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:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as
permitted by Rule a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to '240.a-11(c) or
'240.a-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
a-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):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
AMERICAN HOME PRODUCTS CORPORATION
FIVE GIRALDA FARMS
MADISON, N.J. 07940
John R. Stafford
Chairman, President and
Chief Executive Officer
March 25, 1998
Dear Fellow Stockholder:
It is my pleasure to invite you to attend the American Home
Products Corporation 1998 Annual Meeting of Stockholders. The
meeting will be held on Monday, April 23, 1998 at 9:30 a.m. local
time at The Governor Morris Hotel and Conference Center, Two
Whippany Road, Morristown, 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. This year, for the first time, many of you will
have the option to cast your proxy vote by telephone if your
proxy card includes instructions and a toll-free telephone number
to do so. This is a quick and easy way for you to vote your
proxy. I urge you to take a moment to use the toll-free
telephone number, or sign, date, and promptly return the enclosed
proxy card in the envelope, in order to be certain your shares
are represented at the meeting.
I look forward to seeing you on April 23rd.
Sincerely,
/s/ John R. Stafford
<PAGE>
[Logo]
AMERICAN HOME PRODUCTS CORPORATION
__________________
NOTICE OF ANNUAL MEETING
AND
PROXY STATEMENT
__________________
ANNUAL MEETING OF STOCKHOLDERS
APRIL 23, 1998
YOUR VOTE IS IMPORTANT
If you are unable to attend the meeting, please date, sign
and return the accompanying proxy card promptly or, if your proxy
card includes instructions to do so, use the toll-free telephone
number on the proxy card to vote your shares by proxy.
<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 the Ballroom of The Governor
Morris Hotel and Conference Center, Two Whippany Road,
Morristown, New Jersey, on Thursday, April 23, 1998 at 9:30 a.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 1998;
3. to consider and act upon amendments to the Corporation's
Restated Certificate of Incorporation to increase to
2,400,000,000 the number of authorized shares of Common
Stock and a related matter; and
4. to act upon such other matters, including two stockholder
proposals as stated in the proxy statement, 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 16, 1998 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 25, 1998
YOUR VOTE IS IMPORTANT
If you are unable to attend the meeting, please date, sign
and return the accompanying proxy card promptly or, if your proxy
card includes instructions to do so, use the toll-free telephone
number on the proxy card to vote your shares by proxy.
<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, 1998 and at any adjournment
or adjournments thereof. Properly executed proxies received prior
to the meeting or proxies voted by telephone in accordance with
the instructions set forth on the proxy card if included on your
proxy card (using a personal control number to identify each
stockholder) prior to the meeting will be voted at the meeting.
Stockholders executing proxies or voting by telephone may have
their votes kept secret until after the Annual Meeting by so
indicating in the designated place on the proxy card or following
the instructions when voting by telephone. 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 1998, FOR adoption of the amendments to
the Restated Certificate of Incorporation, AGAINST the
stockholder proposal on directors accepting consulting fees from
the Corporation and AGAINST the Stockholder Proposal on
separation of the Corporation's contraceptive business from its
other businesses. 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 16, 1998 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 25,
1998.
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 or telephone 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 16,
1998 are entitled to notice of and to vote at the meeting. On
March 2, 1998, there were outstanding and entitled to vote
654,924,364 shares of Common Stock (each of which is entitled to
one vote) and 28,277 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
accountants, a majority of the outstanding Common Stock and $2
Convertible Preferred Stock, voting as a single class, is
required for the adoption of the amendments to the Restated
Certificate of Incorporation and a majority of votes cast by the
holders of Common Stock and $2 Convertible Preferred Stock,
voting as a single class, is required for adoption of the
stockholder proposal on directors accepting consulting fees and
for adoption of the stockholder proposal on separating the
Corporation's contraceptive business from its other businesses.
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 of
Stockholders except that, for the proposal to amend the Restated
Certificate of Incorporation, they will have the same effect as a
vote against such proposal.
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.
Essner 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
Director since 1993; age 64; 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 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 65; President and Chief Executive
Officer, The Hearst Corporation (owns and operates
communications media); Director, The Chase Manhattan
Corporation, Hearst-Argyle Television, Inc. and Polo Ralph
Lauren Corporation; Chairman of the Compensation and
Benefits Committee and member of the Executive and
Nominating Committees
Frank A. Bennack, Jr.
Director since 1990; age 59; Senior Executive Vice President
of the Corporation since October 1995; previously Executive
Vice 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
Director since 1975; age 74; National Chair, Population
Action International; Director, International Flavors &
Fragrances Inc.; member of the Compensation and Benefits and
Nominating Committees
Robin Chandler Duke
Director since 1997; age 50; Executive Vice President of the
Corporation since September 1997; previously President of
Wyeth-Ayerst Global Pharmaceuticals from March 1997;
President of Wyeth-Ayerst Laboratories, 1993 to March 1997;
Director, Immunex Corporation; member of the Finance,
Operations and Retirement Committees of the Corporation
Robert Essner
Director since 1987; age 61; Dean, Fordham University School
of Law since 1982; Director, Sentinel Group Funds, Inc. and
Sentinel Pennsylvania Tax Free Trust; Chairman of the Audit
Committee and member of the Compensation and Benefits and
Nominating Committees
John D. Feerick
Director since 1995; age 58; President and Chief Executive
Officer, Blue Cross Blue Shield of Kansas City, Inc. ;
former Chairman, Johnson & Higgins of Missouri, Inc., former
Chairman and Chief Executive Officer, The Continental
Corporation; Director, Blue Cross Blue Shield Kansas City,
Blue Cross Blue Shield Association, AMC Entertainment Inc.,
Businessmen's Assurance Company, Hallmark Cards, Inc. and
Hallmark Entertainment, Inc.; member of the Compensation and
Benefits and Nominating Committees
John P. Mascotte
Director since 1995; age 54; Chairman and Professor,
Department of Obstetrics and Gynecology, Stanford University
School of Medicine since 1990; Director, Conception
Technology, Inc., Metra Biosystems, Inc. and Quidel
Corporation; member of the Corporate Issues and Nominating
Committees
Mary Lake Polan, M.D., Ph.D.
