 1,
1999, in addition to his pension under the Company's retirement plans Mr.
Kirkpatrick will receive a supplemental payment in an amount equal to the
difference between what his pension would have been had his retirement date been
January 1, 1999 and the pension to which he will be actuarially entitled as of
January 1, 1998. The agreement also provides that Mr. Kirkpatrick will not
directly or indirectly be employed by, or be a consultant to, any competitor of
the Company until January 1, 2001.
The Board approved, and the Company has entered into agreements (the
"Agreements") with 16 of its present executives, including the executive
officers listed in the above compensation table. The Agreements provide that if,
within three years of a "change of control", as defined below, an Executive is
involuntarily terminated from employment by the Company or resigns following a
substantial diminution in his duties, responsibilities or status or change in
workplace or a decrease in his compensation of 10% or more, in each case which
is not corrected following
8
<PAGE>
notice of objection by the executive, the executive will be entitled to receive
a lump sum payment in an amount equal to the sum of: (i) three times the higher
of (a) his previous compensation for the calendar year prior to the year in
which the change in control occurred or (b) the compensation for the calendar
year prior to the year of termination, in each case including awards under the
Company's Management Incentive Compensation Plan, provided that such payment
will not exceed three times the Executive's "base amount" allocable to such
payment pursuant to Section 280 G of the Internal Revenue Code, (ii) all unpaid
compensation under the Company's Management Incentive Compensation Plan or any
other compensation plan of the Company, payment of which has been deferred
including interest or other investment return thereon and (iii) for each share
of Common Stock of the Company subject to any option held by the executive,
whether or not such option is then exercisable, an amount equal to the
difference between the exercise price thereof and a price equal to the highest
of (a) the market price on the New York Stock Exchange at the close of business
on the effective day of termination, (b) the price contained in any published
tender offer made within one year before or after the date of change in control,
(c) the price contained in any merger or acquisition agreement entered into by
the Company and any third party within one year before or after the date of
change in control, or (d) the market price on the New York Stock Exchange on the
date of change in control, and, upon such payment, such option shall be deemed
cancelled and annulled. The Agreements also provide for a three-year
continuation of certain benefits under the Company's Pension Plan, Retirement
Investment Fund Plan and any supplemental pension provided by the Company.
However, if any payments to the executive, whether under the Agreement or
otherwise, would be subject to the "golden parachute" excise tax under Section
4999 of the Internal Revenue Code, as amended, the payment to the executive
above will be reduced by the amount necessary to avoid the incurrence of such
excise tax. Under the Agreements a "change of control" means the earlier to
occur of the following events: (i) when any person, corporation, partnership,
association, trust or other entity, or any "group," as defined in Section
13(d)(3) of the Exchange Act, becomes the "beneficial owner," as defined in Rule
13d-3 thereunder, directly or indirectly, of securities of the Company
representing 40% or more of the combined voting power of the Company's then
outstanding securities; or (ii) when persons not nominated by the Board of
Directors in the Company's most recent proxy statement constitute a majority of
the members of the Board.
PENSION PLANS
All of the individuals named in the compensation table on page 5 except Mr.
Merz are participants in the Company's Pension Plan, a defined benefit plan,
under which the Company makes periodic payments computed on an actuarial basis
providing for fixed benefits for members in the event of retirement at age 65
(normal retirement date contemplated by the Plan). Mr. Merz is a participant in
the pension plan of the Company's Swiss subsidiary. Benefits under the Pension
Plan are calculated with respect to a five-year average of participating
employees' covered compensation (base salary or wage plus cash bonus), subject
to an offset for amounts received as Social Security benefits for service after
November 30, 1979. The table below indicates, for purposes of illustration, the
approximate amounts of annual retirement income (subject to the above Social
Security offset and without taking into account any limitations under the
Internal Revenue Code) that would have been payable upon retirement at December
1, 1996 on a straight life basis under various assumptions as to salary and
years of service to employees in higher salary classifications who participate
in the Pension Plan. Messrs. Grisanti, Kirkpatrick, van Baaren and Hoppel have
36, 35, 20 and 36 years of service, respectively under the Pension Plan, which
does not include service with foreign subsidiaries. To the extent that the
amounts of annual retirement income exceed the maximum benefit limitations,
including limitations under Section 415 of the Internal Revenue Code, such
amounts are payable in the same form and manner under the Company's unfunded
Supplemental Retirement Plan adopted on October 29, 1986, effective January 1,
1987. Mr. van Baaren, who is not a United States citizen, has significant
amounts of service with foreign subsidiaries of the Company not covered by the
Company's Pension Plan as a result of which he participates in a
9
<PAGE>
separate unfunded arrangement, providing supplemental pension benefits. Under
that arrangement certain employees who serve in foreign countries other than the
countries of which they are nationals receive at age 65 additional pension
benefits to the extent that the aggregate of the amounts payable by law or under
the pension plans of the Company and its subsidiaries are less than the amount
payable under this arrangement. As of December 31, 1996, Mr. van Baaren is
entitled to an annual benefit under this arrangement currently estimated to be
approximately $37,248. No other named executive officer participates in this
arrangement.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL PENSION
FOR SPECIFIED YEARS OF SERVICE
-------------------------------------------------------------------
AVERAGE
COMPENSATION 15 20 25 30 35 40
------------ -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C>
$ 400,000 .............. $104,652 $130,918 $151,438 $171,958 $192,478 $212,998
500,000............... 130,815 163,647 189,297 214,947 240,597 266,247
600,000 .............. 156,978 196,376 227,156 257,936 288,716 319,496
700,000 .............. 183,141 229,106 265,016 300,926 336,836 372,746
800,000 .............. 209,304 261,835 302,875 343,915 384,955 425,995
900,000 .............. 235,467 294,565 340,735 386,905 433,075 479,245
1,000,000 .............. 261,630 327,294 378,594 429,894 481,194 532,494
1,100,000 .............. 287,793 360,023 416,453 472,883 529,313 585,743
1,200,000 .............. 313,956 392,753 454,313 515,873 577,433 638,993
1,300,000 .............. 340,119 425,482 492,172 558,862 625,552 692,242
1,400,000 .............. 366,282 458,212 530,032 601,852 673,672 745,492
</TABLE>
10
<PAGE>
REPORT OF THE
STOCK OPTION AND COMPENSATION COMMITTEE*
The Stock Option and Compensation Committee of the Board of Directors (the
"Committee") (all of the members of which are "outside directors" as that term
is defined in Section 162(m) of the Internal Revenue Code (the "Code")) is
responsible for setting and administering the policies which govern the annual
compensation paid to the executive officers, including the chief executive
officer.
