<PAGE> 1
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
</TABLE>
AMERICAN HOME PRODUCTS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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> 2
AMERICAN HOME PRODUCTS CORPORATION
FIVE GIRALDA FARMS
MADISON, NEW JERSEY 07940
JOHN R. STAFFORD
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
March 17, 2000
Dear Fellow Stockholder:
It is my pleasure to invite you to attend the American Home Products
Corporation 2000 Annual Meeting of Stockholders. The meeting will be held on
Thursday, April 27, 2000 at 9:30 a.m. local time at the Headquarters Plaza
Hotel, Three Headquarters Plaza, 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 Corporation'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. Many of you
will have the option to cast your proxy vote by telephone or via the internet if
your proxy card or voting instruction form includes instructions and a toll-free
telephone number or internet website to do so. These are quick and easy ways for
you to submit your proxy. I urge you to take a moment to use the internet
website, toll-free telephone number, or sign, date, and promptly return the
enclosed proxy card or voting form in the postage-paid envelope provided, in
order to be certain your shares are represented at the meeting.
I look forward to seeing you on April 27th.
Sincerely,
/s/ John R. Stafford
<PAGE> 3
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 Plaza Ballroom of the Headquarters Plaza Hotel,
Three Headquarters Plaza, Morristown, New Jersey, on Thursday, April 27, 2000 at
9:30 a.m., local time, for the following purposes:
1. to elect a Board of nine 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 2000; and
3. to act upon such other matters which may properly come before the
meeting, including three stockholder proposals as stated in the Proxy
Statement.
Under the provisions of the By-laws, the Board of Directors has fixed the
close of business on March 13, 2000 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 17, 2000
YOUR VOTE IS IMPORTANT
IF YOU ARE UNABLE TO ATTEND THE MEETING, PLEASE SIGN, DATE AND RETURN THE
ACCOMPANYING PROXY CARD
PROMPTLY OR, IF YOUR PROXY CARD OR VOTING FORM INCLUDES INSTRUCTIONS TO DO SO,
USE THE TOLL-FREE
TELEPHONE NUMBER OR INTERNET WEBSITE NOTED ON THE CARD OR VOTING FORM TO SUBMIT
YOUR PROXY.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROXY STATEMENT............................................. 1
ELECTION OF DIRECTORS....................................... 2
NOMINEES FOR ELECTION AS DIRECTORS........................ 2
COMMITTEES................................................ 4
DIRECTORS' FEES; ATTENDANCE............................... 4
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE........ 5
SECURITIES OWNED BY MANAGEMENT AND CERTAIN BENEFICIAL
OWNERS.................................................... 6
SUMMARY COMPENSATION TABLE.................................. 8
OPTION GRANTS TABLE......................................... 9
LONG-TERM INCENTIVE PLAN AWARDS TABLE....................... 10
OPTION EXERCISE AND YEAR-END VALUE TABLE.................... 11
PENSION PLAN TABLE.......................................... 11
PERFORMANCE GRAPH........................................... 13
CHANGE IN CONTROL SEVERANCE AGREEMENTS AND OTHER
ARRANGEMENTS.............................................. 13
CERTAIN LEGAL PROCEEDINGS................................... 15
REPORT OF THE COMPENSATION AND BENEFITS COMMITTEE........... 15
APPOINTMENT OF PRINCIPAL INDEPENDENT PUBLIC ACCOUNTANTS..... 18
2000 STOCKHOLDER PROPOSALS.................................. 18
STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING........... 22
OTHER MATTERS............................................... 22
</TABLE>
<PAGE> 5
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 ("AHPC" or the "Corporation")
to be used at the Annual Meeting of Stockholders to be held on April 27, 2000
and at any adjournment or adjournments thereof. Properly executed proxies
received prior to the meeting or proxies properly submitted prior to the meeting
by telephone or through use of the internet website (using a personal control
number to identify each stockholder) will be voted at the meeting. Stockholders
may have their votes kept secret until after the Annual Meeting by so indicating
in the designated place on the proxy card or voting form or by following the
instructions when submitting a proxy by telephone or through the internet
website. 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 2000, AGAINST the stockholder proposal relating to the
separation of AHPC's oral contraceptive business from its non-contraceptive
business, AGAINST the stockholder proposal relating to price restraint on
pharmaceuticals and AGAINST the stockholder proposal relating to genetically
engineered agricultural products. The proxy may be revoked by you at any time
before it is voted at the meeting.
Attendance at the meeting will be limited to stockholders of record on
March 13, 2000 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 17, 2000.
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 submit a proxy to vote
the shares registered in his or her own name, the shares held for his or her
account in the Master Investment Plan will not be voted.
Stockholders of record at the close of business on March 13, 2000 are
entitled to notice of and to vote at the meeting. On March 1, 2000, there were
outstanding and entitled to vote 1,304,876,760 shares of Common Stock (each of
which is entitled to one vote) and 24,103 shares of $2 Convertible Preferred
Stock (each of which is entitled to thirty-six votes). A plurality of the votes
cast by the holders of Common Stock and $2 Convertible Preferred Stock, voting
as a single class, is required for election of directors, a majority of the
votes cast by the holders of Common Stock and Convertible Preferred Stock,
voting as a single class, is required for each of (i) the ratification of the
appointment of the principal independent public accountants, (ii) the approval
of the stockholder proposal relating to the separation of AHPC's oral
contraceptive business from its non-contraceptive business, (iii) the approval
of the stockholder proposal relating to price restraint on pharmaceuticals and
(iv) approval of the stockholder proposal relating to genetically engineered
agricultural products. 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
<PAGE> 6
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.
ITEM 1.
ELECTION OF DIRECTORS
Nine 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. In accordance with the By-laws of the Corporation, the Board of
Directors has reduced the number of directors constituting the Board of
Directors from ten to nine following the retirement of Mr. Robert G. Blount in
February 2000. If the proxy is executed or submitted by telephone or via the
internet 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 nine
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 were elected by the stockholders at the last Annual
Meeting. Management has no reason to believe that any of the nominees will not
serve if elected. In the event that any nominee should not be available, and if
the Board has designated a substitute nominee, the persons named in the proxy
will vote for the substitute nominee designated by the Board of Directors.
NOMINEES FOR ELECTION AS DIRECTORS
<TABLE>
<C> <S>
[CLIFFORD L. ALEXANDER, JR. Director since 1993; age 66; President, Alexander &
PHOTO] Associates, Inc. (consulting firm specializing in Workforce
CLIFFORD L. ALEXANDER, JR. Inclusiveness); Director, Dreyfus General Family of Funds,
Dreyfus Third Century Fund, Dreyfus Premier Family of Funds,
Dun & Bradstreet Corporation, MCI WorldCom, Inc., IMS Health
Incorporated, and Mutual of America Life Insurance Company;
Chairman of the Corporate Issues Committee and member of the
Audit and Nominating Committees
[FRANK A. BENNACK, JR. Director since 1988; age 67; President and Chief Executive
PHOTO] Officer, The Hearst Corporation (owns and operates
FRANK A. BENNACK, JR. 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
[ROBERT ESSNER PHOTO] Director since 1997; age 52; Executive Vice President of the
ROBERT ESSNER Corporation since September 1997; previously President of
Wyeth-Ayerst Global Pharmaceuticals from March 1997;
President of Wyeth-Ayerst Laboratories, 1993 to March 1997;
member of the Finance, Operations and Retirement Committees
of the Corporation
</TABLE>
2
<PAGE> 7
<TABLE>
<C> <S>
[JOHN D. FEERICK PHOTO] Director since 1987; age 63; Dean, Fordham University School
JOHN D. FEERICK 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 P. MASCOTTE PHOTO] Director since 1995; age 60; President and Chief Executive
JOHN P. MASCOTTE Officer, BlueCross BlueShield of Kansas City, Inc.; former
Chairman, Johnson & Higgins of Missouri, Inc.; former
Chairman and Chief Executive Officer, The Continental
Corporation; Director, BlueCross BlueShield of Kansas City,
BlueCross BlueShield Association, Businessmen's Assurance
Company, Hallmark Cards, Inc., Hallmark Entertainment, Inc.
