<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / 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 Section240.14a-11(c) or
Section240.14a-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):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
AMERICAN HOME PRODUCTS CORPORATION
FIVE GIRALDA FARMS
MADISON, N.J. 07940
John R. Stafford
Chairman, President and
Chief Executive Officer
March 21, 1997
Dear Fellow Stockholder:
It is my pleasure to invite you to attend the American Home Products Corporation
1997 Annual Meeting of Stockholders. The meeting will be held on Monday, April
28, 1997 at 2:00 p.m. local time at the Sheraton Crossroads Hotel, One
International Boulevard, Mahwah, New Jersey.
The Notice of Annual Meeting and Proxy Statement accompanying this letter
describe the business to be dealt with at the meeting. At the conclusion of the
formal part of the meeting, we will present a brief report on the Company's
business and respond to your questions.
Whether or not you plan to attend the meeting, your vote is very important.
Please cast your vote regardless of the number of shares you hold. I urge you to
take a moment to sign, date, and promptly return the enclosed proxy card in the
envelope provided in order to be certain your shares are represented at the
meeting.
I look forward to seeing you on April 28th.
Sincerely,
/s/ John R. Stafford
<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 Ballroom A of the Sheraton Crossroads Hotel, One International
Boulevard, Mahwah, New Jersey, on Monday, April 28, 1997 at 2:00 p.m., local
time, for the following purposes:
1. to elect a Board of twelve 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 1997;
3. to consider and act upon an amendment to the Corporation's Management
Incentive Plan to preserve the Corporation's deduction for federal income
tax purposes of certain compensation under the Plan; and
4. 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 13, 1997 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
EILEEN M. LACH
SECRETARY
March 21, 1997
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 28, 1997 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 1997 and FOR adoption of the amendment to the
Corporation's Management 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
13, 1997 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, 1997.
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"), ChaseMellon 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 13, 1997 are
entitled to notice of and to vote at the meeting. On March 3, 1997, there were
outstanding and entitled to vote 642,458,986 shares of Common Stock (each of
which is entitled to one vote) and 30,847 shares of $2 Convertible Preferred
Stock (each of which is entitled to eighteen 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, and 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 accountant
and for adoption of the amendment to the Corporation's Management 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. Thus, 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. In addition, 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.
<PAGE>
ITEM 1.
ELECTION OF DIRECTORS
Twelve 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 a 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 twelve 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 all except Mr. Seidenberg
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 63; President, Alexander & Associates,
Inc. (consulting firm specializing in Workforce Inclusiveness);
Director, Dreyfus General Family of Funds, Dreyfus Third Century
Fund, Dreyfus Premier Family of Funds, Dun & Bradstreet
[photo] Corporation, MCI Communications Corporation, Cognizant
Corporation, TLC Beatrice International Holding, Inc. and Mutual
of America Life Insurance Company; Chairman of the Corporate
Issues Committee and member of the Audit and Nominating
Committees
Clifford L. Alexander,
Jr.
Director since 1988; age 64; President and Chief Executive
Officer, The Hearst Corporation (owns and operates communications
[photo] media); Director, The Chase Manhattan Corporation; Chairman of
the Compensation and Benefits Committee and member of the
Executive and Nominating Committees
Frank A. Bennack, Jr.
Director since 1990; age 58; 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 73; National Chair, Population Action
[photo] International; Director, International Flavors & Fragrances Inc.;
member of the Compensation and Benefits and Nominating Committees
Robin Chandler Duke
Director since 1987; age 60; Dean, Fordham University School of
Law since 1982; Director, Sentinel Group Funds, Inc. and Sentinel
[photo] Pennsylvania Tax Free Trust; Chairman of the Audit Committee and
member of the Nominating Committee
John D. Feerick
Director since 1995; age 51; Executive Vice President of the
Corporation since October 1995; previously Senior Vice President
[photo] from 1993; Group Vice President, 1993; President of Wyeth-Ayerst
Laboratories, 1989 to 1993; member of the Finance, Operations and
Retirement Committees of the Corporation
Fred Hassan
Director since 1995; age 57; Consultant; retired Chairman and
Chief Executive Officer, The Continental Corporation (an
[photo] insurance holding company); Director, AMC Entertainment Inc.,
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 53; 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 1996; age 50; Chairman and Chief Executive
Officer, NYNEX Corporation; Director, AlliedSignal Inc., CVS
[photo] Corporation and Viacom Inc.; member of the Audit and Nominating
Committees
Ivan G. Seidenberg
Director since 1980; age 59; 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., The
[photo] Chase Manhattan Corporation 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 57; 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
[photo] Chief Executive Officer, CalFed Inc.; former President,
Manufacturers Hanover Corporation and Manufacturers Hanover Trust
Company; Director, Volt Information Sciences, Inc. and the
PaineWebber Mutual Fund Group; member of the Corporate Issues and
Nominating Committees
John R. Torell III
Director since 1981; age 64; President, Chief Executive Officer
and member of the Board, Wm. Wrigley Jr. Company (international
[photo] manufacturer of chewing gum products); Director, Texaco, Inc.;
member of the Audit and Nominating Committees
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.
