<PAGE>
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
American President Companies, Ltd.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
American President Companies, Ltd.
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act rule 0-11.*
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / 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:
------------------------------------------------------------------------
Notes:
<PAGE>
- --------------------------------------------------------------------------------
[LOGO]
- --------------------------------------------------------------------------------
AMERICAN PRESIDENT COMPANIES, LTD.
- --------------------------------------------------------------------------------
1111 Broadway
Oakland, California
94607 U.S.A.
NOTICE OF 1994 ANNUAL MEETING
AND PROXY STATEMENT
Annual Meeting of Stockholders
April 28, 1994
<PAGE>
AMERICAN PRESIDENT COMPANIES, LTD.
1111 BROADWAY
OAKLAND, CA 94607
March 28, 1994
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
American President Companies, Ltd., which will be held on Thursday, April 28,
1994, beginning at 2:30 P.M., at The Claremont Resort Hotel, Ashby and Domingo
Avenues, Oakland, California.
The formal notice of the Annual Meeting and the Proxy Statement have been
made a part of this invitation.
After reading the Proxy Statement, please mark, sign, date and return, at an
early date, the enclosed proxy in the enclosed prepaid envelope to ensure that
your shares will be represented.
A copy of the Company's 1993 Annual Report to Stockholders is also enclosed.
The Board of Directors and management look forward to seeing you at the
meeting.
Sincerely,
John M. Lillie
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
<PAGE>
AMERICAN PRESIDENT COMPANIES, LTD.
1111 BROADWAY
OAKLAND, CA 94607
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 28, 1994
The Annual Meeting of Stockholders of American President Companies, Ltd.
(the "Company") will be held at The Claremont Resort Hotel, Ashby and Domingo
Avenues, Oakland, California, on Thursday, April 28, 1994, beginning at 2:30
P.M., for the following purposes:
1. To elect two Class I directors to hold office until 1996 and five
Class II directors to hold office until 1997.
2. To approve the amendment and restatement of the Company's 1989 Stock
Incentive Plan.
3. To ratify the selection of Arthur Andersen & Co. as the Company's
independent auditors for fiscal year 1994.
4. To transact such other business as may properly come before the
meeting and any adjournment thereof.
The Board of Directors has fixed the close of business on March 1, 1994, as
the record date for determining the stockholders entitled to notice of, and to
vote at, the Annual Meeting and any adjournment thereof. A complete list of
stockholders entitled to vote at the meeting will be available for inspection at
the time and place of the Annual Meeting and, during the ten days prior to the
meeting, at the Company's executive offices at 1111 Broadway, Oakland,
California.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THIS MEETING. EVEN IF YOU
PLAN TO ATTEND THE MEETING, WE HOPE THAT YOU WILL PROMPTLY MARK, SIGN, DATE AND
RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. THIS WILL NOT LIMIT YOUR
RIGHT TO ATTEND OR VOTE AT THE MEETING.
Maryellen B. Cattani
SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
March 28, 1994
<PAGE>
AMERICAN PRESIDENT COMPANIES, LTD.
1111 BROADWAY
OAKLAND, CA 94607
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of American President Companies, Ltd., a Delaware corporation
(the "Company"), of proxies in the accompanying form to be used at the Annual
Meeting of Stockholders of the Company to be held on April 28, 1994, and any
adjournment thereof. The shares represented by the proxies received pursuant to
this solicitation and not revoked will be voted at the Annual Meeting. A
stockholder who has given a proxy may revoke it by voting in person at the
meeting, by giving written notice of revocation to the Secretary of the Company
or by giving a later dated proxy at any time before voting. On the matters
coming before the meeting as to which a choice has been specified by a
stockholder by means of the ballot on the proxy, the shares will be voted
accordingly. If no choice is so specified, the shares will be voted FOR the
election of the seven nominees for director listed in this Proxy Statement and
FOR the proposals referred to in items 2 and 3 in the Notice of Annual Meeting
of Stockholders and described in this Proxy Statement.
Holders of the Company's Common Stock and 9% Series C Cumulative Convertible
Preferred Stock, par value $.01 per share ("Series C Preferred Stock"), of
record at the close of business on March 1, 1994, will be entitled to notice of
and to vote on all matters presented at the Annual Meeting. On such date, the
Company had outstanding 27,198,180 shares of Common Stock and 1,500,000 shares
of Series C Preferred Stock. Each outstanding share of Common Stock is entitled
to one vote and each outstanding share of Series C Preferred Stock is entitled
to approximately 2.641 votes. The Common Stock and Series C Preferred Stock will
vote together with respect to all matters submitted to the stockholders at the
Annual Meeting. See "Certain Beneficial Ownership of Securities--Voting of
Shares by Certain Stockholders" for additional information concerning the voting
of the shares of Series C Preferred Stock.
Directors are elected by a plurality vote. The other matters submitted for
stockholder approval at this Annual Meeting will be decided by the affirmative
vote of a majority of shares present in person or represented by proxy and
entitled to vote on each such matter. Abstentions with respect to any matter are
treated as shares present or represented and entitled to vote on that matter and
thus have the same effect as negative votes. Broker non-votes and other
circumstances in which proxy authority has been withheld will have no effect on
the approval of any matter submitted for stockholder approval at the Annual
Meeting.
The Company will bear the cost of printing and mailing proxy materials,
including the reasonable expenses of brokerage firms and others for forwarding
the proxy materials to beneficial owners of Common Stock. In addition to
solicitation by mail, solicitation may be made by certain directors, officers
and other employees of the Company in person or by telephone or telegraph. No
additional compensation will be paid for such solicitation. Morrow & Co., Inc.
has been retained to assist in the solicitation of proxies for a fee of
approximately $6,500 plus expenses.
This Proxy Statement and a form of proxy are being mailed to stockholders
commencing on or about March 28, 1994. A copy of the Company's Annual Report to
Stockholders containing financial statements for the fiscal year ended December
31, 1993 accompanies this Proxy Statement.
All share and per-share information in this Proxy Statement has been
adjusted to reflect a 100% Common Stock dividend paid on January 28, 1994 to all
common stockholders of record on December 31, 1993.
<PAGE>
ELECTION OF DIRECTORS
The Company has three classes of directors with staggered three-year terms.
Class I consists of three directors, Class II consists of five directors and
Class III consists of four directors. Two Class I and five Class II directors
are to be elected at the Annual Meeting for terms which continue until the 1996
and 1997 Annual Meeting of Stockholders, respectively, and until their
respective successors are duly elected and qualified or until retirement in
accordance with the Retirement Plan for Directors (as defined below).
All five Class II nominees and both Class I nominees have been recommended
by the Board of Directors for election as directors. All of the Class II
nominees are presently members of the Board of Directors of the Company. The
Board of Directors knows of no reason why any of the nominees will be unable to
serve. In the event that any nominee becomes unable or declines to serve, the
proxies may be voted for the balance of those named and for such other nominee
or nominees as the Board may select.
INFORMATION WITH RESPECT TO NOMINEES AND DIRECTORS
Set forth below are the names and ages of the nominees for Class I and Class
II director and the continuing directors of Class I and Class III, their
principal occupations at present and for the past five years and certain
directorships held by each. The terms of the continuing Class I and the Class
III directors expire in 1996 and 1995, respectively. Mr. W. B. Seaton has
advised the Board that, by mutual agreement with management, he intends to
retire from the Board of Directors following the 1994 Annual Meeting. Mr. John
J. Hagenbuch has advised the Board that he intends to resign from the Board
effective April 27, 1994. The Board has nominated Mr. Tully M. Friedman and Mr.
G. Craig Sullivan for election as directors at the 1994 Annual Meeting to fill
the vacancies resulting from Mr. Seaton's retirement and Mr. Hagenbuch's
resignation.
CLASS I--NOMINEES FOR DIRECTOR
[PHOTO] TULLY M. FRIEDMAN (AGE 52). Mr. Friedman has been a general
partner of Hellman & Friedman, a San Francisco-based
investment firm, since 1984. Mr. Friedman is also a director
of Levi Strauss Associates, Inc., Mattel, Inc., McKesson
Corporation and Falcon Cable TV, Inc.
[PHOTO] G. CRAIG SULLIVAN (AGE 53). Mr. Sullivan has been the
Chairman of the Board and Chief Executive Officer of The
Clorox Company since July 1, 1992. Prior to that, he was The
Clorox Company's Vice Chairman and Chief Executive Officer
(May-June, 1992); Group Vice President (1989-1992); Vice
President-Household Products (1984-1989); and Vice
President-Food Service Products Division (1981-1984). He
joined The Clorox Company in 1971.
2
<PAGE>
CLASS II--NOMINEES FOR DIRECTOR
[PHOTO] CHARLES S. ARLEDGE (AGE 58). Mr. Arledge became a director
of the Company in July 1983. Mr. Arledge is a partner of
Signal Ventures, a private investment firm. He was Vice
President, Strategic Planning of Aerojet-General Corporation
from 1986 to 1989. From 1983 to 1986, Mr. Arledge was Senior
Vice President, Corporate Development and Planning of The
Signal Companies, Inc. He is also a director of Wahlco
Environmental Systems, Inc.(a)(b)
[PHOTO] F. WARREN HELLMAN (AGE 59). Mr. Hellman became a director
of the Company in November 1988. He is a general partner of
Hellman & Friedman, a San Francisco-based investment firm.
Mr. Hellman is also a director of Williams-Sonoma, Inc.,
Levi Strauss Associates, Inc., Great American Management and
Investment, Inc., Eagle Industries, Inc. and Franklin
Resources, Inc.(c)(d)
[PHOTO] TIMOTHY J. RHEIN (AGE 53). Mr. Rhein has been a director of
the Company since July 1990. He has been President and Chief
Executive Officer of APL Land Transport Services, Inc. since
May 1990. Mr. Rhein served as President and Chief Operating
Officer of American President Lines, Ltd. from January 1987
to May 1990.
[PHOTO] FORREST N. SHUMWAY (AGE 67). Mr. Shumway became a director
of the Company in August 1987. He retired as Vice Chairman
of the Board of Allied-Signal Inc. in December 1987, a
position he had held since 1985. He was Chief Executive
Officer and Chairman of the Board of The Signal Companies,
Inc. from 1968 to 1985 and 1980 to 1985, respectively, until
the 1985 merger of The Signal Companies, Inc. into
Allied-Signal Inc. Mr. Shumway is also a director of First
Interstate Bancorp, Transamerica Corporation, The Clorox
Company and Aluminum Company of America.(b)(d)
3
<PAGE>
[PHOTO] BARRY L. WILLIAMS (AGE 49). Mr. Williams became a director
of the Company in July 1983. He is President of Williams
Pacific Ventures Inc., a venture capital and real estate
investment firm. He was President of C. N. Flagg Power Inc.,
a construction services company, until its sale in July
1992, and was a Managing Principal of Bechtel Investments,
Inc. until May 1987. He is also a director of Northwestern
Mutual Life Insurance Company, Pacific Gas and Electric
Company, Lucas Arts Entertainment Co. and Tenera, L.P.(a)(b)
CLASS I--DIRECTORS
[PHOTO] JOHN J. HAGENBUCH (AGE 42). Mr. Hagenbuch became a director
of the Company in November 1988. He is the owner of John J.
Hagenbuch & Co. and a general partner of M&H Realty
Partners, L.P., both of which are San Francisco-based
investment firms. He was a general partner of Hellman &
Friedman, a San Francisco-based investment firm, from April
1985 to July 1993. Mr. Hagenbuch is also a director of Story
First Communications, Inc.(a)(b)
[PHOTO] JOJI HAYASHI (AGE 54). Mr. Hayashi has been President and
Chief Executive Officer of American President Lines, Ltd.
since May 1990. He served as Vice Chairman of the Board of
the Company from January 1989 to May 1990. Prior to that, he
was Executive Vice President and Chief Operating Officer of
the Company from January 1987 to January 1989. He has been a
director of the Company since July 1983.
[PHOTO] W. B. SEATON (AGE 68). In January 1992 Mr. Seaton retired
as Chairman of the Board and Chief Executive Officer of the
Company, positions he held since May 1984 and July 1983,
respectively. He has been a director of the Company since
July 1983. He was President of the Company from July 1983
until August 1990.(c)
4
<PAGE>
CLASS III--DIRECTORS
[PHOTO] JOHN H. BARR (AGE 64). Mr. Barr became a director of the
Company in July 1983. He is a real estate developer of
industrial parks.(a)(d)
[PHOTO] JOHN M. LILLIE (AGE 57). Mr. Lillie became Chairman of the
Board and Chief Executive Officer of the Company in January
1992. He became a director in January 1990 and President of
the Company in August 1990. He was also Chief Operating
Officer from August 1990 to January 1992. From May 1989 to
August 1990 he was a general partner of Sequoia Associates,
a private investment firm. From April 1985 to April 1986 he
was President and Chief Executive Officer and from April
1986 to April 1989 Chief Executive Officer and Chairman of
the Board of Lucky Stores, Inc. Mr. Lillie is also a
director of The Gap, Inc. and a trustee of Stanford
University.(c)
[PHOTO] TONI REMBE (AGE 57). Ms. Rembe was elected as a director of
the Company in October 1993. She has been a partner in the
law firm of Pillsbury Madison & Sutro since 1971, where she
is managing partner of the firm's Tax Group and a former
member of the Executive Committee. She is also a director of
Pacific Telesis Group, Potlatch Corporation and Safeco
Corporation, and a Trustee of Van Loben Sels Foundation and
the American Conservatory Theater.