and Crown Media Inc.; member of the Compensation and
Benefits and Nominating Committees
[MARY LAKE POLAN, M.D., Director since 1995; age 56; Chairman and Professor,
PH.D. PHOTO] Department of Gynecology and Obstetrics, Stanford University
MARY LAKE POLAN, M.D., PH.D. School of Medicine since 1990; Director, ChromaVision
Medical Systems, Inc. and Quidel Corporation; member of the
Corporate Issues and Nominating Committees
[IVAN G. SEIDNEBERG PHOTO] Director since 1996; age 53; Chairman and Chief Executive
IVAN G. SEIDENBERG Officer, Bell Atlantic Corporation (telecommunications
company); Director, Honeywell International Inc., CVS
Corporation, Boston Properties, Inc. and Viacom Inc.; member
of the Audit and Nominating Committees
[JOHN R. STAFFORD PHOTO] Director since 1980; age 62; Chairman of the Board,
JOHN R. STAFFORD 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, Honeywell International 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. TORELL III PHOTO] Director since 1982; age 60; Chairman, Torell Management
JOHN R. TORELL III 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, USWeb/CKS, Inc., PaineWebber Group,
Inc. and Heartland Technology, Inc.; member of the Corporate
Issues and Nominating Committees
</TABLE>
3
<PAGE> 8
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 and Seidenberg, held two meetings in 1999. 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, Dean Feerick and Mr. Mascotte, held three meetings in 1999.
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
1999. This Committee recommends the director-nominees contained in the Proxy
Statement, considers candidates for director vacancies and such other management
matters as may be presented to it by the Chairman. Stockholders may submit names
of qualified candidates along with detailed information on their backgrounds to
the Corporate Secretary for referral to the Committee.
The Corporate Issues Committee, whose current members are Mr. Alexander,
Chairman, Dr. Polan and Mr. Torell, reviews the policies and programs of the
Corporation and makes recommendations to the Board as appropriate on public
issues that affect the Corporation. It held two meetings in 1999.
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 Mr.
Bennack. Mr. Blount also served on the Executive Committee prior to his
retirement in February 2000. It held one meeting in 1999.
DIRECTORS' FEES; ATTENDANCE
Messrs. Stafford, Blount (retired) and Essner were employees of the
Corporation for all of 1999 and therefore received no remuneration for serving
on the Board of Directors. The other directors were entitled to receive an
annual retainer of $45,500, a fee of $9,000 for Committee service and a meeting
fee of $1,050 for each Board or Committee meeting attended in 1999. In 1999,
each Committee Chairman received an additional fee of $5,000. There were twelve
Board meetings in 1999. The total fees paid in 1999 (including amounts deferred)
to the eight (including Mr. William Wrigley who served for part of 1999)
non-employee directors was $555,770.
In addition, each director who is not an employee or former employee of the
Corporation or any of its subsidiaries or affiliates is entitled to receive an
initial grant of 800 shares of restricted stock and subsequent grants of 800
shares of restricted stock up to a total of 4,000 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. Under the Corporation's Stock
Option Plan for Non-Employee Directors, directors who are not current or former
employees of the Corporation or any of its subsidiaries or affiliates receive an
annual grant of stock options on the date of the Corporation's Annual Meeting.
The price of the option is the fair market value on the date the option is
granted. The options become exercisable at the date of the next Annual Meeting
or earlier in the event of the termination of the optionee's service as a
director due to death, disability or retirement, provided in each case that the
optionee has completed at least two years of service as a director at the time
of exercise or termination, as the case may be. The number of
4
<PAGE> 9
shares of the Corporation's Common Stock that may be purchased under each option
is 3,000 shares (subject to adjustment with respect to subsequent grants).
During 1999, each member of the Corporation's Board of Directors attended
at least 75% of the total meetings of the Board and the Committees of which such
director was a member.
Pursuant to the Directors' Deferral Plan, directors' fees may be deferred
in amounts specified by each non-employee director. The deferred amounts accrue
interest at a deemed rate or may be allocated to phantom stock units under the
Plan. In addition, under this Plan, each non-employee director serving on the
board as of May 1, 1997 was credited with phantom stock units in an amount equal
to the actuarial equivalent of the amount that, under the former retirement plan
(which was terminated as of such date), would have been due to such director at
his or her earliest retirement date, assuming the director had completed the
vesting requirements under the former plan. Directors with 10 years of Board
service upon the later of retirement or age 65 will be entitled to receive in
cash (in a lump sum or annual installments) an amount equal to the then current
value of such units. Phantom Stock units for both the retirement and deferred
accounts accrue deemed dividends which are computed quarterly and credited in
additional units to each director's account under the Plan.
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires AHPC'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 AHPC, 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 1999 fiscal year,
except that one transaction relating to the purchase of shares by a family
member of Dr. Mary Lake Polan was reported late on a Form 4.
5
<PAGE> 10
SECURITIES OWNED BY MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The table below reflects the numbers of shares of AHPC Common Stock
beneficially owned as of February 1, 2000 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 (with options exercisable within 60 days listed
separately). The table also sets forth information concerning phantom stock
units and contingent stock awards credited to the accounts of each director and
executive officer under various compensation and benefit plans of the
Corporation. There are currently no known beneficial owners of 5% or more of the
Corporation's Common Stock.
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/
CONTINGENT
COMMON EXERCISABLE STOCK PERCENT
NAME OF BENEFICIAL OWNER STOCK OPTIONS UNITS(1) OF CLASS
- ------------------------ ------ ----------- ---------- --------
<S> <C> <C> <C> <C>
DIRECTORS
Clifford L. Alexander, Jr. .............. 9,855(2) 15,780(10) *
Frank A. Bennack, Jr. ................... 16,455(2) 16,790 *
Robert G. Blount (retired)............... 87,721(3) 786,000 80,750(11) *
Robert Essner............................ 80,827(4) 508,065 5,692(12) *
John D. Feerick.......................... 4,855(2) 17,829(13) *
John P. Mascotte......................... 8,055(2) 14,824 *
Mary Lake Polan, M.D., Ph.D. ............ 4,936(2)(9) 13,829 *
Ivan G. Seidenberg....................... 4,237(5) 18,899(14) *
John R. Stafford......................... 622,207(6) 2,134,919(6) 139,486(15) *
John R. Torell III....................... 11,563(2) 15,020 *
NAMED EXECUTIVES
Louis L. Hoynes, Jr. .................... 62,940(7) 293,998 19,211(16) *
David M. Olivier......................... 90,028(8) 159,732 8,584(17) *
All executive officers and directors as a
group (20 persons)..................... 1,363,084 5,571,303 442,873(18) *
</TABLE>
- ---------------
* Less than one percent (1%); including exercisable options of employees.