4
<PAGE>
The Audit Committee, whose current members are Dean Feerick, Chairman, and
Messrs. Alexander, Seidenberg and Wrigley, held two meetings in 1996. 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 eight meetings in 1996. 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 oversees other benefit plans.
The Nominating Committee, whose membership is composed of all of the
non-employee directors and Mr. Stafford as its Chairman, held two meetings in
1996. 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.
The Corporate Issues Committee, whose current members are Mr. Alexander,
Chairman, Dr. Polan and Mr. Torell, 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 two meetings in 1996.
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 by law or the Corporation's Restated
Certificate of Incorporation or By-laws 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 no meetings in 1996.
DIRECTORS' FEES; ATTENDANCE
Messrs. Stafford, Blount and Hassan were employees of the Corporation for
all of 1996 and therefore received no remuneration for serving on the Board of
Directors. The other directors received an annual retainer of $40,000 paid
monthly, a fee of $8,500 for Committee service and a meeting fee of $1,050 for
each Board or Committee meeting attended in 1996. The Chairman of a Committee
receives an additional fee of $3,000. There were 10 Board meetings in 1996. The
total fees paid in 1996 to the current nine non-employee directors was $542,400.
In addition, each director who is not an employee or former employee of the
Corporation is entitled to receive an initial grant of 400 shares of restricted
stock and subsequent grants of 400 shares of restricted stock up to a total of
2,000 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 1996, 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 Board of Directors has determined that, effective May 1, 1997, the
Corporation will no longer grant benefits under its retirement plan for
non-employee directors. Under this plan, non-employee directors with 10 years of
Board service who retire at or after 65 years of age, or before age 65 in case
of disability, are entitled to receive an annual lifetime benefit in the amount
equal to 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. 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. In lieu of this, each
non-employee director will, as of May 1, 1997, be credited with units of common
stock equivalents under a new Directors' Deferral Plan in an amount that is the
actuarial equivalent of the
5
<PAGE>
amount that would have been due to such director upon his/her retirement,
assuming the director had completed the vesting period. Directors with 10 years
of Board service upon the later of retirement or age 65 will be entitled to
receive cash (in a lump sum or annual installment) in an amount equal to the
then current value of such units.
The Corporation has a cash deferral arrangement available to all
non-employee directors, which, effective May 1, 1997, will be combined in the
new Directors' Deferral Plan. Pursuant to such arrangement, directors' fees
otherwise payable in the year earned may be deferred in amounts specified by
such directors. During 1996, two non-employee directors, Messrs. Mascotte and
Seidenberg, elected to defer all future cash compensation. The deferred amounts
accrue interest at a deemed rate and, effective May 1, 1997, may be allocated to
units of common stock equivalents under the new Plan. All common stock
equivalents will accrue deemed dividends which will be computed quarterly and
credited in additional units to each director's account under the Plan.
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.
During 1996, Dr. Polan received fees totaling less than $10,000 from the
Corporation's Wyeth-Ayerst Laboratories Division for her participation on its
Women's Health Research Institute Advisory Board and for lecturing at
Corporation sponsored medical symposia.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's officers and directors, and persons who own more than ten percent
of a registered class of the Corporation's equity securities, to file reports of
ownership and changes in ownership of such securities with the Securities and
Exchange Commission and the New York Stock Exchange. Officers, directors and
greater than ten percent beneficial owners are required by applicable
regulations to furnish the Corporation with copies of all Section 16(a) forms
they file. (The Corporation is not aware of any beneficial owner of more than
ten percent of its Common Stock.)
Based solely upon a review of the copies of the forms furnished to the
Corporation, or written representations from certain reporting persons that no
Forms 5 were required, the Corporation believes that all filing requirements
applicable to its officers and directors were complied with during the 1996
fiscal year, except that one transaction involving the purchase of 200 shares of
the Corporation's Common Stock by Dr. Mary Lake Polan, director, was reported
late on a Form 5.
6
<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 13, 1997 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>
PERCENT
OF
NAME OF BENEFICIAL OWNER COMMON STOCK CLASS
- - ------------------------------------------------------------------ -------------- -----------
<S> <C> <C>
DIRECTORS
Clifford L. Alexander, Jr......................................... 3,600* ***
Frank A. Bennack, Jr.............................................. 7,400* ***
Robert G. Blount.................................................. 34,198(1) ***
Robin Chandler Duke............................................... 25,200* ***
John D. Feerick................................................... 1,600* ***
Fred Hassan....................................................... 269,992(2) ***
John P. Mascotte.................................................. 3,200* ***
Mary Lake Polan, M.D., Ph.D....................................... 1,602* ***
Ivan G. Seidenberg................................................ 900** ***
John R. Stafford.................................................. 507,732(3) ***
John R. Torell III................................................ 4,844* ***
William Wrigley................................................... 48,108*(4) ***
NAMED EXECUTIVES
David M. Olivier.................................................. 110,885(5) ***
Stanley F. Barshay................................................ 174,620(6) ***
All executive officers and directors as a group (21 persons)...... 1,608,528(7) 0.25%
</TABLE>
- - ------------------------
* Includes 1,200 shares of restricted stock awarded under the 1994 Restricted
Stock Plan for Non-Employee Directors.