The Committee recommends, for approval by the Board, the annual salaries of
such officers, makes awards under the Management Incentive Compensation Plan
(the "MICP"), grants stock options under the Company's stock option plans and
determines the form and amount of compensation to be given to the President, who
is the chief executive officer.
COMPENSATION POLICIES
The Company's executive compensation policies are based on several criteria
including, but not limited to, the goals established by the Company, the
performance of the executive in accomplishing them, the performance of the
Company itself, and finally, the competitive realities relating to the
compensation required to secure the services and motivational commitment of the
executive involved. Among other factors, the Committee takes into consideration
the Company's sales and earnings, the return on equity and the performance of
the Company's stock. The Committee is generally familiar with and also takes
into consideration the sales, earnings and return on equity, as well as the
performance of the stock, of other comparable companies. Those companies include
companies which were selected on the basis of their lines of business set forth
on the Performance Graph on page 14, but they also include companies in other
lines of business as competition for executives extends beyond the Company's
line of business. The Committee has not made an analysis of the compensation
practices of other companies (which include non-public companies with which the
Company competes for executives) but the Committee is generally familiar with
the compensation practices of other companies and believes that the Company's
compensation practices including both the type and amount of compensation paid
to its executive officers are fair and appropriate under the circumstances.
The Company, in general, intends to structure executive compensation to be
deductible under Section 162(m) of the Internal Revenue Code. To that end, the
structure and administration of the Company's proposed 1997 Employee Stock
Option Plan (the "1997 Plan") has been designed to meet the deductibility
requirements of Section 162(m), and is being submitted for shareholder approval
at the May 8, 1997 Annual Meeting of Shareholders. For a detailed description of
the 1997 Plan, see "Proposed 1997 Employee Stock Option Plan" at page 16. The
Company also believes, however, that, under some circumstances, such as to
attract or retain key executives or to recognize outstanding performance, it may
be in the best interests of the Company and its shareholders to pay executive
compensation in excess of that which may be deductible.
The three basic components of the Company's executive compensation in 1996
were annual salaries, stock options and incentive compensation.
- ---------
* The report of the Stock Option and Compensation Committee shall not be
deemed incorporated by reference by any general statement incorporating by
reference this proxy statement into any filing under the Securities Act of
1933 (the "1933 Act") or under the Exchange Act, except to the extent that
the Company specifically incorporates this information by reference, and
shall not otherwise be deemed filed under such Acts.
11
<PAGE>
SALARIES
The annual salaries for executive officers for the following fiscal year
are usually recommended by the Committee and approved by the Board in December.
Recommendations for the annual salaries for the officers other than the
President are made by the President to the Committee, based on his firsthand
knowledge of the contribution of each executive officer to his respective area
of concentration. The Committee also reviews financial and other data reflecting
the performance of the various executives' areas of responsibility and how such
areas of responsibility contributed to the Company's overall performance, but
there is no precise test or formula by which the recommended salary is related
to performance. Rather than follow such a rigid standard, the Committee believes
that the Company's interests are best served by having a flexible compensation
policy that gives the Committee the leeway to fix compensation after considering
the factors enumerated above and evaluating such factors as each situation
requires.
The annual salary recommendation for the President is determined separately
by the Committee after reviewing the overall results of the Company during the
prior year taking into account economic conditions. For 1996, the President had
an employment contract with the Company under which he was to receive a salary
of $600,000 unless the Company's Board of Directors fixed a higher salary.
Commencing in 1997 the President is employed under a new contract (the "New
Contract"). For a summary of the terms of the New Contract see "Employment
Contracts and Termination of Employment and Change-in-Control Arrangements" at
page 7. It has been the Board's practice to have the Committee review all
executive officers' salaries, including the President's salary, on an annual
basis and make recommendations with respect to such salaries to the Board.
Although consideration is given by the Committee to previous compensation in
past years, the determination of the annual salary increase of the President as
well as the other officers is based primarily upon events occurring during the
past year including the Company's sales and earnings, the return on equity, the
performance of the Company's stock, inflation and cost of living factors. While
again not employing a precise test or formula with respect to the President's
performance, the Committee in granting in December 1995 the President's salary
increase effective January 1, 1996 took into account the factors stated above
with respect to other executive officers and found that such factors fully
justified the President's salary increase.