(1) Represents, in the case of the non-employee directors, phantom stock units
credited as of May 1, 1997 under the AHPC Directors' Deferral Plan in an
amount determined to be the actuarial equivalent of the amount that would
have been due to such director under the former retirement plan at his/her
earliest retirement date assuming satisfaction of vesting requirements
thereunder. Includes additional units allocated through the deemed
reinvestment of dividends. See "ELECTION OF DIRECTORS -- DIRECTORS' FEES;
ATTENDANCE". Also includes phantom stock units credited to the accounts of
those non-employee directors who have elected to defer directors' fees into
phantom stock units. In the case of the executive officers, represents
phantom stock units and contingent shares under the Corporation's
Supplemental Employee Savings Plan and Management Incentive Plan.
(2) Includes 4,000 shares of restricted stock awarded under the 1994 Restricted
Stock Plan for Non-Employee Directors (plus accrued dividend equivalents)
held by a trust for the benefit of certain executive officers and
non-employee directors of the Corporation under which such officers and
directors have sole voting power but do not have dispositive power except
in certain limited circumstances (the "Restricted Stock Trust").
(3) Includes 2,231 shares owned by Mrs. Blount. Also includes 52,383 shares
held by the Restricted Stock Trust.
6
<PAGE> 11
(4) Includes 15,247 shares owned jointly with Mrs. Essner, and 19,402 shares
held by the Restricted Stock Trust.
(5) Includes 3,200 shares of restricted stock awarded under the 1994 Restricted
Stock Plan for Non-Employee Directors (plus accrued dividend equivalents)
held by the Restricted Stock Trust.
(6) Includes (i) 32,640 shares owned by Mrs. Stafford, and 91,494 shares held
by the Restricted Stock Trust; (ii) 29,746 shares owned by a charitable
foundation of which Mr. and Mrs. Stafford are trustees; (iii) 58,000 shares
of Common Stock held in a Grantor Retained Annuity Trust (GRAT); and (iv)
exercisable options covering 499,753 shares of Common Stock which have been
transferred to an irrevocable trust for the benefit of Mr. Stafford's
family of which Mrs. Stafford is trustee (Mr. Stafford disclaims beneficial
ownership of all options and shares held by such foundation and trust
(other than the GRAT)).
(7) Includes 13,145 shares held by the Restricted Stock Trust.
(8) Includes 20,956 shares owned by Mrs. Olivier, and 16,932 shares held by the
Restricted Stock Trust.
(9) Includes 50 shares held by a member of Dr. Polan's immediate family. Dr.
Polan disclaims beneficial ownership of these shares.
(10) Includes 3,026 fully vested phantom stock units (equivalent to one share of
Common Stock per unit) under the Directors' Deferral Plan which were
acquired pursuant to the deferral of fees.
(11) Represents contingent shares credited to Mr. Blount's account under the
Corporation's Management Incentive Plan.
(12) Represents contingent shares credited to Mr. Essner's account under the
Corporation's Management Incentive Plan.
(13) Includes 1,772 fully vested phantom stock units (equivalent to one share of
Common Stock per unit) under the Directors' Deferral Plan which were
acquired pursuant to the deferral of fees.
(14) Includes 5,661 fully vested phantom stock units (equivalent to one share of
Common Stock per unit) under the Directors' Deferral Plan which were
acquired pursuant to the deferral of fees.
(15) Includes 119,220 contingent shares credited to Mr. Stafford's account under
the Corporation's Management Incentive Plan and phantom stock units
representing 20,266 shares of Common Stock credited to Mr. Stafford's
account under the Corporation's Supplemental Employee Savings Plan.
(16) Includes 15,714 contingent shares credited to Mr. Hoynes' account under the
Corporation's Management Incentive Plan and phantom stock units
representing the 3,497 shares of Common Stock credited to Mr. Hoynes'
account under the Corporation's Supplemental Employee Savings Plan.
(17) Includes 4,174 contingent shares credited to Mr. Olivier's account under
the Corporation's Management Incentive Plan and phantom stock units
representing 4,410 shares of Common Stock credited to Mr. Olivier's account
under the Corporation's Supplemental Employee Savings Plan.
(18) Includes a total of 293,379 contingent shares credited to all officers'
accounts under the Corporation's Management Incentive Plan, phantom stock
units representing 36,523 shares held under the Corporation's Supplemental
Employee Savings Plan and 112,971 phantom stock units representing shares
of Common Stock under the Directors' Deferral Plan.
7
<PAGE> 12
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid for the years
1997-1999 to the Corporation's Chairman, President and Chief Executive Officer
and the four other most highly paid executive officers.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------- --------------------
SECURITIES
UNDERLYING
OPTIONS LTIP ALL OTHER
SALARY BONUS GRANTED PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(1) (#) ($)(2) ($)(3)
- --------------------------- ---- --------- --------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
John R. Stafford.................... 1999 1,560,000 702,000 533,400 849,234 981,884
Chairman of the Board, 1998 1,460,000 1,314,000 430,360 712,800 561,642
President and Chief 1997 1,350,000 1,350,000 538,000 621,169 393,789
Executive Officer
Robert G. Blount(4)................. 1999 840,000 756,000 241,800 480,375 299,940
Senior Executive Vice 1998 785,000 706,500 241,800 403,200 123,054
President 1997 710,000 710,000 302,400 357,744 80,386
Robert Essner....................... 1999 725,000 326,250 177,800 214,453 21,750
Executive Vice President 1998 675,000 607,500 177,800 158,400 20,250
1997 510,908 510,908 177,600 124,131 15,329
David M. Olivier.................... 1999 525,000 472,500 88,800 188,719 15,750
Senior Vice President 1998 495,000 445,500 96,800 158,400 14,850
1997 495,000 495,000 71,200 107,169 14,850
Louis L. Hoynes, Jr. ............... 1999 505,000 404,000 97,800 120,094 113,246
Senior Vice President and 1998 475,000 427,500 88,800 100,800 64,927
General Counsel 1997 440,000 440,000 88,800 89,950 43,580
</TABLE>
- ---------------
(1) Pursuant to the AHPC Deferred Compensation Plan, Mr. Stafford deferred until
after retirement portions of his 1999, 1998 and 1997 base salaries and his
entire 1999 cash bonus; Mr. Blount deferred a portion of his 1997 base
salary; and Mr. Olivier deferred his entire 1999 cash bonus.
(2) Amounts shown for 1999 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 1996 under the Corporation's
1996 Stock Incentive Plan (the "1996 Awards") which, based on 1998
performance, was converted on January 28, 1999 to shares of Restricted
Stock. The 1996 Awards were composed of units subject to conversion to
shares of Restricted Stock based on the Corporation's performance during the
year 1998. For 1998, each named executive officer was entitled to be
credited with shares of Restricted Stock in an amount equal to 0%-125% of
the target number of units subject to the 1996 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 1996 Awards for
each of the named executive officers was 19,800 for Mr. Stafford, 11,200 for
Mr. Blount, 5,000 for Mr. Essner, 4,400 for Mr. Olivier and 2,800 for Mr.
Hoynes.) The amounts in the table above represent 75% of the target numbers
of units which were converted to Restricted Stock based on 1998 performance.
The restrictions on the Restricted Stock earned pursuant to the 1996 Awards
ended in January 1999 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 1997 and 1998 composed of the following respective target
numbers of restricted stock units, which units are subject to conversion
based upon performance factors including the achievement of target levels of
EPS for 1999 and 2000, respectively: 16,800 and 13,450 for Mr. Stafford,
9,400 and 7,550 for Mr. Blount, 5,600 and 5,500 for Mr. Essner, 2,200 and
3,000 for Mr. Olivier and 2,800 and 2,800 for Mr. Hoynes. Based upon the
Corporation's EPS for 1999, no portion of the 1997 Awards was converted to
Restricted Stock in 2000. See the Long-Term Incentive Plan Awards Table in
this Proxy Statement for similar awards made in 1999.