[PHOTO] WILL M. STOREY (AGE 62). Mr. Storey became Executive Vice
President, Chief Financial Officer, Treasurer and a director
of the Company in March 1991. He was a consultant and Vice
Chairman of Manville, Inc. from 1989 to 1991 and Vice
Chairman of Federated Department Stores, Inc. from 1982 to
1988. Prior to that, he was Executive Vice President and
Chief Financial Officer of Boise Cascade Corporation. He is
also a director of T. I. S. Mortgage Investment Company,
Albertsons, Inc., Manville, Inc. and Riverwood International
Corporation.
(SEE FOOTNOTES ON FOLLOWING PAGE.)
5
<PAGE>
- ---------
(a) Member of the Audit Committee
(b) Member of the Nominating Committee
(c) Member of the Executive Committee
(d) Member of the Compensation Committee
CERTAIN COMMITTEES OF THE BOARD OF DIRECTORS; MEETINGS
The Company has standing audit, compensation, executive and nominating
committees of the Board of Directors.
The Audit Committee assists the Board in matters relating to accounting. The
Audit Committee receives from, and reviews with, the Company's independent
auditors the annual report of such auditors; reviews with the independent
auditors the scope of the succeeding annual audit; nominates the independent
auditors to be selected each year by the Board; reviews consulting services
rendered by the Company's independent auditors and evaluates the possible effect
on the auditors' independence of performing such services; ascertains the
existence of adequate internal accounting and control systems; and reviews with
management and the Company's independent auditors current and emerging
accounting and financial reporting requirements and practices affecting the
Company. The Audit Committee held three meetings during 1993.
The Compensation Committee determines or reviews and passes upon
management's recommendations with respect to executive compensation, bonuses,
incentive stock awards and stock option grants. The Compensation Committee held
four meetings during 1993.
The Executive Committee, subject to the ultimate direction and control of
the Board of Directors, exercises all of the powers of the Board in the
management of the business and affairs of the Company during the intervals
between meetings of the Board. The Executive Committee held no meetings during
1993.
The Nominating Committee makes recommendations to the Board with respect to
the number of directors to serve on the Board, reviews potential candidates for
director and recommends nominees for election as director. The Nominating
Committee held two meetings during 1993. Any stockholder may recommend director
nominees to the Nominating Committee by writing to the Secretary of the Company
not less than 30 nor more than 60 days prior to any stockholders' meeting called
for the election of directors. Submissions should include the full name, age,
business and residence addresses of the proposed nominee and a statement of the
nominee's qualifications, including the nominee's principal occupation and
employment during the last five years, and the number of shares of Common Stock
owned by the nominee.
Six meetings of the Board of Directors were held during 1993. During 1993,
each of the directors attended 75% or more of the aggregate number of meetings
of the Board and of the committees on which such director served which were held
during the period of such director's service.
6
<PAGE>
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of December 31, 1993, the number of
shares of Common Stock and Series C Preferred Stock beneficially owned by the
directors and nominees named above, the executive officers listed in the Summary
Compensation Table and the directors and executive officers of the Company as a
group. Except as otherwise indicated, and subject to applicable community
property laws, each person has sole investment and voting power with respect to
the shares shown. Ownership information is based upon information furnished by
the respective individuals and contained in the Company's records, and all share
and per-share amounts have been adjusted to reflect the 100% Common Stock
dividend paid on January 28, 1994 to all common stockholders of record on
December 31, 1993.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
CLASS OF BENEFICIALLY PERCENT OF VOTING
NAME STOCK OWNED(1) CLASS(2) SECURITIES(2)
- ---------------------------------------------------------------------- --------- ---------------- ---------- -------------
<S> <C> <C> <C> <C>
Joji Hayashi.......................................................... Common 30,706 * *
John M. Lillie........................................................ Common 455,868 (3) 1.6 % 1.4 %
James S. Marston...................................................... Common 31,440 * *
Timothy J. Rhein...................................................... Common 43,988 * *
Will M. Storey........................................................ Common 46,666 * *
Charles S. Arledge.................................................... Common 7,450 * *
John H. Barr.......................................................... Common 33,332 * *
Tully M. Friedman..................................................... Common 67,200 (4) *
Series C 12.9 %
Preferred 1,500,000 (4) 100 %
John J. Hagenbuch..................................................... Common 3,332 * *
F. Warren Hellman..................................................... Common 70,532 (4) *
Series C 12.9 %
Preferred 1,500,000 (4) 100 %
Toni Rembe............................................................ Common 1,000 * *
W. B. Seaton.......................................................... Common 35,656 * *
Forrest N. Shumway.................................................... Common 9,332 * *
G. Craig Sullivan..................................................... -- -- -- --
Barry L. Williams..................................................... -- -- -- --
All directors and executive officers as a group
(17 persons including the 15 named above)............................ Common 809,142 2.9 %
15.0 %
Series C
Preferred 1,500,000 100 %
<FN>
* Less than 1%.
- ---------
(1) Includes restricted shares of Common Stock granted under the Company's
1989 Stock Incentive Plan and 1987 Contingent Management Incentive Plan
which have not vested, as follows: Mr. Marston, 9,000; and all directors
and executive officers as a group, 9,000. Also includes shares of Common
Stock which may be acquired pursuant to the exercise of options
exercisable on December 31, 1993 or within 60 days thereafter, as follows:
Mr. Hayashi, 22,916; Mr. Lillie, 439,868; Mr. Marston, 12,680; Mr. Rhein,
37,834; Mr. Storey, 46,666; Mr. Arledge, 3,332; Mr. Barr, 3,332; Mr.
Hagenbuch, 3,332; Mr. Hellman, 3,332; Mr. Seaton, 666; Mr. Shumway, 3,332;
and all directors and executive officers as a group, 615,986. Also
includes shares attributable to accounts under the Company's SMART Plan as
of December 31, 1993, as follows: Mr. Hayashi, 1,636; Mr. Marston, 944;
and all directors and executive officers as a group, 3,724.
(2) Each share of Series C Preferred Stock is entitled to approximately 2.641
votes. All percentages are given as of March 1, 1994, based on 27,198,180
shares of Common Stock and 1,500,000 shares of Series C Preferred Stock
outstanding.
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
(3) Includes 6,000 shares owned by Mr. Lillie's two children. Mr. Lillie
disclaims beneficial ownership of such shares.
(4) Includes an aggregate of 67,200 shares of Common Stock held by Hellman &
Friedman Capital Partners, a California Limited Partnership, Hellman &
Friedman Capital Partners International (BVI) and H&F Redwood Partners,
L.P. and an aggregate of 1,500,000 shares of Series C Preferred Stock
beneficially owned by Hellman & Friedman Capital Partners, a California
Limited Partnership, Hellman & Friedman Capital Partners International
(BVI), APC Partners, L.P., and H&F Redwood Partners, L.P. Messrs. Hellman
and Friedman are directors and officers of each of the corporate general
partners of the general partners of such partnerships. Messrs. Hellman and
Friedman each beneficially owns 50% of the stock of each such corporation
and share investment and voting power with respect to the shares of Common
Stock and Series C Preferred Stock held by the above-named partnerships.
At the Annual Meeting, the Series C Preferred Stock will vote together
with the Common Stock on all matters submitted to the stockholders. Each
share of Series C Preferred Stock is entitled to approximately 2.641
votes. See "Certain Beneficial Ownership of Securities--Voting of Shares
by Certain Stockholders." Messrs. Hellman and Friedman disclaim beneficial
ownership of these shares. Messrs. Hellman's and Friedman's address is c/o
Hellman & Friedman, One Maritime Plaza, 12th Floor, San Francisco, CA
94111.
</TABLE>
8
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Information is set forth below as to the compensation awarded to, earned by
or paid to the Chief Executive Officer, each of the four most highly compensated
executive officers of the Company other than the Chief Executive Officer and the
Company's directors for services rendered to the Company and its subsidiaries
during the last fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------
AWARDS(1) PAYOUTS
ANNUAL COMPENSATION ------------------- ---------------
----------------------------------------- SECURITIES LONG-TERM
OTHER ANNUAL UNDERLYING INCENTIVE
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (2) OPTIONS PLAN PAYOUTS(3)
- ---------------------------- --------- ---------- ---------- ----------------- ------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Joji Hayashi ............... 1993 $ 351,000 $ 243,252 $ 2,302 63,250 $ 73,440
President and Chief 1992 $ 337,500 $ 240,469 $ 1,114 15,250 $ 0
Executive Officer of 1991 $ 324,290 $ 231,107 -- 23,000 $ 0
American President Lines,
Ltd.
John M. Lillie ............. 1993 $ 553,800 $ 403,997 $ 294 85,870 $ 75,000
Chairman of the Board, 1992 $ 532,500 $ 399,375 $ 127 19,870 $ 0
President and Chief 1991 $ 512,019 $ 384,375 -- 30,000 $ 0
Executive Officer
James S. Marston ........... 1993 $ 280,000 $ 183,834 $ 1,761 43,620 $ 61,200
Senior Vice President 1992 $ 269,000 $ 181,575 $ 1,868 10,620 $ 94,500
and Chief Information 1991 $ 258,810 $ 174,707 -- 16,000 $ 82,125
Officer
Timothy J. Rhein ........... 1993 $ 351,000 $ 243,252 $ 2,073 63,250 $ 73,440
President and Chief 1992 $ 337,500 $ 240,469 $ 845 15,250 $ 30,000
Executive Officer of 1991 $ 324,290 $ 231,107 -- 23,000 $ 19,406
APL Land Transport
Services, Inc.
Will M. Storey ............. 1993 $ 351,000 $ 243,252 $ 81 48,000 $ 0
Executive Vice President, 1992 $ 337,500 $ 240,469 $ 14 0 $ 0
Chief Financial Officer 1991 $ 268,221 $ 231,107 -- 160,000 $ 0
and Treasurer
<CAPTION>
ALL OTHER
NAME AND PRINCIPAL POSITION COMPENSATION (2)(4)
- ---------------------------- -------------------
<S> <C>
Joji Hayashi ............... $ 22,430
President and Chief $ 21,119
Executive Officer of --
American President Lines,
Ltd.
John M. Lillie ............. $ 33,867
Chairman of the Board, $ 31,950
President and Chief --
Executive Officer
James S. Marston ........... $ 18,587
Senior Vice President $ 17,389
and Chief Information --
Officer
Timothy J. Rhein ........... $ 22,313
President and Chief $ 21,006
Executive Officer of --
APL Land Transport
Services, Inc.
Will M. Storey ............. $ 21,465
Executive Vice President, $ 20,250
Chief Financial Officer --
and Treasurer
<FN>
- ---------
(1) No restricted stock awards were made in the last three fiscal years. At
the end of 1993, the number and value of the aggregate restricted stock
holdings of Mr. Marston were 9,000 shares of Common Stock and $257,625,
respectively. No other executive officer holds restricted stock. Dividends
are paid on restricted stock to the same extent as on unrestricted shares
of Common Stock.
(2) In accordance with the transitional provisions of the Securities and
Exchange Commission's revised rules on executive compensation disclosure,
amounts of "Other Annual Compensation" and "All Other Compensation" have
not been included for fiscal year 1991.
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
(3) Amounts shown with respect to 1993 represent payments under the 1990 bonus
program, which contained a provision allowing current employees to earn
all or a portion of their annual target bonuses that were not paid with
respect to 1990, if the Company achieved certain cumulative net income
targets for fiscal years 1991 through 1993. Amounts shown with respect to
1992 and 1991 represent cash settlements of vested stock units awarded in
1987 under the Company's 1987 Contingent Management Incentive Plan.
(4) During fiscal year 1993, the Company paid premiums on life insurance for
Messrs. Hayashi, Marston and Rhein having values of $965, $1,464 and $848,
respectively; made matching contributions under the Company's SMART Plan
for Messrs. Lillie, Rhein and Storey of $8,994, $3,721 and $8,994,
respectively; and made matching contributions under the Company's 1988
Deferred Compensation Plan for Messrs. Hayashi, Lillie, Marston, Rhein and
Storey of $21,465, $24,873, $17,123, $17,744, and $12,471, respectively.
</TABLE>
Information is provided below with respect to all stock option grants to and
exercises by the five executive officers named in the Summary Compensation Table
during fiscal year 1993.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO GRANT DATE
OPTIONS EMPLOYEES EXERCISE PRICE EXPIRATION PRESENT
NAME GRANTED(1) IN FISCAL YEAR PER SHARE(1) DATE VALUE(2)
- --------------------------------------------- ---------- --------------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Joji Hayashi................................. 15,250 (3) .63 % $ 19.50 1/25/03 $ 135,573
48,000 (4) 1.98 % $ 22.38 7/26/03 $ 407,040
John M. Lillie............................... 19,870 (3) .82 % $ 19.50 1/25/03 $ 176,644
66,000 (4) 2.72 % $ 22.38 7/26/03 $ 559,680
James S. Marston............................. 10,620 (3) .44 % $ 19.50 1/25/03 $ 94,412
33,000 (4) 1.36 % $ 22.38 7/26/03 $ 279,840
Timothy J. Rhein............................. 15,250 (3) .63 % $ 19.50 1/25/03 $ 135,573
48,000 (4) 1.98 % $ 22.38 7/26/03 $ 407,040
Will M. Storey............................... 48,000 (4) 1.98 % $ 22.38 7/26/03 $ 407,040
<FN>
- ---------
(1) All options were granted at fair market value. During fiscal year 1993, no
stock appreciation rights were awarded to any executive officer.
