<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
A.L. PHARMA INC.
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
A.L. PHARMA INC.
------------------------------------------------------------------------
(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), 14a-6(i)(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./1/
(4) Proposed maximum aggregate value of transaction:
[_] 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:
- - -------------------
/1/ Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
[LOGO OF A.L. PHARMA INC. APPEARS HERE]
A.L. PHARMA INC.
One Executive Drive
P.O. Box 1399
Fort Lee, New Jersey 07024
----------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 7, 1995
----------------------------------------
To the Stockholders of A.L. Pharma Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of A.L. Pharma
Inc., a Delaware corporation (the "Company"), will be held at THE REGENCY
HOTEL, 540 PARK AVENUE, NEW YORK, NEW YORK, on Wednesday, June 7, 1995, at
10:00 a.m., local time, to consider and act upon the following matters:
1. The election of nine directors to the Company's Board of Directors, each
to hold office until the 1996 Annual Meeting of Stockholders and until
their successors shall be elected and shall qualify.
2. Approval of certain amendments to the Company's 1983 Incentive Stock
Option Plan described in the accompanying Proxy Statement.
3. Transaction of such other business as may properly come before the
meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on April 7, 1995 as
the record date for determining the stockholders entitled to notice of and to
vote at the meeting or any adjournment thereof.
YOUR REPRESENTATION AT THIS MEETING IS IMPORTANT. Whether or not you expect
to attend the Annual Meeting in person, please complete, date, sign and return
the enclosed proxy. An envelope is enclosed for your convenience which, if
mailed in the United States, requires no additional postage. If you attend the
Annual Meeting, you may then withdraw your proxy and vote in person.
A copy of the Company's Annual Report for the year ended December 31, 1994
and a Proxy Statement accompany this notice.
By order of the Board of Directors,
Beth P. Hecht
Secretary
April 10, 1995
<PAGE>
[LOGO OF A.L. PHARMA INC. APPEARS HERE]
A.L. PHARMA INC.
ONE EXECUTIVE DRIVE
P.O. BOX 1399
FORT LEE, NEW JERSEY 07024
MAILING DATE
APRIL 10, 1995
--------------------------------------------------
Proxy Statement for Annual Meeting of Stockholders
--------------------------------------------------
To Be Held on June 7, 1995
This proxy statement (the "Proxy Statement") is furnished in connection with
the solicitation of proxies by the Board of Directors of A.L. Pharma Inc., a
Delaware corporation (the "Company"), for use at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held on Wednesday, June 7, 1995 at
The Regency Hotel, 540 Park Avenue, New York, New York at 10:00 a.m., local
time, and at any adjournment or postponement thereof. The cost of solicitation
of the Company's stockholders will be paid by the Company. Such cost will
include the reimbursement of banks, brokerage firms, nominees, fiduciaries and
other custodians for expenses of forwarding solicitation materials to
beneficial owners of shares. In addition to the solicitation of proxies by use
of mail, the directors, officers and employees of the Company may solicit
proxies personally or by telephone, telegraph or facsimile transmission. Such
directors, officers and employees will not be additionally compensated for such
solicitation but may be reimbursed for out-of-pocket expenses incurred in
connection therewith.
THE ANNUAL MEETING
PURPOSE OF MEETING
At the Annual Meeting, the Company's stockholders will consider and act upon
the following matters:
1. The election of nine directors to the Company's Board of Directors,
each to hold office until the 1996 Annual Meeting of Stockholders and until
their successors shall be elected and shall qualify. See "Election of
Directors."
2. The approval of certain amendments to the Company's 1983 Incentive
Stock Option Plan. See "Amendments to the 1983 Incentive Stock Option
Plan."
3. Transaction of such other business as may properly come before the
meeting or any adjournments or postponements thereof.
RECORD DATE
The close of business on April 7, 1995 (the "Record Date") has been fixed as
the record date for determining holders of outstanding shares of the Company's
Class A Common Stock, par value $.20 per share (the "Class A Stock"), and Class
B Common Stock, par value $.20 per share (the "Class B Stock"), entitled
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<PAGE>
to notice of, and entitled to vote at, the Annual Meeting. As of the Record
Date, 13,388,309 shares of Class A Stock and 8,226,562 shares of Class B Stock
were outstanding and entitled to vote.
QUORUM
For each matter to be voted upon at the Annual Meeting, the presence in
person or by proxy, of holders of stock entitled to be voted with respect to
such matter representing a majority of the aggregate voting power of all shares
of stock entitled to be voted with respect to such matter is necessary to
constitute a quorum with respect to such matter and to transact business with
respect to such matter at the Annual Meeting. For purposes of determining
whether a quorum exists with respect to the election of directors, shares as to
which authority to vote in the election of directors has been withheld and
broker non-votes (where a broker submits a proxy but does not have authority to
vote a customer's shares on one or more matters) with respect thereto will be
considered present at the Annual Meeting. For purposes of determining whether a
quorum exists with respect to amending the Company's 1983 Incentive Stock
Option Plan and any other matter which may properly come before the Annual
Meeting, shares abstaining on such matter and all broker non-votes with respect
to such matter will be considered present at the Annual Meeting.
REQUIRED VOTE
Votes Entitled to be Cast by Each Class of Stock. Except for the election of
directors (described below) and certain matters that require a class vote, the
holders of the Class A Stock and the holders of the Class B Stock vote
together, with each share of Class A Stock entitling the holder thereof to one
vote and each share of Class B Stock entitling the holder thereof to four
votes.
Election of Directors. Nine directors will be elected at the Annual Meeting.
Under the Company's Certificate of Incorporation, the holders of the Class A
Stock are entitled, voting as a separate class, to elect at least 33 1/3% of
the Company's Board of Directors (rounded to the nearest whole number, but in
no event less than two members of the Company's Board of Directors), and the
holders of the Class B Stock are entitled, voting separately as a class, to
elect the remaining directors. Therefore, the holders of the Class A Stock will
elect three directors (directors to be elected by the holders of Class A Stock
being referred to as the "Class A Directors") and the holders of the Class B
Stock will elect six directors (directors elected by the holders of Class B
Stock being referred to as the "Class B Directors"). The affirmative vote of a
plurality of the votes cast at the Annual Meeting by the holders of the Class A
Stock, voting as a single class, is necessary to elect the three Class A
Directors, and the affirmative vote of a plurality of the votes cast at the
Annual Meeting by the holders of the Class B Stock, voting as a single class,
is necessary to elect the six Class B Directors. (A plurality of the votes cast
means the greatest number of votes cast for a director.)
Amendments to the Company's 1983 Incentive Stock Option Plan. Approval of the
amendments to the Company's 1983 Incentive Stock Option Plan requires the
affirmative vote of a majority of the aggregate number of votes cast by the
holders of the Class A Stock and the holders of the Class B Stock, voting
together as a single class, present and entitled to vote at the Annual Meeting.
PROXIES
The enclosed proxy provides space for stockholders to vote for, or withhold
authority to vote for, any or all of the Company's three nominees for Class A
Directors. The proxy also provides space for stockholders to vote for, against,
or to abstain from voting on the proposed amendments to the Company's 1983
Incentive Stock Option Plan.
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<PAGE>
Shares of Class A Stock represented by properly executed proxies received at
or prior to the Annual Meeting and which have not been revoked will be voted in
accordance with the instructions indicated therein. If no instructions are
indicated, such proxies will be voted FOR (i) the election, as directors, of
the three nominees for Class A Directors nominated by the Company's Board of
Directors (see "Election of Directors-- Nominees for Directors -- Nominees for
Class A Directors" below); and (ii) the proposed amendments to the Company's
1983 Incentive Stock Option Plan (see "Amendments to the 1983 Incentive Stock
Option Plan" below); and, in the discretion of the proxy holder, as to any
other matter which may properly come before the Annual Meeting. With respect to
the election of directors, neither shares as to which authority to vote has
been withheld (to the extent withheld) nor broker non-votes will be considered
affirmative votes. With respect to the amendments to the Company's 1983
Incentive Stock Option Plan, (i) abstentions, pursuant to Delaware law, will be
considered present and entitled to vote but will not have been cast and
therefore will not be counted in determining whether such proposal received the
requisite votes and (ii) broker non-votes will be considered not entitled to
vote on such proposal and thus will not be counted in determining whether such
proposal has received the requisite votes.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING,
PLEASE COMPLETE, DATE AND SIGN YOUR PROXY IN ORDER TO ENSURE THAT YOUR SHARES
WILL BE REPRESENTED AT THE ANNUAL MEETING. THE GIVING OF SUCH PROXY DOES NOT
AFFECT YOUR RIGHT TO VOTE IN PERSON IN THE EVENT YOU ATTEND THE ANNUAL MEETING.
A holder of Class A Stock who has given a proxy may revoke such proxy at any
time prior to its exercise at the Annual Meeting by (i) giving written notice
of revocation to the Secretary of the Company, (ii) properly submitting to the
Company a duly executed proxy bearing a later date or (iii) attending the
Annual Meeting and voting in person. Attendance at the Annual Meeting will not
in and of itself revoke a proxy. All written notices of revocation and other
communications with respect to revocation of proxies should be sent to the
attention of the Secretary of the Company at the Company's United States
executive offices, located at One Executive Drive, P.O. Box 1399, Fort Lee, New
Jersey 07024.