8
<PAGE> 13
(3) Represents contributions made by the Corporation under its Savings Plan
(401(k)) 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 1999 for Messrs. Stafford, Blount and Hoynes also include
$935,084, $274,740, and $98,096, respectively, for above-market interest
earned but not paid during 1999 on deferred compensation (equal to 2.86% for
the 1st quarter and two months of the 2nd quarter and 3.88% for one month of
the 2nd quarter and the 3rd and 4th quarters).
(4) Mr. Blount retired effective February 1, 2000 after 25 years of service with
the Corporation.
OPTION GRANTS TABLE
The following table provides information on option grants in 1999 to the
named executive officers.
INDIVIDUAL GRANTS IN 1999
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS EXERCISE GRANT DATE
OPTIONS GRANTED TO PRICE PER PRESENT
GRANTED EMPLOYEES IN SHARE EXPIRATION VALUE
NAME (#)(1) 1999 ($)(2) DATE ($)(3)
- ---- ---------- ------------ --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
John R. Stafford.................. 533,400 2.4 62.3125 May 2009 7,686,294
Robert G. Blount.................. 241,800 1.1 62.3125 May 2009 3,484,338
Robert Essner..................... 177,800 .8 62.3125 May 2009 2,562,098
David M. Olivier.................. 88,800 .4 62.3125 May 2009 1,279,608
Louis L. Hoynes, Jr. ............. 97,800 .4 62.3125 May 2009 1,409,298
</TABLE>
- ---------------
(1) These options become exercisable in one-third increments on the first,
second and third anniversaries of the date of grant (May 20, 1999) (except
that such options may be exercised earlier in the case of the optionee's
retirement, disability or death). The options are transferable at the
election of each named executive officer to members of the executive's
family or to a trust or other entity solely for the benefit of such family
members.
(2) The exercise price is the mean stock 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 estimates were developed using
the Black-Scholes option pricing model incorporating the following
assumptions: expected volatility of 24.97% and dividend yield of 2.20% both
based on the historical three-year monthly average for the underlying Common
Stock, the risk-free rate of return of 5.57% based on a four-year zero
coupon rate and assuming, in each case, the time of exercise being four
years (the expected duration of the option).
9
<PAGE> 14
LONG-TERM INCENTIVE PLAN AWARDS TABLE
The following table provides information on Restricted Stock Performance
Awards granted in 1999, under the Corporation's 1999 Stock Incentive Plan, to
the named executive officers.
ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK
PRICE-BASED PLANS
<TABLE>
<CAPTION>
NUMBER OF PERFORMANCE OR
SHARES, UNITS OR OTHER PERIOD BELOW
OTHER RIGHTS UNTIL MATURATION THRESHOLD THRESHOLD TARGET MAXIMUM
NAME (#)(1) OR PAYOUT (#) (#) (#) (#)
- ---- ---------------- ---------------- --------- --------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
John R. Stafford.............. 16,650 2002 -- 12,488 16,650 20,813
Robert G. Blount.............. 7,550 2002 -- 5,663 7,550 9,438
Robert Essner................. 5,550 2002 -- 4,163 5,550 6,938
David M. Olivier.............. 2,800 2002 -- 2,100 2,800 3,500
Louis L. Hoynes, Jr........... 3,050 2002 -- 2,288 3,050 3,813
</TABLE>
- ---------------
(1) Amounts shown represent Restricted Stock Performance Awards (the "1999
Awards") made in 1999 under the Corporation's 1999 Stock Incentive Plan.
These 1999 Awards are composed of units which may be converted to a number
of shares of Restricted Stock equal to 0%-125% of the Target amounts of the
1999 Award based upon the Corporation's performance in 2001. 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. In the event that less than 125% of the award is earned, the
balance shall remain eligible for conversion if the Corporation's total
shareholder return for the performance years 2001-2003 ranks in the top
three when compared to that of the peer group companies listed in this Proxy
Statement (as such group may be amended in the Committee's discretion due to
mergers, consolidations or other appropriate circumstances). During the
restricted period ending when target amounts are earned and converted to
shares of Common Stock, all units will be forfeited upon termination of
employment for any reason other than death, disability or retirement (in
which cases the units will be converted based upon satisfaction of the
performance criteria), unless otherwise determined by the Committee.
10
<PAGE> 15
OPTION EXERCISE AND YEAR-END VALUE TABLE
The following table discloses the options that were exercised by the named
executive officers during 1999 and sets forth the number and value of their
unexercised options at year-end.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN 1999 AND YEAR-END
OPTION VALUES
--------------------------------------------------------- VALUE OF
NUMBER OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AT
SHARES DEC. 31, 1999 (#) DEC. 31, 1999 ($)
ACQUIRED ON VALUE EXERCISABLE* EXERCISABLE*
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE** UNEXERCISABLE**(1)
- ---- ------------ ------------ ---------------------- --------------------
<S> <C> <C> <C> <C>
John R. Stafford......... -- -- 2,134,919*(7) 29,323,082*(7)
999,641**(8) 543,597**(8)
Robert G. Blount......... 190,268(2)(6) 7,417,487 282,198* 611,087*
503,802** 305,548**
Robert Essner............ 37,200(3) 1,400,814 508,065* 5,834,645*
355,535** 179,450**
David M. Olivier......... 80,000(4) 3,275,000 159,732* 1,758,879*
177,068** 71,943**
Louis L. Hoynes, Jr...... 74,800(5) 3,036,723 293,998* 3,676,095*
186,602** 89,727**
</TABLE>
- ---------------
(1) The amounts given are based on the closing market price of the Corporation's
Common Stock at December 31, 1999 which was $39.2500. The closing market
price on March 1, 2000 was $42.5625.
(2) Represents exercises of options (i) granted in 1995 and covering 186,668
shares at an exercise price of $19.0625 per share and (ii) granted in 1996
covering 3,600 shares at an exercise price of $26.5313 per share (in each
case, market value on date of grant).
(3) Represents exercises of the options granted in 1995 and covering 37,200
shares at an exercise price of $19.0625 per share (market value on date of
grant).
(4) Represents exercises of options granted in 1995 and covering 80,000 shares
at an exercise price of $19.0625 per share (market value on date of grant).
(5) Represents exercises of options granted in 1992 and covering 74,800 shares
at an exercise price of $18.9063 per share (market value on date of grant).
(6) Portions of the proceeds of such exercises have been deferred at the
election of Mr. Blount.
(7) Includes options covering 356,933 and 142,820 shares of Common Stock which
were transferred in each of 1997 and 1998, respectively, to an irrevocable
trust for the benefit of members of Mr. Stafford's family.
(8) Includes options covering 178,467, 285,640 and 265,069 shares of Common
Stock which were transferred in each of 1997, 1998 and 1999, respectively,
to an irrevocable trust for the benefit of members of Mr. Stafford's family.
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
11
<PAGE> 16
ending with such employee's early or normal retirement date, divided by five).
The Executive Retirement Plan provides to certain highly compensated employees
and corporate officers an additional retirement benefit based upon average final
compensation (the total amount of an employee's compensation for the three
calendar years during which such employee's compensation was the highest out of
the ten year period of service ending with such employee's early or normal
retirement date, divided by three) with three additional years of service added
(reduced by one year for each year the employee works beyond age 62). The
retirement benefit provided by the Executive Retirement Plan is an unreduced
benefit at the retirement age of 60 and is offset by benefits provided in the
Qualified Plan and SERP.