Director since 1996; age 51; Vice Chairman, President and
Chief Operating Officer, Bell Atlantic Corporation
(telecommunications company); Director, AlliedSignal Inc.,
CVS Corporation, Boston Properties, Inc. and Viacom Inc.;
member of the Audit and Nominating Committees
Ivan G. Seidenberg
Director since 1980; age 60; 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 Chase Manhattan
Corporation, Deere & Company and Bell Atlantic 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 58; Chairman, Torell Management
Inc. (financial advisory company); former Chairman and CEO,
Fortune Bancorp; former Chairman of the Board, President and
Chief Executive Officer, CalFed Inc.; former President,
Manufacturers Hanover Corporation and Manufacturers Hanover
Trust Company; Director, Volt Information Sciences, Inc.,
PaineWebber Group, Inc. and Heartland Technology, Inc.;
member of the Corporate Issues and Nominating Committees
John R. Torell III
Director since 1981; age 65; President, Chief Executive
Officer and member of the Board, Wm. Wrigley Jr. Company
(international manufacturer of chewing gum products);
Director, Texaco, Inc.; member of the Audit and Nominating
Committees
William Wrigley
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 Dean Feerick,
Chairman, and Messrs. Alexander, Seidenberg and Wrigley, held two
meetings in 1997. 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, Dean Feerick and
Mr. Mascotte, held four meetings in 1997. 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 one meeting in 1997. 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 three meetings in 1997.
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
two meetings in 1997.
DIRECTORS' FEES; ATTENDANCE
Messrs. Stafford, Blount and Essner were employees of the
Corporation for all of 1997 and therefore received no
remuneration for serving on the Board of Directors. The other
directors received an annual retainer of $42,500 paid monthly, a
fee of $9,000 for Committee service and a meeting fee of $1,050
for each Board or Committee meeting attended in 1997. In 1997,
the Chairman of a Committee received an additional fee of $3,000.
There were eleven Board meetings in 1997. The total fees paid in
1997 to the current nine non-employee directors was $614,250.
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 1997, 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.
Effective May 1, 1997, the Corporation no longer grants
benefits under its retirement plan for non-employee directors.
Under the terminated plan, non-employee directors with 10 years
of Board service who retired at or after 65 years of age, or
before age 65 in case of disability, would have been 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 was made. Directors who retired before age 65 with 10
years of Board service were entitled to receive the benefit upon
attaining age 65. If the director died 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 had received would have been paid to the
director's beneficiary. In lieu of this, each non-employee
director serving on the board as of May 1, 1997 was credited with
phantom stock units under a new Directors' Deferral Plan in an
amount equal to the actuarial equivalent of the amount that would
have been due to such director upon his or 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
installments) in an amount equal to the then current value of
such units.
Pursuant to the Directors' Deferral Plan, which became
effective May 1, 1997, directors' fees otherwise payable in the
year earned may be deferred in amounts specified by such
directors. The deferred amounts accrue interest at a deemed rate
and may be allocated to phantom stock units under the new Plan.
Phantom Stock units will accrue deemed dividends which will be
computed quarterly and credited in additional units to each
director's account under the Plan.
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 1997
fiscal year except that (i) two transactions which should have
been reported on separate forms and which occurred in a
discretionary account maintained by the wife of John R. Torell
III, a director of the Corporation, were reported late on Form 5,
(ii) due to a clerical error, one transaction by Rene R. Lewin,
an officer of the Corporation, was reported late on Form 5 and
(iii) due to a clerical error, two related transactions by Louis
L. Hoynes, Jr., an officer of the Corporation, were reported late
on an amended Form 5.
SECURITIES OWNED BY MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The table below reflects the numbers of shares of American
Home Products Corporation Common Stock beneficially owned as of
February 2, 1998 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>
Phantom Percent
Exercisable Stock of
Name of Beneficial Owner Common Stock Options Units(1) Class
- ------------------------ ------------ ---------- ------- -------
<S> <C> <C> <C> <C>
DIRECTORS
Clifford L. Alexander, Jr. 4,000 (2) 6,315 (10) *
Frank A. Bennack, Jr. 7,800 (2) 8,108 *
Robert G. Blount 39,158 (4) 177,600 *
Robin Chandler Duke 25,600 (2) 6,584 *
Robert Essner 23,471 (5) 123,400 *
John D. Feerick 2,000 (2) 7,832 (11) *
John P. Mascotte 3,600 (2) 7,159 *
Mary Lake Polan, M.D., Ph.D 2,010 (2) 6,678 *
Ivan G. Seidenberg 1,300 (3) 7,791 (12) *
John R. Stafford 297,060 (6) 783,066 *
John R. Torell III 5,306 (2) 7,254 *
William Wrigley 58,508 (2)(7) 8,774 (10) *
NAMED EXECUTIVES
David M. Olivier 43,937 (8) 71,200 *
Louis L. Hoynes, Jr. 28,183 (9) 90,000 *
All executive officers and
directors as a group
(21 persons 624,583 1,630,757 0.35%
</TABLE>
___________________________________________
* Less than one percent (1%); including exercisable options of
employees.
(1) Effective May 1, 1997, the former AHPC Retirement Plan for
Outside Directors was terminated and participants therein were
credited with phantom stock units under the new AHPC Directors'
Deferral Plan in an amount that is the actuarial equivalent of
the amount that would have been due to such director under the
prior plan upon his/her retirement assuming satisfaction of
vesting requirements thereunder. Directors with 10 years of
board service upon the later of retirement or age 65 will be
entitled to receive in cash (lump sum or annual installments) an
amount equal to the then current value of such units. The total
number of units set forth includes additional units allocated
through the deemed reinvestment of dividends. Certain directors
have also elected to defer directors' fees into phantom stock
units and such accruals have been included in the totals set
forth in the table.
(2) Includes 1,600 shares of restricted stock awarded under the
1994 Restricted Stock Plan for Non-Employee Directors.
(3) Includes 800 shares of restricted stock awarded under the
1994 Restricted Stock Plan for Non-Employee Directors.
(4) Includes 1,077 shares owned by Mrs. Blount. Also includes
4,200 shares of Common Stock subject to certain restrictions
("Restricted Stock") and 17,188 additional shares 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").
(5) Includes 7,361 shares owned jointly with Mrs. Essner, and
1,650 shares of Restricted Stock and 5,969 additional shares held
by the Restricted Stock Trust.