** Includes 400 shares of restricted stock awarded under the 1994 Restricted
Stock Plan for Non-Employee Directors.
*** Less than one percent (1%); including exercisable options of employees.
(1) Includes 1,000 shares owned by Mrs. Blount. Also includes 17,236 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 but do not have dispositive power
except in certain limited circumstances (the "Restricted Stock Trust").
(2) Includes 23,882 shares held in joint tenancy with Mrs. Hassan. Also includes
12,901 shares of Restricted Stock held by the Restricted Stock Trust and
233,200 exercisable employee stock options in tandem with stock appreciation
rights.
(3) Includes 16,320 shares owned by Mrs. Stafford, 29,931 shares of Restricted
Stock held by the Restricted Stock Trust and 233,333 exercisable employee
stock options in tandem with stock appreciation rights. Also includes 15,873
shares (beneficial ownership of which is disclaimed by Mr. Stafford) owned
by a charitable foundation of which Mr. and Mrs. Stafford are trustees.
(4) Includes 21,600 shares held in joint tenancy with Mrs. Wrigley. Also
includes the following shares (beneficial ownership of which is disclaimed
by Mr. Wrigley): 5,944 shares owned by a trust of which
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<PAGE>
Mr. Wrigley and Mrs. Wrigley are co-trustees for the benefit of Mrs.
Wrigley; 2,624 shares owned by two trusts of which Mrs. Wrigley is
co-trustee; 4,000 shares owned by a foundation of which Mrs. Wrigley is an
officer; and 8,740 shares owned by Mrs. Wrigley.
(5) Includes 5,000 shares of Restricted Stock held by the Restricted Stock Trust
and 71,200 exercisable employee stock options in tandem with stock
appreciation rights.
(6) Includes 5,160 shares of Restricted Stock held by the Restricted Stock Trust
and 125,600 exercisable employee stock options in tandem with stock
appreciation rights.
(7) Includes 958,933 exercisable employee stock options in tandem with stock
appreciation rights.
8
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid for the years 1994-1996
to the Corporation's Chairman, President and Chief Executive Officer and the
four other most highly paid executive officers.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FORM OF BONUS LONG-TERM
PAYMENT COMPENSATION
-------------------------- ----------------------------
<CAPTION>
SECURITIES
UNDERLYING
BASE TOTAL CONTINGENT OPTIONS/SARS LTIP
SALARY BONUS CASH SHARES GRANTED PAYOUTS
NAME AND PRINCIPAL POSITION YEAR ($)(2) ($)(3) ($)(2) (#) (#) ($)(4)
- - ---------------------------- ----------- ----------- ----------- --------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
John R. Stafford............ 1996 1,230,000 1,230,000 615,000 10,292 316,400 465,780
Chairman of the Board, 1995 1,185,000 1,185,000 592,500 12,350 1,016,400 341,935
President and Chief 1994 1,112,500 1,112,500 556,250 17,492 240,000 --
Executive Officer
Robert G. Blount............ 1996 650,000 650,000 325,000 5,439 177,600 268,212
Senior Executive Vice 1995 628,250 628,250 314,125 6,546 457,600 196,897
President 1994 543,250 543,250 271,625 8,540 133,200 --
Fred Hassan................. 1996 589,000 589,000 294,500 4,928 133,200 200,749
Executive Vice President 1995 569,000 569,000 284,500 5,930 373,200 147,372
1994 492,000 492,000 246,000 7,734 100,000 --
David M. Olivier............ 1996 457,083 457,083 228,542 3,824 71,200 80,280
Senior Vice President 1995 414,650 414,650 207,325 4,320 151,200 58,935
1994 394,650 394,650 197,325 6,204 40,000 --
Stanley F. Barshay(6)....... 1996 420,500 420,500 210,250 3,518 35,600 80,280
Senior Vice President 1995 414,500 207,250 103,625 2,158 75,600 58,935
1994 398,750 398,750 199,375 6,268 40,000 --
<CAPTION>
<S> <C>
ALL OTHER
COMPENSATION
NAME AND PRINCIPAL POSITION ($)(5)
- - ---------------------------- -------------
<S> <C>
John R. Stafford............ 76,063
Chairman of the Board, 35,550
President and Chief 33,370
Executive Officer
Robert G. Blount............ 19,500
Senior Executive Vice 18,848
President 16,298
Fred Hassan................. 36,420
Executive Vice President 34,070
31,010
David M. Olivier............ 13,733
Senior Vice President 12,440
11,840
Stanley F. Barshay(6)....... 22,574
Senior Vice President 12,435
11,963
</TABLE>
- - ------------------------
(1) All references to Common Stock have been adjusted as appropriate to reflect
the two-for-one stock split effected in the form of a 100% stock dividend
distributed on May 6, 1996.