(2) "Grant Date Present Values" were determined based upon the Black-Scholes
option pricing model. These are estimated values based upon the following
arbitrary assumptions: stock price volatility calculated using daily stock
prices for the 18-month period prior to the grant date; a risk-free rate
of return equivalent to the interbank borrowing rate applicable to
borrowings having a term equal to the remaining term of the option;
exercise on the option expiration date; and a future dividend yield of
1.29%. The actual value, if any, that an executive ultimately realizes
upon the exercise of an option will be the difference between the market
price of the underlying shares and the option exercise price on the date
of exercise.
(3) These options are exercisable as to one-third of the shares on January 26,
1994, and an additional one-third of the shares on each of January 26,
1995 and 1996. In addition, the options will vest in full upon a change in
control as provided in employment agreements with the named executives.
See "Employment Contracts, Termination of Employment and Change-in-Control
Arrangements and Certain Transactions."
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
(4) These options vest over a two-to nine-year period based upon the
achievement of stock price targets (the "performance options"). The
percentage of the performance options that vest during specified time
periods will depend on the amount of stock price appreciation in those
time periods, as described in more detail below under "Description of the
Amended and Restated Plan -- New Long-Term Incentive Program." On July 27,
1998, the options will vest as to 60% of the covered shares if not
otherwise vested, and on July 27, 2002, the options will vest as to the
remaining 40% if not otherwise vested. In addition, the options will vest
in full upon a change in control with respect to the Company (as defined
in the 1989 Stock Incentive Plan).
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL FISCAL
YEAR-END YEAR-END
SHARES
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- -------------------------------------------------------------------- ----------- ---------- ---------------- --------------
<S> <C> <C> <C> <C>
Joji Hayashi........................................................ 15,332 $ 177,045 5,084/ $ 60,380
81,084 $ 705,083
John M. Lillie...................................................... 0 $ 0 426,623/ $ 7,766,148
109,117 $ 932,372
James S. Marston.................................................... 8,940 $ 83,955 266/ $ 5,038
56,034 $ 488,241
Timothy J. Rhein.................................................... 40,414 $ 451,962 20,002/ $ 381,281
81,084 $ 705,083
Will M. Storey...................................................... 60,000 $ 934,500 46,666/ $ 831,238
101,334 $ 1,250,012
</TABLE>
PENSION PLAN TABLE
The following table illustrates the approximate retirement income (including
the supplemental benefit under the Company's Excess-Benefit Plan) which may
become payable under the American President Companies, Ltd. Retirement Plan (the
"Retirement Plan") to an employee credited with the number of years of service
shown, assuming that benefits commence at age 65 and are payable in the normal
form (generally a joint and 50% survivor benefit).
ANNUAL RETIREMENT INCOME
<TABLE>
<CAPTION>
YEARS OF SERVICE
5-YEAR AVERAGE ----------------------------------------------------------
ANNUAL COMPENSATION 15 20 25 30 35
- -------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$400,000 $ 120,000 $ 160,000 $ 180,000 $ 200,000 $ 200,000
$500,000 $ 150,000 $ 200,000 $ 225,000 $ 250,000 $ 250,000
$600,000 $ 180,000 $ 240,000 $ 270,000 $ 300,000 $ 300,000
$700,000 $ 210,000 $ 280,000 $ 315,000 $ 350,000 $ 350,000
$800,000 $ 240,000 $ 320,000 $ 360,000 $ 400,000 $ 400,000
$900,000 $ 270,000 $ 360,000 $ 405,000 $ 450,000 $ 450,000
$1,000,000 $ 300,000 $ 400,000 $ 450,000 $ 500,000 $ 500,000
$1,100,000 $ 330,000 $ 440,000 $ 495,000 $ 550,000 $ 550,000
$1,200,000 $ 360,000 $ 480,000 $ 540,000 $ 600,000 $ 600,000
</TABLE>
11
<PAGE>
The amounts shown in the table are subject to adjustment for Social Security
benefits. The credited years of service of the executive officers of the Company
named in the Summary Compensation Table are as follows: Mr. Hayashi, 25 years;
Mr. Lillie, 3 years; Mr. Marston, 6 years; Mr. Rhein, 26 years; and Mr. Storey,
3 years. The compensation covered by the Retirement Plan and Excess-Benefit Plan
was $701,987, $1,052,178, $555,490, $701,987 and $569,795, for Messrs. Hayashi,
Lillie, Marston, Rhein and Storey, respectively, during 1993. Covered
compensation for any year is equal to the sum of the employee's annual salary
rate on June 1 and any cash bonus that the employee receives or defers during
the year. However, the compensation on which retirement income would be
determined is different from such amount because benefits are based upon a
five-year average of the employee's compensation. See also "Employment
Contracts, Termination of Employment and Change-in-Control Arrangements and
Certain Transactions."
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive an annual retainer of
$24,000, a fee of $1,000 per meeting when attending Board or stockholder
meetings and an additional fee of $850 for each committee meeting attended. All
directors are reimbursed for their reasonable expenses incurred in connection
with the Company's business. Under a deferred compensation plan, a director can
elect to defer receipt of compensation earned as a director. Deferred amounts,
together with interest, become payable over a period of up to 10 years
commencing at the time specified by the director when the election to defer
compensation is made.
Under the Retirement Plan for Directors of American President Companies,
Ltd. (the "Retirement Plan for Directors"), directors who have never been
employees of the Company are eligible to receive an unfunded benefit if they
complete five years of service as a director or if they attain age 70 or become
permanently and totally disabled while serving as a director. The benefit is
equal to the amount of the annual retainer paid by the Company to its directors,
as adjusted during the period that the retired director is receiving the
benefit, and is paid for a period equal to the lesser of 10 years or one year
for each full or partial year of service as a director. A reduced benefit for a
director's surviving spouse is provided in the event that the director dies
before retirement or dies after retirement but before expiration of his or her
benefit. In addition, the Retirement Plan for Directors provides for mandatory
retirement of a director not later than the date of the annual meeting of
stockholders of the Company coinciding with or next following his or her 70th
birthday (72nd birthday for individuals who were directors on September 15,
1992).
Under the 1992 Directors' Stock Option Plan, directors who have never been
Company employees receive options to purchase 10,000 shares of Common Stock upon
election or appointment to the Board of Directors, and all non-employee
directors receive annual grants of options to purchase 2,000 shares of Common
Stock. These options have exercise prices equal to the fair market value of the
Company's Common Stock on the grant date. They vest in three equal annual
installments and, if held for at least six months, vest in full upon the
non-employee director's retirement, death or disability or a change in control
of the Company. As provided in the plan, Messrs. Arledge, Barr, Hagenbuch,
Hellman, Seaton, Shumway and Williams each received options to purchase 2,000
shares, and Ms. Rembe received options to purchase 10,000 shares, of Common
Stock in fiscal year 1993.
Mr. Seaton retired as Chairman of the Board and Chief Executive Officer of
the Company effective January 2, 1992. Pursuant to an agreement which the
Company entered into with Mr. Seaton at that time, Mr. Seaton continued to
participate in the Company's life and group health insurance plans until
September 2, 1993, the date his employment agreement with the Company would have
expired. The Company also continued to provide Mr. Seaton with financial
planning services with respect to the 1992 tax year and to reimburse him for the
operating expenses for an automobile through September 2, 1993. Mr. Seaton has
agreed to provide consulting services to the Company with respect to industry
and community affairs. So long as he continues to perform such services, the
Company has agreed to provide him with an office and secretarial support.
12
<PAGE>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS AND CERTAIN TRANSACTIONS
Mr. Lillie is employed at an annual salary of not less than $575,950 under
an employment agreement that expires when he reaches age 62. The agreement may
be terminated by the Company for cause upon 30 days' notice or for any reason
upon six months' notice. The agreement may be terminated by Mr. Lillie for any
reason upon six months' notice. While the agreement remains in effect, Mr.
Lillie is entitled to receive his salary and to participate in the employee
benefit and compensation plans maintained by the Company. If the Company
terminates Mr. Lillie's employment without cause, 150% of his base salary and
participation in all insurance and similar plans will continue for three years
(but not beyond age 62), and this period will be counted as employment with the
Company for purposes of determining the termination date of options, vesting
under the Company's executive compensation programs, including the 1989 Stock
Incentive Plan, and calculation of a supplemental retirement benefit.
The agreement with Mr. Lillie also provides that he will receive a minimum
pension upon retirement at age 62 equal to 40% of his highest five-year average
annual compensation (subject to adjustment for Social Security benefits). Any
difference between this amount and Mr. Lillie's benefit under the Company's
retirement program will be made up on an unfunded basis. If he retires before
age 62, this minimum pension will be proportionately reduced.
In the event of a change in control with respect to the Company (as defined
below), Mr. Lillie's contract provides that he may resign within one year after
such change and may elect to receive either the continuation of 150% of base
salary and benefits as described above for three years (but not beyond age 62)
or a lump sum severance benefit equal to 150% of his annual base salary at its
most recent rate times three (or the number of years remaining to age 62, if
less). If Mr. Lillie's employment is terminated for any reason at any time
following a change in control, or if he resigns within one year after being
removed as Chief Executive Officer or any other material change in his
responsibilities or the relocation of his place of employment by over 20 miles,
he may also elect to receive either the lump sum severance benefit or the
continuation of 150% of base salary and other benefits as described above for
three years (but not beyond age 62). (150% of base salary is utilized because
bonuses and other forms of supplemental compensation are not taken into account
in computing the amount of the severance benefit.) Currently, if Mr. Lillie's
employment terminated after a change in control, or if he elected to resign
under the circumstances specified above, the value of the lump sum severance
benefit would be approximately $2,591,775. Alternatively, he could elect to
continue receiving 150% of his base salary, plus insurance and similar benefits
with an annual value of approximately $10,100 and vesting under executive
compensation programs for three years, and to receive a supplemental retirement
benefit upon retirement of $8,827 payable monthly for life, and a reduced
benefit for his surviving spouse. Any stock options or other incentive awards
that Mr. Lillie holds at the time of a change in control will immediately become
vested.
If the Company terminates Mr. Lillie's active employment because he becomes
disabled, he will receive a supplemental disability benefit until age 62 equal
to 67% of his base salary, reduced by any other disability benefits (including
statutory benefits) to which he is entitled. The agreement with Mr. Lillie also
provides that the Company will compensate him for any amounts that he does not
receive as a result of any provision in any plan or agreement limiting payments
which are nondeductible by the Company for federal income tax purposes on
account of Internal Revenue Code provisions relating to golden parachute
payments.
For purposes of Mr. Lillie's employment agreement, the term "change in
control" is defined as the occurrence of any of the following events: (a) a
change in control occurs which is required to be reported in the Company's next
proxy statement under the rules of the Securities and Exchange Commission; (b)
any person is or becomes the beneficial owner, directly or indirectly, of at
least 20% of the combined voting power of the Company's outstanding securities,
except by reason of a repurchase by the Company of its securities; or (c) a
change in the composition of the Company's Board of Directors occurs as a result
of which fewer than two-thirds of the incumbent directors are directors who
either had been
13
<PAGE>
directors of the Company 24 months prior to such change or were elected or
nominated with the approval of at least a majority of the directors who had been
directors of the Company 24 months prior to such change and who were still in
office at the time of the election or nomination.
Messrs. Hayashi, Marston, Rhein and Storey are employed at annual salaries
of not less than $365,040, $291,200, $365,040 and $365,040, respectively, under
employment agreements that expire when they attain age 65. These agreements may
be terminated by either party for any reason upon 30 days' notice. While the
agreements remain in effect, these individuals are entitled to receive their
salaries and to participate in the employee benefit and compensation plans
maintained by the Company. If the Company terminates their employment without
cause, 147.5% of their base salaries (145% for Mr. Marston) and participation in
all insurance and similar plans will continue for three years (but not beyond
age 65) and the applicable period will be counted as employment with the Company
for purposes of determining the termination date of options, vesting under the
Company's executive compensation programs, including the 1989 Stock Incentive
Plan, and calculation of a supplemental retirement benefit. In the event of such
termination, Mr. Hayashi would also be credited with service for purposes of
calculating the supplemental retirement benefit for a period during which he was
employed by the Company in a seagoing position.
The agreements with Messrs. Hayashi, Marston, Rhein and Storey also provide
that the Company will compensate them for any amounts that they do not receive
as a result of any provision in any plan or agreement limiting payments which
are nondeductible by the Company for federal income tax purposes on account of
Internal Revenue Code provisions relating to golden parachute payments.
In addition, Mr. Storey's agreement provides that, if his employment with
the Company terminates before he has sufficient service to vest in a benefit
under the Company's Retirement Plan, he will receive an unfunded pension benefit
based upon his service and the benefit formula of such plan. In addition, upon
termination of his employment with the Company, Mr. Storey will be provided with
health insurance coverage comparable to the coverage provided to the Company's
retirees as of March 1991 and will contribute to the cost of such coverage on
the same basis as retirees are contributing at the time he is receiving such
coverage.
Provisions in the agreements with Messrs. Hayashi, Marston, Rhein and Storey
relating to termination of employment following a change in control are similar
to the terms of Mr. Lillie's employment agreement, except that they may resign
and receive a lump sum severance benefit or continuation of salary and other
benefits as described above if such resignation occurs as a result of any
material change in responsibilities or relocation of place of employment by over
20 miles within one year after the change in control or for any reason within a
30-day period commencing one year after the change in control. Currently, if the
employment of Messrs. Hayashi, Marston, Rhein and Storey terminated after a
change in control, the value of their lump sum severance benefits would be
approximately $1,615,300, $1,266,700, $1,615,300 and $1,256,200, respectively.