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------
FINAL 3-YEAR AVERAGE EARNINGS 15 20 25 30(1)
- ----------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
$ 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
3,200,000......................... 960,000 1,280,000 1,600,000 1,920,000
3,300,000......................... 990,000 1,320,000 1,650,000 1,980,000
3,400,000......................... 1,020,000 1,360,000 1,700,000 2,040,000
3,500,000......................... 1,050,000 1,400,000 1,750,000 2,100,000
</TABLE>
- ---------------
(1) Plans recognize up to 30 years of credited services only.
The compensation covered by the retirement plans for each of the named
executives is the base salary rate at January 1, 1999 ($1,560,000 for Mr.
Stafford, $840,000 for Mr. Blount, $725,000 for Mr. Essner, $525,000 for Mr.
Olivier, and $505,000 for Mr. Hoynes) plus the amount in the bonus column of the
Summary Compensation Table for 1998 for a total of $2,874,000 for Mr. Stafford,
$1,546,500 for Mr. Blount, $1,332,500 for Mr. Essner, $970,500 for Mr. Olivier,
and $932,500 for Mr. Hoynes.
The years of service (in nearest years) as of December 31, 1999 for the
named executives are as follows: Mr. Stafford, 30 years; Mr. Blount, 25 years;
Mr. Essner, 10 years; Mr. Olivier, 33 years (18 years of which are recognized
under the benefit formula illustrated in the table above); and Mr. Hoynes, 9
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.)
12
<PAGE> 17
PERFORMANCE GRAPH
The following graph shows the value as of December 31, 1999 of a $1,000
investment in the Corporation's Common Stock made on December 31, 1994 (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.
[AMERICAN HOME PRODUCTS LINE GRAPH]
<TABLE>
<CAPTION>
AHPC COMMON STOCK S&P 500 INDEX PEER GROUP INDEX
----------------- ------------- ----------------
<S> <C> <C> <C>
12/31/94 1000.00 1000.00 1000.00
12/31/95 1603.80 1374.50 1587.80
12/31/96 1990.60 1689.20 2038.28
12/31/97 2658.90 2252.10 3205.22
12/31/98 3984.90 2894.30 4945.11
12/31/99 2826.49 3502.68 4397.30
</TABLE>
CHANGE IN CONTROL SEVERANCE AGREEMENTS AND OTHER ARRANGEMENTS
The Corporation has entered into severance agreements with its executive
officers, including each of the executive officers named in the Summary
Compensation Table in this Proxy Statement, 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, 2002 and provide that they are to
be automatically
13
<PAGE> 18
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, each
of 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 three
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 grant of options and
restricted stock 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 first 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. Under the terms
of the 1996 and 1999 Stock Incentive Plans, outstanding options become
exercisable and restricted stock target awards vest upon a Change in Control, as
defined in such Plans.
14
<PAGE> 19
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 were alleged to have made
similar misstatements and omissions. The putative class action also included
claims for negligent misrepresentation and common law fraud and deceit, with
plaintiffs seeking compensatory and punitive damages for themselves and for the
class. On February 5, 1999, the U.S. District Court dismissed the securities
fraud putative class action with prejudice. The plaintiffs have appealed the
decision to the U.S. Court of Appeals for the Third Circuit. The defendants
believe that the suits are without merit and intend to continue 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 for 1999 were base salary,
bonus and grants of stock options and Restricted Stock awards. The Committee
recommends to the Board of Directors the salaries and bonuses of the executive
officers and administers the Corporation's 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 1999 were recommended by the
Committee and approved by the Board of Directors in November 1998. In
recommending these base salaries, the Committee considered, among other factors,
the 1998 financial performance of the Corporation with net sales estimated at
that time to increase by 2%, operating income before taxes (IBT) to increase by
11% and net income and diluted earnings per share by 10% and 8%, respectively,
excluding extraordinary items, despite the loss of product sales of Redux and
Pondimin in 1997 and Duract in 1998. The Committee also considered the 28.1%
increase in shareholder value during 1998, new product applications submitted
and approvals obtained, and the completion of the acquisition of Solgar Vitamin
and Herb Company. 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
15
<PAGE> 20
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 Consultant's Report indicated that,
overall, the proposed base salaries fall within a competitive range.
1999 CASH BONUS
In determining the amounts of cash bonuses to be awarded to executive
officers in relation to 1999 performance, the Committee took 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 Committee also reviews the
Consultant's Report which, for 1999 indicated that, overall, the cash bonus
awards together with base salaries were generally below the competitive range.
In addition, the Committee considered, among other things, the amounts of awards
previously made under the Corporation's Management Incentive Plan (the
"Plan")(1).
STOCK INCENTIVE PLAN GRANTS
In contrast to salary and cash bonuses, 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 stock 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 1999 will
become exercisable in one-third increments on the first, second and third
anniversaries of the date of grant except in cases of the death, retirement or
disability of the optionee or in the event of a change in control of the
Corporation.
The grants for the named executives were made by the Committee each with an
exercise price per share equal to the mean market price on the date of grant in
May 1999 of $62.3125.
In furtherance of the goal of aligning the interests of management with
those of the stockholders, in 1999 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 of restricted stock units will be converted
to shares of Common Stock based on the Corporation's financial performance in
the year 2001, with the maximum number of units that may be converted equal to
125% of the total award. In the event that less than 125% of the award is
earned, the unearned portion of the award shall remain eligible for conversion
if the Corporation's total shareholder return ranks in the top three when
compared to that of the peer group companies listed in this Proxy Statement (as
such group may be amended in the Committee's discretion due to mergers,
consolidations or other appropriate circumstances) for the performance years
2001-2003. During the restricted period ending on the date target awards are
converted to shares, all of the units will be forfeited in the event of
termination of
- ---------------
(1) The Plan provides for the payment of current and deferred incentive
compensation to selected key employees from an award fund which 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 $.1875 multiplied by the average number of
shares of Common Stock outstanding for the year, assuming full conversion of
the Corporation's Preferred Stock. With respect to 1999, due to the special
charge of $4.75 billion ($3.2875 billion after tax) in connection with the
proposed national class action settlement of the diet drug litigation and
certain related matters, no award fund was available under the Plan. The
proposed settlement was considered a positive development for the
Corporation and the operating performance of the Corporation's business
units overseen by such key employees was deemed to have been generally
excellent. The Committee and the Board of Directors believed that it would
be in the best interests of the Corporation to pay cash bonuses for 1999 to
employees who would otherwise have received bonuses under the Plan. Such
cash bonuses, for the most part, were reduced from prior year levels.
16
<PAGE> 21
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. 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
in May 1999, the Committee took into account, among other things, the progress
in product regulatory approvals and expected product launches in the second half
of 1999 and 2000, the increase in total shareholder return (11.2% from January 1
through May 19, 1999) as compared to the S&P 500 and the peer group and the
implementation, in accordance with predetermined timetables, of restructuring
programs to reorganize supply chain and distribution systems and the reduction
of personnel from the globalization of certain business units. The Committee
also considered the amounts of options and Restricted Stock awards previously
granted. The Committee also reviewed the Consultant's Report which indicated
that the grants and awards fall within a competitive range.