(2) Mr. Stafford deferred until after retirement portions of his 1996, 1995 and
1994 base salaries and the entire cash portion of his 1996 and 1995 bonus
and Mr. Barshay deferred until after retirement portions of his 1996 and
1994 base salaries and the entire cash portion of his 1996 bonus, each
pursuant to a deferred compensation program.
(3) 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 will generally be
made in up to ten substantially 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 of 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
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<PAGE>
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.
(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 1995 performance, was
converted on January 25, 1996 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 be credited with 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, for 1995 and 1996, upon
the Corporation's achievement of a target level of earnings per share
("EPS") for such year. (The target number of units covered by the 1994
Awards for each of the named executive officers was 29,000 for Mr. Stafford,
16,700 for Mr. Blount, 12,500 for Mr. Hassan, 5,000 for Mr. Olivier and
5,000 for Mr. Barshay.) 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 1995 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,
1996 by each of the named executive officers, including additional shares
acquired upon reinvestment of the dividends thereon (all of which shares
relate to the portions of the 1994 Awards converted in 1995 and 1996), and
the value thereof as of such date are: Mr. Stafford, 20,263 shares
($1,187,918); Mr. Blount, 11,668 shares ($684,037); Mr. Hassan, 8,733 shares
($511,972); Mr. Olivier, 3,332 shares ($195,339); and Mr. Barshay, 3,492
shares ($204,719). (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.) Based upon the Corporation's EPS for 1996, an additional
100% of one-third of the target amount of the 1994 Awards was converted to
Restricted Stock in February 1997 and will be reported under the caption
"LTIP Payouts" in the Summary Compensation table in the 1998 proxy
statement. In addition, similar Restricted Stock Performance Awards were
made to the named executive officers in 1995 composed of the following
target numbers of units, which units are subject to conversion to shares of
Restricted Stock based upon the achievement of target levels of EPS for
1997: 9,900 for Mr. Stafford, 5,600 for Mr. Blount, 4,200 for Mr. Hassan,
2,200 for Mr. Olivier and 1,100 for Mr. Barshay. See the Long-Term Incentive
Plan Awards Table in the Proxy Statement for information on similar awards
made in 1996.
(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 amounts shown for
Messrs. Stafford and Barshay also include $39,163 and $9,959, respectively,
for above-market interest earned during 1996 on deferred compensation but
not paid in 1996. The amount shown for Mr. Hassan includes $18,750 in
director's fees paid to him in 1996 by Genetics Institute, Inc.
(6) Mr. Barshay retired effective March 1, 1997 after 32 years of service with
the Corporation.
10
<PAGE>
OPTION/SAR GRANTS TABLE
The following table provides information on Option/SAR grants in 1996 to the
named executive officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS IN 1996
----------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS GRANT DATE
UNDERLYING GRANTED TO EXERCISE PRESENT
OPTIONS/SARS EMPLOYEES IN PRICE PER EXPIRATION VALUE
NAME GRANTED(1) 1996 SHARE($)(2) DATE ($)(3)
- - -------------------------------------------- ------------- ----------------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
John R. Stafford............................ 316,400 4.0% 53.0625 May 2006 2,156,174
Robert G. Blount............................ 177,600 2.2% 53.0625 May 2006 1,210,293
Fred Hassan................................. 133,200 1.7% 53.0625 May 2006 907,719
David M. Olivier............................ 71,200 0.9% 53.0625 May 2006 485,207
Stanley F. Barshay.......................... 35,600 0.4% 53.0625 May 2006 242,604
</TABLE>
- - ------------------------
(1) Grants to named executive officers include SARs in tandem with stock
options. 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).
(2) The exercise price is the mean price on the date of grant.
(3) 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 a
variant of the Black-Scholes option pricing model incorporating the
following assumptions: Expected volatility of 15.0% and dividend yield of
4.3%, both based on the historical three-year monthly average for the
underlying Common Stock; risk-free rate of return of 6.4% based on a four-
year zero coupon rate; and time of exercise of four years, being the
expected duration of the option/ SAR. In addition, the model assumed a 3.0%
discount for forfeiture since the options/SARs are not currently
exercisable. (The methodology used in this model has been revised from the
1996 proxy statement presentation to conform to the new FAS 123 requirements
applicable to audited financial statement footnote presentation.)
LONG-TERM INCENTIVE PLAN AWARDS TABLE
The following table provides information on Restricted Stock Performance
Awards granted in 1996, under the Corporation's 1996 Stock Incentive Plan, to
the named executive officers.
<TABLE>
<CAPTION>
NUMBER OF ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK
SHARES, PERFORMANCE PRICE-BASED PLANS
UNITS OR OR OTHER ----------------------------------------------------
OTHER PERIOD UNTIL BELOW
RIGHTS MATURATION THRESHOLD THRESHOLD TARGET MAXIMUM
NAME (#)(1) OR PAYOUT (#) (#) # #
- - -------------------------------------------- ----------- ------------- --------------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
John R. Stafford............................ 9,900 1999 -- 7,425 9,900 12,375
Robert G. Blount............................ 5,600 1999 -- 4,200 5,600 7,000
Fred Hassan................................. 4,200 1999 -- 3,150 4,200 5,250
David M. Olivier............................ 2,200 1999 -- 1,650 2,200 2,750
Stanley F. Barshay.......................... 1,100 1999 -- 825 1,100 1,375
</TABLE>
- - ------------------------
(1) Amounts shown represent Restricted Stock Performance Awards (the "1996
Awards") made in 1996 under the Corporation's 1996 Stock Incentive Plan.