Alternatively, they could elect to continue receiving 147.5% of their base
salaries (145% for Mr. Marston), plus insurance and similar benefits with annual
values of approximately $11,000, $9,300, $10,900 and $7,900, respectively, and
vesting under executive compensation programs for the applicable periods, and to
receive supplemental retirement benefits upon retirement of $3,813, $2,621,
$4,257 and $4,313, respectively, payable monthly for life, and reduced benefits
for their surviving spouses.
Pursuant to the terms of the Preferred Stock Purchase Agreement between the
Company and Hellman & Friedman Capital Partners ("HFCP") and Hellman & Friedman
Capital Partners International (BVI) ("BVI") (HFCP and BVI being referred to
together as "H&F"), dated August 3, 1988, as amended, whereby H&F acquired an
aggregate of 1,500,000 shares of the Company's Series C Preferred Stock (see
"Certain Beneficial Ownership of Securities"), H&F have the right to designate
two persons for nomination as members of the Board of Directors. The Company is
obligated to use its best efforts to cause such designees to become nominated
for election by the stockholders as members of the Board of Directors and to
vote all shares for which the Company's management or the Board holds proxies,
or is otherwise entitled to vote, in favor of the election of such designees.
Mr. F. Warren Hellman and Mr. John J. Hagenbuch have been
14
<PAGE>
nominated by H&F and elected by the stockholders to the Board of Directors. Mr.
Hellman is a nominee for election at the 1994 Annual Meeting. H&F have nominated
Mr. Tully M. Friedman to replace Mr. Hagenbuch as a director following Mr.
Hagenbuch's resignation on April 27, 1994.
Pillsbury Madison & Sutro, of which Ms. Rembe is a partner, provides legal
services to the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation of the Company's senior management is determined by the
Compensation Committee of the Board of Directors, which is comprised of three
non-employee directors. The Committee believes that the Company's executive
compensation program should attract and retain highly qualified personnel and
provide meaningful incentives for superior performance. The Company seeks to
link executives' interests with those of the Company's stockholders by rewarding
the achievement of short-and long-term performance goals, as measured by
improvements in the Company's earnings and return on equity. The Company intends
that certain compensation paid to its senior management in 1994, including stock
options, be exempt from the limitations on deductibility under Section 162(m) of
the Internal Revenue Code. The Committee has retained an independent
compensation consultant to provide ongoing advice with respect to the Company's
compensation plans and programs.
The Compensation Committee determined 1993 base salaries on the basis of its
review of recommended increases for the senior executives (other than the Chief
Executive Officer) developed by the management of the Company on the basis of
national salary survey data for comparably sized industrial companies,
performance evaluations and expected future contributions of the individual
executives. Cash compensation (salary plus bonus) is generally targeted at the
median of the companies surveyed. The Committee determined the base salary of
the Chief Executive Officer based upon similar competitive data, the Committee's
assessment of his past performance and its expectations as to his future
contributions.
In December 1992, the Compensation Committee approved a bonus program for
1993. Return on equity targets were established based upon anticipated results
for 1992 and the outlook for 1993, and bonus pools ranging from 50% to 150% of
target bonuses were established to correspond to levels of return on equity. The
annual bonus program was recommended by the management of the Company and
approved by the Committee. Following the end of the year, the Committee
authorized a bonus pool of 145.9% of target bonuses, consistent with the
performance target achieved for the year, reviewed and acted upon
recommendations of the management of the Company with respect to bonuses for the
Company's other senior executives and fixed the bonus of the Chief Executive
Officer. Individual bonus awards were based upon the individual's annual salary
and target bonus and an evaluation of the individual's contribution to the
Company's performance.
In January 1993, the Compensation Committee determined the annual stock
option grant levels for the Company's senior executives and other eligible
officers and key employees for 1993. This determination was made based upon
competitive practices for general industry and the Company's performance during
1992. Competitive data on the range of aggregate annual option grants relative
to the number of shares outstanding were considered, and the grant levels were
set at the higher end of that range based upon the Company's 1992 return on
equity.
In July 1993, the Committee approved a new long-term incentive program,
which is intended to replace annual option grants for the next five years. Under
the program, performance options will be granted to each employee in an
aggregate amount of approximately five times the employee's 1993 annual grant.
Utilizing shares already authorized under the Company's 1989 Stock Incentive
Plan (the "Plan"), the Committee granted each eligible employee options for 60%
of the specified shares. Each of these performance options has a term of 10
years and an exercise price equal to the fair market value of the Company's
Common Stock at the time of grant. Vesting will occur over a two-to nine-year
period depending upon the Company's achievement of certain stock price targets,
as described under "Description of the Amended and Restated Plan -- New
Long-Term Incentive Program" below. In addition, eligibility for grants under
the new program has been extended to employees at lower salary grades, nearly
doubling the number of employees receiving options. If the
15
<PAGE>
stockholders approve the amendment and restatement of the Plan, the Committee
intends to complete implementation of the new long-term incentive program by
granting performance options for the remaining 40% of the specified shares
immediately thereafter.
The Committee believes that the long-term incentive program will meet key
strategic objectives of linking the interests of employees with the interests of
stockholders in stock price appreciation, creating a high level of employee
focus and motivation, enhancing employee ownership of the Company's stock and
promoting employee retention. The Committee also believes that the grant levels
are within reasonable competitive limits and will not result in unacceptable
stockholder dilution.
With respect to Mr. Lillie's compensation for 1993, based upon the foregoing
factors, the Compensation Committee determined that a 4% increase in base salary
was appropriate, made an annual option grant for 19,870 shares of the Company's
Common Stock and granted performance options for 66,000 shares under the new
long-term incentive program. In addition, the Committee awarded Mr. Lillie a
bonus that was 145.9% of his target bonus, based upon the Company's achievement
of the corresponding return on equity target under the 1993 bonus program and
taking into consideration his contribution to the Company's overall results for
1993.
The Compensation Committee believes that the total compensation provided to
the Company's executive officers is competitive with the compensation provided
by employers of comparable size and that the annual bonus and stock option
programs have successfully focused the Company's senior management on increasing
profitability and stockholder value and reducing costs.
F. Warren Hellman, Chairman
John H. Barr
Forrest N. Shumway
16
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Company's
Common Stock with a comparable return on the indicated indices for the last five
fiscal years. The total return on the Company's Common Stock is determined based
on the change in the price of the Common Stock and assumes reinvestment of all
dividends and an original investment of $100. The total returns on the indicated
indices also assume reinvestment of dividends and an original investment in each
index of $100 on December 30, 1988.
TOTAL RETURN TO SHAREHOLDERS
[PERFORMANCE CHART]
17
<PAGE>
CERTAIN BENEFICIAL OWNERSHIP OF SECURITIES
Each of the following stockholders has advised the Company under the rules
of the Securities and Exchange Commission that it is the beneficial owner of
more than 5% of the class of the Company's capital stock indicated below. The
following information is furnished as of December 31, 1993 with respect to any
person known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of the Common Stock or Series C Preferred Stock of the
Company. Except as otherwise indicated, the named beneficial owner has sole
voting and investment power with respect to the shares shown.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND ADDRESS BENEFICIALLY CLASS OF PERCENT OF PERCENT OF
OF BENEFICIAL OWNER OWNED(1) STOCK CLASS(2) VOTING SECURITIES(2)
- ------------------------------------ -------------------- ----------- ----------- ---------------------
<S> <C> <C> <C> <C>
Hellman & Friedman 919,327 Series C 61.3%
Capital Partners(3) Preferred 8.0%
61,824 Common *
Hellman & Friedman 49,645 Series C 3.3%
Capital Partners Preferred
International (BVI)(3) *
3,308 Common *
APC Partners, L.P.(3) 500,000 Series C 33.3% 4.2%
Preferred
H&F Redwood Partners, L.P.(3) 31,028 Series C 2.1%
Preferred
*
2,068 Common *
FMR Corp. 3,340,800 Common 12.3% 10.7%
82 Devonshire Street
Boston, MA 02109
Heine Securities Corporation 2,376,000 Common 8.7% 7.6%
51 J.F.K. Parkway
Short Hills, New Jersey 07078
RCM Capital Management(4) 2,399,318 Common 8.8% 7.7%
Four Embarcadero Center
Suite 2900
San Francisco, California 94111
Trimark Investment 2,340,000 Common 8.6% 7.5%
Management Inc.
Scotia Plaza, Suite 5200
40 King Street West
Toronto, Ontario M5H 3Z3
<FN>
* Less than 1%
</TABLE>
(SEE FOOTNOTES ON FOLLOWING PAGE.)
18
<PAGE>
<TABLE>
<S> <C>
- ---------
(1) Following a 100% Common Stock dividend paid on January 28, 1994 to all
common stockholders of record on December 31, 1993.
(2) Each share of Series C Preferred Stock is entitled to approximately 2.641
votes. All percentages are given as of March 1, 1994, based on 27,198,180
shares of Common Stock and 1,500,000 shares of Series C Preferred Stock
outstanding.
(3) The voting and dispositive powers with respect to the shares of Series C
Preferred Stock held by each of the holders of the Series C Preferred Stock
(the "Series C Investors") are indirectly controlled by Hellman & Friedman
Capital Management, Inc., H&F Capital Management International, Inc., APC
Administrators, Inc. and H&F Redwood Investors, Inc., respectively. A trust
of which Mr. F. Warren Hellman is a trustee and a beneficiary and a trust
of which Mr. Tully M. Friedman is a trustee and a beneficiary each owns 50%
of the stock of each such corporation. As a result, Messrs. Hellman and
Friedman could be deemed to beneficially own 100% of the 1,500,000 shares
of Series C Preferred Stock of the Company issued and outstanding and the
aggregate of 67,200 shares of the Common Stock of the Company owned by
Hellman & Friedman Capital Partners, Hellman & Friedman Capital Partners
International (BVI) and H&F Redwood Partners, L.P. Messrs. Hellman and
Friedman disclaim such beneficial ownership. The address of each of the
Series C Investors is c/o Hellman & Friedman, One Maritime Plaza, 12th
Floor, San Francisco, CA 94111.
(4) Includes 1,844,538 shares as to which RCM Capital Management has sole
voting power, 2,381,318 shares as to which it has sole investment power,
and 18,000 shares as to which it has shared investment power.
</TABLE>
VOTING OF SHARES BY CERTAIN STOCKHOLDERS
The Series C Investors have agreed with the Company to vote all voting
securities of the Company owned by them in accordance with the recommendation of
the Board of Directors when voting together as a single class with the holders
of shares of Common Stock. As of March 1, 1994, the Series C Investors were
entitled to 4,028,700 votes at the Annual Meeting, which at March 1, 1994
represented approximately 12.9% of the voting power of the Company. The Board of
Directors has established a committee of independent directors composed of Mr.
Barr and Ms. Rembe to determine the voting of the shares held by the Series C
Investors at the 1994 Annual Meeting of Stockholders. The committee has
determined that all of such votes will be cast for the election of the seven
nominees for director listed in this Proxy Statement and for the proposals
referred to in items 2 and 3 in the Notice of Annual Meeting of Stockholders and
described in this Proxy Statement.
PROPOSAL TO AMEND AND RESTATE THE 1989 STOCK INCENTIVE PLAN
On January 28, 1994, the Board of Directors amended and restated the
Company's 1989 Stock Incentive Plan (as amended and restated, the "Plan"),
subject to the approval of the Company's stockholders at the 1994 Annual
Meeting. The following summary of the principal features of the Plan is
qualified by reference to the terms of the Plan, a copy of which is available
without charge upon stockholder request to Maryellen B. Cattani, Senior Vice
President, General Counsel and Secretary, American President Companies, Ltd.,
1111 Broadway, Oakland, CA 94607.
SUMMARY OF AMENDMENTS
The amendments to the Plan approved by the Board of Directors and submitted
for stockholder approval consist of the following:
(1) to increase the number of shares of Common Stock reserved for
issuance under the Plan by 2,000,000;
(2) to increase the number of restricted shares and stock units that may
be granted under the Plan by 2,000,000;
19
<PAGE>
(3) to provide a limit on the number of options and stock appreciation
rights which may be granted to any Plan participant in a single calendar
year, designed to qualify Plan compensation for federal income tax
deductibility by the Company under Section 162(m) of the Internal Revenue
Code;
(4) to reduce the number of directors required to constitute the
Compensation Committee of the Board of Directors from three to two and
require that the membership of the Committee comply with the provisions of
Section 162(m) of the Internal Revenue Code, as well as Rule 16b-3 of the
Securities Exchange Act of 1934;
(5) to amend the provision governing the availability of forfeited
restricted shares for future awards;
(6) to eliminate the requirement that the exercise price of a
Nonstatutory Stock Option be no less than 50% of the fair market value of
the Common Stock; and
(7) to make various technical amendments and clarifying changes, some of
which are intended to comply with rules of the Securities and Exchange
Commission under Section 16 of the Securities Exchange Act of 1934.
DESCRIPTION OF THE AMENDED AND RESTATED PLAN
GENERAL
The Plan was approved by the Board of Directors in January 1989 and by the
stockholders in April 1989. In April 1989, the 1987 Contingent Management
Incentive Plan (the "1987 Plan") and the 1983 Stock Option Plan (the "1983
Plan") were merged into the Plan with the approval of the Company's
stockholders. The Compensation Committee of the Board of Directors (the
"Committee") administers the Plan. The Committee selects the key employees of
the Company or its subsidiaries who will receive awards, determines the type and
size of each award and establishes any vesting or other applicable conditions.