(6) Includes 16,320 shares owned by Mrs. Stafford, and 7,425
shares of Restricted Stock and 29,847 additional shares held by
the Restricted Stock Trust. Also includes 14,873 shares
(beneficial ownership of which is disclaimed by Mr. Stafford)
owned by a charitable foundation of which Mr. and Mrs. Stafford
are trustees.
(7) Includes 31,600 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 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.
(8) Includes 10,478 shares owned by Mrs. Olivier, and 1,650
shares of Restricted Stock and 4,992 additional shares held by
the Restricted Stock Trust.
(9) Includes 1,050 shares of Restricted Stock and 4,322
additional shares held by the Restricted Stock Trust.
(10) Includes 155.5 fully vested phantom stock units (equivalent
to one share of Common Stock per unit) under the Directors'
Deferral Plan which were acquired pursuant to deferral of fees.
(11) Includes 77.7 fully vested phantom stock units (equivalent
to one share of Common Stock per unit) under the Directors'
Deferral Plan which were acquired pursuant to deferral of fees.
(12) Includes 1,397.9 fully vested phantom stock units (equivalent
to one share of Common Stock per unit) under the Directors'
Deferral Plan which were acquired pursuant to deferral of fees.
BENEFICIAL OWNERSHIP OF 5% STOCKHOLDER
The following table reports beneficial ownership of Common
Stock of the only persons known by the Corporation to beneficially
own more than 5% of its Common Stock based upon statements on
Schedule 13G with the Securities and Exchange Commission.
<TABLE>
<CAPTION>
Percent
of
Name and Address of Beneficial Owner Common Stock Class
- ------------------------------------ ------------ -----
<S> <C> <C>
FMR Corp. 51,140,203(a) 7.87%
Edward C. Johnson 3d
Abigail P. Johnson
82 Devonshire Street
Boston, Massachusetts 02109
</TABLE>
(a) In a Schedule 13G filing made by FMR Corp. ("FMR") on
February 9, 1998, FMR, Edward C. Johnson 3d and Abigail P.
Johnson reported that, as of December 31, 1997 (i) Fidelity
Management & Research Company ("Fidelity"), a wholly-owned
subsidiary of FMR and an investment advisor under the
Investment Advisors Act of 1940, is the beneficial owner of
46,746,276 shares of the Common Stock of the Corporation and
Edward C. Johnson 3d and FMR through its control of Fidelity
and the funds controlled by Fidelity each has the sole power
to dispose of these shares but does not vote the shares
(which are voted by each applicable fund's Board of
Trustees), (ii) Fidelity Management Trust Company ("Fidelity
Trust"), a wholly-owned subsidiary of FMR, and a bank as
defined in the Securities Exchange Act of 1934 is the
beneficial owner of 3,944,377 shares of the Common Stock of
the Corporation; as a result of serving as investment
manager of institutional accounts, Edward C. Johnson 3d and
FMR, through its control of Fidelity Trust, each has sole
dispositive power over 3,944,377 shares and sole power to
vote or to direct the voting of 2,637,357 shares, and shared
power to vote or direct the voting over 1,040 shares of
Common Stock and no power to vote or to direct the voting of
1,305,980 shares of Common Stock owned by the institutional
accounts, and (iii) Fidelity International Limited ("FIL"),
representing various foreign-based subsidiaries which
provide investment advisory and management services to a
number of non-U.S. investment companies (the "International
Funds") and certain institutional investors, is the
beneficial owner of 449,550 shares of the Common Stock of
the Corporation and, although FIL is partially owned by
Edward C. Johnson 3d and members of his family, FIL has the
sole power to vote and dispose of these shares.
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation
paid for the years 1995-1997 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 Compensation
-------------------- ----------------------
Securities
Underlying
Base Total Contingent Options LTIP All Other
Salary Bonus Cash Shares Granted Payouts Compensation
Name and Principal Position Year ($)(1) ($)(2) ($)(1) (#) (#) ($)(3) ($)(4)
--------------------------- ---- ------- ------ -------- -------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John R. Stafford 1997 1,350,000 1,350,000 675,000 9,028 269,000 621,169 393,789
Chairman of the Board, 1996 1,230,000 1,230,000 615,000 10,292 316,400 465,780 76,063
President and Chief Executive 1995 1,185,000 1,185,000 592,500 12,350 1,016,400 341,935 35,550
Officer
Robert G. Blount 1997 710,000 710,000 355,000 4,748 151,200 357,744 80,386
Senior Executive Vice President 1996 650,000 650,000 325,000 5,439 177,600 268,212 19,500
1995 628,250 628,250 314,125 6,546 457,600 196,897 18,848
Robert Essner (5) 1997 510,908 510,908 255,454 3,416 88,800 124,131 15,329
Executive Vice President
David M. Olivier 1997 495,000 495,000 247,500 3,310 35,600 107,169 14,850
Senior Vice President 1996 457,083 457,083 228,542 3,824 71,200 80,280 13,733
1995 414,650 414,650 207,325 4,320 151,200 58,935 12,440
Louis L. Hoynes, Jr. 1997 440,000 440,000 220,000 2,942 44,400 89,950 43,580
Senior Vice President 1996 415,000 375,000 187,500 3,138 44,400 67,463 12,450
and General Counsel 1995 407,000 407,000 203,500 4,240 94,400 49,525 12,210
______________
</TABLE>
(1) Mr. Stafford deferred until after retirement portions of his
1997, 1996 and 1995 base salaries and the entire cash portion
of his 1996 and 1995 bonus; Mr. Blount deferred a portion of
his 1997 base salary and a portion of his 1996 cash bonus; and
Mr. Hoynes deferred the entire cash portion of his 1996 bonus,
each pursuant to the AHPC Deferred Compensation Plan.
