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
[ ] 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 Section 240.14a-11(c) or
Section 240.14a-12
AMERICAN HOME PRODUCTS CORPORATION
...........................................................................
(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):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
................................................
2) Aggregate number of securities to which transaction applies:
................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
................................................
<PAGE>
4) Proposed maximum aggregate value of transaction:
................................................
5) Total fee paid:
................................................
[X] 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>
[LOGO]
AMERICAN HOME PRODUCTS CORPORATION
------------
NOTICE OF ANNUAL MEETING
AND
PROXY STATEMENT
------------
ANNUAL MEETING OF STOCKHOLDERS
APRIL 23, 1996
YOUR VOTE IS IMPORTANT
IF YOU ARE UNABLE TO ATTEND THE MEETING, PLEASE DATE, SIGN
AND RETURN THE ACCOMPANYING PROXY CARD PROMPTLY.
<PAGE>
AMERICAN HOME PRODUCTS CORPORATION
FIVE GIRALDA FARMS
MADISON, NEW JERSEY 07940
-------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
-------------------
The Annual Meeting of the Stockholders of AMERICAN HOME PRODUCTS CORPORATION
will be held in Salon E of the Marriott Hotel, 1401 Route 10 East, Whippany, New
Jersey, on Tuesday, April 23, 1996 at 9:30 a.m., local time, for the following
purposes:
1. to elect a Board of eleven directors;
2. to consider and act upon the ratification of the appointment of Arthur
Andersen LLP as the Corporation's principal independent public
accountants for 1996;
3. to consider and act upon amendments to the Corporation's Restated
Certificate of Incorporation to increase to 1,200,000,000 the number of
authorized shares of Common Stock and a related matter;
4. to consider and act upon adoption of the 1996 Stock Incentive Plan; and
5. to act upon such other matters which may properly come before the
meeting.
Under the provisions of the By-Laws, the Board of Directors has fixed the
close of business on March 15, 1996 as the record date for the determination of
stockholders entitled to notice of and to vote at the meeting.
By Order of the Board of Directors
CAROL G. EMERLING
Secretary
March 21, 1996
YOUR VOTE IS IMPORTANT
IF YOU ARE UNABLE TO ATTEND THE MEETING, PLEASE DATE, SIGN
AND RETURN THE ACCOMPANYING PROXY CARD PROMPTLY.
<PAGE>
AMERICAN HOME PRODUCTS CORPORATION
FIVE GIRALDA FARMS
MADISON, NEW JERSEY 07940
-------------------
PROXY STATEMENT
Your proxy in the form enclosed is solicited by the Board of Directors and
Management of American Home Products Corporation (the "Corporation") to be used
at the Annual Meeting of Stockholders to be held on April 23, 1996 and at any
adjournment or adjournments thereof. Properly executed proxies received prior to
the meeting will be voted at the meeting. Stockholders may have their votes kept
secret until after the Annual Meeting by so indicating in the designated place
on the proxy card. If a stockholder specifies how the proxy is to be voted on
any business to come before the meeting, it will be voted in accordance with
such specifications. If no specification is made, it will be voted in accordance
with the recommendations of the Board of Directors and Management which are FOR
the election of the directors named in this Proxy Statement, FOR ratification of
the appointment of Arthur Andersen LLP as the Corporation's principal
independent public accountants for 1996, FOR adoption of the amendments to the
Restated Certificate of Incorporation and FOR approval of the 1996 Stock
Incentive Plan. The proxy may be revoked by you at any time before it is voted
at the meeting.
Attendance at the meeting will be limited to stockholders of record on March
15, 1996 or their proxies, beneficial owners having evidence of ownership on
that date, and invited guests of the Corporation. No cameras or recording
equipment will be permitted in the meeting room.
This Proxy Statement and accompanying form of proxy are first being sent or
given to stockholders on or about March 21, 1996.
If a stockholder participates in the Corporation's Master Investment Plan, a
proxy to vote shares registered in his or her own name will serve as
instructions on how to vote shares held in custody for the stockholder pursuant
to the Plan. No further action from the stockholder is required to vote the
shares in the Master Investment Plan. Accordingly, as Transfer Agent for shares
of the Corporation's common stock, par value $.33 1/3 per share (the "Common
Stock") Chemical Mellon Shareholder Services will cause shares held in the name
of its nominee for the account of stockholders participating in the Master
Investment Plan to be voted in the same way as such stockholders vote shares
registered in their names. If the stockholder does not send a proxy to vote the
shares registered in his or her own name, the shares held for his or her account
in the Master Investment Plan will not be voted.
Stockholders of record at the close of business on March 15, 1996 are
entitled to notice of and to vote at the meeting. On March 1, 1996, there were
outstanding and entitled to vote 315,188,641 shares of Common Stock (each of
which is entitled to one vote) and 33,722 shares of $2 Convertible Preferred
Stock (each of which is entitled to nine votes). A plurality of the votes cast
by the holders of Common Stock and $2 Convertible Preferred Stock, voting as a
single class, is required for election of directors, a majority of the votes
cast by such holders, voting as a single class, is required for ratification of
the appointment of the principal independent public accountants, a majority of
the outstanding Common Stock and $2 Convertible Preferred Stock, voting as a
single class, is required for adoption of the amendments to the Restated
Certificate of Incorporation and a majority of the votes cast by such holders,
voting as a single class, is required for approval of the 1996 Stock Incentive
Plan. The aggregate number of votes cast by all stockholders present in person
or by proxy at the meeting will be used to determine whether a motion will
carry, except in the case of the adoption of the amendments to the Restated
Certificate of Incorporation which require a majority of the outstanding Common
and $2 Preferred Stock, voting as a single class. Thus, in the case of the
election of directors and the ratification of the appointment of the principal
independent public accountants and other matters that may come before the
meeting, an abstention from voting on a matter by a stockholder present in
person or by proxy at the meeting has no effect on the item on which the
stockholder abstained from voting. However, in the case of the approval of the
1996 Stock Incentive Plan and the adoption of the amendments to the Restated
Certificate of Incorporation, an abstention will be counted as a "no vote." In
addition,
<PAGE>
although broker "non-votes" will be counted for purposes of obtaining a quorum,
they will have no effect on the vote on matters at the Annual Meeting except
that, for the proposal to amend the Restated Certificate of Incorporation, they
will have the same effect as a vote against the proposal.
ITEM 1.
ELECTION OF DIRECTORS
Eleven directors are to be elected to hold office until the next Annual
Meeting of Stockholders and until their successors have been duly elected and
qualified. If the proxy is executed in such manner as not to withhold authority
for the election of any or all of the nominees for directors, then the persons
named in the proxy will vote the shares represented by the proxy for the
election of the following eleven nominees. If the proxy indicates that the
stockholder wishes to withhold a vote from one or more nominees for directors,
such instructions will be followed by the persons named in the proxy. All of the
nominees now are members of the Board of Directors and were elected by the
stockholders at the last Annual Meeting. Management has no reason to believe
that any of the nominees will not serve. In the event that any nominee should
not be available, and if the Board has designated a substitute nominee, the
persons named in the proxy will vote for the substitute nominee designated by
the Board of Directors.
NOMINEES FOR ELECTION AS DIRECTORS
<TABLE>
<S> <C>
Director since 1993; age 62; President of Alexander & Associates,
Inc. (consulting firm specializing in Workforce Inclusiveness);
Director, Dreyfus General Family of Funds, Dreyfus Third Century
[photo] Fund, Dreyfus Premier Family of Funds, Dun & Bradstreet
Corporation, MCI Communications Corporation, and Mutual of
America Life Insurance Company; member of the Audit, Corporate
Issues and Nominating Committees
Clifford L. Alexander,
Jr.
Director since 1988; age 63; President and Chief Executive
Officer of The Hearst Corporation (owns and operates
[photo] communications media); Director, Chemical Banking Corporation;
Chairman of the Compensation and Benefits Committee and member of
the Executive and Nominating Committees
Frank A. Bennack, Jr.
Director since 1990; age 57; Senior Executive Vice President of
the Corporation since October 1995; previously Executive Vice
[photo] President from 1987; member of the Executive Committee of the
Board and of the Finance, Operations and Retirement Committees of
the Corporation
Robert G. Blount
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
Director since 1975; age 72; National Chair, Population Action
International; Director, International Flavors and Fragrances,
[photo] Inc.; member of the Compensation and Benefits and Nominating
Committees
Robin Chandler Duke
Director since 1987; age 59; Dean, Fordham University School of
Law since 1982; Director, Sentinel Group Funds, Inc. and Sentinel
[photo] Pennsylvania Tax Free Trust; member of the Audit and Nominating
Committees
John D. Feerick
Director since 1995; age 50; Executive Vice President of the
Corporation since October 1995; previously Senior Vice President
from 1993; Group Vice President, 1993; President of Wyeth-Ayerst
[photo] Laboratories, 1989 to 1993; Director, Genetics Institute, Inc.;
member of the Finance, Operations and Retirement Committees of
the Corporation
Fred Hassan
Director since 1995; age 56; Consultant; retired Chairman and
Chief Executive Officer, The Continental Corporation (an
insurance holding company); Director, Chemical Banking
[photo] Corporation, Business Men's Assurance Corporation and Hallmark
Cards, Inc.; member of the Compensation and Benefits and
Nominating Committees
John P. Mascotte
Director since 1995; age 52; Chairman and Professor, Department
of Obstetrics and Gynecology, Stanford University School of
[photo] Medicine since 1990; Director, Gynecare, Inc., Metra Biosystems,
Inc. and Quidel Corporation; member of the Corporate Issues and
Nominating Committees
Mary Lake Polan, M.D., Ph.D.
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
Director since 1980; age 58; Chairman of the Board, President and
Chief Executive Officer of the Corporation since 1986 (except for
period between May 1990 and January 31, 1994 when he did not have
additional title of President); Director, AlliedSignal Inc.,
[photo] Chemical Banking Corporation, Metropolitan Life Insurance Company
and NYNEX Corporation; Chairman of the Executive and Nominating
Committees of the Board and Chairman of the Finance, Operations
and Retirement Committees of the Corporation
John R. Stafford
Director since 1982; age 56; Chairman, Torell Management Inc.
(financial advisory company); Chairman, Telesphere, Inc.
(financial information provider); former Chairman and CEO,
Fortune Bancorp; former Chairman of the Board, President and
Chief Executive Officer of CalFed Inc.; former President,
[photo] Manufacturers Hanover Corporation and Manufacturers Hanover Trust
Company; Director, Volt Information Sciences, Inc. and various
investment companies for which PaineWebber, Inc. serves as
investment advisor; Chairman of the Audit Committee and member of
the Nominating Committee
John R. Torell III
Director since 1981; age 63; President, Chief Executive Officer
and member of the Board, Wm. Wrigley Jr. Company (international
[photo] manufacturer of chewing gum products); Director, Texaco, Inc.;
Chairman of the Corporate Issues Committee and member of the
Nominating Committee
William Wrigley
</TABLE>
COMMITTEES
The Board of Directors has, as standing committees, an Audit Committee, a
Compensation and Benefits Committee, a Nominating Committee and a Corporate
Issues Committee. Each such committee consists solely of non-employee members of
the Board except for the Nominating Committee, of which Mr. Stafford is
Chairman.
The Audit Committee, whose current members are Mr. Torell, Chairman, and
Messrs. Alexander and Feerick, held two meetings in 1995. This Committee
recommends the firm of independent public accountants engaged each year as the
Corporation's principal independent public accountants, subject to the approval
of the Board of Directors and ratification by the stockholders, and undertakes
such reviews of the Corporation's financial affairs as the Committee deems
appropriate.
The Compensation and Benefits Committee, whose current members are Mr.
Bennack, Chairman, Mrs. Duke and Mr. Mascotte, held six meetings in 1995. (Mr.
Robert W. Sarnoff served as a member of the Compensation and Benefits Committee
from January 1, 1995 to April 26, 1995 when he retired from the Board.) This
Committee recommends to the Board the salaries of the officers of the
Corporation and administers the Corporation's Management Incentive Plan, Stock
Incentive and Stock Option Plans and other benefit plans.
The Nominating Committee, whose membership is composed of all of the
non-employee directors and Mr. Stafford as its Chairman, held one meeting in
1995. This Committee recommends the director-nominees contained in the proxy
statement, considers candidates for director vacancies and such other management
matters as may be presented to it by the Chairman. Stockholders may submit names
of qualified candidates along with detailed information on their backgrounds to
the Corporate Secretary for referral to the Committee.