If a quorum is not obtained, the Annual Meeting may be adjourned for the
purpose of obtaining additional proxies or for any other purpose, and, at any
subsequent reconvening of the Annual Meeting, all proxies will be voted in the
same manner as such proxies would have been voted at the original convening of
the meeting (except for any proxies which have theretofore effectively been
revoked or withdrawn), notwithstanding that they may have been effectively
voted on the same or any other matter at a previous meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
OWNERSHIP OF COMMON STOCK
The following table sets forth as of March 1, 1995 (unless otherwise noted)
certain information regarding the beneficial ownership of the Class A Stock and
the Class B Stock by (a) each person who is known to the Company to be the
beneficial owner of more than 5% of the outstanding shares of either of such
classes, (b) each director and each nominee for director of the Company and the
five named executive officers (as defined below) and (c) all directors and
executive officers of the Company as a group. Unless otherwise indicated, each
beneficial owner possesses sole voting and dispositive power with respect to
the shares listed in this table.
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<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND
NATURE PERCENT PERCENT OF
TITLE OF CLASS OF BENEFICIAL OF COMMON STOCK
OF STOCK NAME OF BENEFICIAL OWNER OWNERSHIP CLASS (BOTH CLASSES)
-------------------- ------------------------ ------------- ------- --------------
<C> <S> <C> <C> <C>
Class B Common Stock A.L. Industrier AS(1) 8,226,562(2) 100.00% 38.06%
Class A Common Stock A.L. Industrier AS(1) 0(3) * (3) *
Class A Common Stock Wellington Management
Company(4) 1,991,550 14.88 9.21
Class A Common Stock INVESCO PLC(5)
INVESCO North American
Group, Ltd.(5)
INVESCO, Inc.(5)
INVESCO North American
Holdings, Inc.(5)
INVESCO Funds Group,
Inc.(5) 1,381,000 10.32 6.39
Class A Common Stock Government of Singapore
Investment Corporation
Pte Ltd.(6)
Government of
Singapore(6)
Monetary Authority of
Singapore(6) 1,303,800 9.74 6.03
Class A Common Stock State of Wisconsin
Investment Board(7) 1,171,000 8.75 5.42
Class A Common Stock Vanguard Specialized
Portfolios, Inc.--
Health Care(8) 847,700 6.33 3.92
Class A Common Stock Einar W. Sissener(9) 0 * *
Class A Common Stock James Balog 11,000 * *
Class A Common Stock I. Roy Cohen 27,844 * *
Class A Common Stock Thomas G. Gibian 1,450 * *
Class A Common Stock Glen E. Hess 4,525 * *
Class A Common Stock Gert W. Munthe(10) 0 * *
Class A Common Stock Georg W. Sverdrup(11) 4,500 * *
Class A Common Stock Erik G. Tandberg(12) 0 * *
Class A Common Stock Peter G. Tombros 500 * *
Class A Common Stock Jeffrey E. Smith(13) 63,124 * *
Class A Common Stock David E. Cohen(14) 41,466 * *
Class A Common Stock Niels L. Graugaard 14,000 * *
Class A Common Stock George S. Barrett(15) 11,678 * *
Class A Common Stock All directors and
executive officers as a
group (18 persons)(16) 191,100 1.43 *
</TABLE>
- - ----------------------
* Indicates ownership of less than one percent.
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<PAGE>
(1) The address of A.L. Industrier AS (formerly known as Apothekernes
Laboratorium A.S), a corporation organized and existing under the laws of
the Kingdom of Norway ("A.L. Industrier"), is Postboks 158 Skoyen, N-0212
Oslo 2, Norway.
(2) These shares of Class B Stock are held of record by A/S Wangs Fabrik, a
wholly owned subsidiary of A.L. Industrier, although A.L. Industrier
retains full beneficial ownership of these shares. Of such amount 1,828,125
shares have been pledged to two Norwegian banks as collateral for
outstanding debt and unused drawing facilities. A.L. Industrier has agreed
with the Company that, other than pledges of up to 2,000,000 shares
(including the pledges of shares described above), it will not sell or
otherwise dispose of any of its Class B Stock or convert any such shares
into Class A Stock at any time prior to November 1, 1997.
(3) Shares of Class B Stock are convertible into an equal number of shares of
Class A Stock. If all shares of Class B Stock beneficially owned by A.L.
Industrier were converted as of March 1, 1995, A.L. Industrier would own
approximately 38.06% of the then outstanding shares of Class A Stock.
(4) The source of this information is the Amendment No. 4 to Schedule 13G dated
January 24, 1995 and filed with the Securities and Exchange Commission (the
"Commission") by Wellington Management Company ("WMC"). Such Amendment No.
4 to Schedule 13G reported that WMC has shared voting power and shared
dispositive power with respect to 770,150 shares and 1,991,550 shares,
respectively, and does not have sole voting power or sole dispositive power
with respect to any shares. WMC also reported that, other than Vanguard
Specialized Portfolios, Inc. -- Health Care ("Vanguard"), none of its
clients is known to have more than 5% beneficial ownership. See footnote
(8) below for information regarding Vanguard's ownership of shares of Class
A Stock. The address of WMC is 75 State Street, Boston, Massachusetts
02109.
(5) The source of this information is the Amendment No. 2 to Schedule 13G dated
February 14, 1995 and filed with the Commission by INVESCO PLC, a parent
holding company, INVESCO North American Group, Ltd., a holding company,
INVESCO, Inc., a holding company, INVESCO North American Holdings, Inc., a
holding company, and INVESCO Funds Group, Inc., an investment adviser
registered under Section 203 of the Investment Advisers Act of 1940. Such
Amendment No. 2 to Schedule 13G reported that each of the reporting persons
have shared voting power and shared dispositive power with respect to
1,381,000 shares and such persons hold the shares on behalf of other
persons (none of whom has more than 5% beneficial ownership) who have the
right to receive or the power to direct the receipt of dividends from, or
the proceeds from the sale of, such shares. The address of INVESCO PLC,
INVESCO North American Group, Ltd., INVESCO, Inc., INVESCO North American
Holdings, Inc. and INVESCO Funds Group, Inc. is 11 Devonshire Square,
London EC2M 4YR, England.
(6) The source of this information is the Amendment No. 1 to Schedule 13D dated
May 24, 1994 and filed with the Commission by Government of Singapore
Investment Corporation Pte Ltd. (the "Singapore Corporation"), Government
of Singapore ("Singapore") and Monetary Authority of Singapore (the
"Singapore Authority"). Such Amendment No. 1 to Schedule 13D reports that
(a) the Singapore Corporation beneficially owns an aggregate of 1,303,800
shares which were bought by Singapore and the Singapore Authority and has
shared voting power and shared dispositive power with respect to such
shares, (b) Singapore beneficially owns 973,400 shares and has shared
voting power and shared dispositive power with respect to such shares and
(c) the Singapore Authority beneficially owns 330,400 shares and has shared
voting power and shared dispositive power with respect to such shares. The
address of the Singapore Corporation, Singapore and the Singapore Authority
is 250 North Bridge Road, #33-00 Raffles City Tower, Singapore 0617.
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<PAGE>
(7) The source of this information is the Amendment No. 1 to Schedule 13G dated
February 13, 1995 and filed with the Commission by State of Wisconsin
Investment Board (the "Wisconsin Board"), a government agency which manages
public pension funds. The address of the Wisconsin Board is P.O. Box 7842,
Madison, Wisconsin 53707.
(8) The source of this information is the Amendment No. 3 to Schedule 13G dated
February 10, 1995 and filed with the Commission by Vanguard. Such Amendment
No. 3 to Schedule 13G reported that Vanguard had sole voting power and
shared dispositive power with respect to the 847,700 shares. The address of
Vanguard is P.O. Box 2600, Valley Forge, Pennsylvania 19482.
(9) Mr. Sissener is Chairman of the Board of A.L. Industrier and together with
A/S Swekk (Mr. Sissener's family-controlled private holding company)
("Swekk") and certain of his relatives beneficially owns approximately
50.8% of the outstanding ordinary shares of A.L. Industrier's capital stock
("A.L. Industrier Shares"), which corresponds to 53.1% of the A.L.
Industrier Shares entitled to vote.
(10) Mr. Munthe is a director of A.L. Industrier and beneficially owns 11,800
A.L. Industrier Shares (approximately 3% of the outstanding A.L.
Industrier Shares). The Company has been advised by Mr. Munthe that such
A.L. Industrier Shares are owned by members of his immediate family and
are included in the number of shares beneficially owned by Mr. Sissener
(see footnote (9) above) and he does not have any voting or dispositive
power over such shares.
(11) These shares of Class A Stock are owned by Unger-Vetlesen Medical Fund.