(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 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 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) 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 1996 performance, was converted
on February 6, 1997 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. For 1996, each named executive
officer was entitled to 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 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,
5,000 for Mr. Olivier and 4,200 for Mr. Hoynes.) 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 1996 performance. The restrictions on the Restricted
Stock earned pursuant to the 1994 Awards ended in May 1997
and, under the terms of such awards, all of the 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.) In addition, similar Restricted Stock Performance
Awards were made to the named executive officers in 1995 and
1996 composed of the following respective 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 and 1998, respectively: 9,900 and 9,900 for
Mr. Stafford, 5,600 and 5,600 for Mr. Blount, 2,200 and 2,500
for Mr. Essner, 2,200 and 2,200 for Mr. Olivier and 1,400 and
1,400 for Mr. Hoynes. Based upon the Corporation's EPS for
1997, 75% of the target amount of the 1995 Awards was
converted to Restricted Stock in January 1998 and will be
reported under the caption "LTIP Payouts" in the Summary
Compensation table in the 1999 proxy statement. See the Long-
Term Incentive Plan Awards Table in this Proxy Statement for
similar awards made in 1997.
(4) 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 Blount and Hoynes also include $353,289, $59,086,
and $30,380, respectively, for above-market interest earned
during 1997 (equal to 1.96%) on deferred compensation but not
paid in 1997, including amounts deferred on the exercise of
Stock Appreciation Rights and/or options disclosed in the
Option/SAR Exercise and Year-End Value Table on page [ ] of
this Proxy Statement.
(5) Mr. Essner became an executive officer and director of the
Corporation on September 25, 1997.
<PAGE>
<TABLE>
OPTION GRANTS TABLE
The following table provides information on Option grants in
1997 to the named executive officers.
<CAPTION>
Individual Grants in 1997
Number of % of Total
Securities Options Grant Date
Underlying Granted to Exercise Present
Options Employees in Price Per Expiration Value
Name Granted (1) 1997 Share ($) (2) Date ($) (3)
- ----------------- ---------- --------------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
John R. Stafford 269,000(4) 1.9% 72.4375 May 2007 3,084,990
Robert G. Blount 151,200 1.1% 72.4375 May 2007 1,734,017
Robert Essner 88,800 .6% 72,4375 May 2007 1,018,391
David M. Olivier 35,600 .3% 72.4375 May 2007 408,274
Louis L. Hoynes, Jr. 44,400 .3% 72.4375 May 2007 509,195
</TABLE>
(1) These options become exercisable in one-third increments on
the first, second and third anniversaries of the date of grant
(May 22, 1997) (except that such options 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 18.2% and dividend yield of 3.7%, both based on the
historical three-year monthly average for the underlying
Common Stock; risk-free rate of return of 6.5% based on a
four-year zero coupon rate; and time of exercise of four
years, being the expected duration of the option. In
addition, the model assumed a 3.0% discount for forfeiture
since the options are not currently exercisable.
(4) Of such grant, options covering 267,700 shares of Common Stock
were transferred to an irrevocable trust for the benefit of
members of Mr. Stafford's family.
<PAGE>
<TABLE>
LONG-TERM INCENTIVE PLAN AWARDS TABLE
The following table provides information on Restricted Stock
Performance Awards granted in 1997, under the Corporation's 1996
Stock Incentive Plan, to the named executive officers.
<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 8,400 2000 - 6,300 8,400 10,500
Robert G. Blount 4,700 2000 - 3,525 4,700 5,875
Robert Essner 2,800 2000 - 2,100 2,800 3,500
David M. Olivier 1,100 2000 - 825 1,100 1,375
Louis L. Hoynes, Jr. 1,400 2000 - 1,050 1,400 1,750
</TABLE>
(1) Amounts shown represent Restricted Stock Performance Awards
(the "1997 Awards") made in 1997 under the Corporation's
1996 Stock Incentive Plan. These 1997 Awards are composed of
units which may be converted to a number of shares of
Restricted Stock equal to 0%-125% of the 1997 Award based
upon the Corporation's performance in 1999. 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 22, 2000, 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.
<TABLE>
OPTION/SAR EXERCISE AND YEAR-END VALUE TABLE
The following table discloses the options/SARs that were exercised
by the named executive officers during 1997 and sets forth the number and
value of their unexercised options at year-end.
Aggregated Option/SAR Exercises in 1997
And Year-End Option Values (1)
<CAPTION>
Number of Value of
Securities Underlying Unexercised
Unexercised in-the-Money
Options at Options at
Shares Dec. 31, 1997 (#) Dec. 31, 1997 ($)
Acquired on Value Exercisable* Exercisable*
Name Exercise (#) Realized ($) Unexercisable** Unexercisable**(2)
- ---- ----------- ------------ ------------------ -------------------
<S> <C> <C> <C> <C>
John R. Stafford 556,400(3)(8) 17,622,588 783,066* 25,323,933*
502,334** 10,047,005**
Robert G. Blount 186,666(4)(8) 6,398,276 177,600* 4,162,500*
244,534** 4,195,942**
Robert Essner 81,900(5) 3,188,134 123,400* 3,613,400*
168,800** 3,430,750**
David M. Olivier 111,200(6) 3,974,448 71,200* 1,668,750*
115,600** 3,214,625**
Louis L. Hoynes, Jr. 75,000(7)(8) 3,067,222 90,000* 2,819,619*
94,400** 2,099,125**
</TABLE>
(1) Stock Appreciation Rights (SARs) were not granted to any
employees of the Corporation during 1997 and, as of April 1,
1997, all unexercised SARs were surrendered to the
Corporation without additional compensation and were
cancelled.
(2) The amounts given are based on the closing market price of
the Corporation's Common Stock at December 31, 1997 which
was $76.500. The closing market price on March 2, 1998 was
$93.75.
(3) Represents exercises of options/SARs (i) granted in 1994 and
covering 240,000 shares at an exercise price of $29.0313 per
share and (ii) granted in 1995 and covering 316,400 shares
at an exercise price of $38.1250 per share (in each case,
market value on date of grant).
(4) Represents exercises of options/SARs granted in 1995 and
covering 186,666 shares at an exercise price of $38.1250 per
share (market value on date of grant).
(5) Represents exercises of options/SARs (i) granted in 1992 and
covering 33,400 shares at an exercise price of $37.8125 per
share, (ii) granted in 1993 and covering 13,500 shares at an
exercise price of $32.5938 per share and (iii) granted in
1995 covering 35,000 at an exercise price of $38.1250 per
share (in each case, market value on date of grant).
(6) Represents exercises of options/SARs (i) granted in 1992 and
covering 40,000 shares at an exercise price of $37.8125 per
share and (ii) granted in 1995 and covering 71,200 shares at
an exercise price of $38.1250 per share (in each case,
market value on date of grant).