While all future awards will be made under the Plan, awards made under the 1987
Plan or the 1983 Plan will continue to be administered by the Committee in
accordance with the applicable plan. As noted above, the Committee consists
entirely of non-employee directors.
PURPOSES OF THE PLAN
The purposes of the Plan are to encourage key employees of the Company and
its subsidiaries to focus on long-range objectives, to attract and retain key
employees with exceptional qualifications and to link the interests of key
employees and stockholders through stock ownership and other equity-based
incentives. The Company believes that awards under the Plan are an effective
means of motivating key employees to enhance the Company's performance.
ELIGIBILITY
All key employees of the Company and its subsidiaries, as designated by the
Committee, are eligible to receive awards under the Plan. As of December 31,
1993, approximately 384 employees were eligible for awards under the Plan.
FORM OF AWARDS
The Plan provides for awards of restricted shares, stock units and stock
options. The Committee determines the number of restricted shares, stock units
or options to be included in an award. However, the Plan provides that options
granted to any optionee in a single calendar year shall not cover more than
250,000 shares of Common Stock (subject to antidilution adjustments). This
limitation has been added in response to recent changes in federal income tax
laws and is designed to qualify income recognized upon exercise of options
granted under the Plan for tax deductibility by the Company.
No payment is required upon receipt of an award, except that the recipient
of restricted shares must pay the shares' par value to the Company. The
Committee presently intends to make future awards primarily in the form of
options, rather than restricted shares or stock units, although additional
restricted shares or stock units may also be granted from time to time.
20
<PAGE>
Restricted shares are shares of Common Stock that are subject to forfeiture
in the event that the applicable vesting conditions are not satisfied, but which
have the same voting and dividend rights as other shares of Common Stock.
Restricted shares are nontransferable prior to vesting, except for certain
transfers to a trustee. No restricted shares have been granted since 1990, and
there are 75,000 restricted shares outstanding.
A stock unit is an unfunded bookkeeping entry representing the equivalent of
one share of Common Stock. A holder of stock units has no voting rights or other
privileges as a stockholder but is entitled to receive dividend equivalents
equal to the amount of dividends paid on the same number of shares of Common
Stock. Dividend equivalents may be converted into additional stock units or
settled in the form of cash, Common Stock or both. Stock units, when vested, may
be settled by distributing shares of Common Stock or by a cash payment
corresponding to the fair market value of an equivalent number of shares of
Common Stock, or both. Vested stock units will be settled at the time determined
by the Committee. If the time of settlement is deferred, interest or additional
dividend equivalents may be credited on the deferred payment. A stock unit is
nontransferable prior to the holder's death. No stock units have been granted
since 1987, and there are no stock units outstanding.
Options may include Nonstatutory Stock Options ("NSOs"), and Incentive Stock
Options ("ISOs") intended to qualify for special tax treatment. The term of an
ISO cannot exceed 10 years. Under the Plan, the exercise price of an ISO must be
no less than the fair market value of the Common Stock on the grant date, and
the exercise price of an NSO must be no less than the par value of the Common
Stock on the grant date. All outstanding options granted under the Plan have
exercise prices equal to the respective closing prices for the Company's Common
Stock on the trading day immediately preceding the grant date.
The exercise price of an option may be paid in any lawful form permitted by
the Committee, including (without limitation) the surrender of shares of Common
Stock or restricted shares already owned by the optionee. The Plan also allows
the optionee to pay the exercise price of an option by giving "exercise/sale" or
"exercise/pledge" directions. If exercise/sale directions are given, option
shares that are at least sufficient to pay the exercise price and any
withholding taxes are issued directly to a securities broker selected by the
Company who, in turn, sells these shares in the open market. The broker remits
to the Company the exercise price and any withholding taxes, and the optionee
receives the remaining option shares or cash proceeds. If exercise/pledge
directions are given, the option shares are issued directly to a securities
broker or other lender selected by the Company. The broker or other lender will
hold the shares as security and will extend credit for up to 50% of their market
value. The loan proceeds will be paid to the Company to the extent necessary to
pay the exercise price and any withholding taxes. Any excess loan proceeds may
be paid to the optionee. If the loan proceeds are insufficient to cover the
exercise price and withholding taxes, the optionee will be required to pay the
deficiency to the Company at the time of exercise.
NSOs and ISOs may be granted in combination with Stock Appreciation Rights
("SARs"), or SARs may be added to outstanding NSOs at any time after the grant
(but not later than six months before the expiration of the NSO). An SAR permits
the participant to elect to receive any appreciation in the value of the
optioned stock directly from the Company, either in shares of Common Stock or in
cash or a combination of the two, in lieu of exercising the option, with the
Committee having the discretion to determine the form in which such payment will
be made. The amount payable on exercise of an SAR is measured by the difference
between the market value of the optioned stock at exercise and the option
exercise price. Generally, SARs may be exercised at any time after the
underlying NSO or ISO vests; however, directors and officers may ordinarily
exercise SARs for cash only during a specified "window period" following the
release to the public of the Company's quarterly earnings information. Upon
exercise of an SAR, the corresponding portion of the related option must be
surrendered and cannot thereafter be exercised. Conversely, upon exercise of an
option to which an SAR is attached, the SAR may no longer be exercised to the
extent that the corresponding option has been exercised. All options and SARs
are nontransferable prior to the optionee's death. No SARs have been granted
since 1987, and there are no SARs outstanding.
21
<PAGE>
VESTING OF AWARDS
The Committee determines the vesting and other conditions of awards under
the Plan. The vesting conditions may be based on the employee's service, his or
her individual performance, the Company's performance or other appropriate
criteria.
Historically, restricted shares and stock units have vested in unequal
installments over a period of five years, and options in equal installments over
periods of three or four years. As described in the Executive Committee Report
on Executive Compensation, performance options granted on July 27, 1993 will
vest over a two-to nine-year period depending upon the Company's achievement of
stock price appreciation targets.
Vesting may be accelerated in the event of the employee's death, disability
or retirement or in the event of a Change in Control (as defined below), except
that an SAR generally cannot be exercised for cash unless both it and the
underlying option have been outstanding for at least six months. Moreover, the
Committee may determine that outstanding options and any related SARs will
become fully vested if it has concluded that there is a reasonable possibility
of a Change in Control within six months thereafter.
For purposes of the Plan, the term "Change in Control" means that (a) any
change in control occurs which would have to be disclosed in the Company's proxy
statement under the rules of the Securities and Exchange Commission, (b) any
person is or becomes the beneficial owner, directly or indirectly, of at least
20% of the combined voting power of the Company's outstanding securities, except
by reason of a repurchase by the Company of its own securities, or (c) a change
in the composition of the Board of Directors occurs as a result of which fewer
than two-thirds of the incumbent directors are directors who either had been
directors of the Company 24 months prior to such change or were elected or
nominated for election to the Board with the approval of at least a majority of
the directors who had been directors of the Company 24 months prior to such
change and who were still in office at the time of the election or nomination.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Neither the optionee nor the Company will incur any federal tax consequences
as a result of the grant of an option or SAR under the Plan. The optionee will
have no taxable income upon exercising an ISO (although the alternative minimum
tax may apply), and the Company will receive no deduction when an ISO is
exercised. Upon exercising an NSO or SAR, the optionee generally must recognize
ordinary income equal to the "spread" between the exercise price and the fair
market value of Common Stock on the date of exercise. The Company will be
entitled to a deduction for the same amount. The tax treatment of a disposition
of option shares acquired under the Plan depends on how long the shares have
been held and on whether such shares were acquired by exercising an ISO or by
exercising an NSO or SAR. The Company will not be entitled to a deduction in
connection with a disposition of option shares, except in the case of a
disposition of shares acquired under an ISO before the applicable ISO holding
periods have been satisfied.
Awards under the Plan may provide, and awards granted after May 1, 1986
under the 1987 Plan provided, that, if any payment (or transfer) by the Company
to a recipient would be nondeductible by the Company for federal income tax
purposes, the aggregate value of all such payments (or transfers) will be
reduced to an amount which maximizes such value without causing any such payment
(or transfer) to be nondeductible.
The Committee may permit a Plan participant to satisfy his or her
withholding tax obligations by surrendering a portion of his or her previously
issued shares to the Company, or by having the Company withhold a portion of any
shares that otherwise would be issued to him or her.
The above description of tax consequences is based on present federal tax
laws and regulations and does not purport to be a complete description of the
federal income tax aspects of the Plan.
22
<PAGE>
AMENDMENT OF OUTSTANDING AWARDS
The Committee is authorized, within the provisions of the Plan, to amend the
terms of outstanding restricted shares or stock units, to modify or extend
outstanding options or to exchange new options for outstanding options,
including outstanding options with higher exercise prices than the new options.
AMENDMENT AND TERMINATION OF THE PLAN
The Plan may be amended or terminated at any time by the Board of Directors,
subject to applicable laws. No ISOs may be granted under the Plan after January
27, 2004.
NEW LONG-TERM INCENTIVE PROGRAM
As described above in the Compensation Committee Report on Executive
Compensation, the Committee has initiated a long-term incentive program. The
performance stock options granted under the program in July 1993 will vest based
upon the Company's achievement of the stock price targets set forth below. Stock
price targets for vesting of the performance options expected to be granted in
April 1994 upon stockholder approval of the amendment and restatement of the
Plan will be established by the Committee at the time of grant.
<TABLE>
<CAPTION>
VESTED PERCENTAGE
TIME PERIOD STOCK PRICE TARGET OF ORIGINAL OPTION
- ------------------ -------------------------------------------------------------------------- -------------------
<S> <C> <C>
July 27, 1993 to not applicable 0%
July 26, 1995
July 27, 1995 to $31.325 33 1/3%
July 26, 1996 $35.800 66 2/3%
$39.156 100%
July 27, 1996 to $33.563 33 1/3%
July 26, 1997 $36.919 66 2/3%
$42.513 100%
July 27, 1997 to $35.800 33 1/3%
July 26, 1998 $38.038 66 2/3%
$42.513 100%
July 27, 1998 none 60%
July 27, 1998 to Total return on the Company's Common Stock (appreciation plus dividends) 100%
July 26, 2002 since date of grant is at least 100% of total return of median company in
S&P 500 index for same period.
July 27, 2002 none 100%
</TABLE>
In addition, before July 27, 1998, no portion of the performance option will
vest unless the total return on the Company's Common Stock (price appreciation
plus dividends) from the date of grant to the potential vesting date has been at
least 75% of the total return of the median company in the S&P 500 index for the
same period.
All of the performance options have been or are expected to be granted at an
exercise price equal to the closing price of the Company's Common Stock on the
trading date immediately before the grant date. The options granted on July 27,
1993, have an exercise price of $22.375 per share. On March 16, 1994, the
closing price of the Company's Common Stock on the New York Stock Exchange was
$30.125 per share.
For additional information regarding Plan awards, including performance
options, made to the named executive officers during fiscal 1993, see the tables
entitled "Summary Compensation Table" and "Option Grants in Last Fiscal Year"
set forth above.
23
<PAGE>
SHARES AVAILABLE FOR GRANT
Presently 140,928 shares are available for future awards under the Plan. If
the stockholders approve the proposed amendment and restatement of the Plan, the
number of shares available for future awards will be increased by 2,000,000 to
2,140,928. These shares may be awarded as restricted shares, stock units or
options. If any stock units or options are forfeited, or if options terminate
for any other reason prior to exercise (other than termination upon the exercise
of a related SAR), then the underlying shares again become available for awards
under the Plan. If restricted shares are forfeited before any dividends have
been paid with respect to them, then such restricted shares again become
available for awards.
The Board of Directors believes that the authorization of 2,000,000
additional shares under the Plan is appropriate at this time, in order to permit
the granting of the performance options described above and to ensure that
sufficient shares are available for other Plan purposes over the next several
years.
VOTE REQUIRED
Approval of the amendment and restatement of the Plan will require the
affirmative vote of the holders of a majority of the voting power represented by
the shares of stock of the Company entitled to vote thereon and represented at
the meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL
OF THE AMENDMENT AND RESTATEMENT OF THE COMPANY'S 1989 STOCK INCENTIVE PLAN.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Arthur Andersen & Co. to serve as the
Company's independent auditors for fiscal year 1994. Arthur Andersen & Co. have
served as the Company's independent auditors since 1983. While it is not
required to do so, the Board of Directors is submitting the selection of that
firm to the stockholders for ratification in order to ascertain the
stockholders' views. If ratification is not provided, the Board of Directors
will reconsider its selection.
Representatives of Arthur Andersen & Co. are expected to be present at the
meeting and available to respond to appropriate questions. Such representatives
will have the opportunity to make a statement if they desire to do so.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
RATIFICATION OF THE SELECTION OF ARTHUR ANDERSEN & CO.
STOCKHOLDER PROPOSALS
To be considered for presentation at the 1995 Annual Meeting of
Stockholders, a stockholder proposal must be received at the offices of the
Company not later than November 28, 1994.
OTHER MATTERS
The Board of Directors knows of no other business which will be presented to
the meeting. If any other business is properly brought before the meeting, it is
intended that proxies in the enclosed form will be voted in respect thereof in
accordance with the judgment of the persons voting the proxies.
24
<PAGE>
Whether you intend to be present at this meeting or not, you are urged to
return your proxy promptly.