Mr. Sverdrup has advised the Company that, as Chairman of the Board of
Unger-Vetlesen Medical Fund, he has sole voting power with respect to, and
may be deemed to be the beneficial owner of, such shares. Mr. Sverdrup is
also the Vice Chairman of A.L. Industrier's Company Assembly (the
corporate body which elects A.L. Industrier's directors) and owns 2,000
A.L. Industrier Shares (approximately 0.5% of the outstanding A.L.
Industrier Shares).
(12) Mr. Tandberg is a director of A.L. Industrier and owns eight A.L.
Industrier Shares.
(13) Includes 50,125 shares that may be obtained upon exercise of stock options
granted under the Company's 1983 Incentive Stock Option Plan, as amended,
and exercisable as of March 1, 1995 or within sixty days thereof. The
Company has been advised by Mr. Smith that his wife or children own 3,750
of these shares but that he has voting power over such shares.
(14) Includes 32,125 shares that may be obtained upon exercise of stock options
granted under the Company's 1983 Incentive Stock Option Plan, as amended,
and exercisable as of March 1, 1995 or within sixty days thereof.
(15) Includes 9,250 shares that may be obtained upon exercise of stock options
granted under the Company's 1983 Incentive Stock Option Plan, as amended,
and exercisable as of March 1, 1995 or within sixty days thereof.
(16) Includes 99,750 shares that the executive officers of the Company as a
group may obtain upon exercise of stock options granted under the
Company's 1983 Incentive Stock Option Plan, as amended, and exercisable as
of March 1, 1995 or within sixty days thereof.
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<PAGE>
OWNERSHIP OF WARRANTS
Pursuant to a Restructuring Agreement dated May 16, 1994, between the
Company and A.L. Industrier (the "Restructuring Agreement"), the Company
through a series of related transactions (collectively, the "Combination
Transaction") acquired on October 3, 1994 ownership of a newly formed
Norwegian corporation which adopted the name Apothekernes Laboratorium AS
("A.L. Oslo"). The businesses of A.L. Oslo consist of the pharmaceutical, bulk
antibiotics, animal health and aquatic animal health businesses owned and
operated by A.L. Industrier (the "Related Norwegian Businesses") prior to the
Combination Transaction.
The aggregate consideration (the "Consideration") was paid by the Company
directly to the shareholders of A.L. Industrier and consisted of $23.6 million
and warrants (the "Warrants") to purchase 3,600,000 shares of Class A Stock.
The exercise price of the Warrants is $21.945 per share. The Warrants
generally are exercisable beginning on the earlier of October 3, 1995 or the
date the registration statement covering the Warrants is declared effective by
the Commission and expire on January 3, 1999, except that the Warrants issued
to or held by Mr. Sissener and Swekk are not exercisable until October 3,
1997.
As shareholders of A.L. Industrier, Mr. Sissener, Swekk, certain of Mr.
Sissener's relatives (including Mr. Munthe's immediate family) and Messrs.
Sverdrup and Tandberg each received their pro rata share of the Consideration
in connection with the Combination Transaction. In the Combination
Transaction, Mr. Sissener, Swekk and certain of his relatives received
Warrants to purchase an aggregate of 1,894,755.06 shares of Class A Stock (of
which 110,094 shares are issuable upon exercise of Warrants received by Mr.
Munthe's immediate family). Messrs. Sverdrup and Tandberg received Warrants to
purchase 18,660 and 74.64 shares of Class A Stock, respectively, in the
Combination Transaction.
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS
The Company's Board of Directors intends to cause the nomination of the
nominees listed below under "-- Nominees for Directors -- Nominees for Class A
Directors" and all proxies received from holders of the Class A Stock will be
voted FOR the election of such nominees as Class A Directors, except to the
extent that persons giving such proxies withhold authority to vote for such
nominees.
Each director is to be elected to hold office until the next Annual Meeting
of Stockholders and until his successor is chosen and qualified.
A.L. Industrier, which beneficially owns 100% of the shares of Class B
Stock, has advised the Company that it intends to vote its shares in favor of
the nominees listed below under " -- Nominees for Directors -- Nominees for
Class B Directors," which would assure their election as Class B Directors.
NOMINEES FOR DIRECTORS
The Company believes that each of the nominees for director will be able to
serve. If any of the nominees would be unable to serve, the enclosed proxy
confers authority to vote in favor of such other person or persons as the
Company's Board of Directors at the time recommends to serve in place of the
person or persons unable to serve.
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<PAGE>
Nominees for Class A Directors. The name, age, principal business experience
during the last five years, and certain other information regarding each of
the persons proposed to be nominated for election as a Class A Director are
listed below.
<TABLE>
<S> <C>
James Balog............. Age 66. Director of the Company since September, 1983. Chairman
of 1838 Investment Advisors from July, 1988 to December 31, 1994
and Chairman of Lambert Brussels Capital Corporation from
February, 1988 to October, 1993. Director of Elan plc, a
pharmaceutical company, since August, 1990 and from February,
1984 to August, 1988, and TransAtlantic Holdings Inc., a
reinsurance and property and casualty insurance company, since
September 1990.
Thomas G. Gibian........ Age 73. Director of the Company since March, 1993. President and
Chief Executive Officer of Henkel Corporation, a specialty
chemicals manufacturer and United States subsidiary of Henkel
KGaA, from 1980 to 1986.
Peter G. Tombros........ Age 52. Director of the Company since September, 1994. Director,
President and Chief Executive Officer of Enzon, Inc., a
developer and marketer of pharmaceutical products, since April,
1994. Vice President Corporate Strategic Planning of Pfizer Inc.
from 1990-1994; Executive Vice President of Pfizer
Pharmaceuticals, Pfizer Inc. from 1986-1990 and various other
positions with Pfizer Inc. from 1968-1986.
</TABLE>
Nominees for Class B Directors. The name, age, principal business experience
during the last five years, and certain other information regarding each of
the persons proposed to be nominated for election as a Class B Director are
listed below.
<TABLE>
<S> <C>
I. Roy Cohen............ Age 72. Director of the Company since 1975. Consultant to the
Company since January, 1991; Chairman of the Executive Committee
of the Company since June, 1987; Chairman of the Office of the
Chief Executive of the Company from July, 1991 to December,
1992; Vice Chairman of the Board of Directors of the Company
from January, 1991 to December 31, 1992; President and Chief
Executive Officer of the Company from 1976 to January, 1991.
Glen E. Hess............ Age 53. Director of the Company since September, 1983. Partner
in the law firm of Kirkland & Ellis since 1973.
Gert W. Munthe.......... Age 38. Director of the Company since June, 1994. President and
Chief Executive Officer of NetCom GSM AS, a Norwegian cellular
telecommunications company, since 1993. Executive Vice President
and division President of Hafslund Nycomed A.S, a Norwegian
energy and pharmaceutical corporation, from 1988-1993. President
of Nycomed (Imaging) A.S, a wholly owned subsidiary of Hafslund
Nycomed A.S, from 1991 to 1993. Division President in charge of
the energy business of Hafslund Nycomed A.S from 1988 to 1991.
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Einar W. Sissener....... Age 66. Director of the Company since 1975. Chief Executive
Officer of the Company since June, 1994; member of the Office of
the Chief Executive of the Company from July, 1991 to June,
1994; Chairman of the Company since 1975; President of A.L.
Oslo, a subsidiary of the Company since October, 1994; Chief
Executive Officer and President of A.L. Industrier from 1972 to
October, 1994 and Chairman of the Board of A.L. Industrier since
November, 1994.
Georg W. Sverdrup....... Age 66. Director of the Company since June, 1994. Executive Vice
President of Frydenland Ringnes Breweries A.S, a brewery in
Oslo, Norway, from 1970 to 1993. Vice Chairman of the Board of
A/S Elje Oslo, an investment company, since 1977. Chairman of
Unger-Vetlesen Medical Fund, a beneficiary trust in Jersey
Channel Islands, since 1983. Member of the Company Assembly of
A.L. Industrier since 1973 and Vice Chairman of the Company
Assembly of A.L. Industrier since 1986.
Erik G. Tandberg........ Age 65. Director of the Company since June, 1994. Partner in
Corporate Development International, a consulting partnership
specializing in international searches for companies, since
1986. President of Arco Chemical Europe Inc., a chemical
company, from 1982 to 1986.
</TABLE>
BOARD OF DIRECTORS AND COMMITTEES
BOARD MEETINGS AND ATTENDANCE OF DIRECTORS
The Company's Board of Directors held eleven meetings in 1994, excluding
separate meetings of the U.S. Directors (as specified below). Each person who
served as a director in 1994 attended at least 75% of the aggregate of (i) the
total number of meetings of the Company's Board of Directors held while such
person was a member and (ii) the total number of meetings held by all
committees of the Company's Board of Directors on which such person served
while such person was a member of such committee.
In addition to the meetings of the Company's entire Board of Directors, the
U.S. Directors, consisting of Messrs. James Balog, Thomas G. Gibian, I. Roy
Cohen, Glen E. Hess, Oscar W. Kaalstad and William S. Leonhardt in 1994, held a
total of seven meetings and telephone conferences in 1994 principally to
discuss matters relating to the Combination Transaction. See "Certain
Relationships and Related Transactions -- Transactions with A.L. Industrier."