(7) Represents exercises of the options/SARs (i) granted in 1994
and covering 33,200 shares at an exercise price of $29.0313
per share and (ii) granted in 1995 and covering 41,800
shares at an exercise price of $38.1250 per share (in each
case, market value on date of grant).
(8) Portions of the proceeds of such exercises have been
deferred at the election of the named executive officer.
<PAGE>
<TABLE>
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.
<CAPTION>
Years of Service
----------------------------------------
Final 3-Year Average
Earnings 15 20 25 30*
- ------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 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
3,000,000 900,000 1,200,000 1,500,000 1,800,000
3,100,000 930,000 1,240,000 1,550,000 1,860,000
__________
</TABLE>
*Plans recognize up to 30 years of credited service only.
The compensation covered by the retirement plans for each of
the named executives is the base salary rate at January 1, 1997
($1,350,000 for Mr. Stafford, $710,000 for Mr. Blount, $425,000
for Mr. Essner, $495,000 for Mr. Olivier and $440,000 for Mr.
Hoynes) plus the amount in the bonus column of the Summary
Compensation Table for 1996 for a total of $2,580,000 for Mr.
Stafford, $1,360,000 for Mr. Blount, $795,000 for Mr. Essner,
$952,083 for Mr. Olivier and $815,000 for Mr. Hoynes.
The years of service (in nearest years) as of December 31,
1997 for the named executives are as follows: Mr. Stafford, 28
years; Mr. Blount, 23 years; Mr. Essner, 8 years; Mr. Olivier, 31
years of which only 16 years are recognized under the benefit
formula illustrated in the table above; and Mr. Hoynes, 7 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.)
PERFORMANCE GRAPH
The following graph shows the value as of December 31, 1997
of a $1,000 investment in the Corporation's Common Stock made on
December 31, 1992 (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.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
Year AHPC Common S&P 500 Peer Group
Stock Index Index
- -------- ---------- -------- --------
<S> <C> <C> <C>
12/31/92 $1,000.00 $1,000.00 $1,000.00
12/31/93 $1,002.80 $1,100.10 $938.74
12/31/94 $1,020.90 $1,115.10 $1,069.82
12/31/95 $1,637.40 $1,532.60 $1,761.99
12/31/96 $2,032.20 $1,883.60 $2,172.32
12/31/97 $2,714.50 $2,511.20 $3,447.89
<PAGE>
SEVERANCE AGREEMENTS
The Corporation has entered into severance agreements with
certain executive officers (including the named executive
officers other than Messrs. Stafford and Blount), which are
intended to provide for continuity of management in the event of
a change in control of the Corporation. The agreements continue
through December 31, 2000 and provide that they are to be
automatically extended in one year increments, unless, not later
than September 30 in any year, the Corporation has given prior
notice of termination. In such event, the agreements will
continue to be effective until the end of its then remaining
term. However, if a "change in control" (as defined in the
agreements) occurs, the agreements will continue in effect for a
period of thirty-six (36) months beyond such change in control.
A change in control as so defined would include any of the
following events: (i) any "person", as defined in the Securities
Exchange Act of 1934, as amended, acquires 20 percent or more of
the Corporation's voting securities; (ii) the consummation of any
merger or business combination of the Corporation, sale or lease
of the Corporation's assets or any similar transaction, unless in
any case the stockholders of the Corporation retain at least 65%
of the resulting entity; or (iii) a majority of the Corporation's
directors are replaced during a two-year period.
If, following a change in control, the covered executive
officer is terminated by the Corporation for any reason, other
than for disability or for cause (as defined in the agreements),
or if such executive officer terminates his or her employment for
good reason (as defined in the agreements), then the executive
officer is entitled to a lump sum severance payment equal to 3
times the sum of (a) the executive's then base salary, (b) the
highest bonus awarded to the executive under the Corporation's
Management Incentive Plan in any of the three years immediately
prior to the termination year ("Bonus"), and (c) an amount equal
to the highest Black-Scholes value (determined as of the date of
grant, in accordance with the agreements), of any option grant
made to such executive in the year prior to the change in control
or, if higher, thereafter. In addition, the executive would also
receive a pro-rated Bonus, calculated through the date of
termination. During the 90 day period following the anniversary
of the change in control, a voluntary termination of employment
by any of the covered executive officers will be deemed to
constitute Good Reason.
In the event that any payments made in connection with a
change in control would be subjected to the excise tax imposed on
excess parachute payments by the Internal Revenue Code, the
Corporation will "gross-up" the executive officer's compensation
for all such excise taxes and any federal, state and local income
tax applicable to such excise tax penalties and interest thereon.
In addition, upon the date of termination, the executive (or the
spouse or applicable beneficiary in the event of such executive's
death) will receive three additional years of credit for age, and
service purposes in calculating supplemental pension benefits
using the benefit calculation provisions of the Corporation's
Retirement Plan and, to the extent such executives participate
therein, the Corporation's Supplemental Executive Retirement Plan
and the Corporation's Executive Retirement Plan. Such benefit
would be further determined without any reduction for the receipt
of benefits prior to age 65 or 60, as the case may be, with
respect to each plan.
For three years from the date of a covered termination, the
Corporation would either continue the executive's coverage under
the Corporation's welfare and fringe benefit plans (but excluding
the Corporation's disability, pension and 401(k) plans),
perquisites and other programs in which the executive is
participating immediately prior to such termination or provide
substantially similar benefits. If, at the time of termination,
such executive has already attained age 45, the executive would
also become vested in all retiree medical coverage, life
insurance and other retiree benefits; provided, however, that the
retiree medical coverage provided by the Corporation will be
secondary to any other medical coverage the executive may then
have.
In addition, if any restricted stock awards or options
terminate or are forfeited upon or following the termination of
the executive's employment, under the terms of any plan, the
executive will receive in respect of such terminated or forfeited
stock awards or options, an amount equal to the sum of (i) the
Cashout Value (as defined in the agreements) of all the shares
covered by the restricted stock awards so forfeited (with units
converted to shares based on the target awards), and (ii) the
excess of (a) the Cashout Value of all the shares subject to
options which were so forfeited over (b) the aggregate exercise
price of the shares subject to such forfeited options.