By order of the Board of Directors,
Maryellen B. Cattani
SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
25
<PAGE>
NOTES
<PAGE>
PROXY
AMERICAN PRESIDENT COMPANIES, LTD.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby authorizes John M. Lillie, Will M. Storey, Maryellen
B. Cattani and Peter A. V. Huegel, with full power in each to act without the
other and with the power of substitution in each, to represent and to vote all
the shares of stock the undersigned is entitled to vote at the Annual Meeting of
Stockholders of American President Companies, Ltd. to be held on Thursday, April
28, 1994, or at any adjournment thereof.
(CONTINUED, AND TO BE MARKED, SIGNED AND DATED ON REVERSE SIDE)
SEE REVERSE
SIDE
<PAGE>
PLEASE MARK
/X/ VOTES AS IN
THIS EXAMPLE.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NOT OTHERWISE DIRECTED, FOR THE
ELECTION OF DIRECTORS AND FOR PROPOSALS 2 AND 3.
1. TO ELECT DIRECTORS.
<TABLE>
<S> <C>
CLASS I NOMINEES: TULLY M. FRIEDMAN
G. CRAIG SULLIVAN
CLASS II CHARLES S. ARLEDGE
NOMINEES: F. WARREN HELLMAN
TIMOTHY J. RHEIN
FORREST N. SHUMWAY
BARRY L. WILLIAMS
</TABLE>
/ / FOR ALL NOMINEES / / WITHHELD FROM ALL NOMINEES
/ /_____________________________________________________________________________
FOR ALL NOMINEES EXCEPT AS NOTED ABOVE.
2. TO APPROVE THE AMENDMENT AND RESTATEMENT OF THE COMPANY'S 1989 STOCK
INCENTIVE PLAN.
/ / FOR / / AGAINST / / ABSTAIN
3. TO RATIFY THE SELECTION OF ARTHUR ANDERSEN & CO. AS INDEPENDENT AUDITORS.
/ / FOR / / AGAINST / / ABSTAIN
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE ON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE SAID MEETING.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
PLEASE MARK, SIGN, DATE AND RETURN
(SIGN NAME EXACTLY AS IMPRINTED HEREON. IN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN GIVE FULL TITLE AS SUCH. IF SIGNER IS A
CORPORATION, GIVE FULL CORPORATE NAME AND HAVE SIGNED BY DULY AUTHORIZED OFFICER
SHOWING THE OFFICER'S TITLE.)
SIGNATURE:_________________________________________________________DATE_________
SIGNATURE:_________________________________________________________DATE_________
<PAGE>
APPENDIX
(DESCRIPTION OF PHOTOGRAPHS)
Headshot of Tully M. Friedman, a Class I nominee for director of the
Company. (Page 2)
Headshot of G. Craig Sullivan, a Class I nominee for director of the
Company. (Page 2)
Headshot of Charles S. Arledge, current director of the Company and Class II
director nominee. (Page 3)
Headshot of F. Warren Hellman, current director of the Company and Class II
director nominee. (Page 3)
Headshot of Timothy J. Rhein, current director of the Company and Class II
director nominee. (Page 3)
Headshot of Forrest N. Shumway, current director of the Company and Class II
director nominee. (Page 3)
Headshot of Barry L. Williams, current director of the Company and Class II
director nominee. (Page 4)
Headshot of John J. Hagenbuch, current director of the Company. (Page 4)
Headshot of Joji Hayashi, current director of the Company. (Page 4)
Headshot of W. B. Seaton, current director of the Company. (Page 4)
Headshot of John H. Barr, current director of the Company. (Page 5)
Headshot of John M. Lillie, current director of the Company. (Page 5)
Headshot of Toni Rembe, current director of the Company. (Page 5)
Headshot of Will M. Storey, current director of the Company. (Page 6)
<PAGE>
AMERICAN PRESIDENT COMPANIES, LTD.
1989 STOCK INCENTIVE PLAN
(as amended and restated effective April 28, 1994)
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE 1. INTRODUCTION.................................................. 1
ARTICLE 2. ADMINISTRATION................................................ 1
2.1 The Committee................................................. 1
2.2 Disinterested Directors....................................... 2
2.3 Committee Responsibilities.................................... 2
ARTICLE 3. LIMITATION ON AWARDS.......................................... 3
ARTICLE 4. ELIGIBILITY................................................... 4
4.1 General Rule.................................................. 4
4.2 Ten-Percent Stockholders...................................... 4
4.3 Attribution Rules............................................. 4
4.4 Outstanding Stock............................................. 5
ARTICLE 5. OPTIONS....................................................... 5
5.1 Stock Option Agreement........................................ 5
5.2 Options Nontransferable....................................... 5
5.3 Number of Shares.............................................. 6
5.4 Exercise Price................................................ 6
5.5 Exercisability and Term....................................... 6
5.6 Effect of Change in Control................................... 7
5.7 Modification, Extension and Renewal of Options................ 7
ARTICLE 6. PAYMENT FOR OPTION SHARES..................................... 8
6.1 General Rule.................................................. 8
6.2 Surrender of Stock............................................ 8
6.3 Exercise/Sale................................................. 9
6.4 Exercise/Pledge............................................... 9
6.5 Other Forms of Payment........................................ 9
-i-
<PAGE>
ARTICLE 7. STOCK APPRECIATION RIGHTS..................................... 9
7.1 Grant of SARs................................................. 9
7.2 Manner of Exercise of SARs.................................... 10
7.3 Special Holding Period........................................ 11
7.4 Special Exercise Window....................................... 11
7.5 Limited SARs.................................................. 11
ARTICLE 8. RESTRICTED SHARES AND STOCK UNITS............................. 11
8.1 Time, Amount and Form of Awards............................... 11
8.2 Payment for Awards............................................ 12
8.3 Vesting Conditions............................................ 12
8.4 Form of Settlement of Stock Units............................. 13
8.5 Time of Settlement of Stock Units............................. 13
8.6 Death of Recipient............................................ 13
ARTICLE 9. VOTING RIGHTS AND DIVIDENDS OR DIVIDEND EQUIVALENTS........... 14
9.1 Restricted Shares............................................. 14
9.2 Stock Units................................................... 14
ARTICLE 10. PROTECTION AGAINST DILUTION.................................. 15
10.1 General....................................................... 15
10.2 Reorganizations............................................... 15
10.3 Reservation of Rights......................................... 16
ARTICLE 11. LIMITATION OF RIGHTS......................................... 16
11.1 Employment Rights............................................. 16
11.2 Stockholders' Rights.......................................... 17
11.3 Creditors' Rights............................................. 17
11.4 Government Regulations........................................ 17
ARTICLE 12. LIMITATION ON PAYMENTS....................................... 18
12.1 Basic Rule.................................................... 18
-ii-
<PAGE>
12.2 Reduction of Payments......................................... 19
12.3 Overpayments and Underpayments................................ 20
12.4 Related Corporations........................................... 21
ARTICLE 13. WITHHOLDING TAXES............................................ 21
13.1 General....................................................... 21
13.2 Share Withholding............................................. 21
ARTICLE 14. ASSIGNMENT OR TRANSFER OF AWARD.............................. 22
ARTICLE 15. FUTURE OF THE PLAN........................................... 23
15.1 Term of the Plan.............................................. 23
15.2 Amendment or Termination...................................... 23
15.3 Effect of Amendment or Termination............................ 23
ARTICLE 16. DEFINITIONS.................................................. 23
ARTICLE 17. EXECUTION.................................................... 27
-iii-
<PAGE>
AMERICAN PRESIDENT COMPANIES, LTD.
1989 STOCK INCENTIVE PLAN
ARTICLE 1. INTRODUCTION.
The Plan was adopted by the Board on January 24, 1989, and approved by
the Company's stockholders on April 28, 1989. The Plan was amended and
restated by the Board on January 28, 1994, subject to approval by the
Company's stockholders at the annual meeting of stockholders on April 28,
1994. The purpose of the Plan is to promote the long-term success of the
Company and the creation of incremental stockholder value by (a) encouraging
Key Employees to focus on critical long-range objectives, (b) encouraging the
attraction and retention of Key Employees with exceptional qualifications and
(c) linking Key Employees directly to stockholder interests through increased
stock ownership. The Plan seeks to achieve this purpose by providing for
Awards in the form of Restricted Shares, Stock Units, stock appreciation
rights or Options, which may constitute incentive stock options or
nonstatutory stock options. The Plan shall be governed by, and construed in
accordance with, the laws of the State of California.
ARTICLE 2. ADMINISTRATION.
2.1 THE COMMITTEE. The Plan shall be administered by the Committee.
The Committee shall consist of two or more disinterested directors of the
Company, who shall be appointed by the Board. A member of the Committee shall
not be eligible to receive any Award under the Plan. The Board may also
appoint one or more separate committees of the Board, each composed of
-1-
<PAGE>
one or more directors of the Company who need not be disinterested, who may
administer the Plan with respect to Key Employees who are not officers or
directors of the Company, may grant Awards under the Plan to such Key
Employees and may determine all terms of such Awards.
2.2 DISINTERESTED DIRECTORS. A member of the Board shall be deemed
to be "disinterested" only if he or she satisfies (a) such requirements as the
Securities and Exchange Commission may establish for disinterested
administrators acting under plans intended to qualify for exemption under Rule
16b-3 (or its successor) under the Exchange Act and (b) such requirements as
the Internal Revenue Service may establish for outside directors acting under
plans intended to qualify for exemption under section 162(m)(4)(C) of the
Code.
2.3 COMMITTEE RESPONSIBILITIES. The Committee shall select the Key
Employees who are to receive Awards under the Plan, determine the amount,
vesting requirements and other conditions of such Awards, interpret the Plan,
and make all other decisions relating to the operation of the Plan. The
Committee may adopt such rules or guidelines as it deems appropriate to
implement the Plan. The Committee's determinations under the Plan shall be
final and binding on all persons.
ARTICLE 3. LIMITATION ON AWARDS.
The aggregate number of Restricted Shares, Stock Units and Options
awarded under the Plan shall not exceed 6,000,000 plus the number of Common
Shares remaining available for awards under the 1987 Contingent Management
Incentive Plan of American
-2-
<PAGE>
President Companies, Ltd. and the American President Companies, Ltd. 1983
Stock Option Plan as of April 28, 1989; provided that the aggregate number of
Restricted Shares and Stock Units awarded under the Plan shall not exceed
4,000,000 plus the number of Common Shares remaining available for awards
under the 1987 Contingent Management Incentive Plan of American President
Companies, Ltd. as of April 28, 1989. If any Stock Units or Options are
forfeited or if any Options terminate for any other reason before being
exercised, then such Stock Units or Options shall again become available for
Awards under the Plan. If Restricted Shares are forfeited before any
dividends have been paid with respect to such Restricted Shares, then such
Restricted Shares shall again become available for Awards under the Plan. If
any options granted under such option plan are forfeited or terminate for any
other reason before being exercised, then such options shall become available
for additional Awards under this Plan. However, if Options are surrendered
upon the exercise of related SARs, then such Options shall not be restored to
the pool available for Awards. Any dividend equivalents distributed under the
Plan shall not be applied against the number of Restricted Shares, Stock Units
or Options available for Awards, whether or not such dividend equivalents are
converted into Stock Units. The limitation of this Article 3 shall be subject
to adjustment pursuant to Article 10. Any Common Shares issued pursuant to
the Plan may be authorized but unissued shares or treasury shares.
ARTICLE 4. ELIGIBILITY.
-3-
<PAGE>
4.1 GENERAL RULE. Only Key Employees (including, without
limitation, members of the Board or officers of the Company who are also Key
Employees) shall be eligible for designation as Participants by the Committee.
4.2 TEN-PERCENT STOCKHOLDERS. A Key Employee who owns more than 10
percent of the total combined voting power of all classes of outstanding stock
of the Company or any of its Subsidiaries shall not be eligible for the grant
of an ISO unless (a) the Exercise Price under such ISO is at least 110 percent
of the Fair Market Value of a Common Share on the date of grant and (b) such
ISO by its terms is not exercisable after the expiration of five years from
the date of grant.
4.3 ATTRIBUTION RULES. For purposes of Section 4.2, in determining
stock ownership, a Key Employee shall be deemed to own the stock owned,
directly or indirectly, by or for his or her brothers, sisters, spouse,
ancestors and lineal descendants. Stock owned, directly or indirectly, by or
for a corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its stockholders, partners or beneficiaries. Stock
with respect to which the Key Employee holds an option shall not be counted.
4.4 OUTSTANDING STOCK. For purposes of Section 4.2, "outstanding
stock" shall include all stock actually issued and outstanding immediately
after the grant of the ISO to the Key Employee. "Outstanding stock" shall not
include treasury shares or shares authorized for issuance under outstanding
options held by the Key Employee or by any other person.
-4-
<PAGE>
ARTICLE 5. OPTIONS.
5.1 STOCK OPTION AGREEMENT. Each grant of an Option under the Plan
shall be evidenced by a Stock Option Agreement between the Optionee and the
Company. Such Option shall be subject to all applicable terms and conditions
of the Plan and may be subject to any other terms and conditions which are not
inconsistent with the Plan and which the Committee deems appropriate for
inclusion in a Stock Option Agreement. The provisions of the various Stock
Option Agreements entered into under the Plan need not be identical. The
Committee may designate all or any part of an Option as an ISO.
5.2 OPTIONS NONTRANSFERABLE. No Option granted under the Plan shall
be transferable by the Optionee other than by will, by a beneficiary
designation executed by the Optionee and delivered to the Company or by the
laws of descent and distribution, and no Option may be exercised during the
lifetime of the Optionee except by him or her. No Option or interest therein
may be transferred, assigned, pledged or hypothecated by the Optionee during
his or her lifetime, whether by operation of law or otherwise, or be made
subject to execution, attachment or similar process.