These 1996 Awards are composed of units which may be converted to a number
of shares of Restricted Stock equal to 0%-125% of the 1996 Award based upon
the Corporation's performance in 1998. 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
11
<PAGE>
the three-year restricted period ending May 23, 1999, 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.
OPTION/SAR EXERCISE AND YEAR-END VALUE TABLE
The following table discloses the options/SARs that were exercised by the
named executive officers during 1996 and sets forth the number and value of
their unexercised options/SARs at year-end.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN 1996 AND
YEAR-END OPTION/SAR VALUES
-----------------------------------------------
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES DEC. 31, 1996(#) DEC. 31, 1996($)(2)
ACQUIRED ON VALUE EXERCISABLE* EXERCISABLE*
NAME EXERCISE(1) REALIZED ($) UNEXERCISABLE** UNEXERCISABLE**
- - ------------------------------------------ ------------ ------------ ------------------- --------------------
<S> <C> <C> <C> <C>
John R. Stafford.......................... 780,000(3) 15,471,563 789,733* 18,372,015*
783,067** 11,326,649**
Robert G. Blount.......................... 260,600(4) 4,965,350 93,333* 1,913,327*
364,267** 4,814,574**
Fred Hassan............................... 208,200(5) 3,823,387 233,200* 5,689,970*
373,200** 5,660,925**
David M. Olivier.......................... 130,000(6) 3,727,185 111,200* 2,292,100*
151,200** 2,036,050**
Stanley F. Barshay........................ 45,000(7) 1,423,125 165,600* 4,099,795*
75,600** 1,018,025**
</TABLE>
- - ------------------------
(1) All references to Common Stock have been adjusted as appropriate to reflect
the two-for-one stock split effected in the form of a 100% stock dividend
distributed on May 6, 1996.
(2) The amounts given are based on the closing market price of the Corporation's
Common Stock at December 31, 1996 which was $58.625. The closing market
price on March 3, 1997 was $64.8750.
(3) Represents exercises of options/SARs (i) granted in 1990 and covering
150,000 shares at an exercise price of $25.8750 per share, (ii) granted in
1991 and covering 180,000 shares at an exercise price of $30.4375 per share,
(iii) granted in 1992 and covering 180,000 shares at an exercise price of
$37.8125 per share and (iv) granted in 1993 covering 270,000 shares at an
exercise price of $32.5938 per share (in each case, market value on date of
grant).
(4) Represents exercises of options/SARs (i) granted in 1992 and covering 80,000
shares at an exercise price of $37.8125 per share and (ii) granted in 1993
and covering 3,000 shares at an exercise price of $32.5938 per share and
(iii) granted in 1995 covering 177,600 at an exercise price of $38.1250 (in
each case, market value on date of grant).
(5) Represents exercises of options/SARs (i) granted in 1989 and covering 4,400
shares at an exercise price of $21.7969 per share and (ii) granted in 1990
and covering 3,800 shares at an exercise price of $25.8750 per share and
(iii) granted in 1991 covering 50,000 at an exercise price of $30.4375 per
share and (iv) granted in 1992 covering 70,000 shares at an exercise price
of $37.8125 per share and (v) granted in 1993 covering 80,000 shares at an
exercise price of $32.5938 (in each case,market value on date of grant).
(6) Represents exercises of options/SARs (i) granted in 1991 and covering 40,000
shares at an exercise price of $30.4375 per share and (ii) granted in 1993
and covering 50,000 shares at an exercise price of $32.5938 per share and
(iii) granted in 1994 and covering 40,000 shares at an exercise price of
$29.0313 per share (in each case, market value on date of grant).
12
<PAGE>
(7) Represents exercises of the options/SARs (i) granted in 1990 and covering
15,000 shares at an exercise price of $25.8750 per share and (ii) granted in
1991 and covering 30,000 shares at an exercise price of $30.4375 per share
(in each case, market value on date of grant).
PENSION PLAN TABLE
The Corporation has three non-contributory defined benefit retirement plans
in which the named executives participate. One of these plans (the "Qualified
Plan") is qualified under the applicable provisions of the Internal Revenue Code
of 1986, as amended (the "Code"). The other two plans are non-qualified
supplemental retirement plans. The Supplemental Executive Retirement Plan
("SERP") provides the amount of retirement benefit which cannot be paid from the
Qualified Plan due to certain Code restrictions. The aggregate benefits payable
under the Qualified Plan and SERP are determined based upon average final
compensation (the total amount of an employee's compensation for the five
calendar years during which such employee's compensation was the highest out of
the ten year period of service ending with such employee's early or normal
retirement date, divided by five). The Executive Retirement Plan provides to
certain highly compensated employees and corporate officers an additional
retirement benefit based upon average final compensation (the total amount of an
employee's compensation for the three calendar years during which such
employee's compensation was the highest out of the ten year period of service
ending with such employee's early or normal retirement date, divided by three)
with three additional years of service added (reduced by one year for each year
the employee works beyond age 62). The retirement benefit provided by the
Executive Retirement Plan is an unreduced benefit at the retirement age of 60
and is offset by benefits provided in the Qualified Plan and SERP.