4
<PAGE>
The Corporate Issues Committee, whose current members are Mr. Wrigley,
Chairman, Mr. Alexander and Dr. Polan, reviews the policies and programs of the
Corporation and makes recommendations to the Board as appropriate on public
issues that affect the Corporation. It held three meetings in 1995.
The Board also has an Executive Committee which is authorized, during the
intervals between Board meetings, to perform all duties and exercise all powers
of the Board except those that are required to be performed or exercised by the
Board acting as a whole. Its current members are Mr. Stafford, Chairman, and
Messrs. Bennack and Blount. It held one meeting in 1995.
DIRECTORS' FEES; ATTENDANCE
Messrs. Stafford, Blount and Hassan were employees of the Corporation for
all of 1995 and therefore received no remuneration for serving on the Board of
Directors. The other directors received an annual retainer of $39,000, a fee of
$8,500 for Committee service and a meeting fee of $950 for each Board or
Committee meeting attended in 1995. The Chairman of a Committee receives an
additional fee of $3,000. There were 11 Board meetings in 1995. The total fees
paid in 1995 to the current eight non-employee directors and four non-employee
directors who did not stand for re-election in April 1995 were $587,400.
In addition, each director who is not an employee or former employee of the
Corporation is entitled to receive an initial grant of 200 shares of restricted
stock and subsequent grants up to a total of 1,000 shares of restricted stock
over a period of five years, subject to the terms and conditions of the 1994
Restricted Stock Plan for Non-Employee Directors.
During 1995, each member of the Corporation's Board of Directors attended at
least 75% of all meetings of the Board and of each Committee of which such
director was a member.
The Corporation has a cash deferral contract available to all non-employee
directors. Pursuant to such arrangement, directors' fees otherwise payable in
the year earned may be deferred in amounts specified by such directors. In 1995,
no non-employee director elected to defer compensation.
The Corporation has a retirement plan for outside directors. For directors
with 10 years of Board service who retire at or after 65 years of age, or before
age 65 in case of disability, it provides an annual lifetime benefit in the
amount of the annual Board retainer in effect for the year for which the payment
is made. Directors who retire before age 65 with 10 years of Board service may
receive the benefit upon attaining age 65. Directors who formerly were employees
also are eligible for this retirement benefit if they have 10 years of Board
service, at least five of which were as a non-employee director. If the director
dies before receiving at least five annual benefit payments, a lump sum amount
equal to the difference between five annual benefit payments and the amount the
director already has received will be paid to the director's beneficiary.
CERTAIN TRANSACTIONS
On July 1, 1994, the Corporation entered into a consulting agreement with
Alexander & Associates, Inc., of which Mr. Clifford L. Alexander, Jr. is
President and of which Mr. Alexander and his wife each are 25% owners. Under the
agreement, Alexander & Associates agreed to review the Corporation's affirmative
action plans, recruitment process and diversity training programs in three
phases over a three-year period for a total of $120,000.
5
<PAGE>
SECURITIES OWNED BY MANAGEMENT
The table below reflects the numbers of shares of American Home Products
Corporation Common Stock beneficially owned as of February 1, 1996 by each
director of the Corporation and each named executive listed in the Summary
Compensation Table and the number of shares beneficially owned by all directors
and executive officers of the Corporation as a group.
All directors and named executives disclaim beneficial ownership of shares
owned solely by their spouses. No director or officer owns shares of the
Corporation's Preferred Stock.
<TABLE><CAPTION>
EXERCISABLE PERCENT
NAME OF BENEFICIAL OWNER COMMON STOCK OPTIONS OF CLASS
------------------------ ------------ ----------- --------
<S> <C> <C> <C>
DIRECTORS
Clifford L. Alexander, Jr......................... 1,600* **
Frank A. Bennack, Jr.............................. 3,500* **
Robert G. Blount.................................. 14,604(1) 41,500 **
Robin Chandler Duke............................... 12,400* **
John D. Feerick................................... 600* **
Fred Hassan....................................... 10,405(2) 154,100 **
John P. Mascotte.................................. 1,400* **
Mary Lake Polan, M.D., Ph.D....................... 500* **
John R. Stafford.................................. 141,001(3) 510,000 **
John R. Torell III................................ 1,686* **
William Wrigley................................... 23,854*(4) **
NAMED EXECUTIVES
Joseph J. Carr.................................... 14,026(5) 41,600 **
Louis L. Hoynes, Jr............................... 12,468(5) 61,600 **
All executive officers and directors as a group
(21 persons).................................... 290,202 1,150,100 0.46%
</TABLE>
- ------------
* Includes 400 shares of restricted stock awarded under the 1994 Restricted
Stock Plan for Non-Employee Directors.
** Less than one percent (1%); includes exercisable options.
(1) Includes 500 shares owned by Mrs. Blount. Also includes 5,676 shares of
Common Stock subject to certain restrictions ("Restricted Stock") held by a
trust for the benefit of certain executive officers of the Corporation under
which such officers have sole voting power with respect to the shares they
each beneficially own but do not have dispositive power except in certain
limited circumstances (the "Restricted Stock Trust").
(2) Includes 6,157 shares held in joint tenancy with Mrs. Hassan. Also includes
4,248 shares of Restricted Stock held by the Restricted Stock Trust.
(3) Includes 8,160 shares owned by Mrs. Stafford and 9,857 shares of Restricted
Stock held by the Restricted Stock Trust.
(4) Includes 10,800 shares held in joint tenancy with Mrs. Wrigley. Also
includes the following shares (beneficial ownership of which is disclaimed
by Mr. Wrigley): 2,972 shares owned by a trust of which Mr. Wrigley is
co-trustee, along with Mrs. Wrigley, for the benefit of Mrs. Wrigley, 1,312
shares owned by two trusts of which Mrs. Wrigley is co-trustee, 2,000 shares
owned by a foundation of which Mrs. Wrigley is an officer and 4,370 shares
owned by Mrs. Wrigley.
(5) Includes 1,428 shares of Restricted Stock held by the Restricted Stock
Trust.
6
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid for the years 1993-1995
to the Corporation's Chairman, President and Chief Executive Officer and the
four other most highly paid executive officers.
<TABLE><CAPTION>
ANNUAL COMPENSATION
---------------------------------------------------
FORM OF BONUS LONG-TERM
PAYMENT (2) COMPENSATION
-------------------- --------------------
SECURITIES
UNDERLYING
BASE TOTAL CONTINGENT OPTIONS LTIP ALL OTHER
SALARY BONUS CASH SHARES GRANTED PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(2) ($) (#) (#)(3) ($)(4) ($)(5)
- -------------------------------- ---- --------- --------- ------- ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John R. Stafford................ 1995 1,185,000 1,185,000 592,500 6,175 508,200 341,935 35,550
Chairman of the Board, 1994 1,112,500 1,112,500 556,250 8,746 120,000 -- 33,370
President and Chief Executive 1993 1,085,000 1,085,000 542,500 8,359 135,000 -- 32,550
Officer
Robert G. Blount................ 1995 628,250 628,250 314,125 3,273 228,800 196,897 18,848
Senior Executive Vice President 1994 543,250 543,250 271,625 4,270 66,600 -- 16,298
1993 530,000 530,000 265,000 4,083 75,000 -- 15,900
Fred Hassan..................... 1995 569,000 569,000 284,500 2,965 186,600 147,372 34,070
Executive Vice President 1994 492,000 492,000 246,000 3,867 50,000 -- 31,010
1993 476,667 476,667 238,334 3,672 40,000 -- 26,800
Louis L. Hoynes, Jr............. 1995 407,000 407,000 203,500 2,120 47,200 49,525 12,210
Senior Vice President and 1994 389,500 331,075 165,538 2,602 16,600 -- 11,685
General Counsel 1993 380,000 380,000 190,000 2,927 25,000 -- 11,400
Joseph J. Carr.................. 1995 350,500 350,500 175,250 1,826 56,600 49,525 10,515
Senior Vice President 1994 333,250 333,250 166,625 2,619 16,600 -- 9,998
1993 325,000 325,000 162,500 2,503 25,000 -- 9,750
</TABLE>
- ------------
(1) Mr. Stafford deferred until after retirement portions of his 1995 and 1994
base salaries and the entire cash portion of his 1995 bonus pursuant to a
deferred compensation program.
(2) The total bonus and form of bonus payment in cash and contingent shares
under the Corporation's Management Incentive Plan are shown for services
rendered in the corresponding year. Under current policy of the Compensation
and Benefits Committee (the "Committee"), participants in the Plan who are
corporate vice presidents and above, and all U.S. employees with a base
salary of $175,000 or more may request that up to 50% of the award for any
year be paid as a cash award. All others may request that up to 100% of the
award be paid as a cash award. The remainder of the award for each year is
made as a contingent stock award which may be delivered either in the third
year following the year in respect of which the award was granted, or after
retirement or termination of employment. Deliveries of contingent stock
awards following retirement or termination of employment generally will be
made in five approximately equal annual installments.
Shares of Common Stock which are contingently awarded to an employee are
credited to a contingent award account for the employee. No shares of Common
Stock are issued or earmarked for the employee's account at the time of
award, nor does he or she have any rights as a stockholder with respect to
the shares credited to the account before actual issuance and delivery of
such shares. The dividends which would have been paid during a calendar year
with respect to shares credited to an employee's contingent award account,
had the shares then been outstanding, are calculated at the end of each
year, and the employee's account is then credited with the largest full
number of shares of Common Stock which such an amount of dividends could
have purchased at the average closing market price of the Common Stock for
the last five business days of the year. Any amounts remaining are carried
forward in the employee's account and applied to the calculation of shares
for that account at the end of the next year.
(3) In addition to the 1995 grants, on May 25, 1995 the Committee granted to
each of the named executive officers SARs in tandem with previously
outstanding stock options at the same exercise price per share as the
underlying option.
(4) Amounts shown represent the value (based on the closing market price of the
Common Stock) on the date of conversion of the portion of the Restricted
Stock Performance Awards made in 1994 under the Corporation's 1993 Stock
Incentive Plan (the "1994 Awards") which, based on 1994 performance, was
converted on February 7, 1995 to shares of Restricted Stock. The 1994 Awards
were composed of units subject to conversion to shares of Restricted Stock
based on the Corporation's performance during the years 1994-1996. Following
each such year, each named executive officer may receive shares of
Restricted Stock in an amount equal to 0%-125% of one-third of the target
number of units subject to the 1994 Awards based upon the Corporation's
performance in such year. (The target number of units covered by the 1994
Awards for each of
(Footnotes continued on following page)
7
<PAGE>
(Footnotes continued from preceding page)
the named executive officers was 14,500 for Mr. Stafford, 8,350 for Mr.
Blount, 6,250 for Mr. Hassan, 2,100 for Mr. Hoynes, and 2,100 for Mr. Carr.)
The amounts in the table above represent 100% of one-third of the target
numbers of units which were converted to Restricted Stock based on 1994
performance. During the three-year restricted period ending May 26, 1997,
all of the units and Restricted Stock will be forfeited upon termination of
employment for any reason other than death, disability or retirement (in
which cases the Restricted Stock will vest immediately and the units will
continue to be converted based upon satisfaction of the performance
criteria) unless otherwise determined by the Committee. The number of shares
of Restricted Stock beneficially held as of December 31, 1995 by each of the
named executive officers, including additional shares acquired upon
reinvestment of the dividends thereon (all of which shares relate to the
portion of the 1994 Awards converted in 1995), and the value thereof as of
such date are: Mr. Stafford, 5,024 shares ($487,328); Mr. Blount, 2,893
shares ($280,621); Mr. Hassan, 2,165 shares ($210,005); Mr. Hoynes, 728
shares ($70,616); and Mr. Carr, 728 shares ($70,616). (All of such shares
were contributed by the Corporation to the Restricted Stock Trust, pursuant
to which actual delivery of such shares to the named executive officers is
deferred until after termination of employment.) For 1995 and 1996,
conversion to Restricted Stock is based on the achievement of a target level
of earnings per share ("EPS") in the same manner as described under the
Long-Term Incentive Plan Awards Table with respect to the 1995 Awards. Based
upon the Corporation's EPS for 1995, an additional 100% of one-third of the
target amount of the 1994 Awards was converted to Restricted Stock in
January 1996 and will be reported under the caption "LTIP Payouts" in the
Summary Compensation table in the 1997 proxy statement.
(5) Represents contributions made by the Corporation under its Savings Plan and
Supplemental Employee Savings Plan (the Corporation matches up to 50% of the
first 6% of compensation contributed by the employee). The amount shown for
Mr. Hassan includes $17,000 in director's fees paid to him in 1995 by
Genetics Institute, Inc., of which the Corporation owns approximately 62% of
the outstanding common stock.
OPTION/SAR GRANTS TABLE
The following table provides information on Option/SAR grants in 1995 to the
named executive officers.