CERTAIN LEGAL PROCEEDINGS
On January 14, 1998, the directors (other than Mr. Essner),
certain officers of the Corporation, a former director and
officer of the Corporation and the Corporation itself (as a
nominal defendant) were named in a shareholder derivative action
filed in New Jersey Superior Court, Morris County (No. MRS-L-164-
98). The suit seeks to recover any losses or damages sustained
by the Corporation, as well as profits from the sale of stock by
certain present and former officers and directors, as a result of
alleged intentional, reckless or negligent breaches of fiduciary
duty by the defendants. The suit alleges that the defendants
made material misstatements or omissions regarding alleged
adverse events associated with REDUX and/or PONDIMIN (and in
particular an alleged association between those two products and
valvular heart disease), exposing the Corporation to liability
for personal injury lawsuits and securities claims. In addition,
in a securities fraud putative class action filed against the
Corporation and certain officers and directors on September 18,
1997 in U.S. District Court (No. 97-CV-4513 (NHP) (D.N.J.)) on
behalf of purchasers of the Corporation's common stock during the
period from March 1, 1997 through September 16, 1997, the
defendants are alleged to have made similar misstatements and
omissions. The putative class action also includes claims for
negligent misrepresentation and common law fraud and deceit.
Plaintiffs seek compensatory and punitive damages for themselves
and for the class. While the shareholder lawsuits are at a very
early stage, defendants believe that the suits are without merit
and intend to defend the litigation vigorously.
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 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 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 health care products and chemical industry companies
also are considered.
BASE SALARY
Base salaries for executive officers for 1997 were recommended by the
Committee and approved by the Board of Directors in November 1996. In
recommending these base salaries, the Committee considered, among other
factors, the financial performance of the Corporation as a whole, the
successful completion of the integration of the American Cyanamid business and
the introduction of new pharmaceutical products in 1996. The Committee also
considered 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
health care products and chemical industry companies. The report indicated
that, overall, the proposed base salaries fall within a competitive range.
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 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 1997 were granted by the Committee in January
1998. In addition, the Committee considered the amounts of previous awards in
deciding upon the awards for 1997. 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 grants is tied
directly to stock price performance. The Committee grants options 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 are valueless.
Annual grants are made to executive officers based on salary,
responsibility and performance of the individual officer. Grants in 1997 are
exercisable in one-third increments on the first, second and third anniversary
date of 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 1997 each with an exercise price equal to the mean market
price on the date of grant of $72.4375.
In furtherance of the goal of aligning the interests of management with
those of the stockholders, in May 1997 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 covering four shares of Common Stock. These awards represent
units which will be converted to shares of Restricted Stock based on 1999
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
2000, 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, the Committee considered the amounts of options and Restricted Stock
awards previously granted. The Committee also reviewed the Consultant's
Report which indicated that, taken together, the grants and awards, in most
cases, were an overall reduction by 15% over the prior year in number of
option grants and restricted stock awards and were within a competitive range.
Conversion of units to Restricted Stock for a portion of the units
covered by a Restricted Stock Performance Award made in 1995 was based on a
formula related to the relative achievement of the 1997 targeted earnings per
share set by the Committee in February 1997. As a result, 75% of the award was
converted to Restricted Stock in January 1998 based on 1997 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 Chairman, President and Chief Executive Officer and
executive officers generally, the Committee viewed being of greatest
significance the financial performance of the Corporation. Pro forma worldwide
net sales increased 5% for 1997 after adjusting for the acquisition of the
worldwide animal health business of Solvay, S.A. in 1997 and the divestitures
of the American Home Foods majority interest and the Symbiosis business in
1996. Excluding the 1997 special charges relating to the voluntary market
withdrawal of the Corporation's anti-obesity products, the Corporation's net
income and basic earnings per share for the 1997 full year of $2.16 billion
and $3.34, respectively, represented increases of 15% and 13%, respectively,
over 1996 results excluding the gain on the sale of the American Home Foods
majority interest and special charges related to the purchase of the remaining
interest in Genetics Institute, Inc. The next most significant factor
considered by the Committee was the increase in shareholder value. The
Corporation's shareholder return, including dividends reinvested, for 1997 was
34%, continuing the positive trend that occurred in 1996 and 1995. The next
most significant factor considered by the Committee was the product
development activity of the Corporation, including regulatory approval to
market Neumega , and the advisory committee recommendation to approve Wyeth-
Ayerst's vaccine against rotavirus gastroenteritis. The Committee also viewed
as significant the implementation of the Corporation's strategic plan as
evidenced by the execution of an agreement to sell the Sherwood-Davis & Geck
business for $1.77 billion in cash and the sale of Storz Instrument Company
which was completed in December 1997 for $380 million.
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 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 1997 will be deductible under Section 162(m).
COMPENSATION AND BENEFITS COMMITTEE
Frank A. Bennack, Jr., Chairman
Robin Chandler Duke
John D. Feerick
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 1998. This firm served in such
capacity in 1997 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 1998.
ITEM 3.
PROPOSED AMENDMENTS TO THE RESTATED CERTIFICATE OF INCORPORATION
On March 5, 1998, 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 1,200,000,000 to 2,400,000,000 shares subject to approval by
the stockholders. On March 5, 1998, 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 eighteen to thirty-six 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
amendment 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 $2.00 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, 1998. It is anticipated that on May 5, 1998 the additional shares
will be credited to an account for the benefit of each stockholder of record
promptly followed by an account statement being mailed to each such
stockholder setting forth, among other things, the number of shares so
credited. Upon request, a physical stock certificate will be mailed to any
such stockholder and the account statement will be accompanied by instructions
for making such request.
A total of approximately 711,000,000 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 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 and Restricted Stock Awards under such Plans
and the exercise price of each such option 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 or the exercise prices of stock options
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 share account statements or new
certificates representing the additional shares.
In connection with the Stock Split, a transfer of $.33 cents for each
additional share of Common Stock issued and outstanding or aggregating to
approximately $218,000,000 will be made from the Corporation's earned surplus
account to its capital account as of May 5, 1998, 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 will no
longer 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),
immediately after the Stock Split, the number of shares of Common Stock
available for future issuance would be, on a proportionate basis, the same as
the number of shares of Common Stock available for future issuance prior to
the Stock Split. 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.