<TABLE>
<CAPTION>
YEARS OF SERVICE
---------------------------------------------
<S> <C> <C> <C> <C>
FINAL 3-YEAR AVERAGE
EARNINGS 15 20 25 30*
---------------------- --------- ---------- ---------- ----------
$ 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
2,900,000................................................... 870,000 1,160,000 1,450,000 1,740,000
</TABLE>
- - ------------------------
* Plans recognize up to 30 years of credited service only.
13
<PAGE>
The compensation covered by the retirement plans for each of the named
executives is the base salary rate at January 1, 1996 ($1,230,000 for Mr.
Stafford, $650,000 for Mr. Blount, $589,000 for Mr. Hassan, $425,000 for Mr.
Olivier and $420,500 for Mr. Barshay) plus the amount in the bonus column of the
Summary Compensation Table for 1995 for a total of $2,415,000 for Mr. Stafford,
$1,278,250 for Mr. Blount, $1,158,000 for Mr. Hassan, $839,650 for Mr. Olivier
and $627,750 for Mr. Barshay.
The years of service (in nearest years) as of December 31, 1996 for the
named executives are as follows: Mr. Stafford, 27 years; Mr. Blount, 22 years;
Mr. Hassan, 8 years; Mr. Olivier, 30 years of which only 15 years are recognized
under the benefit formula illustrated in the table above; and Mr. Barshay, 32
years.
The table shows the combined annual pension under the current provisions of
all retirement plans assuming retirement of an employee who has continued
employment to age 60 and assuming payment as a single life annuity. (No
reduction has been made for the Social Security offset.)
14
<PAGE>
PERFORMANCE GRAPH
The following graph shows the value as of December 31, 1996 of a $1,000
investment made on December 31, 1991 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 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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AHPC COMMON STOCK S&P 500 INDEX PEER GROUP INDEX
<S> <C> <C> <C>
12-31-91 $1,000.00 $1,000.00 $1,000.00
12-31-92 $828.30 $1,076.10 $841.57
12-31-93 $830.60 $1,183.90 $796.98
12-31-94 $845.60 $1,199.90 $911.64
12-31-95 $1,356.20 $1,649.20 $1,445.00
12-31-96 $1,683.30 $2,026.90 $1,837.74
</TABLE>
15
<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 compensation 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 1996 were unchanged from the base
salaries at July 1, 1995 which had been recommended by the Committee and
approved by the Board of Directors in May 1995 (except for one executive officer
who received an increase on January 26, 1996 in conjunction with a promotion).
In recommending these base salaries, 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 and determined the base salary
recommendation for Mr. Stafford out of his presence. The Committee had also
reviewed a report of the independent compensation consulting firm (the
"Consultant's Report") with respect to its survey of compensation information,
which survey included 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 $.375
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 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
16
<PAGE>
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 1996 were granted by the Committee in February 1997.
In addition, the Committee considered the amounts of previous awards in deciding
upon the awards for 1996. 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.
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/SAR grants is
tied directly to stock price performance. The Committee grants options/SARs
under the stockholder-approved option/incentive 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.
Annual grants are made to executive officers based on salary, responsibility
and performance of the individual officer. 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 1996 each with an exercise price equal to the market price on
the date of grant of $53.0625.
In furtherance of the goal of aligning the interests of management with
those of the stockholders, in May 1996 the Committee also made Restricted Stock
Performance Awards to certain 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 1998 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 1999, 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.
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 relative achievement of the 1996 targeted earnings per share set
by the Committee in February 1996. As a result, 100% of one-third of the award
was converted to Restricted Stock in February 1997 based on 1996 performance.
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
17
<PAGE>
Chairman, President and Chief Executive Officer and executive officers
generally, the Committee viewed being of greatest significance the fact that,
after excluding the gain on the sale of the American Home Foods business and
special charges related to the purchase of the minority interest in Genetics
Institute, Inc., the Corporation's pro forma earnings per share in 1996 were
$2.95, which exceeded comparable pro forma earnings per share in 1995 of $2.39
by 23% and also exceeded the Corporation's forecasted performance for 1996. The
next most significant factor considered by the Committee was the implementation
of the Corporation's strategic plan as evidenced by the sale of an 80% interest
in its American Home Foods business for $1.2 billion, the sale of Symbiosis
Corporation for $153 million, the acquisition of the minority equity interests
in Genetics Institute, Inc. and Cyanamid Italia SpA and the execution of a
definitive purchase agreement to acquire the worldwide animal health business of
Solvay S.A. for $460 million.
The next most significant factor was the reduction in the Corporation's net
indebtedness by more than $1.3 billion (after taking into account an additional
$1.2 billion of indebtedness incurred in connection with the acquisition of the
remaining equity interest in Genetics Institute, Inc.)