COMMITTEES OF THE BOARD
Pursuant to its bylaws, the Company has established standing Audit, Executive
and Compensation Committees.
The Audit Committee reviews and makes recommendations to the Company's Board
of Directors regarding internal accounting and financial controls and
accounting principles, auditing practices, the engagement of independent public
accountants and the scope of the audit to be undertaken by such accountants.
The Audit Committee also monitors compliance with the Company's Code of Ethics,
which was adopted in 1989. In addition, the Company's Board of Directors has
adopted a resolution requiring the Audit Committee to review transactions
between the Company and A.L. Industrier (the beneficial owner of
- 9 -
<PAGE>
all the outstanding Class B Stock) (or their respective subsidiaries) involving
more than $50,000 and to report to the Company's Board of Directors regarding
whether such transactions are fair to the Company. Such resolution also
requires prior approval of the Audit Committee for any transaction with A.L.
Industrier which involves $500,000 or more, except that prior approval of the
Audit Committee is required for any sale or transfer of assets other than
inventory sold or transferred in the ordinary course of business. The bylaws of
the Company require that a majority of the members of the Audit Committee not
be employees of the Company or A.L. Industrier or otherwise have a material
relationship with either of them. The current members of the Audit Committee
are Messrs. James Balog (Chairman), Thomas G. Gibian and Erik G. Tandberg. The
Audit Committee held two meetings in 1994.
The Executive Committee is generally empowered, to the fullest extent
permitted by Delaware law, to exercise all power and authority vested in the
Company's Board of Directors. By resolution, the Company's Board of Directors
has specifically authorized and requested the Executive Committee to act on
behalf of the Board in emergency situations where the full Board is unable to
meet, to discuss and consult with the Chief Executive Officer of the Company as
requested by such officer and to act with respect to such matters as the Board
may from time to time designate. The members of the Executive Committee are
Messrs. I. Roy Cohen (Chairman), Einar W. Sissener, James Balog and Gert W.
Munthe. The Executive Committee held three meetings in 1994 and also
communicated informally throughout the year.
The Compensation Committee has the authority of the Company's Board of
Directors with respect to the compensation, benefit and employment policies and
arrangements for executive officers and other highly paid personnel of the
Company, except the Chief Executive Officer as to whom the Committee makes
compensation recommendations to the Company's Board of Directors. The Committee
also has authority with respect to the compensation and benefit plans generally
applicable to the Company's employees and administers the Company's 1983
Incentive Stock Option Plan, as amended, with authority to grant options to
eligible employees of the Company and its subsidiaries. The Compensation
Committee held nine meetings in 1994.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Messrs. Thomas G. Gibian
(Chairman), I. Roy Cohen, Glen E. Hess and Einar W. Sissener. Following the
Annual Meeting of Stockholders in June 1994, Mr. Gibian was elected as Chairman
of the Committee in place of Mr. William S. Leonhardt who had previously held
such position. Mr. Cohen is a former executive officer of the Company, having
served as President and Chief Executive Officer from 1983 to January, 1991 and
as a member of the Office of the Chief Executive from July, 1991 through 1992.
He currently serves as a consultant to the Company and as Chairman of the
Executive Committee. See "Certain Relationships and Related Transactions--
Certain Other Transactions and Relationships" for a description of Mr. Cohen's
consulting agreement. Mr. Hess' professional corporation is a partner of
Kirkland & Ellis, a law firm which since 1978 has performed and continues to
perform significant legal services for the Company.
Since 1983 Mr. Sissener has served as the Chairman of the Board of Directors
of the Company. He was a member of the Office of the Chief Executive from July,
1991, until June, 1994. In August, 1993, at the request of the Board of
Directors, Mr. Sissener undertook, in the context of the Office of the Chief
Executive, greater responsibilities for management of the Company, and when the
Office of the Chief Executive was terminated in June, 1994, he was elected
Chief Executive Officer of the Company. Since the closing of the Combination
Transaction, Mr. Sissener also serves as President of A.L. Oslo, the Company's
Norwegian subsidiary acquired in such transaction.
- 10 -
<PAGE>
Mr. Sissener is the Chairman (and prior to the Combination Transaction was
the President and Chief Executive Officer) of A.L. Industrier, which entered
into the Restructuring Agreement under which the Company acquired the Related
Norwegian Businesses. Mr. Sissener and members of his family beneficially own
approximately 50.8% of the outstanding A.L. Industrier Shares and in the
Combination Transaction received their proportionate share of the cash and
Warrants paid by the Company. A.L. Industrier beneficially owns all of the
Company's outstanding Class B Stock. See "Security Ownership of Certain
Beneficial Owners."
During 1994, as in prior years, the Company prior to the Combination
Transaction engaged in certain transactions with the Related Norwegian
Businesses when they were owned by A.L. Industrier. After the Combination
Transaction, the Company through A.L. Oslo began leasing certain property from
A.L. Industrier and providing certain administrative services to A.L.
Industrier and entered into certain commercial transactions with subsidiaries
of A.L. Industrier. See "Certain Relationships and Related Transactions --
Transactions with A.L. Industrier" for a more detailed description of such
transactions.
DIRECTORS' COMPENSATION
Effective January 1, 1995, directors (other than any employee of the Company
or a subsidiary of the Company) receive directors' fees at an annual rate of
$22,500 and an annual grant of 200 shares of Class A Stock. In addition, each
director receives $1,200 for each Board meeting attended in person, $600 for
each Committee meeting attended in person and one-half of the applicable fee
for each meeting attended by telephone (with certain exceptions). The Chairman
of each of the Audit, Executive and Compensation Committees receives an
additional $7,500 per year. During 1994 Messrs. Balog and Gibian received
$75,000 and $37,500, respectively, as additional consideration for serving as
members of a special committee to assess the Combination Transaction, and
Messrs. Cohen and Hess received $8,400 each for attending certain special
meetings of the Company's directors not affiliated with A.L. Industrier at
which the Combination Transaction was discussed.
AMENDMENTS TO THE 1983 INCENTIVE STOCK OPTION PLAN
GENERAL
The 1983 Incentive Stock Option Plan, as amended (the "Plan"), of the Company
originally was adopted by the Company's Board of Directors on September 26,
1983, and was approved by the Company's stockholders on January 25, 1984. As
presently amended, the Plan provides that no more than 1,650,000 shares are
available for grants under the Plan and that options may not be granted under
the Plan after September 26, 1998. As of March 31, 1995, a total of 609,025
shares were reserved for issuance pursuant to outstanding options under the
Plan, and 335,123 shares were available for the issuance of future options to
be granted under the Plan (prior to giving effect to the amendments described
below). The Company's Board of Directors recommends that the Company's
stockholders approve amendments to (i) increase the maximum number of shares
available under the Plan from 1,650,000 to 2,500,000 shares, (ii) permit
options to be granted under the Plan until September 26, 2003 and (iii) specify
that a maximum number of 100,000 shares may be granted to any person under the
Plan in any taxable period.
The purpose of the Plan is to attract, retain and provide incentive to
present and future executive, managerial, marketing, technical and other key
employees of the Company and its subsidiaries by affording such employees an
opportunity to acquire or increase their proprietary interest in the Company
through the
- 11 -
<PAGE>
acquisition of shares of its Class A Stock. The Company's Board of Directors
believes that the Plan has been successful to date in accomplishing its
purpose, and that an increase in the number of shares available for grant is
necessary in view of the growth of the Company's businesses and the
corresponding higher number of employees eligible to receive options.
The following table sets forth the number of shares underlying options
granted during the Company's last fiscal year under the Plan to (i) each of the
named executive officers, (ii) all current executive officers as a group and
(iii) all employees (including current officers who are not executive officers)
as a group. The Plan does not permit options to be granted to directors who are
not employees.
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING OPTIONS
GRANTED IN 1994
------------------
<S> <C>
Einar W. Sissener......................................... 0
Jeffrey E. Smith.......................................... 9,000
David E. Cohen............................................ 9,000
Niels L. Graugaard........................................ 7,000
George S. Barrett......................................... 7,000
All current executive officers as a group................. 57,500
All employees (including current officers who are not
executive officers) as a group........................... 149,500
</TABLE>
The closing price of the Company's Class A Stock on The New York Stock
Exchange on March 31, 1995 was $22.875. Option grants will be considered from
time to time by the Compensation Committee.
Approval of the proposal to amend the Plan requires that a majority of the
votes cast by the holders of the shares of the Class A Stock and Class B Stock,
voting together, present and entitled to vote at the meeting be votes for
approval. A.L. Industrier has advised the Company that it intends to vote its
shares in favor of the proposal, which would assure its approval. The material
features of the Plan, as amended (including the proposed amendments), are
described below.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE PROPOSAL
TO AMEND THE COMPANY'S 1983 INCENTIVE STOCK OPTION PLAN, AS AMENDED.