The Board of Directors and Management recommend a vote FOR approval of the
amendments to the Restated Certificate of Incorporation.
STOCKHOLDER PROPOSALS
Two Stockholders of the Corporation have informed management of the
intention of each to present a resolution as set forth below at the Annual
Meeting. The name, address and the number of shares held by each such
Stockholder will be furnished orally or in writing, as requested, by the
Corporation to any person promptly upon receipt of any oral or written
request. Such request may be directed to Eileen M. Lach, Secretary of the
Corporation.
ITEM 4.
STOCKHOLDER PROPOSAL ON DIRECTORS ACCEPTING
CONSULTING FEES
BE IT RESOLVED: That the shareholders of American Home Products Corporation
(or "Company") urge that the Board of Directors establish a clear and
unequivocal policy that members of the Board refrain from accepting consulting
or other fees from the Company, either individually or through any associated
business entity, while they serve on the Board of Directors.
SUPPORTING STATEMENT
The Board of Directors should play an independent role in helping to
determine overall corporate policy and strategic direction. They should
actively monitor senior management in faithfully implementing these policies.
In their capacity on the Board, Directors owe their fundamental allegiance to
the shareholders of the corporation - the owners who elect them, and not to
management.
We believe, however, that certain financial relationships can adversely
affect the ability of Directors to function in their appropriate oversight
role. This is especially critical for so-called outside directors who are not
employee/Directors and who should bring a certain arms-length objectivity to
Board deliberations. The Company currently utilizes the services of a firm
with which one of our Directors is a part-owner, and has paid another Director
to lecture and participate on a company-sponsored Advisory Board. The large
fees collected by these Directors reflect a business relationship with our
Company which is a clear financial benefit to these Directors.
Shareholder confidence in our Directors is absolutely critical to a
properly functioning Board. We believe that these Directors, as our elected
representatives, have a serious potential conflict of interest.
Others share our concern regarding the independence and integrity of
Directors who have lucrative financial arrangements with companies on whose
Boards they sit. The National Association of Corporate Directors has issued a
Report on principles and best practices on director compensation, which
states:
Boards should adopt a policy stating that a company should not hire a
director or a director's firm to provide professional or financial
services to the corporation. The director's role is distinct and
separate from that of a consultant; both roles can be severely
compromised through commingling....
Simply put, our Directors should not attempt to serve two masters at
once; they should decide whether they can best serve our Company as Directors
or as consultants but not both.
We urge support for adoption of this proposal.
AMERICAN HOME PRODUCTS RESPONSE
The Board of Directors and Management do not agree with the foregoing proposal
and recommend a vote AGAINST it for the following reasons:
The Proposal seeks to prohibit members of the Corporation s Board of
Directors (and their associated business entities) from accepting any
consulting or other fees from the Corporation for services outside of the
scope of their duties as directors. In the view of the Board of Directors and
management, this absolute prohibition is unnecessary and should not be
adopted.
The Board believes that it can maintain a substantial degree of
independence from management without adopting the rigid approach set forth in
the Proposal. Historically, the Corporation has not relied extensively upon
its non-employee directors or their associated business entities to provide
services to the Corporation. In fact, there are no consulting or similar
arrangements between any director and the Corporation under which a director
or an associated business enterprise is currently being compensated, except
for one director who has been paid a nominal aggregate amount in honoraria for
speaking engagements organized by educational and charitable groups of which
the Corporation is one of the sponsors. Nevertheless, the Board believes that
it is appropriate for the Corporation to have the flexibility to obtain the
services of its directors or their firms when it is deemed to be in the
Corporation s best interests to do so.
The Board of Directors and management agree with the principles set
forth in the Statement on Corporate Governance issued by The Business
Roundtable in September 1997. This Statement acknowledges that a business or
personal relationship between a non-employee director and a corporation may
affect the actual or perceived independence of the director and recommends
that:
[W]here such relationships exist, boards should be mindful
of them and make a judgment about a director s
independence based on his or her individual circumstances
rather than through the mechanical application of rigid
criteria. This would involve consideration of whether the
relationships are sufficiently significant as to interfere
with the director s exercise of independent judgment. If
a particular director is not deemed sufficiently
independent, the board may nevertheless conclude that the
individual s role on the board remains highly desirable
(as in the case of an inside director) in the context of a
board composed of a majority of directors with the
requisite independence. The overall result should be a
board that, as a whole, represents the interests of
stockholders with appropriate independence.
For the reasons stated above, the Board of Directors and management
believe that the Proposal is not in the best interests of the Corporation and
its stockholders.
Accordingly, the Board of Directors and Management recommend a vote AGAINST
this stockholder proposal.
ITEM 5.
STOCKHOLDER PROPOSAL ON SEPARATING THE
CORPORATION'S CONTRACEPTIVE BUSINESS
Whereas, the company makes a number of "contraceptive" products, including
Norplant; and
Whereas, the overseas testing of Norplant was described in a BBC documentary
as abusive, without proper informed consent, causing great suffering to women;
Be it resolved: the shareholders ask the Board to take steps to accomplish a
separation of the Corporation's contraceptive business from all its non-
contraceptive business by January 1, 1999.
Supporting Statement
The proponent of the resolution did not think it advisable to challenge the
Company's involvement in contraceptive production directly, since if [sic]
represents less than 5 percent of annual revenues. A spin-off may not only
help preserve the Company's assets, but also make the Company more attractive
to a broader spectrum of consumers and investors.
If you agree that American Home Products shall free itself of
any involvement in the manufacture of contraceptives, please vote
"YES" (FOR) this resolution.
AMERICAN HOME PRODUCTS RESPONSE
The Board of Directors and Management do not agree with the foregoing proposal
and recommend a vote AGAINST it for the following reasons:
The Proposal seeks to direct the Board of Directors to cause the
Corporation's contraceptive business to be separated from all its non-
contraceptive business by January 1, 1999. In the view of the Board of
Directors and management, the proposed separation would be unwise and the
Proposal should not be adopted.
The Corporation acknowledges the strong convictions that some people hold
on the subject of birth control and respects their decision to refrain from
using contraceptive products. However, the Board of Directors and management
do not believe that these views should prevent the Corporation from making
contraceptive products available to the women who choose to use them.