STOCK OPTIONS
Stock options have long been a significant part of the long-term incentives
awarded by the Company to its officers and its employees. Such plans have been
successful in motivating the officers consistently to promote long-term
shareholder value. Stock options, which return no monetary value to the
recipient unless the shareholders as a whole also benefit from an increase in
the stock price, have been a particularly effective means of promoting
shareholder value and of attracting and retaining the services of qualified
officers of the Company.
The selection of the executive officers of the Company other than the
President for participation in the plans as well as the timing, pricing and the
number of shares covered by individual options, are determined by the Committee,
after considering the recommendations of the President and applying the above
criteria, as well as taking into account options previously granted. As in the
case of salaries, the Committee does not use a precise test or formula of
corporate performance in determining either the timing or number of shares to be
granted. The granting of stock options to the President is considered separately
by the Committee applying the above policy guidelines taking into account
options and restricted stock previously granted. Recognizing the President's
contribution to the Company's overall performance in the past, the Committee
made the 1996 option grant to the President in order to motivate him to continue
in his efforts of improving the Company's performance. Without such an
improvement as reflected in increased shareholder value, the option will have no
value.
12
<PAGE>
INCENTIVE COMPENSATION
Under the MICP as amended in 1995, the amount of bonus paid to the
executive officers of the Company is determined from year to year. All of the
Company's executive officers participate in the MICP. Under the MICP, the
incentive compensation of those selected for participation by the Committee for
each year is paid from an incentive fund for such year, the existence and amount
of which is subject to a performance goal, specified in the MICP, equal to 10%
of the amount by which the pretax consolidated earnings of the Company for such
year exceed the sum of 20% of net capital (defined as the average of the amounts
of the Company's consolidated capital and surplus at the beginning and end of
such year) for such year, provided that the fund may not exceed for any year 10%
of the amount of cash dividends paid by the Company in such year. No award to
any participant may exceed the lesser of 15% of the incentive fund or 100% of
his annual rate of salary. The Committee may exercise negative discretion to
reduce the maximum award to any participant. Under regulations adopted by the
Committee pursuant to the MICP, awards are payable in cash either currently in a
lump sum or in installments that may be deferred in various ways. Under the MICP
the Committee, following the criteria set forth above, and after the year-end
results have been certified by the Company's independent public accountants,
determines whether the MICP's performance goal has been met and, if it has been,
so certifies. The Committee then allocates the incentive fund, or such portion
thereof as the Committee has determined, to the participants and designates the
manner in which awards are to be paid. For 1996, the performance goal was
satisfied and the Committee so certified. With respect to 1996 incentive
compensation under the MICP, the Committee did not use a precise test or formula
in determining whether to reduce the maximum award to the executive officers
including the President. The Committee considered both the President's
performance and the results achieved by the Company in 1996 in determining the
award for that year given to the President under the MICP.
THE PROPOSED 1997 EMPLOYEE STOCK OPTION PLAN
The Committee has recommended, and the Board has approved, subject to
shareholder approval, the 1997 Plan. Like previous Company stock option plans,
the 1997 Plan permits the Committee to grant both incentive and non-qualified
stock options. For a detailed description of the 1997 Plan, see "Proposed 1997
Employee Stock Option Plan" at page 16. Continuing the Company's policy of
using stock options as long term incentive compensation will enable the Company
to continue to be competitive in attracting and retaining executives; to provide
incentives to its executives in their efforts to continue to improve the
Company's sales, profitability and return to shareholders; and to have
flexibility in rewarding outstanding performance.
In summary, the Company has an appropriate and competitive compensation
program, which is designed to promote shareholder value and attract and retain
qualified executives. The Company's compensation soundly balances base salary,
bonus based on annual performance and the use of long-term incentives.
William D. Van Dyke, III, Chairman
Richard M. Furlaud
Stanley M. Rumbough, Jr.
13
<PAGE>
Comparisons of Total Cumulative Return*
Five Year Period Ending December 31, 1996
(The following tabular information is a description, pursuant to Rule 304
of Regulation S-T, of a graph contained in the paper format of this Proxy
Statement being sent to Shareowners.)
IFF S&P Peer Group
1 2 3
------ ------ -----------
1991 100 100 100
1992 108.78 107.61 101.17
1993 116.97 118.41 100.97
1994 146.69 120.01 101.11
1995 156.18 164.95 128.48
1996 150.86 202.73 156.33
Ten Year Period Ending December 31, 1996
(The following tabular information is a description, pursuant to Rule 304
of Regulation S-T, of a graph contained in the paper format of this Proxy
Statement being sent to Shareowners.)
IFF S&P Peer Group
1 2 3
------ ------ -----------
1986 100 100 100
1987 122.23 105.18 104.47
1988 140.65 122.53 124.17
1989 199.77 161.24 157.51
1990 227.03 156.22 161.29
1991 322.45 203.60 221.98
1992 350.79 219.09 224.58
1993 377.18 241.08 224.14
1994 472.99 244.35 224.44
1995 503.60 335.85 285.18
1996 486.45 412.76 347.02
- ----------
(1) Total return assumes that the value of an investment in the Company's
common stock and each index was $100 on December 31, 1991 and December 31,
1986, respectively, and that all dividends were reinvested.