<TABLE><CAPTION>
INDIVIDUAL GRANTS IN 1995
----------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS/SARS EMPLOYEES PRICE PER EXPIRATION PRESENT VALUE
NAME GRANTED (1) IN 1995 SHARE($)(5) DATE ($)(6)
---- ------------ ------------ ------------ ---------- -------------
<S> <C> <C> <C> <C> <C>
John R. Stafford............ 158,200(2)
350,000(3)
------------
508,200 4.9% 76.2500 May 2005 6,442,200
Robert G. Blount............ 88,800(2)
140,000(3)
------------
228,800 2.2% 76.2500 May 2005 2,907,200
Fred Hassan................. 66,600(2)
120,000(4)
------------
186,600 1.8% 76.2500 May 2005 2,323,600
Louis L. Hoynes, Jr......... 22,200(2)
25,000(4)
------------
47,200 0.5% 76.2500 May 2005 591,900
Joseph J. Carr.............. 26,600(2)
30,000(4)
------------
56,600 0.5% 76.2500 May 2005 709,700
</TABLE>
- ------------
(1) Grants to named executive officers in 1995 include SARs in tandem with stock
options.
(Footnotes continued on following page)
8
<PAGE>
(Footnotes continued from preceding page)
(2) These options/SARs are not exercisable during the first year of their term
(except that such options/SARs may be exercised earlier in the case of the
optionee's retirement, disability or death).
(3) These options/SARs become exercisable over a three year period. One-third of
these options/SARs become exercisable one year from the date of grant, an
additional one-third become exercisable two years from the date of grant and
the remaining one-third become exercisable three years from the date of
grant (except that all such options/SARs may be exercised earlier in the
case of the optionee's disability or death).
(4) These options/SARs become exercisable three years from the date of grant
(except that all such options/SARs may be exercised earlier in the case of
the optionee's disability or death).
(5) The exercise price is the mean price on the date of grant.
(6) These estimates of value were developed solely for the purposes of
comparative disclosure in accordance with the rules and regulations of the
Securities and Exchange Commission and are not intended to predict future
prices of the Corporation's Common Stock. The estimate was developed using
the Black-Scholes option pricing model incorporating the following
assumptions: Volatility of .1546 and dividend yield of 4.4%, both based on
the historical three-year monthly average for the underlying Common Stock;
risk-free rate of return of 6.25% based on a ten-year zero coupon rate; and
time of exercise of 10 years, being the term of the option/SAR grants. In
addition, the model assumed a 3% discount for forfeiture since the
options/SARs become exercisable at various future dates as set forth in
Notes 2, 3, and 4 above.
LONG-TERM INCENTIVE PLAN AWARDS TABLE
The following table provides information on Restricted Stock Performance
Awards granted in 1995, under the Corporation's 1993 Stock Incentive Plan, to
the named executive officers.
<TABLE><CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE-BASED PLANS
----------------------------------------
PERFORMANCE
NUMBER OF OR OTHER
SHARES, UNITS PERIOD UNTIL BELOW
OR OTHER MATURATION OR THRESHOLD THRESHOLD TARGET MAXIMUM
NAME RIGHTS (#)(1) PAYOUT (#) (#) (#) (#)
---- ------------- ------------- --------- --------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
John R. Stafford...................... 4,950 1998 -- 3,713 4,950 6,188
Robert G. Blount...................... 2,800 1998 -- 2,100 2,800 3,500
Fred Hassan........................... 2,100 1998 -- 1,575 2,100 2,625
Louis L. Hoynes, Jr................... 700 1998 -- 525 700 875
Joseph J. Carr........................ 850 1998 -- 638 850 1,063
</TABLE>
- ------------
(1) Amounts shown represent Restricted Stock Performance Awards (the "1995
Awards") made in 1995 under the Corporation's 1993 Stock Incentive Plan.
These 1995 Awards are composed of units which may be converted to a number
of shares of Restricted Stock equal to 0%-125% of the 1995 Award based upon
the Corporation's performance in 1997. The Target amount will be earned if
96%-105% of the target EPS is achieved; the Threshold amount will be earned
if 90%-95% of the target EPS is achieved; and the Maximum amount will be
earned if over 105% of the target EPS is achieved. During the three-year
restricted period ending May 25, 1998, all of the units and Restricted Stock
will be forfeited upon termination of employment for any reason other than
death, disability or retirement (in which cases the Restricted Stock will
vest immediately and the units will be converted based upon satisfaction of
the performance criteria) unless otherwise determined by the Committee.
9
<PAGE>
OPTION/SAR EXERCISE AND YEAR-END VALUE TABLE
The following table discloses the options that were exercised by the named
executive officers during 1995 and sets forth the number and value of their
unexercised options/SARs at year-end. No SARs were exercised in 1995.
<TABLE><CAPTION>
AGGREGATED OPTION EXERCISES IN 1995
AND YEAR-END OPTION/SAR VALUES
----------------------------------------------------
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT OPTIONS/SARS AT
ACQUIRED ON DEC. 31, 1995 (#) DEC. 31, 1995 ($)
EXERCISE VALUE EXERCISABLE* EXERCISABLE*
NAME (#) REALIZED ($) UNEXERCISABLE**(1) UNEXERCISABLE**(2)
---- ----------- ------------ --------------------- ------------------
<S> <C> <C> <C> <C>
John R. Stafford................. 75,000(3) 2,237,535 510,000* 17,535,938*
508,200** 10,545,150**
Robert G. Blount................. 195,100(4) 4,194,074 41,500* 902,719*
228,800** 4,747,600**
Fred Hassan...................... -- -- 154,100* 5,074,094*
186,600** 3,871,950**
Louis L. Hoynes, Jr.............. 50,000(5) 1,470,400 61,600* 1,869,176*
47,200** 979,400**
Joseph J. Carr................... 30,000(6) 675,774 41,600* 1,441,676*
56,600** 1,174,450**
</TABLE>
- ------------
(1) On May 25, 1995, the Committee granted to each of the named executive
officers SARs in tandem with previously outstanding stock options at the
exercise price per share of the underlying options.
(2) The amounts given are based on the closing market price of the Corporation's
Common Stock at December 31, 1995 which was $97.00. The closing market price
on March 1, 1996 was $100.00.
(3) The option exercised was granted in 1989 at an exercise price of $47.2188
per share (market value on date of grant).
(4) Represents exercises of options (i) granted in 1990 and covering 15,000
shares at an exercise price of $51.7500 per share, (ii) granted in 1991 and
covering 40,000 shares at an exercise price of $60.8750 per share, (iii)
granted in 1993 and covering 73,500 shares at an exercise price of $65.1875
per share and (iv) granted in 1994 covering 66,600 shares at an exercise
price of $58.0625 per share (in each case, market value on date of grant).
(5) Represents exercises of options (i) granted in 1990 and covering 30,000
shares at an exercise price of $50.5625 per share and (ii) granted in 1991
and covering 20,000 shares at an exercise price of $60.8750 per share (in
each case, market value on date of grant).
(6) Represents exercises of options (i) granted in 1991 and covering 15,000
shares at an exercise price of $60.8750 per share and (ii) granted in 1992
and covering 15,000 shares at an exercise price of $75.6250 per share (in
each case, market value on date of grant).
10
<PAGE>
PENSION PLAN TABLE
The Corporation has two non-contributory defined benefit retirement plans in
which the named executives participate. One of these plans is qualified under
the applicable provisions of the Internal Revenue Code (the "Qualified Plan"),
and the other is a non-qualified Supplemental Executive Retirement Plan
("SERP"). The total combined benefits payable under the Qualified Plan and SERP
to the named executives are determined on the basis of a final 10-year average
earnings formula.
<TABLE><CAPTION>
YEARS OF SERVICE
----------------------------------------------
FINAL 10-YEAR AVERAGE
EARNINGS 15 20 25 30*
- --------------------- -- -- -- --
<S> <C> <C> <C> <C>
$ 600,000........................................ 180,000 240,000 300,000 360,000
700,000........................................ 210,000 280,000 350,000 420,000
800,000........................................ 240,000 320,000 400,000 480,000
900,000........................................ 270,000 360,000 450,000 540,000
1,000,000........................................ 300,000 400,000 500,000 600,000
1,100,000........................................ 330,000 440,000 550,000 660,000
1,200,000........................................ 360,000 480,000 600,000 720,000
1,300,000........................................ 390,000 520,000 650,000 780,000
1,400,000........................................ 420,000 560,000 700,000 840,000
1,500,000........................................ 450,000 600,000 750,000 900,000
1,600,000........................................ 480,000 640,000 800,000 960,000
1,700,000........................................ 510,000 680,000 850,000 1,020,000
1,800,000........................................ 540,000 720,000 900,000 1,080,000
1,900,000........................................ 570,000 760,000 950,000 1,140,000
2,000,000........................................ 600,000 800,000 1,000,000 1,200,000
2,100,000........................................ 630,000 840,000 1,050,000 1,260,000
2,200,000........................................ 660,000 880,000 1,100,000 1,320,000
2,300,000........................................ 690,000 920,000 1,150,000 1,380,000
2,400,000........................................ 720,000 960,000 1,200,000 1,440,000
2,500,000........................................ 750,000 1,000,000 1,250,000 1,500,000
2,600,000........................................ 780,000 1,040,000 1,300,000 1,560,000
2,700,000........................................ 810,000 1,080,000 1,350,000 1,620,000
2,800,000........................................ 840,000 1,120,000 1,400,000 1,680,000
</TABLE>
- ------------
* Plan only recognizes up to 30 years of credited service.
The compensation covered by the retirement plans for each of the named
executives is the base salary rate at January 1, 1995 ($1,140,000 for Mr.
Stafford, $606,500 for Mr. Blount, $549,000 for Mr. Hassan, $399,000 for Mr.
Hoynes and $341,500 for Mr. Carr) plus the amount in the bonus column of the
Summary Compensation Table for 1994 for a total of $2,252,500 for Mr. Stafford,
$1,149,750 for Mr. Blount, $1,041,000 for Mr. Hassan, $730,075 for Mr. Hoynes
and $674,750 for Mr. Carr.
The years of service (in nearest years) as of December 31, 1995 for the
named executives are as follows: Mr. Stafford, 26 years; Mr. Blount, 21 years;
Mr. Hassan, 7 years; Mr. Hoynes, 5 years and Mr. Carr, 14 years.
The table shows the combined annual pension under the current provisions of
both retirement plans assuming retirement of an employee who has continued
employment to age 65 and assuming payment as a single life annuity. (No
reduction has been made for the Social Security offset.)
11
<PAGE>
PERFORMANCE GRAPH
The following graph shows the value as of December 31, 1995 of a $1,000
investment made on December 31, 1990 in the Corporation's Common Stock (with
dividends reinvested), as compared with similar investments based on (i) the
value of the S&P 500 Index (with dividends reinvested) and (ii) the value of a
market-weighted Peer Group Index composed of the common stock of Abbott
Laboratories, American Home Products Corporation, Bristol-Myers Squibb Company,
Johnson & Johnson, Eli Lilly and Company, Merck & Co., Inc., Pfizer Inc.,
Schering-Plough Corporation, and Warner-Lambert Company, in each case on a
"total return" basis assuming reinvestment of dividends. (The Upjohn Company,
previously included in the Peer Group Index, no longer is publicly traded and
therefore has been omitted.) The market-weighted Peer Group Index values were
calculated from the beginning of the performance period. The stock performance
shown below is not necessarily indicative of future performance.
<TABLE>
<S> <C> <C> <C> <C> <C>
$2,500
$2,000
[GRAPH]
$1,500
$1,000
500
12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
[2ND GRAPH]
</TABLE>
<TABLE><CAPTION>
COMPARATIVE VALUES
------------------------------------------------------
YEAR AHPC COMMON STOCK S&P 500 INDEX PEER GROUP INDEX
---- ----------------- ------------- ----------------
<S> <C> <C> <C>
12/31/90................................... $1,000.00 $1,000.00 $1,000.00
12/31/91................................... $1,653.20 $1,300.00 $1,572.99
12/31/92................................... $1,370.60 $1,396.70 $1,365.28
12/31/93................................... $1,372.90 $1,535.30 $1,284.94
12/31/94................................... $1,392.80 $1,555.20 $1,462.05
12/31/95................................... $2,220.00 $2,132.40 $2,327.16
</TABLE>
12
<PAGE>
REPORT OF THE COMPENSATION AND BENEFITS COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Corporation's compensation policies applicable to its executive officers
are administered by the Compensation and Benefits Committee (the "Committee") of
the Board of Directors. All members of the Committee are non-employee directors.