SUMMARY DESCRIPTION OF THE COMPANY'S 1983 INCENTIVE STOCK OPTION PLAN
Eligibility. The Plan is administered by a committee of the Company's Board
of Directors appointed for such purpose (the "Options Committee"). The
Compensation Committee is currently the Options Committee (see "Board of
Directors and Committees -- Committees of the Board"). The individuals who are
eligible to participate in the Plan are such executive, managerial, marketing,
technical and other key employees of the Company and its subsidiaries as the
Options Committee determines from time to time, provided, however, that no
options may be granted to any person who is a member of the Options Committee
at the time of such grant. As of March 31, 1995, approximately 90 employees of
the Company and its subsidiaries held options under the Plan.
- 12 -
<PAGE>
Options. The stock, subject to the options and other provisions of the Plan,
as amended, is the Class A Stock. Subject only to any applicable limitations
set forth in the Plan, the number of shares of Class A Stock which may be
purchased pursuant to any option is determined by the Options Committee. In the
discretion of the Options Committee, options granted under the Plan may be
either "incentive stock options" as such term is defined in Section 422 of the
United States Internal Revenue Code of 1986, as amended ("Incentive Stock
Options"), or options which do not meet such definition. The number of shares
which may be subject to options granted under the Plan shall be subject to
adjustment for any stock split, recapitalization or other change in the
Company's capital structure. One of the proposed amendments would provide that
no more than 100,000 shares (subject to adjustment for stock splits,
recapitalization and other changes in the Company's capital structure) may be
granted to any participant in any taxable year.
At the time the option is granted, the Options Committee specifies the price
at which shares may be purchased pursuant to any option, and such price may not
be less than the fair market value of the shares on the date that the option is
granted. The Options Committee has discretion to provide that the exercise
price may be paid by delivery of shares of Class A Stock previously owned by
the optionee having a fair market value equal to the exercise price of the
options being exercised. The Options Committee also determines the term of each
option, which in no event may exceed ten years (in the case of an Incentive
Stock Option) or ten years and one month (in the case of any other option) from
the date of grant. If for any reason the full number of shares covered by any
option are not issued before the option expires or terminates, shares not
issued under such option are again available for the grant of options under the
Plan.
Each option may be exercised from time to time during its term, in part or in
whole, subject to such vesting requirements and any other limitations that the
Options Committee, in its discretion, may specify at the time of grant. Unless
the Options Committee otherwise determines at the time of grant, options become
exercisable (or vest) at the rate of 25% per year that the employee holds such
options so that options do not become fully exercisable until four years from
the date of grant. Subject to certain limitations, the Options Committee may,
in its discretion: (i) accelerate the time at which any outstanding option or
part thereof shall become exercisable and (ii) extend the time during which any
outstanding option may be exercised, provided that no option may be exercised
more than ten years (in the case of an Incentive Stock Option) or ten years and
one month (in the case of any other option) after the date of grant.
Alternative Cash Settlement Method. The Options Committee, in its discretion,
may confer upon the grantee of any option granted pursuant to the Plan the
right to exercise, with respect to shares of Class A Stock which could be
purchased under the option otherwise exercisable under the Plan, an alternative
cash settlement right in lieu of purchasing shares under such option. Such
right may be conferred at the time the options are granted or with respect to
outstanding options.
An alternative cash settlement right means the right, in lieu of purchasing
shares under an option which is otherwise exercisable under the Plan, to
receive a payment in cash equal to the excess of the value of one share of
Class A Stock over the option price set forth in the option, times the number
of shares as to which the alternative cash settlement right is exercised.
Notwithstanding the other provisions of the Plan, exercise of an alternative
cash settlement right (i) is subject to the approval of the Options Committee
at the time of such exercise and (ii) may only be exercised in connection with,
and at the same time that, an option is being exercised under the Plan, and may
not be exercised with respect to more shares of Class A Stock than are then
being purchased upon such exercise under the Plan. For purposes of determining
an alternative cash settlement, the value per share of Class A Stock is the
closing price on the principal stock exchange on which the Class A Stock is
listed for trading on the date of the exercise of the option (or, if no such
closing price is
- 13 -
<PAGE>
available, the value will be determined in such other manner as the Options
Committee may deem appropriate).
Exercise of an option through exercise of an alternative cash settlement
right has the same effect for the purposes of the Plan as if the shares of
Class A Stock as to which such right was exercised were issued under the Plan;
accordingly, there is a decrease in the number of shares of Class A Stock which
thereafter may be available for purposes of granting options under the Plan
equal to the number of shares of Class A Stock as to which an alternative cash
settlement right is exercised.
Transferability of Options. Options are not transferable otherwise than by
will or the laws of descent and distribution.
Termination of Employment or Death of Optionee. Except as expressly provided
in the Plan, options terminate on the earlier of: (i) the date of expiration
thereof, specified by the Options Committee (as described above under " --
Summary Description of the Company's 1983 Incentive Stock Option Plan --
Options"), (ii) immediately upon termination of the employment relationship
between the Company and the optionee for cause, or (iii) 30 days after
termination of the employment relationship between the Company and the optionee
without cause for any reason other than death, retirement in good standing or
disability.
If an optionee dies while in the employ of the Company and before the date of
expiration of an option such option terminates on the earlier of such date of
expiration or one year following the date of such death. After the death of an
optionee, his or her executors or administrators have the right, at any time
prior to the termination of such option, to exercise such option to the extent
that such option was vested immediately prior to his or her death.
If the optionee is retired in good standing from the employment of the
Company for reason of age or disability before the date of expiration of an
option, such option terminates on the earlier of such date of expiration or a
date from 90 days to one year (as the Options Committee determines) after the
date of such retirement. In the event of such retirement the optionee has the
right prior to the termination of such option to exercise the option to the
extent to which he or she was entitled to exercise such option immediately
prior to such retirement.
Tax Consequences. The following discussion is intend only as a brief summary
of the United States Federal income tax consequences of the grant and exercise
of option and alternative cash settlement rights. The discussion addresses only
the United States Federal income tax consequences to optionees who are citizens
or residents of the United States and who perform services within the United
States. Some optionees who are employees of the Company's foreign subsidiaries
may be subject to tax under the law of the country where they are citizens or
residents, which may differ significantly from United States income tax law.
The laws governing the tax aspects of stock options and appreciation rights are
highly technical, and such laws are subject to change at any time, which could
be retroactive in nature.
The Options Committee has the discretion to grant either (i) Incentive Stock
Options with the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended, or (ii) options which do not qualify as Incentive Stock Options and
which shall be referred to herein as "nonstatutory options." The United States
income tax consequences will vary depending on which type of option is granted.
Tax Consequences of Incentive Stock Options to United States Citizens or
Residents. An optionee generally will not recognize taxable income or loss on
the grant or exercise of an Incentive Stock Option, but
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<PAGE>
he may incur alternative minimum tax liability on exercise of the Incentive
Stock Option. Neither the Company nor any subsidiary will be entitled to any
deduction on the grant or exercise of an Incentive Stock Option.
An optionee's tax consequences from the sale or other disposition of shares
acquired on the exercise of an Incentive Stock Option will depend on when such
sale or disposition occurs. If the optionee holds the option shares for more
than two years after the Incentive Stock Option was granted and for more than
one year after the Incentive Stock Option was exercised (the "Required Holding
Periods"), he will recognize long-term capital gain or loss when he sells or
disposes of his shares equal to the difference between the proceeds he receives
and his tax basis in the option shares (generally the exercise price paid for
the shares, except as otherwise discussed below). In such case, neither the
Company nor any subsidiary will be entitled to a deduction on the optionee's
sale or disposition of his shares.
If an optionee sells the shares acquired upon exercise of an option without
satisfying the Required Holding Periods (a "Disqualifying Disposition"), he
generally will recognize ordinary taxable income, and the Company, or a United
States subsidiary, if the subsidiary is the optionee's employer, will be
entitled to a deduction for the amount of ordinary income taxed to the
optionee. The amount of ordinary income taxable to the optionee (and the
corresponding deduction) is calculated by deducting the option price from the
lesser of (i) the fair market value of the shares on the exercise date and (ii)
the price at which the optionee sells or otherwise disposes the shares (unless
such sale or disposition is to a related party, in which case the fair market
value must be used even if the sales price is lower). If the price at which the
optionee sells the shares exceeds the shares' fair market value on the exercise
date, the excess will be taxed as capital gain. This capital gain will be
either long or short-term depending on whether the optionee held the shares for
more than one year. Neither the Company nor any subsidiary will be entitled to
a deduction for the capital gain.
If an optionee delivers previously-acquired Class A Stock (other than stock
acquired upon exercise of an Incentive Stock Option and not held for the
Required Holding Periods) in payment of all or part of the option price of an
Incentive Stock Option, the optionee generally will not be required to
recognize as taxable income or loss any appreciation or depreciation in the
value of the previously-acquired stock after its acquisition date. The
optionee's tax basis in, and holding period (for capital gain, but not
Disqualifying Disposition, purposes) for, the previously-acquired stock
surrendered carries over to an equal number of the option shares received on a
share-for-share basis. Shares received in excess of the number of shares
surrendered have a tax basis equal to the amount paid (if any) in excess of the
previously-acquired shares used to pay the exercise price, and the holding
period of those excess shares will begin on the date of exercise. Proposed
regulations provide that where an Incentive Stock Option is exercised using
previously-acquired stock, a later Disqualifying Disposition of the shares
received will be deemed to have been a disposition of the shares having the
lowest basis first.