(2) The Peer Group consists of the following companies: Alberto Culver Company,
Avon Products, Inc., Block Drug Co., Inc., Church & Dwight Co., Inc.,
Ecolab Inc., Ethyl Corp., W.R. Grace & Co., Hershey Foods Corp., McCormick
& Company, Inc., Morton International, Inc., NCH Corp., Nalco Chemical
Company, The Quaker Oats Company, Ralston Purina Company, Tambrands Inc.,
and Wm. Wrigley Jr. Company. The performance of the Peer Group is weighted
based on market capitalization. For years ending in December 31, 1994 and
earlier, Borden, Inc. was included in the Peer Group but was omitted for
the years ended December 31, 1995 and December 31, 1996 since, in light of
its acquisition by Kohlberg Kravis Roberts & Co., it is no longer a
separate reporting entity. Helene Curtis Industries, Inc. was included in
the Peer Group, but was omitted for the year ended December 31, 1996 since,
in light of its acquisition by Unilever United States, Inc., it is no
longer a separate reporting entity.
* The Comparisons of Five Year and Ten Year Cumulative Total Return shall not
be deemed incorporated by reference by any general statement incorporating
by reference this proxy statement into any filing under the 1933 Act or
under the Exchange Act, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be
deemed filed under such Acts.
14
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Stock Option and Compensation Committee of the Board of Directors
consists of Messrs. Furlaud, Rumbough and Van Dyke. Mr. Van Dyke is Senior
Vice-President of Smith Barney Inc. which has received commissions for brokerage
services performed in connection with securities transactions on behalf of the
Company and its retirement plans.
STOCK OWNERSHIP
The following is a tabulation as of December 31, 1996 of those
shareholders of the Company who own beneficially in excess of 5% of the
Company's Common Stock determined in accordance with Rule 13d-3 under the
Exchange Act.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
---------------------------------------
TITLE SOLE VOTING SHARED VOTING PERCENT
OF NAME AND ADDRESS AND AND OF
CLASS OF BENEFICIAL OWNER INVESTMENT POWER INVESTMENT POWER CLASS
----- ------------------- ---------------- ------------------ --------
<S> <C> <C> <C> <C>
Common George Rowe, Jr. ................. 12,750 shares 9,312,678 shares(1) 8.5%
Stock One Rockefeller Plaza
New York, N.Y. 10020
Common State Farm Mutual Automobile
Stock Insurance Company and
related entities ................ 6,999,100 shares 0 shares 6.4%
One State Farm Plaza
Bloomington, Ill. 61701
Common Henry van Ameringen .............. 2,422,511 shares 4,929,932 shares(1) 6.7%
Stock 509 Madison Avenue
New York, N.Y. 10022
Common Trust, c/o J.P. Morgan
Stock Florida, FSB .................... 0 shares 5,993,727 shares(2) 5.5%
109 Royal Palm Way
Palm Beach, Florida 33480
Common Henry G. Walter, Jr. (3) ......... 344,669 shares 7,752,817 shares(1) 7.4%
Stock 509 Madison Avenue
New York, N.Y. 10022
</TABLE>
- ----------
(1) See Note 7 on page 4.
(2) Held of record by CEDE & Co. as nominee for a trust of which Mr. and Mrs.
William D. Van Dyke, III and J. P. Morgan Florida, FSB are co-trustees, who
should be considered the beneficial owners of such shares with shared
voting and investment power. Mrs. Van Dyke is also beneficial owner of
129,426 shares in which she has sole voting and investment power and
1,830,774 shares over which she has shared voting and investment power. See
footnote 9 on page 4 for additional shares beneficially owned by Mr. Van
Dyke. J. P. Morgan and related entities also beneficially own 881,512
shares over which they have sole voting power and 1,580,668 shares over
which they have sole investment power, and 25,485 shares over which they
have shared voting power and 50,379 shares over which they have shared
investment power.
(3) The number of shares beneficially owned by Mr. Walter listed above does not
include the beneficial interest of Mr. Walter's wife in 18,016 shares owned
directly by her. Mr. Walter disclaims any beneficial interest in any such
shares.
15
<PAGE>
As of December 31, 1996 the officers and directors of the Company (23
persons) and Mr. Merz beneficially owned in the aggregate shares of the
Company's Common Stock as set forth below:
<TABLE>
<CAPTION>
AMOUNT OF PERCENT
TITLE OF CLASS NAME BENEFICIAL OWNERSHIP(1)(2) OF CLASS
-------------- ---- -------------------------- --------
<S> <C> <C> <C>
Common Stock .......... All directors and officers as a group ... 20,388,872 18.5%
Common Stock .......... R. Merz ................................. 49,000 (3)
</TABLE>
- ----------
(1) Includes 509,946 shares of Common Stock which the directors and officers of
the Company have (or will have as of 60 days after such date) the right to
acquire under stock options granted by the Company.
(2) Adjusted to eliminate duplicate holdings of the same shares by two or more
officers and directors. Except for the shares included in footnotes 7, 8
and 9 on page 4, the remaining shares listed as beneficially owned by all
directors and officers in the aggregate are subject to the sole voting and
investment power of the individual directors or officers whose shares are
included in such number.
(3) Less than .1%.
SHAREHOLDER PROPOSALS
Any shareholder proposal intended to be presented at the next Annual
Meeting of Shareholders must be received by the Company for inclusion in the
Company's Proxy Statement and form of proxy with respect to that meeting by
November 26, 1997.
ADDITIONAL INFORMATION
The Company has selected Price Waterhouse LLP to be its principal
independent accountants for 1997. Representatives of Price Waterhouse LLP are
expected to be present at the shareholders' meeting with the opportunity to make
a statement if they desire to do so and are expected to be available to respond
to appropriate questions.