These policies are designed to enhance the overall strength and financial
performance of the Corporation by aligning the financial interests of the
Corporation's executive officers with those of its stockholders.
The three primary components of executive compensation are base salary,
awards under the Corporation's Management Incentive Plan and annual grants of
stock options and stock appreciation rights ("SARs") and Restricted Stock
awards. The Committee recommends to the Board of Directors the salaries of the
executive officers and administers the Management Incentive Plan and the Stock
Option and Stock Incentive Plans under which employee stock options and SARs are
granted and Restricted Stock awards are made. All of these primary components of
executive compensation are reviewed for competitiveness in relation to a group
of companies in the pharmaceutical industry by an independent consulting firm
specializing in executive compensation. In certain instances, compensation data
related to consumer products and chemical industry companies also are
considered.
BASE SALARY
Base salaries for executive officers for the first six months of 1995 were
unchanged from the base salaries at July 1, 1994 which had been recommended by
the Committee and approved by the Board of Directors in May 1994 except for two
executive officers who received an increase on January 1, 1995 based on
increased responsibilities. Base salaries for the second six months of 1995 were
recommended by the Committee and approved by the Board of Directors in May 1995,
at which time the Committee considered the financial performance of the
Corporation as a whole and its individual business units as well as the
contribution of each of the executive officers. In addition, the Committee
reviewed base salaries recommended by Mr. John R. Stafford for executive
officers other than himself. The Committee then determined the base salary
recommendation for Mr. Stafford, out of his presence. The Committee also
reviewed a report of the independent compensation consulting firm (the
"Consultant's Report") with respect to its survey of compensation information,
which survey includes information for all of the companies comprising the Peer
Group Index appearing on the Performance Graph in this Proxy Statement as well
as, for certain executive officers, compensation data related to consumer
products and chemical industry companies.
MANAGEMENT INCENTIVE PLAN AWARDS
The stockholder-approved Management Incentive Plan (the "Plan") is designed
to provide current and deferred incentive compensation to selected key employees
who contribute in a substantial degree to the success of the Corporation, thus
affording to them a means of participating in that success and an incentive to
contribute further to that success.
The Committee determines the awards to be made under the Plan to executive
officers, including Mr. Stafford, and determines and recommends to the Board the
award fund. The award fund under the Plan may not exceed 12% of the excess of
net income (as defined in the Plan) for any year over the greater of either 12%
of average net capital (as defined in the Plan) or an amount equal to $.75
multiplied by the average number of shares of Common Stock outstanding for the
year, assuming full conversion of the Corporation's Preferred Stock.
Plan participants, including executive officers, are eligible to receive an
award of up to 100% of salary. Under current Committee policy, at least 50% of
each award to executive officers who are corporate vice presidents and above and
to U.S. executives whose base salary is $175,000 or above is
13
<PAGE>
made in the form of a contingent stock award to be delivered in shares of the
Corporation's Common Stock either in the third year following the year in
respect of which the award was granted or after retirement or termination of
employment at the election of each participant or as the Committee otherwise
determines. The value of each deferred contingent stock award together with its
associated dividend equivalent rights is tied to future performance because it
will rise and fall with the market price of the Corporation's Common Stock and
will reflect the payment of dividends during the deferral period. Accordingly,
an important component of executive compensation is weighted to current and
deferred "bonus awards" based on the Corporation's financial performance.
In determining amounts to be awarded to executive officers under the Plan,
the Committee takes into account a number of factors, including the
performance-related factors described below under "Relationship of Corporate
Performance to Executive Compensation," as well as individual performance and
achievement. The awards for 1995 were granted by the Committee in January 1996.
In addition, the Committee considered the amounts of previous awards in deciding
upon the awards for 1995. The Committee also reviewed the Consultant's Report
which indicated that, overall, the Management Incentive Plan awards together
with base salaries were within the competitive range for competitive companies.
STOCK OPTION AND INCENTIVE PLANS GRANTS
In contrast to salary and the cash portion of Management Incentive Plan
awards, the value to each executive officer of the stock option grants is tied
directly to stock price performance. The Committee grants options/SARs under the
stockholder-approved option plans with an exercise price equal to the market
price on the date of grant. If there is no appreciation in the market price for
the Corporation's Common Stock, the options/SARs are valueless.
Grants are made to executive officers based on salary, responsibility and
performance of the individual officer. Grants are made to executive officers on
an annual basis, thereby tying option-based compensation to stock price
performance over the long term. Grants are not exercisable for one year
following the date of grant except in cases of the death, retirement or
disability of the optionee. The grants for the named executives were made by the
Committee in May 1995 at the market price on the date of grant of $76.25.
In May 1995, the Committee also granted SARs to the executive officers in
tandem with all currently held and newly granted stock options at the price of
the underlying options.
In furtherance of the goal of aligning the interests of management with
those of the stockholders, in May 1995 the Committee also made Restricted Stock
Performance Awards to executives including the Chairman, President and Chief
Executive Officer. The Restricted Stock awards were granted in lieu of a portion
of the stock option award that would have been granted at a ratio of one unit
representing one share of Restricted Stock replacing options/SARs covering four
shares of Common Stock. These awards represent units which will be converted to
shares of Restricted Stock based on 1997 performance, with the maximum number of
units that may be converted equal to 125% of the total award. During the
three-year restricted period ending in May 1998, all of the units and shares of
Restricted Stock are forfeited upon termination of employment for any reason
other than death, disability or retirement (in which case the units will
continue to be converted based upon satisfaction by the Corporation of the
performance criteria), unless the Committee makes a partial or complete
exception to this requirement. Otherwise, all shares of Restricted Stock will be
free of any restrictions when the restricted period lapses. The shares are
valued at the mean between the high and low prices of the Corporation's Common
Stock on the Consolidated Transaction Reporting System on the designated date of
delivery.
14
<PAGE>
In deciding to award Restricted Stock and make the annual grant of
options/SARs, the Committee considered the amounts of options/SARs and
Restricted Stock awards previously granted. The Committee also reviewed the
Consultant's Report which indicated that, taken together, the grants and awards
fell in the highest or second highest quartile of the competitive companies.
Conversion of units to Restricted Stock for a portion of the units covered
by a Restricted Stock Performance Award made in 1994 was based on a formula
related to the achievement of the 1995 targeted growth rate set by the Committee
in February 1995. As a result, 100% of one-third of the award was converted to
Restricted Stock in January 1996 based on 1995 performance.
SPECIAL STOCK OPTION GRANTS
The Committee on its own initiative began discussions among its members in
January 1995, as well as with the independent compensation consulting firm and
the full Board, regarding a special one-time additional stock option/SAR grant
to certain key members of management. The continued service of such executives
to the Corporation is believed to be important to the full realization of the
enhanced shareholder value to be derived from the American Cyanamid acquisition
and the various strategic plans related thereto. In the Committee's view, the
one-time additional stock option/SAR grant would provide significant incentive
to these executives to assist the Corporation in deriving maximum value from the
acquisition.
After studying the matter over the next four months, at its May 25, 1995
meeting, the Committee made special one-time stock option/SAR grants to certain
designated senior members of management, including the Chairman, President and
Chief Executive Officer. Unlike regular stock option/SAR grants which generally
vest after one year, these special grants vest either in equal annual
installments over a three-year period or in total at the end of three years. In
determining the amount of these grants, the Committee followed the
recommendation of the independent compensation consulting firm which had
reviewed information regarding special one-time grants of options/SARs or
restricted stock awards by other companies in various industries.
RELATIONSHIP OF CORPORATE PERFORMANCE TO EXECUTIVE COMPENSATION
While all of the Corporation's executive officer compensation is related to
corporate performance, the awards under the Management Incentive Plan are most
closely tied to corporate performance. The maximum aggregate amount of the award
fund is based on corporate performance in the manner described under "Management
Incentive Plan Awards," above. In determining the amounts that were awarded to
the Chairman, President and Chief Executive Officer and executive officers
generally, the Committee viewed being of greatest significance the aggressive
implementation of the Corporation's strategic plan as evidenced by the
successful integration of the American Cyanamid businesses into the Corporation,
the program of divestiture of non-strategic assets and the restructuring of the
combined businesses.
The next most significant factor considered by the Committee was the
financial results achieved in 1995, which exceeded the Corporation's initial
forecast at the time of the acquisition. This better than expected performance
was primarily the result of synergies being realized earlier than expected,
faster paydown of debt due to the sale of the oral health care business and a
lower effective interest rate than forecast.
The Committee also considered important the strengthening of the
Corporation's research capabilities.
With respect to Mr. Stafford, it was the Committee's view that his vigorous
leadership was instrumental in the planning and execution of the programs and
policies that resulted in the favorable outcome of the factors considered above.
The Committee also viewed favorably his leadership activities
15
<PAGE>
in the pharmaceutical industry in articulating industry positions and in
proposing alternative health care programs to the administration and the U.S.
Congress.
STOCK OWNERSHIP GUIDELINES FOR EXECUTIVE OFFICERS
Stock Ownership Guidelines ("Guidelines") have been adopted for executive
officers and other members of the Corporation's Operations Committee. Authority
to administer the Guidelines was delegated to the Chairman, President and Chief
Executive Officer, who shall report periodically to the Committee on the status
of compliance with the Guidelines. The Guidelines state that the Chief Executive
Officer shall own shares of the Corporation's stock with a value of at least
four times his base salary. Officers who report directly to the Chief Executive
Officer shall own shares with a value of at least three times base salary; and
all others covered by the Guidelines must own shares with a value of at least
twice base salary. As currently administered, stock options/SARs are not counted
toward compliance with the Guidelines. Full compliance with the Guidelines by
each covered person must be achieved by the later of May 1999 or five years from
the date of appointment to the Finance or Operations Committees.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation of more than $1 million paid in
any year (not including amounts deferred) to a corporation's Chief Executive
Officer and to the four other most highly compensated executive officers.
Qualifying performance-based compensation will not be subject to the deduction
limit if certain requirements are met. The Corporation believes that all
compensation paid in 1995 is deductible under Section 162(m) because the
performance-based compensation is structured in a manner believed to comply with
the statute.
COMPENSATION AND BENEFITS COMMITTEE
Frank A. Bennack, Jr., Chairman
Robin Chandler Duke
John P. Mascotte
ITEM 2.
APPOINTMENT OF PRINCIPAL INDEPENDENT PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee of the Board of Directors,
the Board of Directors has, subject to ratification by the stockholders,
appointed Arthur Andersen LLP as the Corporation's principal independent public
accountants for the year 1996. This firm served in such capacity in 1995 and
previously. A representative of Arthur Andersen LLP will be present at the
Annual Meeting and will be available to make such comments as may be appropriate
and to answer proper questions.
THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND A VOTE FOR RATIFICATION OF
THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE CORPORATION'S PRINCIPAL
INDEPENDENT PUBLIC ACCOUNTANTS FOR 1996.
16
<PAGE>
ITEM 3.
PROPOSED AMENDMENTS TO THE RESTATED CERTIFICATE OF INCORPORATION
On January 25, 1996, the Board of Directors of the Corporation unanimously
approved the proposed amendments to the Corporation's Restated Certificate of
Incorporation to increase the number of authorized shares of the Corporation's
Common Stock from 600,000,000 to 1,200,000,000 shares subject to approval by the
stockholders. On January 25, 1996, the Board of Directors also unanimously
approved a two-for-one stock split in the form of a stock dividend of the Common
Stock subject to the approval by the stockholders of the proposed amendments to
the Corporation's Restated Certificate of Incorporation (the "Stock Split"). An
increase in the number of authorized shares of Common Stock is necessary for the
Stock Split to be effected. If the proposed amendments are not approved by the
stockholders of the Corporation, the stock split will not be effected.
In addition, the Board also unanimously approved an amendment to increase
the number of votes per share of the Corporation's $2 Convertible Preferred
Stock (the "Preferred Stock") from nine to eighteen votes per share of Common
Stock when voting with the Common Stock. This will prevent dilution of the
voting rights of the Preferred Stock when the Stock Split is effected.
The Board of Directors believes that the Stock Split and the related
amendments to the Corporation's Restated Certificate of Incorporation to
increase the Corporation's authorized shares of Common Stock are in the best
interests of the Corporation and its stockholders because it will place the
market price of the Common Stock in a range more attractive to investors,
particularly individuals, and may broaden the market for, and increase the
liquidity of, the Corporation's Common Stock. The amendments will permit the
Corporation to effect the Stock Split, and will provide additional shares of
Common Stock which could be used for various purposes without requiring further
stockholder approval unless necessitated by applicable law, regulation or stock
exchange rule. The affirmative vote of the holders of a majority of the
outstanding shares of Common Stock and Preferred Stock, voting together as a
single class, is required for the adoption of the proposed amendments. The text
of the proposed amendments is set forth in Exhibit I.