The Committee also considered important the increased credibility in the
financial markets of the Corporation's research and development organization. In
addition, the Committee viewed as important the substantial increase in
shareholder value realized in 1996.
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 in the worldwide
health care industry.
STOCK OWNERSHIP GUIDELINES FOR EXECUTIVE OFFICERS
Stock Ownership Guidelines ("Guidelines") have been adopted for executive
officers and other U.S. employees with annual base salaries of $175,000 or more.
Authority to administer the Guidelines was delegated to the Chairman, President
and Chief Executive Officer, who reports periodically to the Committee on the
status of compliance with the Guidelines. The Guidelines state that the Chief
Executive Officer must own shares of the Corporation's stock with a value of at
least eight times his base salary. Officers who report directly to the Chief
Executive Officer shall own shares with a value of at least six times base
salary; other employees who are members of the Finance and Operations Committees
must own shares with a value of at least four times base salary; and all other
U.S. employees with annual base salaries of $175,000 or more 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 on which an individual becomes
subject to the Guidelines.
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 1996 will be deductible under Section 162(m).
In order to ensure that compensation paid pursuant to the Management
Incentive Plan in 1997 and thereafter will continue to be deductible under
Section 162(m), the Board of Directors is requesting stockholder approval of an
amendment to the Plan as described more fully in this proxy statement.
COMPENSATION AND BENEFITS COMMITTEE
Frank A. Bennack, Jr., Chairman
Robin Chandler Duke
John P. Mascotte
18
<PAGE>
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 1997. This firm served in such capacity in 1996 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 1997.
ITEM 3.
APPROVAL OF AMENDMENT TO THE MANAGEMENT INCENTIVE PLAN
Section 162(m) of the Internal Revenue Code and regulations thereunder
provide that to preserve the deductibility for federal income tax purposes of
compensation in excess of $1 million that may be paid to certain specified
executives under performance-based compensation plans, certain requirements must
be met.
The Compensation and Benefits Committee (the "Committee") and the Board of
Directors have approved, subject to stockholder approval, an amendment to the
Corporation's Management Incentive Plan (the "Plan") imposing an additional
limit on the amounts of awards that may be granted at year-end under the Plan to
the Chief Executive Officer and the other four highest compensated officers
whose compensation is required to be reported in the Summary Compensation Table
of the Proxy Statement (the "Covered Executives").
The terms under which eligible employees, including the Covered Executives,
may receive awards under the Plan are described below followed by a description
of the proposed amendment. The proposed amendment will become effective only if
the stockholders approve this Proposal.
The Plan, first adopted by stockholders in 1967, is designed to provide
current incentive compensation and deferred contingent incentive compensation to
a select group of management and key employees, whether or not directors, in
executive, administrative, technical, professional or other important capacities
who contribute in a substantial degree to the success of the Corporation. Awards
under the Plan may be, in whole or in part, current and payable in cash, or
deferred and contingent and payable in cash or shares of Common Stock. To date,
all deferred contingent awards have been in the form of shares of Common Stock.
The Plan is administered by the Committee, the members of which, under the
terms of the Plan, are non-employee members of the Board of Directors of the
Corporation.
The Plan provides for an award fund (the "Award Fund") which, for any
calendar year, is the maximum amount available for awards under the Plan in
respect of that year. The Award Fund is recommended by the Committee and
approved by the Board of Directors and 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 $.375
multiplied by the average number of shares of Common Stock outstanding on each
day of the year, assuming full conversion of the Corporation's Preferred Stock.
An aggregate of 24 million shares of Common Stock (plus dividend accruals prior
to distribution as described below) may be awarded under the Plan, of which
5,991,505 shares remained available as of March 3, 1997. In determining amounts
to be awarded to employees under the Plan out of the amount available from the
Award Fund, the Committee takes into account a number of factors which it deems
to be relevant, including overall corporate earnings, earnings of the division
or other business unit with which the employee is associated and individual
performance and achievement during the year in respect of which the award is
made. The factors that have been taken into account in determining amounts to be
awarded to the Covered Executives for 1996 are described in the report on
executive compensation
19
<PAGE>
of the Committee set forth in this Proxy Statement. The amount received by an
employee may not exceed the total of such employee's other compensation from the
Corporation for the same year which, as administered by the Committee, has been
limited to amounts of base salary for such year.
Under current Committee policy, participants under 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, before the end of each calendar year, that up to
50% of any award which may be granted for such year be in current cash with the
remainder being in the form of a contingent stock award. All others may request
that up to 100% of the award be paid as a cash award. Each participant may also
indicate a preference to have the contingent stock portion of the award
delivered either in the third year following the year in respect of which the
award was granted, or after retirement or termination of employment. Such
request and indicated preference are subject to approval by the Committee.
Deliveries of contingent stock awards following retirement or termination of
employment will generally be made in up to ten substantially equal annual
installments. The Plan is governed by and construed in accordance with the laws
of the State of New York.