The Company paid to Messrs. Fulton, Rowe, Hart & Coon, of which Mr.
Rowe, a director of the Company, is a member, $270,800 for legal services in
1996.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
In 1996, Mr. Chadbourne did not file on a timely basis one report
required by Section 16 of the Exchange Act relating to his appointment as an
officer of the Company, each of Stuart R. Maconochie, an officer of the Company,
and Mr. Merz did not file on a timely basis one report required by Section 16 of
the Exchange Act relating to a transaction in Company stock, and a report
required by Section 16 of the Exchange Act reflecting Mr. van Ameringen's
succession as co-trustee of a family trust was not filed on a timely basis.
PROPOSED 1997 EMPLOYEE STOCK OPTION PLAN
The Company's Employee Stock Option Plan of 1992, which was adopted on
February 11, 1992, was approved by the shareholders on May 14, 1992 (the "1992
Plan") . As of December 31, 1996, only 85,248 shares of Common Stock of the
Company remain available under the 1992 Plan for the granting of options.
16
<PAGE>
The Board believes that the 1992 and earlier Plans have fulfilled their
purpose and were of significant benefit to the Company and its shareholders. In
view of the Board's experience under these Plans and its continued belief that
stock options play an important role in securing and retaining the services of
key personnel and encouraging such personnel to make greater efforts on behalf
of the Company, on February 11, 1997, the Board adopted the 1997 Plan, subject
to approval by the shareholders of the Company.
The favorable vote of the holders of a majority of the outstanding
shares of Common Stock of the Company is required in order to adopt the 1997
Plan. The Board considers it in the best interests of the Company and the
shareholders to approve the 1997 Plan and recommends that the shareholders vote
in favor of the following resolution which will be presented to the meeting:
"RESOLVED, that the Company's 1997 Employee Stock Option Plan, in the
form presented to this meeting, be, and it hereby is, approved."
The terms of the 1997 Plan are set forth in full in Exhibit A attached
hereto.
A total of 3,500,000 shares of Common Stock of the Company may be
issued upon the exercise of options granted under the 1997 Plan. The maximum
aggregate number of shares that may be granted under the 1997 Plan during its
term to any participant therein shall be 500,000 shares (the "Individual Cap").
Any key employee or officer may be designated by the Board of Directors for
participation. The timing, pricing and the number of shares covered by
individual options will be determined by the Stock Option and Compensation
Committee of the Board or such other Committee or a subcommittee of a committee
as may be appointed by the Board to administer the Plan (herein called the
"Committee") (all of the members of which Committee will be "outside directors"
as that term is defined in Section 162(m) of the Internal Revenue Code (the
"Code") as amended) . If any options expire or terminate without being exercised
in full, including options voluntarily surrendered for cancellation, the shares
subject thereto which have not been purchased in accordance with the terms of
such options will be available for the grant of new options under the Plan.
Unless otherwise determined by the Committee at the time of grant, options
granted hereunder to employees subject to United States taxation will be deemed
to be "incentive stock options" to the extent permitted under section 422 of the
Code and the balance of such options will be deemed not to be incentive stock
options.
The option price must be at least the fair market value of the stock on
the date of grant. No option may be for longer than ten years, and no option may
be granted after May 8, 2007, although previously granted options may be remain
exercisable beyond that date. Up to one-third of the shares covered by an option
may be purchased at any time after 24 months from the date of grant; up to
two-thirds at any time after 36 months from such date; and all the shares at any
time after 48 months from such date. Upon exercise of any option the employee
may pay for the stock covered by the option and/or may pay for any tax
withholding resulting from such exercise with Common Stock of the Company,
provided the employee has held such Common Stock for at least six months or such
longer period as determined by the Committee. The Committee may also allow
payment upon exercise of any option by any other means which the Committee
determines to be consistent with the Plan's purpose and applicable law.
At the discretion of the Committee, options ("reload options") may be
granted to replace shares delivered by a Plan participant in payment of the
option price of such option and/or in payment of any tax withholding resulting
from such exercise. A reload option must have an option price of not less than
100% of the per share market value on the date of grant of such reload option,
and will be subject to all other terms and conditions of the original grant,
including the expiration date, to the availability of the shares under the Plan
and to the Individual Cap of such participant.
Each option may be exercised only so long as the employee remains in
the employ of the Company, but if he or she voluntarily resigns with the consent
of the Board of Directors, or if he or she becomes totally disabled, or if he or
she retires at or after the age of 65, or if he or she dies while employed by
the Company, he or she, or in the case of
17
<PAGE>
death, his or her legal representative, distributees or legatees, may exercise
the option within three months thereafter (but not more than 120 months after
the date of the option agreement) with respect to any shares the employee was
entitled to purchase under the option at the date of such resignation,
disability, retirement or death, except that, in the case of the employee's
death before the option first becomes exercisable, his or her legal
representatives, distributees or legatees may exercise the option for a pro rata
portion of the total number of shares subject thereto. No option may be assigned
or transferred in any way by the employee except at death, by will or pursuant
to the applicable laws of descent or distribution, and in the event of death the
option will be exercisable as stated above. If an employee attempts to make any
prohibited assignment or transfer, the unexercised portion of the option will be
null and void.
The 1997 Plan provides that each option agreement is to contain an
anti-dilution provision for adjustment of the number of shares and the price per
share to take account of any stock splits, stock dividends or similar
transactions.