5.3 NUMBER OF SHARES. Each Stock Option Agreement shall specify the
number of Shares subject to the Option and shall provide for the adjustment of
such number in accordance with Article 10. Options granted to any Optionee in
a single calendar year shall in no event cover more than 250,000 Common
Shares, subject to adjustment in accordance with Article 10.
-5-
<PAGE>
The Stock Option Agreement shall also specify whether the Option is an ISO or
an NSO.
5.4 EXERCISE PRICE. Each Stock Option Agreement shall specify the
Exercise Price. The Exercise Price under an ISO shall not be less than 100
percent of the Fair Market Value of a Common Share on the date of grant,
except as otherwise provided in Section 4.2. The Exercise Price under an NSO
shall not be less than the par value of the Common Shares subject to such NSO.
Subject to the preceding two sentences, the Exercise Price under any Option
shall be determined by the Committee. The Exercise Price shall be payable in
accordance with Article 7.
5.5 EXERCISABILITY AND TERM. Each Stock Option Agreement shall
specify the date when all or any installment of the Option is to become
exercisable. The Stock Option Agreement shall also specify the term of the
Option. The term of an ISO shall in no event exceed 10 years from the date of
grant, and Section 4.2 may require a shorter term. Subject to Sections 7.3
and 7.4 and the preceding sentence, the Committee shall determine when all or
any part of an Option (and any SARs included therein) is to become exercisable
and when such Option is to expire. A Stock Option Agreement may provide for
accelerated exercisability in the event of the Optionee's death, disability or
retirement and may provide for expiration prior to the end of its term in the
event of the termination of the Optionee's employment. NSOs may also be
awarded in combination with Restricted Shares or Stock Units, and such an
Award may provide that the NSOs will not be
-6-
<PAGE>
exercisable unless the related Restricted Shares or Stock Units are forfeited.
5.6 EFFECT OF CHANGE IN CONTROL. The Committee (at its sole
discretion) may determine, at the time of granting an Option or thereafter,
that such Option (and any SARs included therein) shall become fully
exercisable as to all Common Shares subject to such Option in the event that a
Change in Control occurs with respect to the Company. If the Committee finds
that there is a reasonable possibility that, within the succeeding six months,
a Change in Control will occur with respect to the Company, then the Committee
may determine that all outstanding Options (and any SARs included therein)
shall become fully exercisable as to all Common Shares subject to such
Options.
5.7 MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Within the
limitations of the Plan, the Committee may modify, extend or renew outstanding
Options or may accept the cancellation of outstanding Options (to the extent
not previously exercised) in return for the grant of new Options at the same
or a different price. The foregoing notwithstanding, no modification of an
Option shall, without the consent of the Optionee, alter or impair his or her
rights or obligations under such Option.
ARTICLE 6. PAYMENT FOR OPTION SHARES.
6.1 GENERAL RULE. The entire Exercise Price of Common Shares issued
upon exercise of Options shall be payable in cash at the time when such Common
Shares are purchased, except as follows:
-7-
<PAGE>
(a) In the case of an ISO granted under the Plan, payment shall
be made only pursuant to the express provisions of the applicable Stock
Option Agreement. However, the Committee may specify in the Stock
Option Agreement that payment may be made pursuant to Section 6.2, 6.3,
6.4 or 6.5.
(b) In the case of an NSO, the Committee may at any time accept
payment pursuant to Section 6.2, 6.3, 6.4 or 6.5.
6.2 SURRENDER OF STOCK. To the extent that this Section 6.2 is
applicable, payment for all or any part of the Exercise Price may be made with
Common Shares which have already been owned by the Optionee for more than six
months and which are surrendered to the Company. Such Common Shares shall be
valued at their Fair Market Value on the date when the new Common Shares are
purchased under the Plan. In the event that the Common Shares being
surrendered are Restricted Shares that have not yet become vested, the same
restrictions shall be imposed upon the new Common Shares being purchased.
6.3 EXERCISE/SALE. To the extent this Section 6.3 is applicable,
payment may be made by the delivery (on a form prescribed by the Company) of
an irrevocable direction to a securities broker approved by the Company to
sell Common Shares and to deliver all or part of the sales proceeds to the
Company in payment of all or part of the Exercise Price and any withholding
taxes.
-8-
<PAGE>
6.4 EXERCISE/PLEDGE. To the extent that this Section 6.4 is
applicable, payment may be made by the delivery (on a form prescribed by the
Company) of an irrevocable direction to pledge Common Shares to a securities
broker or lender approved by the Company as security for a loan and to deliver
all or part of the loan proceeds to the Company in payment of all or part of
the Exercise Price and any withholding taxes.
6.5 OTHER FORMS OF PAYMENT. To the extent that this Section 6.5 is
applicable, payment may be made in any other form approved by the Committee,
consistent with applicable laws, regulations and rules.
ARTICLE 7. STOCK APPRECIATION RIGHTS.
7.1 GRANT OF SARS. Each Option granted under the Plan may, at the
discretion of the Committee, include an SAR. Such SAR shall entitle the
Optionee (or any person having the right to exercise the Option after his or
her death) to surrender to the Company, unexercised, all or any part of that
portion of the Option which then is exercisable and to receive from the
Company Common Shares or cash, or a combination of Common Shares and cash, as
the Committee shall determine. If an SAR is exercised, the number of Common
Shares remaining subject to the related Option shall be reduced accordingly,
and vice versa. The amount of cash and/or the Fair Market Value of Common
Shares received upon exercise of an SAR shall, in the aggregate, be equal to
the amount by which the Fair Market Value (on the date of surrender) of the
Common Shares subject to the surrendered portion of the Option exceeds the
Exercise Price. In no event shall any SAR be
-9-
<PAGE>
exercised if such Fair Market Value does not exceed the Exercise Price. The
discretion of the Committee to include an SAR in an ISO may be exercised only
at the time of the grant of such ISO. The discretion of the Committee to
include an SAR in an NSO may be exercised at the time of the grant of such NSO
or at any subsequent time, but not later than six months before the expiration
of such NSO.
7.2 MANNER OF EXERCISE OF SARS. An SAR may be exercised by written
notice to the Company. Subject to Sections 7.3 and 7.4, it may be exercised
to the extent, and only to the extent, that the Option in which it is included
is exercisable. If, on the date when an Option expires, the Exercise Price
under such Option is less than the Fair Market Value on such date but any
portion of such Option has not been exercised or surrendered, then any SAR
included in such Option shall automatically be deemed to be exercised as of
such date with respect to such portion.
7.3 SPECIAL HOLDING PERIOD. To the extent required by section 16 of
the Exchange Act or any rule thereunder, an SAR shall not be exercised for
cash unless both it and the related Option have been outstanding for more than
six months.
7.4 SPECIAL EXERCISE WINDOW. To the extent required by section 16
of the Exchange Act or any rule thereunder, an SAR may only be exercised for
cash during a period which (a) begins on the third business day following a
date when the Company's quarterly summary statement of sales and earnings is
released to the public and (b) ends on the 12th business day following such
-10-
<PAGE>
date. This Section 7.4 shall not apply if the exercise occurs automatically
on the date when the related Option expires, and the Committee may determine
that it shall not apply to limited SARs granted under Section 7.5.
7.5 LIMITED SARS. An Option granted under the Plan may, at the
discretion of the Committee, provide that it will be exercisable as an SAR
only in the event of a Change in Control.
ARTICLE 8. RESTRICTED SHARES AND STOCK UNITS.
8.1 TIME, AMOUNT AND FORM OF AWARDS. The Committee may grant
Restricted Shares or Stock Units with respect to an Award Year during such
Award Year or at any time thereafter. The amount of each Award of Restricted
Shares or Stock Units shall be determined by the Committee. Awards under the
Plan may be granted in the form of Restricted Shares, in the form of Stock
Units, or in any combination of both, as the Committee shall determine at its
sole discretion at the time of the grant. Restricted Shares or Stock Units
may also be awarded in combination with NSOs, and such an Award may provide
that the Restricted Shares or Stock Units will be forfeited in the event that
the related NSOs are exercised.
8.2 PAYMENT FOR AWARDS. To the extent that an Award is granted in
the form of Restricted Shares, the Award recipient, as a condition to the
grant of such Award, shall be required to pay the Company in cash an amount
equal to the par value of such Restricted Shares. To the extent that an Award
is granted in the form of Stock Units, no cash consideration shall be required
of Award recipients.
-11-
<PAGE>
8.3 VESTING CONDITIONS. Each Award of Restricted Shares or Stock
Units shall become vested, in full or in installments, upon satisfaction of
the conditions specified in the Stock Award Agreement. The Committee shall
select the vesting conditions, which may be based upon the Participant's
service, the Participant's performance, the Company's performance or such
other criteria as the Committee may adopt. A Stock Award Agreement may also
provide for accelerated vesting in the event of the Participant's death,
disability or retirement. The Committee (at its sole discretion) may
determine, at the time of making an Award or thereafter, that such Award shall
become fully vested in the event that a Change in Control occurs with respect
to the Company.
8.4 FORM OF SETTLEMENT OF STOCK UNITS. Settlement of vested Stock
Units may be made in the form of cash, in the form of Common Shares, or in any
combination of both, as the Committee shall determine at or before the time
when distribution commences. The Committee may designate a method of
converting Stock Units into cash, including (without limitation) a method
based on the average Fair Market Value of Common Shares over a series of
trading days. Until an Award of Stock Units is settled, the number of such
Stock Units shall be subject to adjustment pursuant to Article 10.
8.5 TIME OF SETTLEMENT OF STOCK UNITS. Vested Stock Units may be
settled in a lump sum or in installments. The distribution may occur or
commence when all vesting conditions applicable to the Stock Units have been
satisfied or have lapsed, or
-12-
<PAGE>
it may be deferred to any later date. The Committee shall determine when all
or any part of an Award of Stock Units is to be distributed, and it may modify
its original determination with respect to the time of distribution at any
time before settlement of the Stock Units is completed. The Committee may
also permit Participants to request a deferral of any distribution under this
Section 8.5. In the case of any deferred distribution, the Committee may
increase the amount of such distribution by an interest factor or by dividend
equivalents, as it deems appropriate.
8.6 DEATH OF RECIPIENT. Any Stock Units Award which becomes payable
after the recipient's death shall be delivered or distributed to the
recipient's beneficiary or beneficiaries. Each recipient of a Stock Units
Award under the Plan shall designate one or more beneficiaries for this
purpose by filing the prescribed form with the Company. A beneficiary
designation may be changed by filing the prescribed form with the Company at
any time before the Award recipient's death. If no beneficiary was designated
or if no designated beneficiary survives the Award recipient, then any Stock
Units Award which becomes payable after the recipient's death shall be
delivered or distributed to the recipient's estate. The Committee, at its
sole discretion, shall determine the form and time of any distribution(s) to a
recipient's beneficiary or estate.
ARTICLE 9. VOTING RIGHTS AND DIVIDENDS
OR DIVIDEND EQUIVALENTS.
-13-
<PAGE>
9.1 RESTRICTED SHARES. The holders of Restricted Shares awarded
under the Plan shall have the same voting, dividend and other rights as the
Company's other stockholders.
9.2 STOCK UNITS. The holders of Stock Units shall have no voting
rights. Prior to settlement or forfeiture, any Stock Unit awarded under the
Plan shall carry with it a right to dividend equivalents. Such right entitles
the holder to be credited with an amount equal to all cash dividends paid on
one Common Share while the Stock Unit is outstanding. Dividend equivalents
may be converted into additional Stock Units. The Committee shall determine
at what time(s) any dividend equivalents are to be distributed. Settlement of
dividend equivalents may be made in the form of cash, in the form of Common
Shares, or in a combination of both. Prior to distribution, any dividend
equivalents which are not paid on or about the date when dividends on Common
Shares are paid shall be subject to the same conditions and restrictions
(including, without limitation, any forfeiture conditions) as the Stock Units
to which they attach. The Committee, at its sole discretion, shall make all
determinations relating to dividend equivalents.
ARTICLE 10. PROTECTION AGAINST DILUTION.
10.1 GENERAL. In the event of a subdivision of the outstanding
Common Shares, a declaration of a dividend payable in Common Shares, a
declaration of a dividend payable in a form other than Common Shares in an
amount that has a material effect on the price of Common Shares, a spinoff, a
combination or consolidation of the outstanding Common Shares (by
reclassifica-
-14-
<PAGE>
tion or otherwise) into a lesser number of Common Shares, a recapitalization
or a similar occurrence, the Committee shall make appropriate adjustments in
one or more of (a) the number of Options, Restricted Shares and Stock Units
available for future Awards under Section 3.1, (b) the number of Stock Units
included in any prior Award which has not yet been settled, (c) the number of
Common Shares covered by each outstanding Option or (d) the Exercise Price
under each outstanding Option.
10.2 REORGANIZATIONS. In the event that the Company is a party to a
merger or other reorganization, outstanding Options, Restricted Shares and
Stock Units shall be subject to the agreement of merger or reorganization.
Such agreement may provide, without limitation, for the assumption of
outstanding Awards by the surviving corporation or its parent, for their
continuation by the Company (if the Company is a surviving corporation), for
accelerated vesting or for settlement in cash.