All deliveries of contingent awards under the Plan are subject to the
forfeiture and other conditions of the Plan. In particular, no participant under
the Plan is entitled to delivery of a deferred contingent award if, prior to the
delivery of such award, he or she fails to comply with the non-competition
requirements set forth in the Plan, or engages in certain other activities which
are not in the best interests of the Corporation, or fails to consult with or
otherwise cooperate with the Corporation and its subsidiaries on a reasonable
basis. The delivery schedules for contingent awards are subject to change or
adjustment from time to time as determined by the Committee.
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 of 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.
PROPOSED AMENDMENT
If the proposed amendment to the Plan is approved by stockholders, the
awards payable to any of the Covered Executives for any year will be subject to
an additional limit under which any individual award for any year may not exceed
3% of the Award Fund. In addition, the amount of an award payable under the Plan
to any employee, including any Covered Executives, will continue to be limited
to the Employee's total compensation for the year (excluding any award under the
Plan) which, as administered by the Committee, has been limited to amounts of
base salary for such year. Moreover, the Committee, in its discretion, may make
individual awards in amounts that are lower than but not higher than the maximum
amounts that would be permitted under the Plan. Accordingly, individual awards
under the Plan are not expected to increase as a result of the proposed
amendment.
In the event that this Proposal is not approved by stockholders, the
Committee has made no determination as to what action it might take with respect
to the Covered Executives. The Committee's general approach to executive
compensation is described in its report on executive compensation included in
this Proxy Statement. The terms of the Plan would remain in effect for all other
employees who are eligible participants in the Plan.
The Board of Directors and Management recommend that the stockholders
approve the proposed amendment under which the first two sentences of Paragraph
V of the Management Incentive Plan would be deleted and the following two
sentences would be substituted in their place:
20
<PAGE>
The Committee shall determine the awards to be made for any year subject
to the following: (1) the award amounts payable with respect to any year
to an Employee who for such year is the Chief Executive Officer of the
Corporation or one of the Corporation's four other highest compensated
officers (as determined in accordance with Section 162(m) of the
Internal Revenue Code of 1986, as amended) shall not exceed 3% of the
Award Fund, and, (2) the portion of the Award Fund remaining after the
awards to the Employees in (1) above shall be available for awards to
other Employees in such amounts as the Committee determines. In no
event, however, shall the amount of an award payable to any Employee
exceed the Employee's total compensation for the year, excluding only
any award under the Plan.
THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND A VOTE FOR APPROVAL OF THE
PROPOSED AMENDMENT TO THE MANAGEMENT INCENTIVE PLAN.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Stockholder proposals intended to be presented at the 1998 Annual Meeting
must be received by the Corporation at its principal executive offices on or
before November 21, 1997 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, 1996,
including financial statements, is enclosed with this Proxy Statement.
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
EILEEN M. LACH
SECRETARY
March 21, 1997
21
<PAGE>
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 EILEEN M. LACH 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 28,
1997 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 AND 3.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
- - -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
<TABLE>
<S> <C> <C> <C>
THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND YOU VOTE "FOR" ITEMS 1, 2 AND 3 Optional Secret Proxy | | Please mark |X|
| | your votes as
indicated in
this example
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, I.G. Seidenberg, J.R. Stafford, J.R. Torell III and
W. Wrigley
FOR WITHHOLD
all nominees AUTHORITY WITHHELD FOR: (Write that nominee's name in the space provided below):
to vote for
all nominees
| | | | ______________________________________________________________________________
| | | |
Item 2 - APPOINTMENT OF INDEPENDENT Item 3 - AMENDMENT TO THE MANAGEMENT
PUBLIC ACCOUNTANTS INCENTIVE PLAN
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
| | | | | | | | | | | |
| | | | | | | | | | | |
Dated:___________________________, 1997
_______________________________________
Signature
_______________________________________
Signature
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.
- - --------------------------------------------------------------------------------------------------------------------------------
FOLD AND DETACH HERE
</TABLE>
<PAGE>
VOTING INSTRUCTIONS TO TRUSTEE
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 EILEEN M. LACH 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 28,
1997 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 AND 3.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
- - -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
<TABLE>
<S> <C> <C> <C>
THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND YOU VOTE "FOR" ITEMS 1, 2 AND 3 Optional Secret Proxy | | Please mark |X|
| | your votes as
indicated in
this example
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, I.G. Seidenberg, J.R. Stafford, J.R. Torell III and
W. Wrigley
FOR WITHHOLD
all nominees AUTHORITY WITHHELD FOR: (Write that nominee's name in the space provided below):
to vote for
all nominees
| | | | ______________________________________________________________________________
| | | |
Item 2 - APPOINTMENT OF INDEPENDENT Item 3 - AMENDMENT TO THE MANAGEMENT
PUBLIC ACCOUNTANTS INCENTIVE PLAN
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
| | | | | | | | | | | |
| | | | | | | | | | | |
Dated:___________________________, 1997
_______________________________________
Signature
_______________________________________
Signature
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.
- - --------------------------------------------------------------------------------------------------------------------------------
FOLD AND DETACH HERE
</TABLE>