The Board may discontinue or amend the 1997 Plan in any respect, except
with respect to shares subject to outstanding options, provided that it may not,
without shareholder approval, change the number of shares available for options,
change the employees eligible to receive options or reduce the option price
below that presently provided, or make any change requiring shareholder approval
under Section 162(m) of the Code.
The Company has been advised by its counsel that if shares of Common
Stock of the Company are issued to an employee upon exercise of a non-qualified
stock option, (i) no income will be realized at the time of grant of such
option; (ii) upon exercise of the option, he or she will realize as income,
taxable at ordinary income rates in the year of exercise, an amount equal to the
excess of the market price on the date of exercise over the option price of such
shares, and the amount of such excess will be deductible as compensation for
federal income tax purposes by the Company in the year of exercise; (iii) the
income realized upon exercise of a non-qualified option will not be subject to
the alternative minimum tax; (iv) any gain or loss upon a subsequent disposition
of the option shares will be treated under the provisions of the Code applicable
to capital gains and losses and (v) the employee may add the amount of income
described in the preceding clause (ii) to his or her tax basis in such shares
for purpose of computing any subsequent capital gain or loss.
If shares of the Common Stock of the Company are issued to an employee
upon exercise of an incentive stock option, and if no disposition of such shares
is made within two years from the date the option was granted or within one year
of the transfer to him or her of such shares, then, subject to the modification
described in the next paragraph: (i) no income will be realized by such holder
at the time of the grant of such option or at the time of the transfer of the
shares to him or her; (ii) the amount, if any, by which the fair market value of
the shares at the time of exercise of the option exceeds the option price will
be subject to the alternative minimum tax; (iii) when he or she sells such
shares, any amount realized in excess of the option price will be taxed to him
or her as a long-term capital gain and any loss sustained will be a long-term
capital loss; and (iv) no deduction will be allowable to the Company for federal
income tax purposes in connection with the grant or exercise of the option.
If shares of the Common Stock of the Company issued to an employee upon
exercise of an incentive stock option are disposed of within a single taxable
year and within two years from the date the option was granted or one year from
the transfer to him of such shares: (i) the amount, if any, by which the fair
market value of the shares at the time of exercise of the option exceeded the
option price will be taxable to the employee as compensation income in the year
of disposition but, in the case of disposition by sale, ordinarily only to the
extent of the employee's gain, and the balance, if any, of the gain will be
taxable as capital gain; (ii) the Company will be entitled to a deduction in the
amount taxable to the employee as compensation; and (iii) such amount will not
be subject to the alternative minimum tax.
The foregoing summary does not discuss the effect of state and local
taxes.
18
<PAGE>
The shares reserved for issuance under the 1997 Plan are approximately
3.2% of the number of shares outstanding on February 11, 1997. The proceeds
received by the Company upon the exercise of options will be added to the
general funds of the Company and will be used for such corporate purposes as the
Board determines.
It is not possible at this time to state the number or names of
individuals who may receive options under the 1997 Plan, since the Committee has
not as yet made any such determination. There are at present approximately 400
employees of the Company who are eligible to receive options under the 1992
Plan. The closing price of the Common Stock of the Company on the New York Stock
Exchange on March 11, 1997 was $46.875 per share.
OTHER MATTERS
As of the date of this Proxy Statement the Board of Directors is not
aware that any matters other than those specified above are to be presented for
action at the meeting. If any other matters should come before the meeting,
proxies in the enclosed form will be voted on such matters in accordance with
the judgment of the person or persons voting the proxies, unless otherwise
specified. Shares of Common Stock represented by executed proxies received by
the Company will be counted for purposes of establishing a quorum at the
meeting, regardless of how or whether such shares are voted on any specific
proposal. All executed proxies will be voted in accordance with the instructions
contained therein. In accordance with the Board of Directors' recommendations,
executed proxies returned by shareholders will be voted, if no contrary
instruction is indicated, FOR the election of the 12 nominees described herein
and FOR the proposal. With respect to the required vote on any particular
matter, abstentions and votes withheld by nominee recordholders will not be
treated as votes cast or as shares present or represented.
THE COMPANY WILL ON A REQUEST IN WRITING PROVIDE WITHOUT CHARGE TO EACH
PERSON FROM WHOM PROXIES ARE BEING SOLICITED FOR THE COMPANY'S ANNUAL MEETING A
COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31,
1996, INCLUDING THE FINANCIAL STATEMENTS AND THE SCHEDULES THERETO, REQUIRED TO
BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 13a-1
UNDER THE EXCHANGE ACT. A REQUEST FOR THE COMPANY'S ANNUAL REPORT ON FORM 10-K
SHOULD BE MADE TO STEPHEN A. BLOCK, SECRETARY, INTERNATIONAL FLAVORS &
FRAGRANCES INC., 521 WEST 57TH STREET, NEW YORK, N.Y. 10019.
THE BOARD OF DIRECTORS INVITES YOU TO ATTEND THE MEETING IN PERSON. IF
YOU ARE UNABLE TO DO SO, PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE ENCLOSED ENVELOPE, SO THAT YOUR SHARES WILL BE REPRESENTED AT
THE MEETING.
By Order of the Board of Directors,
Stephen A. Block
Secretary
March 27, 1997
19
<PAGE>
EXHIBIT A
INTERNATIONAL FLAVORS & FRAGRANCES INC.