If an optionee pays the exercise price of an Incentive Stock Option in whole
or in part with Class A Stock that was previously acquired upon the exercise of
an Incentive Stock Option and that has not been held for the Required Holding
Periods, the optionee will recognize ordinary taxable income with respect to
the shares surrendered under the rules applicable to Disqualifying
Dispositions. The Company will be entitled to a corresponding deduction. The
optionee's basis in the shares received in exchange for the shares surrendered
will be increased by the amount of ordinary income recognized by the optionee.
Tax Consequences of Nonstatutory Options and Alternative Cash Settlement
Rights to United States Citizens or Residents. In general, upon the grant of a
nonstatutory option or an alternative cash settlement
- 15 -
<PAGE>
right, an optionee will not recognize taxable income or loss, and neither the
Company nor any subsidiary will be entitled to a deduction.
Upon the exercise of a nonstatutory option or an alternative cash settlement
right, the amount by which the fair market value of the shares at the time of
exercise exceeds the option price, or in the case of an alternative cash
settlement right, the amount of the consideration paid to the optionee on the
exercise of such cash settlement right, will constitute ordinary taxable income
to the optionee. The Company, or, if the optionee is employed by a subsidiary
of the Company, the subsidiary, will be entitled to a corresponding deduction.
If an optionee delivers previously-acquired Class A Stock, however acquired,
in payment of all or part of the option exercise price of a nonstatutory
option, the optionee generally will not, as a result of such delivery, be
required to recognize as taxable income or loss any appreciation or
depreciation in the value of the previously-acquired stock after its
acquisition date. The optionee's tax basis in, and holding period for, the
previously-acquired stock surrendered carries over to an equal number of the
option shares received on a share-for-share basis. The excess of the fair
market value of the shares received over the option exercise price constitutes
compensation taxable to the optionee as ordinary income. Such fair market value
is determined on the date of exercise. Shares received in excess of the number
of shares surrendered have a tax basis equal to their fair market value on the
exercise date, and their holding period begins on the exercise date. The
Company is entitled to a tax deduction equal to the compensation income
recognized by the optionee (if certain holding period requirements are met).
EXECUTIVE COMPENSATION
SUMMARY OF EXECUTIVE COMPENSATION
From January 1 until June 20, 1994 the functions of the Chief Executive
Officer were carried out by the Office of the Chief Executive consisting of
Messrs. Jeffrey E. Smith and Einar W. Sissener, acting together. On June 20,
1994 Mr. Sissener was elected Chief Executive Officer and the Office of the
Chief Executive was abandoned. Although the responsibilities and authority of
the Chief Executive Officer were shared between the members of the Office of
the Chief Executive as they determine, Mr. Sissener had, in the context of the
Office of the Chief Executive, greater responsibilities for the overall
management of the Company.
The following table (the "Summary Compensation Table") sets forth the annual
and long-term compensation paid or granted to, or accrued for, the executive
officers named below (the "named executive officers") during 1994, 1993 and
1992:
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<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------ ------------
AWARDS
------------
OTHER ANNUAL ALL OTHER
COMPENSATION OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION DURING 1994 YEAR SALARY($) BONUS($) ($) (#)(1) ($)
- - --------------------------------------- ---- --------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Einar W. Sissener 1994 341,263(2) 75,000 * 0 0
(Chairman, Director, 1993 215,932(2) 0 * 0 0
Chief Executive 1992 119,284(2) 120,000 * 0 0
Officer and Member
of the Office of the
Chief Executive)
Jeffrey E. Smith 1994 365,630 50,000 * 9,000 15,573(3)
(Vice President -- 1993 364,023 65,000 * 10,000 9,198
Finance, Chief 1992 358,799 125,000 * 10,000 8,925
Financial Officer
and Member of the
Office of the Chief
Executive)
David E. Cohen 1994 260,000 110,000 * 9,000 12,269(3)
(Vice President and 1993 240,058 120,000 * 7,000 9,186
President-- Animal 1992 232,637 80,000 * 7,000 8,925
Health Division)
Niels L. Graugaard 1994 260,333 0 * 7,000 30,433(4)
(President and 1993 249,572 30,864 * 7,000 28,720
Managing Director -- 1992 250,994 66,269 * 7,000 30,028
A/S Dumex Ltd.
("Dumex"))(5)
George S. Barrett 1994 259,615 116,110(6) * 7,000 11,244(7)
(Vice President and 1993 230,232 168,031(6) * 7,000 3,598
President -- 1992 229,327 107,345 * 7,000 28,574
U.S. Pharmaceuticals
Division)
</TABLE>
- - ----------------------
* The Company provides automobile allowances to its executive officers and an
apartment (in lieu of hotel accommodations) to Mr. Sissener while he is in
the United States. The incremental cost of such perquisites in each of 1994,
1993 and 1992 was not in excess of the lesser of (a) $50,000 and (b) 10% of
the amounts reported as Salary and Bonus for such year in the Summary
Compensation Table.
(1) Reflects options granted under the Company's 1983 Incentive Stock Option
Plan. The Company has not granted any stock appreciation rights ("SARs") to
any of the named executive officers in 1992, 1993 or 1994.
(2) Includes fees from the Company and its subsidiaries (before deduction of
Company charges for office and secretarial services) for services as
Chairman of the Board and as a member of committees of the Company's Board
of Directors and the board of directors of a subsidiary. Effective January
1, 1995, Mr. Sissener will not receive fees for such services in such
positions. Does not include amounts paid by A.L. Industrier for services
rendered to the Related Norwegian Businesses prior to the Combination
Transaction.
(3) Aggregate contributions by the Company to the Company's Voluntary
Contributory Retirement Income Plan for Salaried Employees prior to July 1,
1994 and the Company's Supplemental Savings Plan after July 1, 1994.
(4) Contributions by Dumex to a defined contribution pension plan.
(5) Mr. Graugaard was paid in Danish kroner ("DKr."). Mr. Graugaard's salary
for 1994, 1993 and 1992 was DKr. 1,574,947, DKr. 1,536,026, and DKr.
1,450,000, respectively. For purposes of the Summary Compensation Table,
such Danish kroner amounts were translated into United States dollars using
the average exchange rate for the year presented. The average exchange rate
of Danish kroner for United States dollars for each of 1994, 1993 and 1992
was DKr. 6.361 to $1.00, DKr. 6.480 to $1.00, and DKr. 6.036 to $1.00,
respectively. Prior to the end of 1994, Mr. Graugaard ceased to be an
executive officer.
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<PAGE>
(6) The 1994 bonus consists of a bonus award for 1994 of $30,000 and an
additional contractual bonus of $86,110, of which $46,110 is an incentive
bonus based on 1994 operating performance of NMC Laboratories, Inc.
("NMC"), a subsidiary of the Company. The incentive bonus based on 1994
operating performance of NMC is based on preliminary information available
as of March 31, 1995 and may change. The 1993 bonus consists of a bonus
award for 1993 of $60,000 and an additional contractual bonus of $108,031,
of which $68,031 is an incentive bonus based on 1993 operating performance
of NMC.
(7) Consists of $5,544, representing contributions by the Company to Barre-
National, Inc.'s Profit-Sharing and Savings Plan, and $5,700, representing
contributions by the Company to the Company's Supplemental Savings Plan.
EMPLOYMENT AGREEMENTS
Mr. Einar W. Sissener is a party to an agreement (the "Sissener Employment
Agreement") dated August 10, 1972 with A.L. Oslo, the Company's Norwegian
subsidiary, which provides that he may be terminated on one-year's notice and,
if his employment is terminated by such subsidiary after 20 years of service,
he is entitled to receive an amount equal to three years of his salary from
such subsidiary in addition to his ordinary salary from such subsidiary during
the one-year notice period. In addition, if Mr. Sissener retires from the
Company's Norwegian subsidiary on or after reaching age 67 he is entitled to an
annual pension from such subsidiary equal to 67% of his average annual cash
salary received from such subsidiary during the three years prior to his
retirement minus amounts payable to him under the Subsidiary Pension Plan
(defined below) and his social security benefits. The contract also provides
that if Mr. Sissener dies his wife is entitled to 40% of his average annual
cash salary received from A.L. Oslo during the three years prior to his death
minus amounts payable under the Subsidiary Pension Plan (defined below) and
social security benefits. See "-- Retirement Plans" below.
Mr. Jeffrey E. Smith is a party to an employment arrangement with the Company
which provides that, if his employment is terminated by the Company for any
reason other than for cause, he is entitled to receive base salary and certain
benefits for one year. Mr. Smith participates in all of the employee benefits
available to executives of the Company. Upon retirement, the Company will pay
to Mr. Smith supplemental retirement benefits equal to the amount, if any, by
which the pension due under the Company's Non-Contributory Retirement Plan
without any limitation imposed by the Internal Revenue Service exceeds any
ceiling imposed by the Internal Revenue Service.