In addition to permitting the Stock Split, the additional shares would be
available for general corporate purposes, including use in financing
transactions, acquisitions, stock dividends, further stock splits, and employee
stock option and other stock ownership plans. Except for the Stock Split,
management of the Corporation has no plan, agreement or understanding at the
present time for the issuance or use of the additional shares of Common Stock to
be authorized by the amendments. No holders of any class of stock of the
Corporation are entitled as a matter of right to any preemptive or subscription
rights with respect to any shares of the Corporation's capital stock. The
Corporation intends to apply to list the additional shares to be issued as a
result of the Stock Split on the New York Stock Exchange.
If the amendments are approved and the Stock Split is effected, one
additional share of Common Stock will be issued for each issued share of Common
Stock (including treasury shares) and one additional share of Common Stock will
be reserved for each share currently reserved for issuance upon conversion of
the Corporation's series of $2 Convertible Preferred Stock. The record date for
the determination of holders of Common Stock entitled to receive additional
shares resulting from the Stock Split is expected to be April 24, 1996. It is
anticipated that certificates for additional shares will be mailed to
stockholders on or about May 6, 1996.
A total of approximately 355,445,583 additional shares of Common Stock will
be issued as a result of the Stock Split. The additional shares of Common Stock
resulting from the Stock Split will have one vote per share and the par value of
the Common Stock will remain $.33 1/3 per share. The Stock Split will not affect
the validity of Common Stock certificates already outstanding. Share
certificates for Common
17
<PAGE>
Stock outstanding on the record date will continue thereafter to represent the
same number of shares of Common Stock indicated on the certificate.
The aggregate number of shares that may be sold under the Corporation's
stock option and stock incentive plans (the "Plans"), the number of shares
covered by outstanding options/SARs and Restricted Stock Awards under such Plans
and the exercise price of each such option and SAR will be proportionately
adjusted to reflect the Stock Split. The aggregate number of shares of Common
Stock that may be issued under the Management Incentive Plan and the number of
shares of Common Stock credited under contingent award accounts will be
proportionately adjusted to reflect the Stock Split. Other appropriate
adjustments will be made to the Corporation's employee benefit plans to reflect
the impact of the Stock Split.
None of the data in this Proxy Statement with respect to outstanding stock,
stock options, restricted stock, SARs or the exercise prices of stock options or
SARs has been adjusted to give effect to the Stock Split.
Under existing law and regulation, the Stock Split will not result in any
gain or loss or any other form of taxable income to the stockholders for federal
income tax purposes. The laws of jurisdictions other than the United States may
impose income taxes on the issuance of the additional shares in connection with
the Stock Split and stockholders subject to those laws are urged to consult
their tax advisors. A stockholder's basis in his or her shares held before the
Stock Split will be allocated between such shares and the new shares for the
purpose of determining future gain or loss on a sale of any of the shares and
the holding period of new shares will include the holding period of the shares
with respect to which they were issued.
After the Stock Split, purchases and sales of Common Stock by an individual
stockholder may be subject to somewhat higher brokerage charges and applicable
stock transfer taxes than on a pre-split transaction of equivalent market value,
due to the greater number of shares of Common Stock outstanding after the Stock
Split. In addition, the Corporation will incur certain expenses in connection
with the Stock Split, such as listing fees and the cost of preparing and
delivering to stockholders new certificates representing the additional shares.
In connection with the Stock Split, a transfer of $.33 1/3 for each
additional share of Common Stock issued will be made from the Corporation's
earned surplus account to its capital account as of May 6, 1996, the date on
which stockholders will be entitled to the additional shares, so that the
additional shares to be issued will be fully paid. The amounts so transferred no
longer will be available for distribution to stockholders as dividends.
Although an increase in the authorized shares of Common Stock could, under
certain circumstances, have an anti-takeover effect (for example, by diluting
the stock ownership of a person seeking to effect a change in the composition of
the Board of Directors or contemplating a tender offer or other transaction for
the combination of the Corporation with another company), this proposal to amend
the Restated Certificate of Incorporation is not in response to any effort of
which the Corporation is aware to accumulate the Corporation's stock or obtain
control of the Corporation, nor is it part of a plan by management to recommend
a series of similar amendments to the Board of Directors and stockholders,
although the 1996 Stock Incentive Plan provides, among other things, that all
options and SARs will become immediately exercisable and the restrictions shall
expire with respect to Restricted Stock Awards in the event of a Change in
Control (as defined therein). See Item 4.
The Corporation's existing Restated Certificate of Incorporation also
includes certain other provisions which could be characterized as having an
anti-takeover effect, including (1) providing that any vacancy on the Board be
filled only by the remaining directors then in office, whether or not less than
a quorum; (2) providing that advance notice of stockholder nominations for
election of directors be given and that certain information be provided with
respect to stockholder nominees in the manner
18
<PAGE>
provided in the By-Laws; (3) providing that directors may be removed from
office, with or without cause, by the affirmative vote of the holders of 80% of
the voting power of all the shares of the Corporation entitled to vote generally
in the election of directors, voting together as a single class; (4) requiring
that stockholder action be taken only at an annual meeting of stockholders or a
special meeting of stockholders, which may be called only by the Chairman or
Vice Chairman of the Board, the President or the Board of Directors, and
prohibiting stockholder action by written consent; and (5) providing that the
stockholder vote required to alter, amend or repeal the foregoing amendments to
the Certificate or related changes in the By-Laws is 80% of the voting power of
all the Corporation's shares entitled to vote generally in the election of
directors, voting together as a single class.
THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND A VOTE FOR APPROVAL OF THE
AMENDMENTS TO THE RESTATED CERTIFICATE OF INCORPORATION.
ITEM 4.
PROPOSED 1996 STOCK INCENTIVE PLAN
Previous stock option plans were designed to attract and retain persons of
exceptional performance to the Corporation and its subsidiaries, as well as to
ensure additional incentive for persons who can contribute significantly to the
success of the business.
In the belief that the plans adopted earlier accomplished their objectives
and that the Corporation should be in a position to continue to provide
incentives to officers and other employees, whose number has increased
significantly since the acquisition of American Cyanamid Company, to contribute
to the future success and prosperity of the Corporation, the Board of Directors,
on January 25, 1996, unanimously adopted the 1996 Stock Incentive Plan (the
"1996 Plan"), subject to approval by the stockholders. The following is a
summary of the provisions of the 1996 Plan.
The 1996 Plan will be administered by the Compensation and Benefits
Committee (the "Committee") composed of non-employee members of the Board of
Directors of the Corporation, each of whom is a "disinterested person" under
Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and an "outside director" within the meaning of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"). Under the 1996 Plan, the
Committee may, from time to time, grant stock options and Stock Appreciation
Rights ("SARs"), and award shares of Common Stock subject to certain
restrictions or units representing such shares ("Restricted Stock"), to
executive officers, whether or not directors, (currently 13 officers) and
approximately 16,000 other key employees of the Corporation and its subsidiaries
("optionees"). The 1996 Plan provides for the granting of incentive stock
options, within the meaning of Section 422(b) of the Code, and non-qualified
stock options as determined by the Committee. The Committee, in its discretion,
may grant SARs in tandem with these options with exercise prices equal to the
exercise prices of the underlying options. The option price per share shall not
be less than the fair market value of a share of the Corporation's Common Stock
on the date the option is granted. The Committee may also, in its discretion,
grant SARs to certain optionees in tandem with previously granted options at the
price of the underlying options. Awards of Restricted Stock under the 1996 Plan
may be subject to such terms, conditions and restrictions (whether based on
performance standards, periods of service or otherwise) as the Committee shall
establish and set forth in Restricted Stock agreements.
The maximum number of shares of Common Stock that can be issued under the
1996 Plan is 15 million (such number shall be adjusted to 30 million, without
further action, upon consummation of the proposed two-for-one Stock Split, to be
effected in the form of a stock dividend), including a maximum of two million
(to be similarly adjusted to four million) shares that may be subject to
Restricted Stock awards. The maximum number of shares of Common Stock which can
be sold or awarded under the 1996 Plan to any optionee during the term of the
1996 Plan, including shares for which SARs may be exercised, shall not exceed
10% of the maximum number of shares issuable under the 1996 Plan. Under the 1996
Plan, no options can be granted, nor awards made, before January 25, 1996 or
after January 24, 2006.
19
<PAGE>
Options granted under the 1996 Plan will become exercisable and expire in
accordance with the 1996 Plan and the applicable option agreement, provided that
no option may become exercisable earlier than the later of (i) one year from the
date of grant or (ii) the date on which the optionee completes two years of
continuous employment with the Corporation or its subsidiaries.
Notwithstanding the foregoing, in the event of a Change in Control (as
defined in the 1996 Plan), all options and SARs shall become immediately
exercisable (and the restrictions shall expire with respect to Restricted Stock
awards) and, at the discretion of the Committee, any outstanding options, SARs
or restricted stock awards may be canceled and the holders thereof paid the
value thereof as described in the 1996 Plan.
There is a three-year period after termination of an optionee's employment
due to death or due to Retirement or Disability (each as defined in the 1996
Plan), during which any unexercised options or SARs held by the optionee, to the
extent exercisable at the time of termination, may be exercised, unless an
earlier termination date is specified in the option agreement. In the event of
the termination of an optionee's employment by the Corporation or a subsidiary
for reasons other than death, Retirement, Disability or deliberate gross
misconduct, there is a three-month period after such termination during which
any unexercised options or SARs, to the extent exercisable at the time of
termination, may be exercised unless an earlier termination date is specified in
the option agreement. To the extent unexercised, options and SARs will expire
immediately upon the termination by the optionee of his or her employment for
reasons other than Retirement, Disability or death and immediately upon the
termination of an optionee's employment by the Corporation or a subsidiary for
deliberate gross misconduct. Shares of Common Stock with respect to which
options or SARs are not exercised prior to termination or which are canceled, or
shares of Restricted Stock which are forfeited, will be available for subsequent
grants under the 1996 Plan.
Upon the exercise of an option, the full option price, either in cash,
Common Stock or a combination of cash and Common Stock, or in any other form of
consideration approved by the Committee, including under any cashless exercise
program approved by the Committee, is required to be paid to the Corporation.
SARs granted to officers and directors of the Corporation subject to Section
16(b) of the Exchange Act may be exercised only during certain ten-day "window
periods" outlined in the 1996 Plan, unless otherwise determined by the Committee
in the event that Rule 16b-3 ceases to impose such a requirement.
The 1996 Plan provides that options, SARs and shares of Restricted Stock are
nontransferable other than by the laws of descent and distribution. However, the
Committee may, in its discretion, allow transfers of options (but not SARs) to
other persons or entities unless such transfer would affect the incentive stock
option tax treatment of such option or affect the exemption from short swing
liability of such option under the Exchange Act. The Committee also may, in its
discretion, allow for the transfer of shares of Restricted Stock to other
persons or entities.
The 1996 Plan authorizes the Committee to permit the deferral of the
delivery of the proceeds from the exercise of an option or SAR on the terms and
conditions set forth in the 1996 Plan. Interest will be credited to the deferred
amounts at a rate of interest determined by the Committee and the deferred
account balance will be payable, at the election of the optionee, either in a
lump sum payment or in annual installments over a period of up to 10 years. Such
deferred amounts may be disbursed earlier in certain events such as Disability,
death, an "unforeseeable emergency" or otherwise at the discretion of the
Committee.
The 1996 Plan contains the non-competition and "employment at will"
provisions contained in the Corporation's other stock option plans.
The closing market price of one share of Common Stock on the New York Stock
Exchange as of February 12, 1996 was $101.75.
20
<PAGE>
If the aggregate fair market value of the Common Stock, determined at the
time of grant, with respect to which incentive stock options are granted under
the 1996 Plan or any other plan of the Corporation, are exercisable for the
first time by an optionee during any calendar year exceeds $100,000, or such
other amount as may be permitted under the Code, such excess shall be considered
non-qualified stock options. The 1996 Plan also contains limitations on the
grant of incentive stock options to any holder of more than 10% of the combined
voting power of the Corporation's voting stock.
An optionee will not be subject to federal income tax upon the grant of an
option under the 1996 Plan. Upon exercise of a non-qualified stock option, the
optionee generally must recognize ordinary income in the amount of the "option
spread" (the difference between the fair market value of the option shares and
the exercise price) at the date of exercise and the optionee's employer
generally is entitled to a tax deduction in the same amount subject to
applicable tax withholding requirements; and upon sale, appreciation (or
depreciation) after the date of exercise is treated as either short-term or
long-term capital gain (or loss) depending on how long the shares have been
held.