1997 EMPLOYEE STOCK OPTION PLAN
INTERNATIONAL FLAVORS & FRAGRANCES INC., a New York corporation (herein
together with its subsidiaries and subsidiaries which become such after the
adoption of the Plan called "IFF"), hereby establishes the 1997 Employee Stock
Option Plan (herein called the "Plan") on the following terms and conditions:
1. Purpose: To promote the best interests of IFF and its shareholders
by providing methods by which officers and key employees of IFF may acquire a
proprietary interest in IFF, thus identifying their interests with those of the
shareholders and encouraging them to make greater efforts on behalf of IFF.
2. Method of Adoption: By the favorable vote of at least two-thirds of
the Board of Directors of IFF (herein called the "Board") subject to the
approval of the holders of a majority of IFF shares.
3. Term: Options may be granted at any time and from time to time, from
the date of adoption of the Plan by the Board, subject to the approval of the
Plan by the shareholders of IFF within 12 months after the Plan is adopted, to
May 8, 2007, but no stock option shall extend for a term of more than ten years
from the date of its grant.
4. Number of Shares: The Plan shall cover an aggregate of three million
five hundred thousand (3,500,000) shares of Common Stock of IFF of the par value
of $.12-1/2 each. The maximum aggregate number of shares that may be granted
under this Plan during its term to any "Participant", as defined in Section 6
hereof, shall be five hundred thousand (500,000) shares (the "Individual Cap").
Either authorized and unissued shares or treasury shares maybe used.
If any options expire or terminate without being exercised in full,
including options voluntarily surrendered for cancellation, the shares subject
thereto which have not been purchased in accordance with the terms of such
options shall be available for the grant of new options under the Plan.
5. Purchase Price: The purchase price per share for any stock optioned
at any time under this Plan shall be such price as shall be fixed by the Stock
Option and Compensation Committee of the Board or such other Committee or a
subcommittee of a committee as may be appointed by the Board to administer the
Plan (herein called the "Committee"), but not less than the fair market value
thereof at the time of granting the option. Upon exercise of any stock option
the Participant may pay for the stock covered by the stock option and/or may pay
for any tax withholding resulting from such exercise by delivery of Common Stock
of IFF, providing the Participant has held such Common Stock for at least six
months, or such longer period as determined by the Committee. The Committee may
also allow payment upon exercise of any option by any other means which the
Committee determines to be consistent with the Plan's purpose and applicable
law.
6. Eligibility: Any officer or key employee of IFF designated by the
Committee (any such officer or key employee is referred to in this Plan as a
"Participant").
7. Employment at the Time of Each Purchase: Any stock option may be
exercised by any Participant only so long as he or she remains in the employ of
IFF; provided that if a Participant voluntarily resigns with the consent of the
Board, if he becomes totally disabled or if he or she retires, he or she may
exercise within 3 months thereafter (but not later than the expiration date of
the option) the option as to the balance, if any, of the shares which the
Participant was entitled to purchase pursuant to Section 9 hereof at the date of
such resignation, disability or retirement. Authorized leaves of absence for
military or governmental service or other purposes approved by the Committee
will
A-1
<PAGE>
be deemed a continuation of employment for purposes of the Plan, and
modifications or extensions of the periods of the option agreement or otherwise
may be made by the Committee. If a Participant dies while employed by IFF, his
or her legal representatives, distributees or legatees as the case may be, may
exercise within 3 months thereafter (but not later than the expiration date of
the option) the option as to the balance, if any, of the shares which the
Participant was entitled to purchase pursuant to Section 9 hereof at the date of
his or her death or, in case such death occurs less than 48 months from the date
of the grant of the option, that proportion of the shares covered by the option
which the number of days in the period from the date of grant to the date of the
Participant's death bears to the number 1460, less any shares previously
purchased under the option.
8. Individual Options: Notwithstanding any other provision hereof, the
selection of Participants and decisions concerning the timing, pricing, and the
number of shares covered by individual stock options shall be made solely by the
Committee. Unless otherwise determined by the Committee at the time of grant,
options granted hereunder to Participants subject to United States taxation
shall be deemed to be "incentive stock options" to the extent permitted under
Section 422 of the Internal Revenue Code, as amended (the "Code"), and the
balance of such options shall be deemed not to be incentive stock options.
The Committee may authorize the grant of an additional automatic option
("reload option") effective on the date of exercise by a Participant of an
already outstanding option under this Plan, on such terms and conditions as the
Committee shall determine. Unless otherwise provided by the Committee, the
number of shares subject to a reload option granted to a Participant with
respect to the exercise of an option shall not exceed the number of shares
delivered by the Participant in payment of the option price of such option,
and/or in payment of any tax withholding resulting from such exercise. A reload
option shall have an option price of not less than 100% of the per share fair
market value on the date of grant of such reload option, and shall be subject to
all other terms and conditions of the original grant, including the expiration
date, and to such additional terms and conditions as the Committee in its sole
discretion shall determine. Notwithstanding the foregoing, any rights a
Participant may have to a reload option under a stock option agreement or
otherwise shall be subject to (a) the availability of shares under the Plan, and
(b) the Individual Cap of such Participant.
9. Exercise of Options: The stock options may be exercised as follows:
up to one-third of the shares covered at any time after 24 months from the date
of grant; up to two-thirds of such shares at any time after 36 months from such
date; and all the shares at any time after 48 months from such date. Stock
certificates will be issued as the stock options are exercised and the shares
are paid for.
10. Rights of Participants Before Issuance of Stock Certificates: No
Participant shall have any rights as a shareholder with respect to any shares
covered by his or her stock option until the date of the issuance of the stock
certificate to him or her for such shares following his or her exercise of the
options. No adjustment shall be made for dividends or other rights for which the
record date is prior to the date such stock certificate is issued.