Mr. Niels L. Graugaard served as an officer of the Company's subsidiary,
Dumex, until January 31, 1995. On December 23, 1994, Mr. Graugaard entered into
an agreement with Dumex, on behalf of itself and the Company, pursuant to which
Mr. Graugaard agreed to resign his position with Dumex effective January 31,
1995 in exchange for a one-time payment of DKr. 2,075,000 on January 31, 1995
and certain benefits during the first year after his resignation.
Mr. George S. Barrett and the Company entered into an employment agreement in
August 1990 concurrent with the Company's acquisition of its topical creams and
ointments pharmaceutical subsidiary, NMC. Such agreement contemplates that Mr.
Barrett would serve as NMC's President and provides for a minimum annual salary
and bonus through December 31, 1995 and an incentive bonus based upon the
operating performance of NMC for each of the four years in the period ending
December 31, 1994. In the event of Mr. Barrett's resignation or termination by
the Company for any reason other than for cause, he is entitled to receive 75%
of such amounts. In July 1991, Mr. Barrett was also appointed President of the
Company's liquid pharmaceutical subsidiary, Barre-National, Inc., and the
minimum annual salary set forth in his employment agreement was increased. The
minimum annual salary under such contract for 1995 is $280,000.
- 18 -
<PAGE>
GRANTS OF OPTIONS
The following table discloses, for the named executive officers, information
regarding stock options granted during 1994. All grants described below are
"nonstatutory options" granted under the Company's 1983 Incentive Stock Option
Plan, as amended, have a term of ten years and are subject to vesting
provisions under which 25% of the shares covered by each option becomes
exercisable on each of the first four anniversaries of the date of grant if the
grantee is still employed by the Company on such anniversary.
1994 OPTION GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
INDIVIDUAL GRANTS AT EXPIRATION USING
- - ------------------------------------------------------------------------ ASSUMED ANNUAL
NUMBER OF PERCENT OF RATES OF STOCK
SHARES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM (1)
OPTIONS EMPLOYEES BASE PRICE ----------------------------
NAME GRANTED IN 1994 ($/SH) EXPIRATION DATE 5% ($)(2) 10% ($)(3)
- - ------------------ ---------- ------------- ----------- --------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Einar W. Sissener 0 * * * * *
Jeffrey E. Smith 9,000 4.35% 13.50 5/17/2004 76,410 193,680
David E. Cohen 9,000 4.35 13.50 5/17/2004 76,410 193,680
Niels L. Graugaard 7,000 3.38 13.50 5/17/2004 59,430 150,640
George S. Barrett 7,000 3.38 13.50 5/17/2004 59,430 150,640
</TABLE>
- - ----------------------
*Not applicable.
(1) Amounts reflect certain assumed annual stock price appreciation rates set
forth in the Commission's executive compensation disclosure rules. Actual
gains on a stock option exercise, if any, will depend on the Class A Stock
market price on the date of exercise.
(2) Assumes Class A Stock price would be $21.99.
(3) Assumes Class A Stock price would be $35.02.
OPTION EXERCISES AND VALUES
The following table discloses, for the named executive officers, (a) the
number of shares acquired upon exercise of options or with respect to which
such options were exercised and the aggregate dollar value realized upon such
exercise and (b) the number and value of unexercised options, in each case as
of December 31, 1994.
- 19 -
<PAGE>
1994 AGGREGATED OPTION EXERCISES AND YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF
SHARES UNDERLYING VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY
SHARES AT 12/31/94(1) OPTIONS AT 12/31/94(1)
ACQUIRED ON VALUE ------------------------- -------------------------------
NAME EXERCISE REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE(2) UNEXERCISABLE(2)
- - ------------------ ----------- ------------ ----------- ------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Einar W. Sissener 0 0 0 0 0 0
Jeffrey E. Smith 0 0 47,625 28,395 $259,704 $86,297
David E. Cohen 0 0 30,375 19,625 219,393 70,171
Niels L. Graugaard 0 0 15,750 15,750 90,122 49,875
George S. Barrett 0 0 9,250 14,750 10,781 52,594
</TABLE>
- - ----------------------
(1) All grants are in the form of options under the Company's 1983 Incentive
Stock Option Plan, as amended.
(2) Value is based on the closing price of a share of Class A Stock on December
31, 1994 ($20.25) minus the exercise price.
RETIREMENT PLANS
Messrs. Jeffrey E. Smith, David E. Cohen and George S. Barrett are active
participants in the A.L. Pharma Inc. Pension Plan (a qualified defined benefit
plan) (the "Pension Plan"). Under the Pension Plan, both salaried and hourly
employees are eligible for benefits. Participants are entitled to receive their
specified annual benefit, in the form of a life annuity or, at the election of
participants, its actuarial equivalent in certain other forms, commencing
within one month of their 65th birthday. The specified annual benefit is equal
to (x) the sum of (i) 0.8% of the participant's highest five-year Final Average
Compensation (as defined below) up to "covered compensation" ($24,312 for 1994)
plus (ii) 1.45% of the participant's highest five-year Final Average
Compensation in excess of "covered compensation" ($24,312 for 1994), multiplied
by (y) the number of years of benefit service (up to a maximum of 30 years).
The Pension Plan also provides for an early retirement benefit which is equal
to the specified annual benefit described above, reduced actuarially for each
year by which the early retirement date precedes the normal retirement date.
The following table sets forth the approximate annual retirement benefit
under the Pension Plan based on years of service and Final Average
Compensation.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------
REMUNERATION (1) 15 20 25 30 35 (2)
- - ----------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000........................... $ 24,817 $ 33,089 $ 41,362 $ 49,634 $ 49,634
$150,000........................... 30,255 40,339 50,424 60,509 60,509
$175,000........................... 35,692 47,589 59,487 71,384 71,384
$200,000........................... 41,130 54,839 68,549 82,259 82,259
$225,000........................... 46,567 62,089 77,612 93,134 93,134
$250,000........................... 52,005 69,339 86,674 104,009 104,009
$300,000........................... 62,880 83,839 104,799 125,759 125,759
$400,000........................... 84,630 112,839 141,049 169,259 169,259
$450,000........................... 95,505 127,339 159,174 191,009 191,009
$500,000........................... 106,380 141,839 177,299 212,759 212,759
</TABLE>
- - ----------------------
(1) Final average compensation. Current Federal pension law limits average
annual compensation considered for benefit purposes to $150,000 for 1994
and 1995.
(2) The Plan provides that there is a maximum of 30 years of service for
computation of benefits.
- 20 -
<PAGE>
For purposes of the Pension Plan, an employee's "Final Average Compensation"
is his regular cash salary plus "regular" overtime pay in an amount not
exceeding 20% of base salary (excluding bonuses, overtime pay in excess of 20%
of base salary and other extraordinary items), for the five consecutive years
of service in which his compensation was highest during the ten years of
service immediately preceding his retirement. In 1994, the respective amounts
of the compensation of Messrs. Jeffrey E. Smith, David E. Cohen and George S.
Barrett would have been $329,992, $260,000 and $259,615, respectively, under
the Pension Plan if there were no limitations under Federal pension law.
However, due to the Federal pension law, the respective amounts of compensation
of Messrs. Jeffrey E. Smith, David E. Cohen and George S. Barrett under the
Pension Plan in 1994 were limited to $150,000. Mr. Jeffrey E. Smith, however,
is entitled to supplemental retirement benefits from the Company equal to the
amount, if any, by which the pension due under the Pension Plan without any
limitation imposed by the Internal Revenue Service exceeds any ceiling imposed
by the Internal Revenue Service. In addition, Messrs. David E. Cohen and George
S. Barrett are participants in the A.L. Pharma Inc. Supplemental Pension Plan
(a non-qualified defined benefit plan) (the "Supplemental Pension Plan"). Under
the Supplemental Pension Plan, participants are entitled to supplemental
retirement benefits from the Company equal to the amount, if any, by which (x)
the lesser of (i) the pension due under the Pension Plan without any limitation
imposed by the Internal Revenue Service and (ii) $235,840 exceeds (y) any
ceiling imposed by the Internal Revenue Service. The years of service credited
under the Pension Plan and the Supplemental Pension Plan as of December 31,
1994 to such officers were as follows: Mr. Jeffrey E. Smith -- 10 years, Mr.
David E. Cohen -- 19 years and Mr. George S. Barrett -- 4 years.
Under the Pension Plan, in the event of the termination of employment prior
to retirement, part of the employee's benefit may be forfeited. A retirement
benefit, payable in the form of a life annuity following the employee's 55th
birthday, is equal to an accrued percentage of the normal retirement benefit,
actuarially reduced to reflect commencement of payments prior to the normal
retirement date. As to employees hired on or after January 1, 1989, pension
benefits under the Pension Plan vest after five years of employment with the
Company. Pension benefits under the Pension Plan of employees hired prior to
January 1, 1989 are currently 100% vested. Under the Supplemental Pension Plan,
all participants' benefits vest after ten years of employment with the Company.
Mr. Einar W. Sissener is an active participant in the pension plan of A.L.