Upon exercise of an incentive stock option, the optionee generally will not
have to recognize any taxable income (except that the alternative minimum tax
may apply). Instead, the optionee will be subject to taxation only upon the
disposition of the shares acquired upon exercise of the incentive stock option.
If the optionee disposes of the shares acquired upon exercise of an incentive
stock option more than two years after the date of grant of the incentive stock
option and more than one year after exercise, he or she will realize a long-term
capital gain (or loss) based on the difference between the sale price of the
shares and the exercise price of the option (or his or her basis in the shares
if it is not equal to the exercise price). Otherwise, in the event the optionee
disposes of the shares acquired pursuant to the exercise of an incentive stock
option prior to the expiration of two years from the date of grant or one year
from the date of exercise of the incentive stock option, the optionee will
realize ordinary income in the year of disposition in an amount equal to the
excess (if any) of the fair market value of such shares on the date of exercise
or the amount realized on a sale (whichever is less) over the option price, and
the optionee's employer will be entitled to deduct such amount for federal
income tax purposes. Any further gain (or loss) realized by the optionee upon
the sale of the Common Stock will be taxed as short-term or long-term capital
gain (or loss), depending on how long the shares have been held, and will not
result in any further deduction by the employer.
To enable optionees to satisfy tax withholding obligations relating to
non-qualified stock options, in lieu of cash payment the Committee may provide
that optionees may elect to have the Corporation withhold from an option
exercise, or separately surrender, shares of Common Stock.
Because all grants and awards under the 1996 Plan are entirely within the
discretion of the Committee, the total benefits allocable under the 1996 Plan in
the future are not at present determinable. No grants or awards have been made
to date and no grants or awards will be made by the Corporation until such time
as the 1996 Plan is approved by the stockholders at the 1996 annual meeting.
The proposal to approve the 1996 Plan requires the affirmative vote of the
holders of a majority of the Common Stock and $2 Convertible Preferred Stock,
voting as a single class, present or represented and entitled to vote at the
meeting. However, under Rule 16b-3 of the Exchange Act, abstentions will be
counted as votes cast against the proposal for purposes of tabulating the votes
on this item. Broker non-votes will have no effect.
THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND A VOTE FOR APPROVAL OF THE
1996 STOCK INCENTIVE PLAN.
21
<PAGE>
STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Stockholder proposals intended to be presented at the 1997 Annual Meeting
must be received by the Corporation at its principal executive offices on or
before November 21, 1996 in order to be considered for inclusion in the
Corporation's Proxy Statement and form of proxy relating to that meeting.
OTHER MATTERS
Management knows of no other matters to be brought before the Annual
Meeting, but if other matters come before the meeting, it is the intention of
the persons named in the accompanying proxy to take such action as in their
judgment is in the best interest of the Corporation and its stockholders.
The Corporation will bear the expenses in preparing, printing and mailing
the proxy materials to the stockholders. In addition, the Corporation will
retain D.F. King & Co., Inc., New York, NY, to aid in the solicitation of
proxies, for which such firm will be paid a fee of $18,500 plus out-of-pocket
expenses and disbursements. In addition, officers and employees of the
Corporation and its subsidiaries may request the return of proxies by telephone,
telegram or in person, for which no additional compensation will be paid to
them.
The Annual Report of the Corporation for the year ended December 31, 1995,
including financial statements, has been mailed to stockholders.
REGARDLESS OF THE NUMBER OF SHARES YOU HOLD, IT IS IMPORTANT THAT YOUR STOCK
BE REPRESENTED AT THE MEETING IN ORDER THAT THE PRESENCE OF A QUORUM CAN BE
SECURED. IF YOU ARE UNABLE TO ATTEND THE MEETING, YOU ARE URGED TO DATE AND SIGN
YOUR PROXY AND RETURN IT WITHOUT DELAY IN THE ENCLOSED ADDRESSED ENVELOPE. THE
SHARES REPRESENTED BY EACH PROXY SO SIGNED AND RETURNED WILL BE VOTED IN
ACCORDANCE WITH THE STOCKHOLDER'S DIRECTIONS.
By Order of the Board of Directors
CAROL G. EMERLING
Secretary
March 21, 1996
22
<PAGE>
EXHIBIT I
AMENDMENTS TO RESTATED CERTIFICATE OF INCORPORATION
Amendments to the following sections of the Restated Certificate of
Incorporation are reflected by printing additions in boldface; deleted material
is reflected by lining through. [For SEC EDGAR Filing - Deletions are enclosed
in brackets.]
1. The first sentence of the first paragraph of Article FOURTH of the
Restated Certificate of Incorporation of the Corporation is hereby
amended in its entirety to read as follows:
"The total number of shares of Capital Stock which may be issued by the
corporation is [Six hundred five million (605,000,000)] ONE BILLION TWO
HUNDRED FIVE MILLION (1,205,000,000) of which [Six hundred million
(600,000,000)] ONE BILLION TWO HUNDRED MILLION (1,200,000,000) shares
shall be Common Stock, [of the] par value of Thirty-three and one-third
cents (33 1/3) per share and Five Million (5,000,000) shares shall be
Preferred Stock (hereinafter referred to as the "Preferred Stock"), [of
the] par value of Two Dollars fifty cents ($2.50) per share."
2. The first sentence of subdivision (g) of Section VII of such Article
FOURTH is hereby amended in its entirety to read as follows:
"The shares of such series shall be entitled to [Nine (9)] EIGHTEEN (18)
votes per share voting with the shares of Common Stock at any annual or
special meeting of stockholders for the election of directors and upon
any other matter coming before such meeting."
<PAGE>
APPENDIX A
----------
[FORM OF PROXY CARD]
AMERICAN HOME PRODUCTS CORPORATION
FIVE GIRALDA FARMS
MADISON, NEW JERSEY 07940
This Proxy is solicited on Behalf of the Board of Directors and
Management.
The undersigned hereby appoints JOHN R. STAFFORD, LOUIS L. HOYNES, JR.
and CAROL G. EMERLING and each of them proxies with power of substitution,
to represent and to vote, as designated below, on behalf of the undersigned
at the Annual Meeting of Stockholders of the Corporation to be held on
April 23, 1996 and at any adjournment thereof on each of the following
matters, as set forth in the Proxy Statement, and upon such other matters
properly coming before the meeting.
This proxy when properly executed will be voted in the manner directed by
the stockholder. If no direction is given, this proxy will be voted FOR
Items 1, 2, 3 and 4.
(Continued and to be signed on the reverse side)
____________ _______________
Common Preferred
THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND YOU VOTE "FOR"
ITEMS 1, 2, 3 and 4
Item 1 - ELECTION OF DIRECTORS:
Nominees:
C.L. Alexander, Jr., F.A. Bennack, Jr., R.G. Blount,
R.C. Duke, J.D. Feerick, F. Hassan, J.P. Mascotte, M.L.
Polan, J.R. Stafford, J.R. Torell III and W. Wrigley
FOR / / WITHHELD FOR ALL / /
WITHHELD FOR: (Write that nominee's name in the space provided below):
________________________________
Item 2 - APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
FOR / / AGAINST / / ABSTAIN / /
<PAGE>
Item 3 - AMENDMENTS TO RESTATED CERTIFICATE OF INCORPORATION TO
INCREASE TO 1,200,000,000 THE NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK AND A RELATED MATTER
FOR / / AGAINST / / ABSTAIN / /
Item 4 - ADOPTION OF THE 1996 STOCK INCENTIVE PLAN
FOR / / AGAINST / / ABSTAIN / /
/ /
OPTIONAL SECRET PROXY
Signature(s)_____________________________ Date___________________
Note: Please sign exactly as the name appears above. When shares are held
by joint owners, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
<PAGE>
APPENDIX B
----------
American Home Products Corporation
1996 STOCK INCENTIVE PLAN
(As approved by the Board of Directors on January 25, 1996, subject to the
approval of stockholders at the April 1996 Annual Meeting)
Section 1. Purpose. The purpose of the 1996 Stock Incentive Plan (the
"Plan") is to provide favorable opportunities for officers and other key
employees of American Home Products Corporation (the "Company") and its
subsidiaries to acquire shares of Common Stock of the Company or to benefit
from the appreciation thereof. Such opportunities should provide an
increased incentive for these employees to contribute to the future success
and prosperity of the Company, thus enhancing the value of the stock for
the benefit of the stockholders, and increase the ability of the Company to
attract and retain individuals of exceptional skill upon whom, in large
measure, its sustained progress, growth and profitability depend.
Pursuant to the Plan, options to purchase the Company's Common Stock
("Options") and Stock Appreciation Rights may be granted and Restricted
Stock may be awarded by the Company. Options granted under the Plan may be
either incentive stock options, as defined in Section 422(b) of the
Internal Revenue Code of 1986, as amended (the "Code"), or options which do
not meet the requirements of said Section 422(b) of the Code, herein
referred to as non-qualified stock options.
It is intended, except as otherwise provided herein, that incentive
stock options may be granted under the Plan and that such incentive stock
options shall conform to the requirements of Section 422 and 424 of the
Code and to the provisions of this Plan and shall otherwise be as
determined by the Committee and, to the extent provided in the last
sentence of Section 2 hereof, approved by the Board of Directors. The
terms "subsidiaries" and "subsidiary corporation" shall have the meanings
given to them by Section 424 of the Code. All section references to the
Code in this Plan are intended to include any amendments or substitutions
therefor subsequent to the adoption of the Plan.
Section 2. Administration. The Plan shall be administered by the
Compensation and Benefits Committee (the "Committee") consisting of two or
more members of the Board of Directors of the Company, each of whom shall
be (i) a "disinterested person" within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and (ii)
an "outside director" within the meaning of Section 162(m) of the Code.
The Committee shall have full authority to grant Options and Stock
Appreciation Rights, and make Restricted Stock awards, to interpret the
Plan and to make such rules and regulations and establish such procedures
as it deems appropriate for the
<PAGE>
administration of the Plan, taking into consideration the recommendations
of management. The decisions of the Committee shall be binding and
conclusive for all purposes and upon all persons unless and except to the
extent that the Board of Directors of the Company shall have previously
directed that all or specified types of decisions of the Committee shall be
subject to approval by the Board of Directors.
Section 3. Number of Shares. The total number of shares which may be
sold or awarded under the Plan and with respect to which Stock Appreciation
Rights may be exercised shall not exceed 15,000,000 shares of the Company's
Common Stock. Such number shall be, without further action, adjusted to
30,000,000 in accordance with Section 8 hereof upon the consummation of a
two-for-one stock split (in the form of a dividend) anticipated to occur in
1996. The total number of shares which may be sold or awarded under the
Plan to any optionee (hereinafter defined), including shares for which
Stock Appreciation Rights may be exercised, shall not exceed 10% of such
number, as and if adjusted, over the life of the Plan. The shares may be
authorized and unissued or issued and reacquired shares, as the Board of
Directors from time to time may determine. Shares with respect to which
Options or Stock Appreciation Rights are not exercised prior to termination
of the Option and shares that are part of a Restricted Stock award which
are forfeited before the restrictions lapse shall be available for Options
and Stock Appreciation Rights thereafter granted and for Restricted Stock
thereafter awarded under the Plan, to the fullest extent permitted by Rule
16b-3 under the Exchange Act (if applicable at the time).
Section 4. Participation. The Committee may, from time to time,
select and grant Options and Stock Appreciation Rights to officers (whether
or not directors) and other key employees of the Company and its
subsidiaries ("optionees") and award Restricted Stock to officers (whether
or not directors) and other key employees of the Company and its
subsidiaries and shall determine the number of shares subject to each
Option or award.
Section 5. Terms and Conditions of Options. The terms and conditions
of each Option and each Stock Appreciation Right shall be set forth in an
agreement or agreements between the Company and the optionee. Such terms
and conditions shall include the following as well as such other
provisions, not inconsistent with the Plan, as may be deemed advisable by
the Committee:
(a) Number of Shares. The number of shares subject to the
Option.
(b) Option Price. The option price per share (the "Option
Price"), which shall not be less than 100% of the fair market value of
the Company's Common Stock on the date the Option is granted. Fair
market value shall be deemed to be the mean between the highest and
lowest sale prices of
<PAGE>
the Common Stock on the Consolidated Transaction Reporting System on
the date the Option is granted.
(c) Date of Grant. Subject to previous directions of the Board
of Directors pursuant to the last sentence of Section 2, the date of
grant of an Option shall be the date when the Committee meets and
awards such Option.