11. Anti-Dilution Provisions: Each option agreement shall contain such
provisions as the Committee shall deem to be appropriate, including provisions
for appropriate adjustment of the option price and the number of shares covered,
or both, to protect the Participant in the event of a reorganization,
recapitalization, stock split, stock dividend, combination of shares, merger or
consolidation (except as otherwise stated below) or in the event of any other
change in the corporate capital structure of IFF. In the event of any such
adjustment, the aggregate number and class of shares available under the Plan
and the maximum number of shares as to which options may be granted to any
Participant may also be appropriately adjusted.
A-2
<PAGE>
12. Nonassignability: No option shall be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution. All options granted to a Participant shall be
exercisable during his or her lifetime only by such Participant.
13. Administration: The Plan shall be administered by vote of a
majority of the Committee, all of the members of which shall be "outside
directors" as that term is defined in Section 162(m) of the Code, but no Board
member who is to be considered as a Participant in the Plan shall take part in
the deliberations or vote with respect to his own participation.
14. Merger or Consolidation: In the event of the merger or
consolidation of IFF with or into another corporation as a result of which IFF
is not the surviving corporation, then on written notice to the Participant
given by the surviving corporation, an option under the Plan may be exercised,
as to the entire number of shares subject thereto, on and after the effective
date of such merger or consolidation and the option shall cease and terminate as
to any shares as to which it has not been exercised on a date 180 days after the
effective date of such merger or consolidation or on the expiration date of such
option, whichever is earlier.
15. Agreements: Options issued under the Plan shall be evidenced by
agreements in such form as the Committee may approve. The terms of such
agreements shall comply with the applicable terms of the Plan outlined herein.
16. Interpretation: In the event of any difference of opinion between a
Participant and IFF concerning the meaning or effect of the Plan, such
difference shall be resolved by the Committee.
17. Compliance with Applicable Laws: No shares shall be offered under
the Plan and no stock certificate shall be delivered upon exercise of options
until such offering has been registered under the Securities Act of 1933, as
amended, and any other applicable governmental laws and regulations, unless in
the opinion of counsel such offering is exempt from registration under such Act,
and until IFF shall have complied with any applicable provisions of the
Securities Exchange Act of 1934, as amended.
18. Amendment and Termination of the Plan: The Board may from time to
time, with respect to any shares at the time not subject to options, suspend or
discontinue the Plan or amend it in any respect, provided that the Board may
not, without the approval of the holders of a majority of outstanding shares of
IFF (except as provided in paragraph 11 above), increase the aggregate number of
shares available for options, change the employees or class of employees
eligible to become Participants, reduce the option price below that provided for
hereunder, or make any change requiring shareholder approval under Section
162(m) of the Code.
A-3
<PAGE>
IFF PROXY
INTERNATIONAL FLAVORS & FRAGRANCES INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 8, 1997
The undersigned shareholder of INTERNATIONAL FLAVORS & FRAGRANCES INC.
(hereinafter called the Company) hereby appoints Messrs. EUGENE P. GRISANTI,
GEORGE ROWE, JR. and STEPHEN A. BLOCK, the attorneys and proxies, and each of
them the attorney and proxy, of the undersigned, with full power of
substitution, to act by a majority present, for and in the name, place and stead
of the undersigned, to attend the Annual Meeting of Shareholders to be held at
the headquarters of the Company, 521 West 57th Street, New York, New York, on
Thursday, May 8, 1997 at 10 A.M., and any adjournment or adjournments thereof,
and thereat to vote the number of votes or shares of stock the undersigned would
be entitled to vote if then and there personally present.
IFF
P.O. BOX 11117
NEW YORK, N.Y. 10203-0117
PLEASE INDICATE ON THE REVERSE SIDE OF THIS CARD HOW
YOUR SHARES OF STOCK ARE TO BE VOTED.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED.
(Continued and to be signed on the other side)
1. Election of all Directors M. H. Adame, R. C. Duke, R. M. Furlaud, E. P.
Grisanti, T. H. Hoppel, B. D. Chadbourne, H. G. Reid, G. Rowe, Jr.,
S. M. Rumbough, Jr., H. P. van Ameringen, H. C. van Baaren,
W. D. Van Dyke, III
For [X] Withheld [X] Exceptions* [X]
*Exceptions.....................................................................
................................................................................
To vote your shares for all Director nominees, mark the "For" box on Item 1. To
withhold voting for all nominees, mark the "Withhold" box. If you do not wish
your shares voted "For" a particular nominee, mark the "Exceptions" box and
enter the name(s) of the exception(s) in the space provided.
2. Proposal to approve the 1997 Stock Option Plan.
For [X] Against [X] Abstain [X]
Change of address and/or Comments [X]_____________________________________
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.
(This Proxy will be voted FOR each of the
above nominees as a director, FOR
Proposal 2, and in the discretion of the
proxy committee on any other matter
properly before the meeting, unless
otherwise specified)
Please sign exactly as name or names
appear on this proxy. If stock is held
jointly, each holder should sign. If
signing as attorney, trustee, executor,
administrator, custodian, guardian, or
corporate officer, please give full
title.
DATED __________________________, 1997
SIGNED __________________________________
_________________________________________
Sign, Date and Return the Proxy Card Votes MUST be indicated in Black
Promptly Using the Enclosed Envelope. or Blue ink. [X]