The Restricted Stock Performance Awards made in 1997 were generally based
upon 1999 targeted earnings per share. Based upon 1999 performance, no portion
of these awards were converted to Common Stock in January 2000. The entire award
will be eligible for conversion in 2002 if the Corporation's total shareholder
return for the performance years 1999-2001 ranks in the top three when compared
to the performance of the peer group companies listed in this Proxy Statement
(as such group may be amended in the Committee's discretion due to mergers,
consolidations or other appropriate circumstances).
RELATIONSHIP OF CORPORATE PERFORMANCE TO EXECUTIVE COMPENSATION
While all of the Corporation's executive officer compensation is related to
corporate performance, the cash bonuses are most closely tied to such
performance. In determining the bonuses for the Chairman, President and Chief
Executive Officer and executive officers generally in January 2000 for 1999
performance, the Committee viewed being of greatest significance a 9% increase
in the sale of human pharmaceuticals and consumer health products over 1998, the
significant number of new pharmaceutical products which have been launched in
1999 and those with project product launches in 2000, obtaining preliminary
approval of the federal diet drug litigation settlement and securing the right
to receive a significant termination fee in the merger agreement with
Warner-Lambert Company (which fee was paid to the Corporation in February 2000
upon termination of the merger agreement). The Committee noted that, with
respect to Mr. Stafford and each of the named executive officers, bonuses were
equal to 100% of salary for 1997 and 90% of salary for 1998. The bonuses for
each of the named executives for 1999 ranged from 45% to 90% of base salary.
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 are required to 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 within
five years from the date on which an individual becomes subject to the
Guidelines.
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<PAGE> 22
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 1999 will be deductible under Section 162(m).
COMPENSATION AND BENEFITS COMMITTEE
Frank A. Bennack, Jr., Chairman
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 2000. This firm served in such capacity in 1999 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 2000.
2000 STOCKHOLDER PROPOSALS
Several AHPC stockholders have informed management of their intention to
present the following resolutions set forth below for consideration at the
Annual Meeting. The names, addresses and number of shares held by such
stockholders will be promptly furnished orally or in writing, as requested, by
the Corporation. Such request may be directed to Eileen M. Lach, Secretary of
the Corporation.
ITEM 3.
STOCKHOLDER PROPOSAL RELATING TO THE SEPARATION OF AHPC'S ORAL CONTRACEPTIVE
BUSINESS FROM ITS NON-CONTRACEPTIVE BUSINESS
WHEREAS, the Company makes various contraceptive products that represent a
small portion of Company sales.
WHEREAS, Pro Vita Advisors and St. Antoninus Institute are urging a boycott
of Company products because of the Company's contraceptive business.
WHEREAS, the Catholic Church opposes the use of contraceptive products and
Catholics constitute approximately 25% of the population of this country and are
a significant presence in other market areas.
WHEREAS, the following research studies, among others, have found an
increased risk of developing breast cancer for women taking oral contraceptives
prior to their first term pregnancy.
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<PAGE> 23
1. Brinton LA, Daling JR et al. Oral contraceptives and breast cancer risk
among younger women. JNCI. 6/7/95; 87: 827-35.
2. Wingo PA, Lee NC, et al. Age-specific differences in the relationship
between oral contraceptives use and breast cancer. Cancer (supplement).
1993; 71: 1506-17.
3. Rosenberg L, Palmer JR, et al. A case-control study of oral
contraceptive use and risk of breast cancer. American Journal of
Epidemiology. 1996; 143: 25-37.
4. White E, Malone K, Weiss N. Daling J. Breast cancer among young US
women in relation to oral contraceptive use. JNCI. 1994; 86: 505-514.
RESOLVED, that shareholders ask management to take steps to accomplish a
separation of the Company's oral contraceptive business from all its
non-contraceptive business by January 1, 2002.
SUPPORTING STATEMENT
The proponent of this proposal believes it advisable to challenge the
Company's involvement in oral contraceptive products. Also, a spin-off or sale
of the oral contraceptive business may make the Company more attractive to a
broader spectrum of consumers and investors.
AHPC'S RESPONSE
THE BOARD OF DIRECTORS AND MANAGEMENT OPPOSE 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 oral contraceptive business to be separated from all its
non-contraceptive business by January 1, 2002. In the view of the Board of
Directors and management, this 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 right 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. For example, Wyeth-Ayerst is
supplying product for a major National Institutes of Health trial, the Women's
Health Initiative, which is currently in progress involving 25,000 women over 14
years. To separate contraceptive products from the rest of the business would
undermine the Corporation's commitment to women's health care and would hinder
the Corporation's ability to provide a full range of products in this important
area.
Moreover, the research and development as well as the manufacturing,
marketing and sales 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 major
manufacturing facilities in the United States and abroad that, in their various
production units, also produce other Wyeth products for hormone replacement
therapy, neuroscience therapies and cardiovascular uses, among others. 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 adoption of 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.
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<PAGE> 24
ITEM 4.
STOCKHOLDER PROPOSAL RELATING TO PRICE RESTRAINT ON PHARMACEUTICALS
WHEREAS, Health Care Financing Administration data, based on five year
figures through 1998, shows spending on prescription drugs rising 12% per year,
more than double the 5.1% increase in national health expenditures;
A 1998 House Committee Report found that:
- Older Americans and other individuals (e.g., the uninsured and the
underinsured) who buy prescription drugs in the retail market pay
substantially more for drugs than drug manufacturers' "favored customer"
(federal government agencies and large HMOs);
- Pharmacies appear to have small mark-ups in prices of prescription
drugs;
These higher prices are also borne by institutional health care facilities;
Drug prices are consistently higher in the U.S. retail market than in other
industrialized countries. Recent studies reveal that eight antidepressants and
anti-psychotic drugs cost, on average, twice as much in the U.S. as in European
and other North American industrialized countries.
Our company has paid $12.4 million as part of a settlement of a class
action law suit that accused several companies of using an unfair two-tiered
system to price wholesale drugs;
RESOLVED: Shareholders request the Board of Directors to:
1. Create and implement a policy of price restraint on pharmaceutical
products for individual consumers and institutional purchasers,
utilizing a combination of approaches to keep drug prices at reasonable
levels.
2. Report to shareholders by September, 2000 on changes in policies and
pricing procedures for pharmaceutical products (withholding any
competitive information, and at reasonable cost).
SUPPORTING STATEMENT
We suggest that the policy include a restraint on each individual drug and
that it not be based on averages which can mask tremendous disparities: a low
price increase for one compound and a high price increase for another; one price
for a "favored customer" (usually low) and another for the retail customer
(usually high).
We understand the need for ongoing research and appreciate the role that
our company has played in the development of new medicines. We are also aware
that the cost of research is only one determinant for the final price of a drug.
The manufacturing, selling, marketing and administrative costs often contribute
far more to the price of a drug than research costs. Thus, we believe that price
restraint can be achieved without sacrificing necessary research efforts.
AHPC'S RESPONSE
THE BOARD OF DIRECTORS AND MANAGEMENT OPPOSE THE FOREGOING PROPOSAL AND
RECOMMEND A VOTE AGAINST IT FOR THE FOLLOWING REASONS:
The proposal requests that the Board of Directors of American Home Products
Corporation create and implement a policy of price restraint on individual
products for individual consumers and institutional purchasers. The supporting
statement implies that price increases should be set at some uniform
"reasonable" level for all products.
Pricing decisions are very complex and involve many market factors,
including for any given product, the nature and cost of available alternative
therapies, the complexity and cost of the manufacturing process, the anticipated
life cycle of the product, market competition, and the size of the market, both
in the U.S. and overseas. In addition, the Corporation has faced a growing need
to increase the size of its investment in research and development to discover
and develop new and improved products. By way of illustration, the Corporation's
annual expenditures for pharmaceutical research and development have risen at an
average rate over nine percent during each of the last five years.