(d) Payment. The Option Price multiplied by the number of
shares to be purchased by exercise of the Option shall be paid upon
the exercise thereof. Unless the terms of an Option provide to the
contrary, upon exercise, the aggregate Option Price shall be payable
by delivering to the Company (i) cash equal to such aggregate Option
Price, (ii) shares of the Company's Common Stock owned by the grantee
having a fair market value (determined in accordance with Section
5(b)) at least equal to such aggregate Option Price, (iii) a
combination of any of the above methods which total to such aggregate
Option Price, or (iv) any other form of consideration which has been
approved by the Committee, including under any approved cashless
exercise mechanism; and payment of such aggregate Option Price by any
such means shall be made and received by the Company prior to the
delivery of the shares as to which the Option was exercised. The right
to deliver in full or partial payment of such Option Price any
consideration other than cash shall be limited to such frequency as
the Committee shall determine in its absolute discretion. A holder of
an Option shall have none of the rights of a stockholder until the
shares are issued to him or her; provided that if an optionee
exercises an Option and the appropriate purchase price is received by
the Company in accordance with this Section 5(d) prior to any dividend
record date, such optionee shall be entitled to receive the dividends
which would be paid on the shares subject to such exercise if such
shares were outstanding on such record date.
(e) Term of Options. Each Option granted pursuant to the Plan
shall be for the term specified in the applicable option agreement
(the "Option Agreement") subject to earlier termination in all cases
as provided in paragraph (g) of this Section.
(f) Exercise of Option. Options granted under the Plan may be
exercised during the period and in accordance with the conditions set
forth in the Plan and the applicable Option Agreement; provided,
however, that (i) no option granted under the Plan may be exercisable
earlier than the later of (A) one year from the date of grant or (B)
the date on which the optionee completes two years of continuous
employment with the Company or one or more of its subsidiaries and
(ii) in the event of an optionee's death, Retirement (as defined
below) or Disability (as defined below), any options held by such
optionee shall become
<PAGE>
exercisable on his or her Retirement date, the date his or her
employment terminates on account of Disability or the date of his or
her death provided he or she has been in the continuous employment of
the Company or one or more of its subsidiaries for at least two years
at such time. No Option may be exercised after it is terminated as
provided in paragraph (g) of this Section, and no Option may be
exercised unless the optionee, except as provided in paragraph (g) of
this Section, is then employed by the Company or any of its
subsidiaries and shall have been continuously employed by the Company
or one or more of such subsidiaries since the date of the grant of his
or her Option. Non-qualified stock options and incentive stock
options may be exercised regardless of whether or not other Options
granted to the optionee pursuant to the Plan are outstanding or
whether or not other stock options granted to the optionee pursuant to
any other plan are outstanding.
(g) Termination of Options. An Option, to the extent not
validly exercised, shall terminate upon the occurrence of the first of
the following events:
(i) On the date specified in the Option
Agreement;
(ii) Three years after the date of termination of
the optionee's employment by the Company or its subsidiaries due
to "Retirement" (defined as termination of full time employment
on or after the earliest retirement age under any qualified
retirement plan of the Company or its subsidiaries which covers
the optionee, or age 55 with 5 continuous years of such
employment if there is no such plan) or "Disability" (defined as
disability for purposes of at least one qualified retirement plan
or long term disability plan maintained by the Company or its
subsidiaries in which the optionee participates), during which
three year period the optionee may exercise the Option to the
extent he or she was entitled to exercise it at the time of such
termination or such shorter period as may be provided in the
Option Agreement;
(iii) Three years after the date of the
optionee's death during which three year period the Option may be
exercised by the optionee's legal representative or legatee or
such other person designated by an appropriate court as the
person entitled to exercise such Option to the extent the
optionee was entitled to exercise it at the time of his or her
death;
(iv) Three months after termination by the
Company or one of its subsidiaries of the optionee's employment
for any reason other than death,
<PAGE>
Retirement, Disability or deliberate gross misconduct, determined
in the sole discretion of the Committee, during which three month
period the Option may be exercised by the optionee to the extent
the optionee was entitled to exercise it at the time of such
termination;
(v) Concurrently with the time of termination by
the Company or one of its subsidiaries of the optionee's
employment for deliberate gross misconduct, determined in the
sole discretion of the Committee (for purposes only of this
subparagraph (v) an Option shall be deemed to be exercised when
the optionee has received the stock certificate representing the
shares for which the Option was exercised); or
(vi) Concurrently with the time of termination
by the employee of his or her employment with the Company or one
of its subsidiaries for reasons other than Retirement, Disability
or death.
Notwithstanding the above, no Option shall be exercisable after
termination of employment unless the optionee shall have, during the
entire time period in which his or her Options are exercisable, (a)
refrained from becoming or serving as an officer, director, partner
or employee of any individual proprietorship, partnership or
corporation, or the owner of a business, or a member of a partnership
which conducts a business in competition with the Company or renders
a service (including without limitation, advertising agencies and
business consultants) to competitors with any portion of the business
of the Company, (b) made himself or herself available, if so
requested by the Company, at reasonable times and upon a reasonable
basis to consult with, supply information to, and otherwise cooperate
with, the Company and (c) refrained from engaging in deliberate
action which, as determined by the Committee, causes substantial harm
to the interests of the Company. If these conditions are not
fulfilled, the optionee shall forfeit all rights to any unexercised
Option as of the date of the breach of the condition.
Notwithstanding the provisions of subparagraphs (ii) and (iii) of
this Section 5(g), an Option granted under the Plan to an optionee
who dies or terminates employment due to Retirement or Disability
before this Plan is approved by the stockholders of the Company, to
the extent not validly exercised, shall terminate three years after
the date the Plan is approved by the stockholders of the Company.
(h) Non-transferability of Options and Stock Appreciation Rights.
Options and Stock Appreciation Rights shall not be transferable by the
optionee other than by will or the laws of
<PAGE>
descent and distribution, and Options and Stock Appreciation Rights shall
during his or her lifetime be exercisable only by the optionee;
provided, however, that the Committee may, in its sole discretion, allow for
- -------- -------
transfer of Options (other than incentive stock options, unless such
transferability would not adversely affect incentive stock option tax treatment)
to other persons or entities, subject to such conditions or limitations as it
may establish to ensure that transactions with respect to Options intended to
be exempt from Section 16(b) of the Exchange Act pursuant to Rule 16b-3
under the Exchange Act do not fail to maintain such exemption as a result
of the Committee causing Options to be transferrable, or for other
purposes; provided further, however, that for any Option that is
-------- ------- -------
transferred, other than by the laws of descent and distribution, any
related Stock Appreciation Right shall be extinguished.
(i) Applicable Laws or Regulations. The Company's obligation to sell
and deliver stock under the Option is subject to such compliance as the
Company deems necessary or advisable with federal and state laws, rules and
regulations.
(j) Limitations on Incentive Stock Options. To the extent that the
aggregate fair market value of the Company's Common Stock, determined at
the time of grant in accordance with the provisions of Section 5(b), with
respect to which incentive stock options granted under this or any other
Plan of the Company are exercisable for the first time by an optionee
during any calendar year exceeds $100,000, or such other amount as may be
permitted under the Code, such excess shall be considered non-qualified
stock options.
Notwithstanding anything in the Plan to the contrary, any incentive
stock option granted to any individual who, at the time of grant, is the
owner, directly or indirectly, of stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the
Company or any subsidiary thereof, shall (i) have a term not exceeding five
years from the date of grant and (ii) shall have an option price per share
of not less than 110% of the fair market value of the Company's Common
Stock on the date the incentive stock option is granted (determined in
accordance with the last sentence of Section 5(b)).
Section 6. Stock Appreciation Rights.
(a) The Committee may, in its sole discretion, from time to time
grant Stock Appreciation Rights to certain optionees in connection with any
Option granted under this Plan and in connection with Options granted under
the 1990 and 1993 Stock Incentive Plans and under the 1985 Stock Option
Plan. Stock Appreciation Rights may be granted either at the time of the
grant of an Option under the Plan or at any time thereafter during the term
of the Option, provided such Stock Appreciation
<PAGE>
Rights may also be granted with respect to outstanding Options under the
1990 and 1993 Stock Incentive Plans and the 1985 Stock Option Plan. Stock
Appreciation Rights may be granted with respect to all or part of the stock
under a particular Option.
(b) Stock Appreciation Rights shall entitle the holder of the related
Option, upon exercise, in whole or in part, of the Stock Appreciation
Rights, to receive payment in the amount and form determined pursuant to
subparagraph (iii) of paragraph (c) of this Section 6. Stock Appreciation
Rights may be exercised only to the extent that the related Option has not
been exercised. The exercise of Stock Appreciation Rights shall result in
a pro rata surrender of the related Option to the extent that the Stock
Appreciation Rights have been exercised.
(c) Stock Appreciation Rights shall be subject to such terms and
conditions which are not inconsistent with the Plan as shall from time to
time be approved by the Committee and reflected in the applicable Option
Agreement (or in a separate document, which shall be considered for
purposes of the Plan to be incorporated into and part of the applicable
Option Agreement), and to the following terms and conditions.
(i) Stock Appreciation Rights shall be exercisable at
such time or times and to the extent, but only to the extent,
that the Option to which they relate shall be exercisable.
(ii) Subject to Section 9, Stock Appreciation Rights
and any Options to which they relate shall in no event be
exercisable during the first six months after the date of grant;
provided that this limitation shall apply only to persons who are
subject to Section 16(b) of the Exchange Act.
(iii) Upon exercise of Stock Appreciation Rights, the
holder thereof shall be entitled to elect to receive therefor
payment in the form of shares of the Company's Common Stock
(rounded down to the next whole number so no fractional shares
are issued), cash or any combination thereof in an amount equal
in value to the difference between the Option Price per share and
the fair market value per share of Common Stock on the date of
exercise multiplied by the number of shares in respect of which
the Stock Appreciation Rights shall have been exercised, subject
to any limitation on such amount which the Committee may in its
discretion impose at the time of grant of the Stock Appreciation
Rights. Such election as to the form of payment shall be subject
to the consent of the Committee which consent or disapproval may
be given at any time after the election to which it relates. The
fair market value of Common Stock shall be deemed to be the mean
between the highest and lowest sale prices of the Common Stock on
<PAGE>
the Consolidated Transaction Reporting System on the date the
Stock Appreciation Right is exercised or if no transaction on the
Consolidated Transaction Reporting System occurred on such date,
then on the last preceding day on which a transaction did take
place.
(iv) Any exercise of Stock Appreciation Rights by an
officer or director subject to Section 16(b) of the Exchange Act,
as well as any election by such officer or director as to the
form of payment of Stock Appreciation Rights (Common Stock, cash
or any combination thereof), which election is subject to the
consent of the Committee in its sole discretion as provided in
subparagraph (iii) hereof, shall be made during the ten-day
period beginning on the third business day following the release
for publication of any quarterly or annual statement of sales and
earnings by the Company and ending on the twelfth business day
following the date of such release. In the event that such a
director or officer exercises a Stock Appreciation Right for cash
or stock pursuant to this Section 6 during a "window period" as
provided in Rule 16b-3 under the Exchange Act, the day on which
such right is effectively exercised shall be that day, if any,
during such "window period" which is designated by the Committee
in its discretion for all such exercises by such individuals
during such period. If no such day is designated, the day of
effective exercise shall be determined in accordance with normal
administrative practices of the Plan. This clause (iv) shall
cease to apply at the discretion of the Committee if any
amendment or Securities and Exchange Commission interpretation of
such Rule 16b-3 makes the application of this clause (iv)
unnecessary to exempt the grant and/or exercise of Stock
Appreciation Rights from the application of Section 16(b) of the
Exchange Act.
(d) To the extent that Stock Appreciation Rights shall be exercised,
the Option in connection with which such Stock Appreciation Rights shall
have been granted shall be deemed to have been exercised for the purpose of
the maximum limitations set forth in the Plan under which such Options
shall have been granted. Any shares of Common Stock which are not
purchased due to the surrender in whole or in part of an Option pursuant to
this Section 6 shall not be available for granting further Options under
the Plan.
Section 6A. Deferral.
(a) Notwithstanding anything herein to the contrary, an optionee
may elect, at the discretion of, and in accordance with rules which may be
established by, the Committee, to defer delivery of the proceeds of
exercise of an unexercised Option or the corresponding Stock Appreciation
Right, provided such
<PAGE>
election is irrevocable and is made (i) at least six months prior to the
date that such Option or the corresponding Stock Appreciation Right
otherwise would expire and (ii) at least one month prior to the date such
Option or the corresponding Stock Appreciation Right is exercised (or such
shorter period as may be determined by the Committee). Upon such exercise,
the amount deferred shall be equal in value to the difference between the
Option Price per share and the fair market value per share of the Common
Stock on the date of exercise (determined in accordance with Section 5(b)),
multiplied by the number of shares covered by such exercise and in respect
of which the optionee shall have made the deferral election, and shall be
credited to an account in the name of the optionee on the books and records
of the Company (a "Deferred Compensation Account") at the date of exercise.