Through its Wyeth-Ayerst Laboratories division, the Corporation has a
strong commitment to women's health care and is the largest provider of
women's health care prescription products in the United States. Wyeth-Ayerst
prides itself on its product innovation, basic and clinical research and
educational initiatives in the area of women's health care. To separate
contraceptive products from the rest of the business would undermine the
Corporation's commitment to women's health care and would prevent the
Corporation from being able to provide a full range of products in this
important area.
Moreover, the research and development as well as the manufacturing,
marketing and sale of the Corporation's contraceptive products are integrated
with similar functions for many of the Corporation's other pharmaceutical
products. For example, oral contraceptive products are produced at certain
manufacturing facilities that also produce other health care products. A
separation of these product lines would therefore be impractical and extremely
inefficient from the standpoint of the Corporation's business operations.
For the reasons stated above, the Board of Directors and management believe
that the Proposal is not in the best interests of the Corporation and its
stockholders.
Accordingly, the Board of Directors and Management recommend a vote AGAINST
this stockholder proposal.
STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
Stockholder proposals intended to be presented at the 1999 Annual Meeting must
be received by the Corporation at its principal executive offices on or before
November 25, 1998 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 $20,000 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, 1997,
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 VOTE
YOUR PROXY BY TELEPHONE IF POSSIBLE OR 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 OR BY PROXY BY TELEPHONE WILL BE VOTED IN
ACCORDANCE WITH THE STOCKHOLDER'S DIRECTIONS.
By Order of the Board of Directors
EILEEN M. LACH
Secretary
March 25, 1998
<PAGE>
EXHIBIT I
Amendments to Restated Certificate of Incorporation
Amendments to the following sections of the Restated Certificate of
Incorporation are reflected by underlining additions in bold face; deleted
material is reflected [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 [One Billion Two Hundred Five Million (1,205,000,000)] Two
Billion Four Hundred and Five Million (2,405,000,000) of which [One Billion
Two Hundred Million (1,200,000,000)] Two Billion Four Hundred Million
(2,400,000,000) shares shall be Common Stock, par value of Thirty-three and
one-third cents (33 1/3 cents) per share and Five Million (5,000,000) shares
shall be Preferred Stock (hereinafter referred to as the "Preferred Stock"),
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 [Eighteen (18)] thirty-six
(36) 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
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 23, 1998 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.
YOU CAN VOTE YOUR SHARES IN ONE OF TWO WAYS
1. 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 and
AGAINST Items 4 and 5.
OR
2. CALL TOLL-FREE 1-888-XXX-XXXX 24 hours a day, 7 days a week
on a Touch Tone telephone and follow the instructions.
(Continued and to be signed if voting by mail on the reverse side
or follow the instructions to vote by telephone)
<PAGE>
/ /
OPTIONAL SECRET PROXY
THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND YOU VOTE "FOR"
ITEMS
1, 2 and 3.
Item 1 - ELECTION OF DIRECTORS:
Nominees:
C.L. Alexander, Jr., F.A. Bennack, Jr., R.G. Blount,
R.C. Duke, R.A. Essner, J.D. Feerick, J.P. Mascotte,
M.L. Polan, I.G. Seidenberg, 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 / /
Item 3 - AMENDMENTS TO THE RESTATED CERTIFICATE OF INCORPORATION
FOR / / AGAINST / / ABSTAIN / /
THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND A VOTE "AGAINST"
ITEMS 4 AND 5.
Item 4 - STOCKHOLDER PROPOSAL ON DIRECTORS ACCEPTING CONSULTING
FEES
FOR / / AGAINST / / ABSTAIN / /
Item 5 - STOCKHOLDER PROPOSAL ON SEPARATING THE CORPORATION'S
CONTRACEPTIVE BUSINESS
FOR / / AGAINST / / ABSTAIN / /
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>
INSTRUCTIONS TO VOTE BY TELEPHONE
Your telephone vote authorizes the named proxies to vote your
shares in the same manner as if you marked, signed and returned
your proxy card.
- - On a Touch Tone Telephone call Toll-Free 1-888-XXX-XXXX 24
hours a day, 7 days a week.
- - You will be asked to enter your Personal Identification Number
(PIN) which is next to your name and address on the Proxy
Card.
Message #1 To vote your shares as the Board of Directors
recommends, Press "1" Now. If you wish to vote on
each proposal separately, Press "0" Now.
If you chose to vote as the Board of Directors recommended by
pressing "1", your vote will be confirmed and cast as you have
directed and you may either hang up or listen for more options.
Message #2 You have chosen to vote your shares separately on
each Item to be presented at the Annual Meeting,
please listen to and follow the instructions to
vote your shares on each matter.
After you have completed your voting, your vote will be confirmed
and cast as you have directed and you may either hang up or
listen for more options.
IF YOU VOTE BY TELEPHONE, THERE IS NO NEED TO MAIL BACK YOUR
PROXY CARD. THANK YOU FOR VOTING.
<PAGE>
[Proxy Card without telephonic voting]
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 23, 1998 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 and AGAINST Items 4 and
5.
(Continued and to be signed on the reverse side)
<PAGE>
/ /
OPTIONAL SECRET PROXY
THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND YOU VOTE "FOR"
ITEMS 1, 2 and 3.
Item 1 - ELECTION OF DIRECTORS:
Nominees:
C.L. Alexander, Jr., F.A. Bennack, Jr., R.G. Blount,
R.C. Duke, R.A. Essner, J.D. Feerick, J.P. Mascotte,
M.L. Polan, I.G. Seidenberg, 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 / /
Item 3 - AMENDMENTS TO THE RESTATED CERTIFICATE OF INCORPORATION
FOR / / AGAINST / / ABSTAIN / /
THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND A VOTE "AGAINST"
ITEMS 4 AND 5.
Item 4 - STOCKHOLDER PROPOSAL ON DIRECTORS ACCEPTING CONSULTING
FEES
FOR / / AGAINST / / ABSTAIN / /
Item 5 - STOCKHOLDER PROPOSAL ON SEPARATING THE CORPORATION'S
CONTRACEPTIVE BUSINESS
FOR / / AGAINST / / ABSTAIN / /
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.
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