20
<PAGE> 25
In the pharmaceutical industry, developers and manufacturers do not
establish product prices that individual consumers pay. Retail pharmacies set
the price of products for their customers and these prices do vary. When
government and other discounts and rebates are taken into account, the average
price increase of the Corporation's domestic pharmaceutical products across all
product lines was only 3.3% in 1999.
We do not believe that arbitrary limits on pricing -- whether self-imposed
or set by government -- are compatible with a private, market-based competitive
system. Moreover, appropriate pricing of its products is central to the success
of the Corporation. In light of the global marketplace in which the Corporation
operates, we believe that the Corporation must have the freedom to adopt,
implement, and, where necessary, change its policies in order to best serve the
interests of all shareholders and others with a stake in the Corporation's
success, including physicians and other health care professionals, and, most
importantly, the many patients who depend on the Corporation's current and
future products.
ACCORDINGLY, THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND A VOTE AGAINST
THIS STOCKHOLDER PROPOSAL.
ITEM 5.
STOCKHOLDER PROPOSAL RELATING TO GENETICALLY ENGINEERED
AGRICULTURAL PRODUCTS
WHEREAS, International markets for genetically engineered (GE) foods are
threatened by extensive resistance to gene protection technology, transgenic
technology and genetically altered foods:
Several of Europe's largest food retailers, including Tesco, Sainsbury
Group, Carrefour and Rewe have committed to removing GE ingredients from their
store-brand products;
In the UK, three fast-food giants -- McDonald's, Burger King and Kentucky
Fried Chicken -- are eliminating GE soya and corn ingredients from their menus;
Gerber Products Co. announced in July 1999 that they would not allow GE
corn or soybeans in any of their baby foods;
Archer Daniels Midland asked its grain suppliers in August 1999 to
segregate their genetically engineered crops from conventional crops;
There is increasing scientific concern that genetically engineered
agricultural products may be harmful to humans, animals or the environment:
- The U.S. Department of Agriculture has acknowledged (July 13, 1999) the
need to develop a comprehensive approach to evaluating long-term and
secondary effects of GE products;
- As early as 1989, scientists reported that GE foods may pose risks to
human health;
- Some GE crops have been engineered to have higher levels of toxins, such
as Bacillus thuringiensis (Bt) to make them insect-resistant. When
plants are genetically engineered to resist predators, the plant defense
systems may involve the synthesis of natural carcinogens and may pose a
public health risk;
- In 1998, research showed that Bt crops are building up Bt toxins in the
soil, thereby harming soil ecology and beneficial organisms and insects;
- In 1999, the European Union suspended approval of new genetically
engineered organisms until a new safety law for genetically engineered
organisms is implemented in 2002. This followed a new study that showed
Bt corn pollen may harm monarch butterflies.
RESOLVED: Shareholders request the Board of Directors to adopt a policy of
not marketing or distributing genetically-engineered agricultural products until
long-term safety testing has shown that they are not harmful to humans, animals
and the environment.
21
<PAGE> 26
SUPPORTING STATEMENT
We believe that this technology involves significant social, economic and
environmental risks. Our company should take a leadership position in delaying
market adoption of genetically engineered crops and foods. Failure to do so
could leave our company financially liable, should detrimental effects to public
health or the environment appear in the future.
AHPC'S RESPONSE
THE BOARD OF DIRECTORS AND MANAGEMENT OPPOSE THE FOREGOING PROPOSAL AND
RECOMMEND A VOTE AGAINST IT FOR THE FOLLOWING REASONS:
The proposal requests the Board of Directors of American Home Products
Corporation to adopt a policy of not marketing or distributing
genetically-engineered agricultural products until long-term safety testing has
been conducted. American Home Products Corporation, acting through its American
Cyanamid agricultural products division, markets and distributes herbicides,
insecticides and fungicides for agricultural use. The proposal focuses upon
issues surrounding genetically engineered agricultural products. Genetic
engineering involves the introduction of foreign genetic materials into living
organisms, including plants. Cyanamid's agricultural products are not
genetically engineered.
As part of its agricultural business, Cyanamid does provide traits to seed
companies. The traits provided by Cyanamid that have been developed for
commercial seed production use advanced breeding methods and not genetic
engineering. In fact, Cyanamid has the largest portfolio of non-genetically
engineered herbicide-tolerant traits in the industry. However, the Corporation
supports biotechnology advancement and sound science and Cyanamid's research
programs utilize a variety of technologies, including genetic engineering.
The Corporation is a science and research-based company and therefore does
not adopt policies that inhibit scientific progress. As with all products
marketed or distributed by the Corporation, any new agricultural product will
meet and may exceed all required testing and safety standards prior to
introduction.
For the reasons stated above, the Board of Directors and management believe
that the proposal is not in the best interest of the Corporation and its
stockholders.
ACCORDINGLY, THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND A VOTE AGAINST
THIS STOCKHOLDER PROPOSAL.
STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
Stockholder proposals for inclusion in the proxy materials for the 2001
Annual Meeting must be received by the Corporation at its principal executive
offices on or before November 17, 2000. In addition, the Corporation's by-laws
provide that any stockholder wishing to make a nomination for director at the
2001 Annual Meeting must give notice by January 27, 2001, subject to certain
exceptions, and that such notice must meet certain requirements set forth in the
by-laws. A copy of the Corporation's by-laws may be obtained from the Corporate
Secretary. If a stockholder notifies the Corporation of such stockholder's
intent to present other matters for consideration at the Corporation's 2001
Annual Meeting of Stockholders after January 31, 2001, the Corporation, acting
through the persons named as proxies in the proxy materials for such meeting,
may exercise discretionary voting authority with respect to such proposal
without including information regarding such proposal in its proxy materials.
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.
22
<PAGE> 27
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 $19,000 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, 1999,
including financial statements, is being mailed to stockholders together with
these proxy materials.
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 SUBMIT
YOUR PROXY BY TELEPHONE OR VIA THE INTERNET WEBSITE IF INCLUDED ON YOUR PROXY
CARD OR VOTING FORM OR TO SIGN AND DATE YOUR PROXY AND RETURN IT WITHOUT DELAY
IN THE ENCLOSED ADDRESSED ENVELOPE. THE SHARES REPRESENTED BY EACH PROXY SO
SIGNED AND RETURNED OR SUBMITTED BY TELEPHONE OR VIA THE INTERNET WILL BE VOTED
IN ACCORDANCE WITH THE STOCKHOLDER'S DIRECTIONS.
By Order of the Board of Directors
EILEEN M. LACH
Secretary
March 17, 2000
23
<PAGE> 28
Optional Secret Proxy [ ] Please mark
your votes as
indicated in [X]
this example
THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND YOU VOTE
"FOR" ITEMS 1 and 2; "AGAINST" ITEMS 3, 4 and 5.