10.3 RESERVATION OF RIGHTS. Except as provided in this Article 10, a
Participant shall have no rights by reason of any subdivision or consolidation
of shares of stock of any class, the payment of any stock dividend or any
other increase or decrease in the number of shares of stock of any class. Any
issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
Exercise Price of Common Shares subject to an Option. The grant of an Award
pursuant to the Plan shall not affect in any way the right or power of the
-15-
<PAGE>
Company to make adjustments, reclassifications, reorganizations or changes of
its capital or business structure, to merge or consolidate or to dissolve,
liquidate, sell or transfer all or any part of its business or assets.
ARTICLE 11. LIMITATION OF RIGHTS.
11.1 EMPLOYMENT RIGHTS. Neither the Plan nor any Award granted under
the Plan shall be deemed to give any individual a right to remain employed by
the Company or a Subsidiary. The Company and its Subsidiaries reserve the
right to terminate the employment of any employee at any time, with or without
cause, subject only to a written employment agreement (if any).
11.2 STOCKHOLDERS' RIGHTS. A Participant shall have no dividend
rights, voting rights or other rights as a stockholder with respect to any
Common Shares covered by his or her Award prior to the issuance of a stock
certificate for such Common Shares. No adjustment shall be made for cash
dividends or other rights for which the record date is prior to the date when
such certificate is issued, except as expressly provided in Articles 8, 9 and
10.
11.3 CREDITORS' RIGHTS. A holder of Stock Units shall have no rights
other than those of a general creditor of the Company. Stock Units represent
an unfunded and unsecured obligation of the Company, subject to the terms and
conditions of the applicable Stock Award Agreement.
11.4 GOVERNMENT REGULATIONS. Any other provision of the Plan
notwithstanding, the obligations of the Company with respect to Common Shares
to be issued pursuant to the Plan shall
-16-
<PAGE>
be subject to all applicable laws, rules and regulations and such approvals by
any governmental agencies as may be required. The Company reserves the right
to restrict, in whole or in part, the delivery of Common Shares pursuant to
any Award until such time as:
(a) Any legal requirements or regulations have been met relating
to the issuance of such Common Shares or to their registration,
qualification or exemption from registration or qualification under the
Securities Act of 1933, as amended, or any applicable state securities
laws; and
(b) Satisfactory assurances have been received that such Common
Shares, when issued, will be duly listed on the New York Stock Exchange,
Inc. or any other securities exchange on which Common Shares are then
listed.
ARTICLE 12. LIMITATION ON PAYMENTS.
12.1 BASIC RULE. Any provision of the Plan to the contrary
notwithstanding, in the event that the independent auditors most recently
selected by the Board (the "Auditors") determine that any payment or transfer
by the Company to or for the benefit of a Key Employee, whether paid or
payable (or transferred or transferable) pursuant to the terms of this Plan or
otherwise (a "Payment"), would be nondeductible by the Company for federal
income tax purposes because of the provisions concerning "excess parachute
payments" in section 280G of the Code, then the aggregate present value of all
Payments shall be reduced (but
-17-
<PAGE>
not below zero) to the Reduced Amount; provided that each award granted under
a plan of the Company prior to May 2, 1986, shall not be so reduced and shall
not be subject to this Article 12; and provided, further, that the Committee,
at the time of making an Award under this Plan or at any time thereafter, may
specify in writing that such Award shall not be so reduced and shall not be
subject to this Article 12. For purposes of this Article 12, the "Reduced
Amount" shall be the amount, expressed as a present value, which maximizes the
aggregate present value of the Payments without causing any Payment to be
nondeductible by the Company because of section 280G of the Code.
12.2 REDUCTION OF PAYMENTS. If the Auditors determine that any
Payment would be nondeductible by the Company because of section 280G of the
Code, then the Company shall promptly give the Key Employee notice to that
effect and a copy of the detailed calculation thereof and of the Reduced
Amount, and the Key Employee may then elect, in his or her sole discretion,
which and how much of the Payments shall be eliminated or reduced (as long as
after such election the aggregate present value of the Payments equals the
Reduced Amount) and shall advise the Company in writing of his or her election
within 10 days of receipt of notice. If no such election is made by the Key
Employee within such 10-day period, then the Company may elect which and how
much of the Payments shall be eliminated or reduced (as long as after such
election the aggregate present value of the Payments equals the Reduced
Amount) and shall notify the Key Employee promptly of such election. For
purposes
-18-
<PAGE>
of this Article 12, present value shall be determined in accordance with
section 280G(d)(4) of the Code. All determinations made by the Auditors under
this Article 12 shall be binding upon the Company and the Key Employee and
shall be made within 60 days of the date when a payment becomes payable or
transferable. As promptly as practicable following such determination and the
elections hereunder, the Company shall pay or transfer to or for the benefit
of the Key Employee such amounts as are then due to him or her under the Plan
and shall promptly pay or transfer to or for the benefit of the Key Employee
in the future such amounts as become due to him or her under the Plan.
12.3 OVERPAYMENTS AND UNDERPAYMENTS. As a result of uncertainty in
the application of section 280G of the Code at the time of an initial
determination by the Auditors hereunder, it is possible that Payments will
have been made by the Company which should not have been made (an
"Overpayment") or that additional Payments which will not have been made by
the Company could have been made (an "Underpayment"), consistent in each case
with the calculation of the Reduced Amount hereunder. In the event that the
Auditors, based upon the assertion of a deficiency by the Internal Revenue
Service against the Company or the Key Employee which the Auditors believe has
a high probability of success, determine that an Overpayment has been made,
such Overpayment shall be treated for all purposes as a loan to the Key
Employee which he or she shall repay to the Company, together with interest at
the applicable federal rate provided in section 7872(f)(2) of the Code;
provided, however,
-19-
<PAGE>
that no amount shall be payable by the Key Employee to the Company if and to
the extent that such payment would not reduce the amount which is subject to
taxation under section 4999 of the Code. In the event that the Auditors
determine that an Underpayment has occurred, such Underpayment shall promptly
be paid or transferred by the Company to or for the benefit of the Key
Employee, together with interest at the applicable federal rate provided in
section 7872(f)(2) of the Code.
12.4 RELATED CORPORATIONS. For purposes of this Article 12, the term
"Company" shall include affiliated corporations to the extent determined by
the Auditors in accordance with section 280G(d)(5) of the Code.
ARTICLE 13. WITHHOLDING TAXES.
13.1 GENERAL. If withholding tax obligations arise under federal,
state, local or foreign law in connection with any transaction under the Plan,
then the Participant, beneficiary or other person who is subject to such
obligations shall make arrangements satisfactory to the Company to meet such
obligations. The Company shall not be required to issue any Common Shares or
make any cash payment under the Plan until such obligations are satisfied.
13.2 SHARE WITHHOLDING. The Committee may permit a Participant,
beneficiary or other person who is subject to withholding or income tax
obligations in connection with any transaction under the Plan to satisfy all
or part of such obligations by having the Company withhold a portion of any
Common Shares that otherwise would be issued to him or her or by surrendering
a
-20-
<PAGE>
portion of any Common Shares that previously were issued to him or her. Such
Common Shares shall be valued at their Fair Market Value on the date when
taxes otherwise would be withheld in cash. Any payment of taxes by assigning
Common Shares to the Company may be subject to restrictions, including any
restrictions required by rules of the Securities and Exchange Commission.
ARTICLE 14. ASSIGNMENT OR TRANSFER OF AWARD.
Any Award granted under the Plan shall not be anticipated, assigned,
attached, garnished, optioned, transferred or made subject to any creditor's
process, whether voluntarily, involuntarily or by operation of law. Any act
in violation of this Article 14 shall be void. However, this Article 14 shall
not preclude a Participant from designating a beneficiary who will receive any
undistributed Awards in the event of the Participant's death, nor shall it
preclude a transfer by will or by the laws of descent and distribution. In
addition, neither this Article 14 nor any other provision of the Plan shall
preclude a Participant from transferring or assigning Restricted Shares to (a)
the trustee of a trust that is revocable by such Participant alone, both at
the time of the transfer or assignment and at all times thereafter prior to
such Participant's death, or (b) the trustee of any other trust to the extent
approved in advance by the Committee in writing. A transfer or assignment of
Restricted Shares from such trustee to any person other than such Participant
shall be permitted only to the extent approved in advance by the Committee in
writing, and Restricted Shares held by such
-21-
<PAGE>
trustee shall be subject to all of the conditions and restrictions set forth
in the Plan and in the applicable Stock Award Agreement as if such trustee
were a party to such Agreement.
ARTICLE 15. FUTURE OF THE PLAN.
15.1 TERM OF THE PLAN. The Plan, as set forth herein, shall become
effective on April 28, 1994, subject to the approval of the Company's
stockholders. The Plan shall remain in effect until it is terminated under
Section 15.2, except that no ISOs shall be granted after January 27, 2004.
15.2 AMENDMENT OR TERMINATION. The Board may, at any time and for
any reason, amend or terminate the Plan. However, any amendment of the Plan
shall be subject to the approval of the Company's stockholders to the extent
required by applicable laws, regulations or rules.
15.3 EFFECT OF AMENDMENT OR TERMINATION. No Awards shall be made
under the Plan after the termination thereof. The termination of the Plan, or
any amendment thereof, shall not affect any Option, Restricted Share or Stock
Unit previously granted under the Plan.
ARTICLE 16. DEFINITIONS.
16.1 "AWARD" means any award of an Option (with or without a related
SAR), a Restricted Share or a Stock Unit under the Plan.
16.2 "AWARD YEAR" means a calendar year with respect to which an
Award may be granted.
16.3 "BOARD" means the Company's Board of Directors, as constituted
from time to time.
-22-
<PAGE>
16.4 "CHANGE IN CONTROL" means the occurrence of any of the following
events:
(a) A change in control required to be reported pursuant to Item
6(e) of Schedule 14A of Regulation 14A under the Exchange Act;
(b) A change in the composition of the Board, as a result of
which fewer than two-thirds of the incumbent directors are directors who
either (i) had been directors of the Company 24 months prior to such
change or (ii) were elected, or nominated for election, to the Board
with the affirmative votes of at least a majority of the directors who
had been directors of the Company 24 months prior to such change and who
were still in office at the time of the election or nomination; or
(c) Any "person" (as such term is used in sections 13(d) and
14(d) of the Exchange Act) is or becomes the beneficial owner, directly
or indirectly, of securities of the Company representing 20 percent or
more of the combined voting power of the Company's then outstanding
securities ordinarily (and apart from rights accruing under special
circumstances) having the right to vote at elections of directors (the
"Base Capital Stock"); provided, however, that any change in the
relative beneficial ownership of securities of any person resulting
solely from a reduction in the aggregate number of outstanding shares of
Base Capital
-23-
<PAGE>
Stock, and any decrease thereafter in such person's ownership of
securities, shall be disregarded until such person increases in any
manner, directly or indirectly, such person's beneficial ownership of
any securities of the Company.
16.5 "CODE" means the Internal Revenue Code of 1986, as amended.
16.6 "COMMITTEE" means the Compensation Committee of the Board, as
constituted from time to time in accordance with Article 2.
16.7 "COMMON SHARE" means one share of the common stock of the
Company.
16.8 "COMPANY" means American President Companies, Ltd., a Delaware
corporation.
16.9 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
16.10 "EXERCISE PRICE" means the amount for which one Common Share
may be purchased upon exercise of an Option, as specified by the Committee in
the applicable Stock Option Agreement.
16.11 "FAIR MARKET VALUE" shall mean the closing price of a Common
Share on the trading day immediately preceding the day in question, as stated
in the New York Stock Exchange composite transactions report.
16.12 "ISO" means an incentive stock option described in section
422(b) of the Code.
-24-
<PAGE>
16.13 "KEY EMPLOYEE" means a key employee of the Company or any
Subsidiary, as determined by the Committee.
16.14 "NSO" means an employee stock option not described in section
422 or 423 of the Code.
16.15 "OPTION" means an ISO or NSO granted under the Plan and
entitling the holder to purchase one Common Share.
16.16 "OPTIONEE" means an individual who holds an
Option.
16.17 "PARTICIPANT" means a Key Employee who has received an Award.
16.18 "PLAN" means this American President Companies, Ltd. 1989 Stock
Incentive Plan, as it may be amended from time to time.
16.19 "RESTRICTED SHARE" means a Common Share awarded to a
Participant under the Plan subject to vesting conditions.
16.20 "SAR" means a stock appreciation right granted under the Plan
as part of an Option or as a subsequent addition to an Option.
16.21 "STOCK AWARD AGREEMENT" means the agreement between the Company
and the recipient of a Restricted Share or Stock Unit which contains the
terms, conditions and restrictions pertaining to such Restricted Share or
Stock Unit.
16.22 "STOCK OPTION AGREEMENT" means the agreement between the
Company and an Optionee which contains the terms, conditions and restrictions
pertaining to his or her Option.
-25-
<PAGE>
16.23 "STOCK UNIT" means a bookkeeping entry representing the
equivalent of one Common Share and awarded to a Participant under the Plan.
16.24 "SUBSIDIARY" means any corporation, if the Company and/or one
or more other Subsidiaries own not less than 50 percent of the total combined
voting power of all classes of outstanding stock of such corporation. A
corporation that attains the status of a Subsidiary on a date after the
adoption of the Plan shall be considered a Subsidiary commencing as of such
date.
ARTICLE 17. EXECUTION.
To record the amendment and restatement of the Plan by the Board, the
Company has caused its duly authorized officer to affix the corporate name and
seal hereto.
AMERICAN PRESIDENT COMPANIES, LTD.
By
---------------------------------
-26-