A separate Deferred Compensation Account shall be maintained with respect
to each Option or corresponding Stock Appreciation Right subject to an
effective deferral election.
(b) Interest shall be credited on amounts in the Deferred
Compensation Account from the date of exercise of the Option or the
corresponding Stock Appreciation Right to the date of payment, at the rate
of interest determined by the Committee and communicated to the optionees.
The value of an optionee's Deferred Compensation Account shall be payable
in a lump sum cash payment or in annual installments over a period not to
exceed 10 years or as otherwise determined by the Committee. At the time
an optionee makes such deferral election, the optionee shall elect the form
of payment and date for lump sum payment or commencement of annual payments
of the Deferred Compensation Account, with such date at least one year
subsequent to the date of exercise of the Option or corresponding Stock
Appreciation Right, but not later than the date of the optionee's
termination of employment with Company. Notwithstanding any election by an
optionee, in the event of Disability or death of the optionee, the
optionee's Deferred Compensation Account shall be paid within 90 days in
the form of a single lump sum.
(c) Notwithstanding the deferred payment date elected by the
optionee, the Committee may, in its discretion, allow for early payment of
an optionee's Deferred Compensation Account in the event of an
"unforeseeable emergency." For this purpose, an unforeseeable emergency
shall be defined as an unanticipated emergency that is caused by an event
beyond the control of the optionee and that would result in severe
financial hardship to the optionee if early withdrawal were not permitted.
Any withdrawal on account of an unforeseeable emergency must be limited to
the amount necessary to meet the emergency. The above provisions regarding
a withdrawal upon an unforeseeable emergency shall be interpreted in
accordance with published revenue procedures, regulations, releases or
interpretations. In addition, Deferred Compensation Accounts may be
distributed on an accelerated basis in the discretion of the Committee.
(d) Optionees have the status of general unsecured
<PAGE>
creditors of the Company with respect to their Deferred Compensation
Accounts, and such accounts constitute a mere promise by the Company to
make payments with respect thereto.
(e) An optionee's right to benefit payments under the Plan with
respect to the Deferred Compensation Accounts may not be anticipated,
alienated, sold, transferred, assigned, pledged, encumbered, attached or
garnished by creditors of the optionee or the optionee's beneficiary and
any attempt to do so shall be void.
Section 7. Restricted Stock Performance Awards. The Committee may,
in its sole discretion, from time to time, make awards of shares of the
Company's Common Stock or awards of units representing shares of the
Company's Common Stock, up to 2,000,000 shares in the aggregate (such
number to be adjusted without further action to 4,000,000 in accordance
with Section 8 hereof upon the consummation of the stock split referred to
in Section 3), to such officers and other key employees of the Company and
its subsidiaries in such quantity, and on such terms, conditions and
restrictions (whether based on performance standards, periods of service or
otherwise) as the Committee shall establish ("Restricted Stock"). The
terms, conditions and restrictions of any Restricted Stock award made under
this Plan shall be set forth in an agreement or agreements between the
Company and the recipient of the award.
(a) Issuance of Restricted Stock. The Committee shall determine
the manner in which Restricted Stock shall be held during the period it is
subject to restrictions.
(b) Stockholder Rights. Beginning on the date of grant of the
Restricted Stock award and subject to the execution of the award agreement
by the recipient of the award and subject to the terms, conditions and
restrictions of the award agreement, the Committee shall determine to what
extent the recipient of the award has the rights of a stockholder of the
Company including, but not limited to, whether or not the employee
receiving the award has the right to vote the shares or to receive
dividends or dividend equivalents.
(c) Restriction on Transferability. None of the shares or units
of a Restricted Stock award may be assigned or transferred, pledged or sold
prior to their delivery to a recipient or, in the case of a recipient's
death, to the recipient's legal representative or legatee or such other
person designated by an appropriate court; provided, however, that the
Committee may, in its sole discretion, allow for transfer of shares or
units of a Restricted Stock Award to other persons or entities.
(d) Delivery of Shares. Upon the satisfaction of the terms,
conditions and restrictions contained in the Restricted Stock award
agreement or the release from the terms, conditions and restrictions of a
Restricted Stock award agreement, as determined by
<PAGE>
the Committee, the Company shall deliver, as soon as practicable, to the
recipient of the award (or permitted transferee), or in the case of his or
her death to his or her legal representative or legatee or such other
person designated by an appropriate court, a stock certificate for the
appropriate number of shares of the Company's Common Stock, free of all
such restrictions, except for any restrictions that may be imposed by law.
(e) Forfeiture of Restricted Stock. Subject to Section 7(f),
all of the restricted shares or units with respect to a Restricted Stock
award shall be forfeited and all rights of the recipient with respect to
such restricted shares or units shall terminate unless the recipient
continues to be employed by the Company or its subsidiaries until the
expiration of the forfeiture period and the satisfaction of any other
conditions set forth in the award agreement.
(f) Waiver of Forfeiture Period. Notwithstanding any other
provisions of the Plan, the Committee may, in its sole discretion, waive
the forfeiture period and any other conditions set forth in any award
agreement under certain circumstances (including the death, Disability or
Retirement of the recipient of the award or a material change in
circumstances arising after the date of an award) and subject to such terms
and conditions (including forfeiture of a proportionate number of the
restricted shares) as the Committee shall deem appropriate.
Section 8. Adjustment in Event of Change in Stock. Subject to
Section 9, in the event of stock split, stock dividend, cash dividend
(other than a regular cash dividend), combination of shares, merger, or
other relevant change in the Company's capitalization, the Committee shall,
subject to the approval of the Board of Directors, appropriately adjust the
number and kind of shares available for issuance under the Plan, the
number, kind and Option Price of shares subject to outstanding Options and
Stock Appreciation Rights and the number and kind of shares subject to
outstanding Restricted Stock awards; provided, however, that to the extent
permitted in the case of incentive stock options by Sections 422 and 424 of
the Code, in the event that the outstanding shares of Common Stock of the
Company are increased or decreased or changed into or exchanged for a
different number or kind of shares or other securities of the Company or of
another corporation, through reorganization, merger, consolidation,
liquidation, recapitalization, reclassification, stock split-up,
combination of shares or dividend, appropriate adjustment in the number and
kind of shares as to which Options may be granted and as to which Options
or portions thereof then unexercised shall be exercisable, and in the
Option Price thereof, shall be made to the end that the proportionate
number of shares or other securities as to which Options may be granted and
the optionee's proportionate interests under outstanding Options shall be
maintained as before the occurrence of such event; provided, that any such
adjustment in shares subject to outstanding Options (including any
adjustments in the Option Price) shall be made in such manner as not to
constitute
<PAGE>
a modification as defined by subsection (h)(3) of Section 424 of the Code;
and provided, further, that, in the event of an adjustment in the number or
kind of shares under a Restricted Stock award pursuant to this Section 8,
any new shares or units issued to a recipient of a Restricted Stock award
shall be subject to the same terms, conditions and restrictions as the
underlying Restricted Stock award for which the adjustment was made.
Section 9. Effect of a Change of Control.
(a) For purposes of this Section 9, "Change in Control" shall,
unless the Board of Directors of the Company otherwise directs by
resolution adopted prior thereto or, in the case of a particular award, the
applicable award agreement states otherwise, be deemed to occur if (i) any
"person" (as that term is used in Sections 13 and 14(d)(2) of the Exchange
Act) other than a Permitted Holder (as defined below) is or becomes the
beneficial owner (as that term is used in Section 13(d) of the Exchange
Act), directly or indirectly, of 50% or more of either the outstanding
shares of Common Stock or the combined voting power of the Company's then
outstanding voting securities entitled to vote generally, (ii) during any
period of two consecutive years, individuals who constitute the Board of
Directors of the Company at the beginning of such period cease for any
reason to constitute at least a majority thereof, unless the election or
the nomination for election by the Company's stockholders of each new
director was approved by a vote of at least three-quarters of the directors
then still in office who were directors at the beginning of the period or
(iii) the Company undergoes a liquidation or dissolution or a sale of all
or substantially all of the assets of the Company. No merger, consolidation
or corporate reorganization in which the owners of the combined voting
power of the Company's then outstanding voting securities entitled to vote
generally prior to said combination, own 50% or more of the resulting
entity's outstanding voting securities shall, by itself, be considered a
Change in Control. As used herein, "Permitted Holder" means (i) the
Company, (ii) any corporation, partnership, trust or other entity
controlled by the Company and (iii) any employee benefit plan (or related
trust) sponsored or maintained by the Company or any such controlled
entity.
(b) Except to the extent reflected in a particular award
agreement, in the event of a Change of Control:
(i) notwithstanding any vesting schedule, or any other
limitation on exercise or vesting, with respect to an award of
Options, Stock Appreciation Rights or Restricted Stock, such Options
or Stock Appreciation Rights shall become immediately exercisable
with respect to 100 percent of the shares subject thereto, and the
restrictions shall expire immediately with respect to 100 percent of
such Restricted Stock award; and
(ii) the Committee may, in its discretion and upon at
<PAGE>
least 10 days advance notice to the affected persons, cancel any
outstanding Options, Stock Appreciation Rights or Restricted Stock
awards and pay to the holders thereof, in cash, the value of such
awards based upon the highest price per share of Company Common Stock
received or to be received by other stockholders of the Company in
connection with the Change of Control.
Section 10. Amendment and Discontinuance. The Board of Directors of
the Company may from time to time amend or revise the terms of the Plan, or
may discontinue the Plan at any time as permitted by law, provided,
however, that such amendment shall not (except as provided in Section 8),
without further approval of the stockholders, (i) increase the aggregate
number of shares with respect to which awards may be made under the Plan;
(ii) change the manner of determining the Option Price (other than
determining the fair market value of the Common Stock to conform with
applicable provisions of the Code or regulations and interpretations
thereunder); (iii) extend the term of the Plan or the maximum period during
which any Option may be exercised or (iv) make any other change which, in
the absence of stockholder approval, would cause awards granted under the
Plan which are then outstanding, or which may be granted in the future, to
fail to meet the exemptions provided by Rule 16b-3 under the Exchange Act
and Section 162(m) of the Code. No amendments, revision or discontinuance
of the Plan shall, without the consent of an optionee or a recipient of a
Restricted Stock award, in any manner adversely affect his or her rights
under any Option theretofore granted under the Plan.
Section 11. Effective Date and Duration. The Plan was adopted by
the Board of Directors of the Company on January 25, 1996, subject to
approval by the stockholders of the Company at a meeting to be held in
April 1996. Neither the Plan nor any Option or Stock Appreciation Right or
Restricted Stock award shall become binding until the Plan is approved by a
vote of the stockholders in a manner which complies with Rule 16b-3
promulgated pursuant to the Exchange Act and Sections 162(m) and 422(b)(1)
of the Code. No Option may be granted and no stock may be awarded under
the Plan before January 25, 1996 nor after January 24, 2006.
Section 12. Tax Withholding. Notwithstanding any other provision
of the Plan, the Company or its subsidiaries, as appropriate, shall have
the right to deduct from all awards under the Plan cash and/or stock,
valued at fair market value on the date of payment in accordance with
Section 5(b), in an amount necessary to satisfy all federal, state or local
taxes as required by law to be withheld with respect to such awards. In
the case of awards paid in the Company's Common Stock, the optionee or
permitted transferee may be required to pay to the Company or a subsidiary
thereof, as appropriate, the amount of any such taxes which the Company or
subsidiary is required to withhold, if any, with respect to such stock.
Subject in particular cases to the disapproval of the Committee, the
Company may accept shares of the Company's Common Stock of equivalent fair
market value in payment of such withholding
<PAGE>
tax obligations if the optionee elects to make payment in such manner.
Section 13. Construction and Conditions. The Plan and Options,
Restricted Stock awards, and Stock Appreciation Rights granted thereunder
shall be governed by and construed in accordance with the laws of the State
of Delaware and in accordance with such federal law as may be applicable.
Neither the existence of the Plan nor the grant of any Options or
Stock Appreciation Rights or awards of Restricted Stock pursuant to the
Plan shall create in any optionee the right to continue to be employed by
the Company or its subsidiaries. Employment shall be "at will" and shall
be terminable "at will" by the Company or employee with or without cause.
Any oral statements or promises to the contrary are not binding upon the
Company or the employee.