Item 1 -ELECTION OF DIRECTORS:
FOR WITHHOLD
all nominees AUTHORITY
to vote for all nominees
[ ] [ ]
Nominees: 01 C.L. Alexander, Jr., 02 F.A. Bennack, Jr.,
03 R. Essner, 04 J.D. Feerick, 05 J.P. Mascotte,
06 M.L. Polan, 07 I.G. Seidenberg, 08 J.R. Stafford and
09 J.R. Torell III
WITHHELD FOR: (Write that nominee's name in the space provided below):
- ----------------------------------------------------------------------
Item 2 -APPOINTMENT OF INDEPENDENT
PUBLIC ACCOUNTANTS
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Item 3 -ADOPTION OF THE STOCKHOLDER
PROPOSAL ON SEPARATION OF
THE ORAL CONTRACEPTIVE BUSINESS
FROM OTHER BUSINESS
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Item 4 -ADOPTION OF THE STOCKHOLDER
PROPOSAL ON PRICE RESTRAINT
ON PHARMACEUTICALS
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Item 5 -ADOPTION OF THE STOCKHOLDER
PROPOSAL ON GENETICALLY ENGI-
NEERED AGRICULTURAL PRODUCTS
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
I plan to attend the meeting [ ]
"By checking the box to the right, I consent to [ ]
future access of the Annual Report, Proxy Statements,
prospectuses and other communications electronically
via the Internet. I understand that the Company may
no longer distribute printed materials to me for any
future stockholder meeting until such consent is
revoked. I understand that I may revoke any consent
at any time by contacting the Company's transfer
agent, ChaseMellon Shareholder Services, Ridgefield
Park, NJ and that costs normally associated with
electronic access, such as usage and telephone
charges, will be my responsibility."
Signature
-------------------------------------------
Signature
-------------------------------------------
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.
- --------------------------------------------------------------------------------
*FOLD AND DETACH HERE *
YOUR VOTE IS IMPORTANT!
YOU CAN VOTE IN ONE OF THREE WAYS:
[TELEPHONE GRAPHIC] [COMPUTER GRAPHIC]
================================================================================
VOTE BY INTERNET
24 HOURS A DAY, 7 DAYS A WEEK
Follow the instructions at our Internet Address: http://www.eproxy.com/ahp
================================================================================
or
================================================================================
VOTE BY PHONE
HAVE YOUR PROXY CARD IN HAND.
Call toll-free 1-800-840-1208 in the U.S., Canada or Puerto Rico on a touch tone
telephone 24 hours a day, 7 days a week
There is NO CHARGE to you for this call.
You will be asked to enter your 11-digit Control Number, which is located in
the box in the lower right hand corner of this form. Follow the recorded
instructions
================================================================================
or
================================================================================
VOTE BY PROXY CARD
Mark, sign and date your proxy card and return promptly in the enclosed
envelope.
================================================================================
================================================================================
IF YOU WISH TO ACCESS FUTURE ANNUAL REPORTS AND PROXY STATEMENTS ELECTRONICALLY
VIA THE INTERNET AND NO LONGER RECEIVE THE PRINTED MATERIALS PLEASE PROVIDE
YOUR CONSENT WITH YOUR PROXY VOTE.
================================================================================
NOTE: If you voted by Internet or telephone, THERE IS NO NEED TO MAIL BACK your
proxy card.
THANK YOU FOR VOTING.
<PAGE> 29
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 on the reverse side, on behalf of the
undersigned at the Annual Meeting of Stockholders of the Corporation to be held
on April 27, 2000 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.
(Continued and to be signed if voting by mail on the reverse side or follow the
instructions to vote by telephone or via the Internet)
- --------------------------------------------------------------------------------
*FOLD AND DETACH HERE *
YOU CAN VOTE YOUR SHARES IN ONE OF THREE WAYS
1. Vote via the Internet by following the directions at our Internet
Address: http://www.eproxy.com/ahp
OR
2. CALL TOLL-FREE 1-800-840-1208 24 hours a day, 7 days a week on a Touch
Tone telephone and follow the instructions. (Available to Stockholders
in the United States, Canada and Puerto Rico).
OR
3 Mark, sign and date your proxy card and return it promptly in the
enclosed envelope. Properly executed proxies will be voted in the
manner directed by the stockholder. If no direction is given, this
proxy will be voted FOR Items 1 and 2 and AGAINST Items 3, 4 and 5.
PLEASE VOTE
<PAGE> 30
[INTERNET Proxy Form]
[www.eproxy.com/ahp]
[AMERICAN HOME PRODUCTS CORPORATION LOGO] [CHASEMELLON LOGO]
[VOTE DIRECT LOGO]
PLEASE ENTER THE 11-DIGIT CONTROL NUMBER PROVIDED TO YOU.
DO NOT ENTER ANY SPACES IN THE CONTROL NUMBER FIELD.
______________
Submit
[VOTE DIRECT LOGO]
Copyright 1999 ChaseMellon Shareholder Services, L.L.C.
All rights reserved.
[CHASEMELLON LOGO]
<PAGE> 31
[AMERICAN HOME PRODUCTS CORPORATION] [CHASEMELLON LOGO]
[VOTE DIRECT LOGO]
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 on the reverse side, on behalf of the
undersigned at the Annual Meeting of Stockholders of the Corporation to be held
on April 27, 2000 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.
- ----------------------------------------------------
THE BOARD OF DIRECTORS AND MANAGEMENT
RECOMMEND YOU VOTE "FOR" ITEMS 1 and 2; "AGAINST"
ITEMS 3, 4 and 5.
- ----------------------------------------------------
To vote in accordance with the Board of Directors'
recommendations, just submit this blank form;
no boxes need to be checked.
- ----------------------------------------------------
1. ELECTION OF DIRECTORS - NOMINEES:
__ FOR all nominees (except those marked below).
__ WITHHOLD to vote for all nominees.
__ C.L. Alexander, Jr.
__ F.A. Bennack, Jr.
__ R. Essner
__ J.D. Feerick
__ J.P. Mascotte
__ M.L. Polan
__ I.G. Seidenberg
__ J.R. Stafford
__ J.R. Torell III
- -----------------------------------------------------
2. APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
__ FOR
__ AGAINST
__ ABSTAIN
- -----------------------------------------------------
3. ADOPTION OF THE STOCKHOLDER PROPOSAL ON
SEPARATION OF THE ORAL CONTRACEPTIVE BUSINESS
FROM OTHER BUSINESS
__ FOR
__ AGAINST
__ ABSTAIN
- ----------------------------------------------------
4. ADOPTION OF THE STOCKHOLDER PROPOSAL ON PRICE
RESTRAINT ON PHARMACEUTICALS
__ FOR
__ AGAINST
__ ABSTAIN
- ----------------------------------------------------
5. ADOPTION OF THE STOCKHOLDER PROPOSAL ON
GENETICALLY ENGINEERED AGRICULTURAL PRODUCTS
__ FOR
__ AGAINST
__ ABSTAIN
- -------------------------------------------------------
__ I plan to attend the meeting
__ Optional Secret Proxy
__ "By checking the box, I consent to future access
of the Annual Report, Proxy Statements,
prospectuses and other communications
electronically via the Internet. I understand
that the Company may no longer distribute
printed materials to me for any future
stockholder meeting until such consent is
revoked. I understand that I may revoke consent
at any time by contacting the Company's transfer
agent, ChaseMellon Shareholder Services,
Ridgefield Park, NJ and that costs normally
associated with electronic access, such as usage
and telephone charges, will be my
responsibility."
-------------------------------------------------------
To authorize your vote, click the "SUBMIT PROXY"
button. _______________ Submit Proxy
-------------------------------------------------------
To change the address of record for your registered
shares, please use ChaseMellon Shareholder Services'
CHANGE OF ADDRESS FORM.
[VOTE DIRECT LOGO]
Copyright 1999 ChaseMellon Shareholder Services, L.L.C.
All rights reserved.
[CHASEMELLON LOGO]