Oslo, the Company's Norwegian subsidiary (a defined benefit plan) (the
"Subsidiary Pension Plan"). Under the Subsidiary Pension Plan, both salaried
and hourly employees are eligible for benefits. The retirement age under the
Subsidiary Pension Plan is 67 years of age. A participant's specified annual
benefit under the Subsidiary Pension Plan is equal to (x) the difference
between (i) 60% of such participant's Final Compensation (as defined below) and
(ii) the social security benefit (173,968 Norwegian Kroner ("NOK") or
approximately $25,686 for 1994), multiplied by (y) a fraction, the numerator of
which is the number of years of service (up to a maximum of 30 years) and the
denominator of which is 30. The Subsidiary Pension Plan does not provide for an
early retirement benefit.
- 21 -
<PAGE>
The following table sets forth the approximate annual retirement benefit
under the Subsidiary Pension Plan based on years of service and Final
Compensation.
SUBSIDIARY PENSION PLAN TABLE (1)
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------
REMUNERATION (2) 15 20 25 30 35 (3)
- - ----------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000........................... $ 24,657 $ 32,876 $ 41,095 $ 49,314 $ 49,314
$150,000........................... 32,157 42,876 53,595 64,314 64,314
$175,000........................... 39,657 52,876 66,095 79,314 79,314
$200,000........................... 47,157 62,876 78,595 94,314 94,314
$225,000........................... 54,657 72,876 91,095 109,314 109,314
$250,000........................... 62,157 82,876 103,595 124,314 124,314
$300,000........................... 77,157 102,876 128,595 154,314 154,314
$400,000........................... 107,157 142,876 178,595 214,314 214,314
$450,000........................... 122,157 162,876 203,595 244,314 244,314
$500,000........................... 137,157 182,876 228,595 274,314 274,314
</TABLE>
- - ----------------------
(1) The payments under the Subsidiary Pension Plan are made in Norwegian
kroner. For purposes of the Subsidiary Pension Plan Table, such Norwegian
kroner amounts were translated into United States dollars using the
exchange rate at December 31, 1994 of NOK 6.773 to $1.00.
(2) Final compensation.
(3) The Plan provides that there is a maximum of 30 years of service for
computation of benefits.
For purposes of the Subsidiary Pension Plan, an employee's "Final
Compensation" is his base cash salary in his last year of service. If Mr.
Sissener were to retire with his last year of service being 1994, the amount of
his Final Compensation for purposes of calculating his pension benefits under
the Subsidiary Pension Plan would have been NOK 960,000 (or approximately
$141,739). In addition, Mr. Sissener may be entitled to receive additional
pension benefits pursuant to the Sissener Employment Agreement. Such agreement
provides that on or after reaching age 67 Mr. Sissener is entitled to an annual
pension equal to 67% of his average annual cash salary received from A.L. Oslo
during the three years prior to his retirement minus his pension benefits under
the Subsidiary Pension Plan and his social security benefits. See "Executive
Compensation -- Employment Agreements." Therefore, Mr. Sissener is entitled to
receive an aggregate annual pension equal to (x) the amounts he would be
entitled to receive under the Subsidiary Pension Plan plus (y) his social
security benefits plus (z) the excess, if any, of (i) the amount he would be
entitled to receive under the Sissener Employment Agreement over (ii) the
amount he would be entitled to receive under the Subsidiary Pension Plan plus
his social security benefits. The years of service credited to Mr. Sissener
under the Subsidiary Pension Plan as of December 31, 1994 was the maximum
number of 30 years.
Under the Subsidiary Pension Plan if a participant dies, such participant's
spouse is entitled to receive 55% of the participant's specified annual
benefit. In addition, under the Sissener Employment Agreement, Mr. Sissener's
wife may be entitled to receive certain additional pension benefits if Mr.
Sissener dies. Such additional benefits are equal to the excess, if any, of (x)
40% of Mr. Sissener's average annual cash salary received from A.L. Oslo during
the three years prior to his death over (y) the spouse's pension under the
Subsidiary Pension Plan plus social security benefits. See "Executive
Compensation -- Employment Agreements."
- 22 -
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Company's Board of Directors has
responsibility for establishing general compensation and employee benefit
policies and the specific compensation of the Company's executive officers and
other highly paid personnel, except the Chief Executive Officer. As to the
Chief Executive Officer's compensation, the Compensation Committee makes
recommendations to the Company's Board of Directors. The Compensation Committee
also serves as the committee established under the Company's 1983 Incentive
Stock Option Plan with authority to fix the terms of, and grant options under,
such plan. The Compensation Committee is comprised of non-employee directors
except for Mr. Sissener.
In general, the Compensation Committee strives to meet the following
objectives in making compensation decisions and recommendations: (1) provide
overall compensation that equals or exceeds industry standards so that the
Company is competitive in its ability to attract and retain highly qualified
personnel; (2) relate compensation to the degree to which the Company (and/or
the specific business unit for which an executive is responsible) attains its
annual earnings or other performance targets; (3) reward excellent individual
performance, with special consideration for specific projects completed or
adverse conditions overcome; and (4) provide incentive to contribute to the
long-term growth of the Company's businesses and stockholder value. As
described below, certain special considerations have been involved in
determining the compensation of the Chief Executive Officer for 1994. The
Committee does not intend to approve or recommend compensation which would not
be deductible under Section 162 of the Internal Revenue Code of 1986, as
amended and consults with tax advisors as necessary to avoid any unintended
result.
As reflected in the Summary Compensation Table above, there are currently
three principal components of senior executive compensation -- salaries,
bonuses and stock options. Salaries are determined annually, primarily on the
basis of industry standards as applied to each executive's background,
experience and overall performance with the Company. Bonuses are determined
annually on the basis of an informal plan which sets potential bonus targets
that an individual may achieve. A portion of each potential bonus is based on
individual performance during the year, a second portion is based on the
performance of the business unit for which the executive is responsible and a
third portion is based on the Company's performance for such year. Bonuses may
also be adjusted to reflect special projects or events relating to the
performance of the individual. Executives whose responsibilities are broader
than a particular business unit have a larger portion of their annual bonus
potential dependent on the overall earnings performance of the Company.
Executives with less ability to influence Company-wide or segment performance
have a greater proportion of their bonus dependent on individual performance.
In general, performance is measured by the operating income of individual
business units and the net income of the Company, in each case relative to
budgeted amounts and after consideration of events not reasonably anticipated
which affected income and accomplishments which may not immediately have income
benefits. In addition, in certain instances the compensation of certain
executive officers and other highly paid personnel is determined with regard to
contractual commitments made in connection with acquisitions or in other
circumstances.
Stock option grants are intended to provide incentive for long-term
contribution to the Company by providing rewards which are earned over a
substantial period of employment, which reflect growth in the value of
stockholder equity and which align the interests of key personnel with those of
stockholders. The policy of the Compensation Committee has been to consider
option grants for executives annually and to provide option vesting in annual
increments over four years. In determining how broadly in the organization
options should be distributed and the number of options to be granted to an
individual, the overriding consideration is the importance of the employee's
experience, skills and knowledge to the long-term
- 23 -
<PAGE>
performance of the Company. In making individual grants, the Committee also
considers prior grants to each individual and the terms of prior granted
options.
During 1993 an executive compensation consulting firm was retained to advise
the Compensation Committee regarding the competitiveness of the Company's
executive compensation and the effectiveness of current compensation policies
to achieve the objective of attracting, retaining, and providing incentives for
key executives and management personnel. The Committee considered the
consultant's report in making its 1994 determinations.
In recommending compensation for the Chief Executive Officer, the
Compensation Committee has taken into consideration the special circumstances
relating to that office. Since the establishment in mid-1991 of the Office of
the Chief Executive (the "OCE") consisting of more than one officer, the
Committee's actions have been influenced by the unique structure and
circumstances of the OCE. From January, 1994 to June, 1994 the members of the
OCE were Messrs. Einar W. Sissener and Jeffrey E. Smith, although Mr. Sissener,
at the request of the Company's Board of Directors in August, 1993, undertook
in the context of the OCE greater responsibilities for management of the
Company. In June 1994, Mr. Sissener was elected as Chief Executive Officer, and
the OCE was terminated. In October, 1994 the Company completed the Combination
Transaction under which it acquired the Related Norwegian Businesses of A.L.
Industrier.
The compensation recommended by the Compensation Committee for Messrs.
Sissener and Smith with respect to 1994 reflect the circumstances of the OCE,
the performance of its members, the performance of the Company and factors
relating to the Combination Transaction. With respect to Mr. Sissener, the
Committee considered that although he had primary responsibility for (and
devoted a majority of his business time to) management of the Company in 1994,
he also continued to serve as President of A.L. Industrier until the
Combination Transaction was completed and to receive compensation from the
Related Norwegian Businesses. The Committee believes that Mr. Sissener's
economic interests are aligned with those of the Company's stockholders through
the large indirect beneficial ownership of the Company's common stock held by
Mr. Sissener and his family and the enhanced incentive for Mr. Sissener which
resulted from the issuance to him and his family interests in the Combination
Transaction of warrants to purchase common stock of the Company. The Committee
believes that Mr. Sissener should receive current cash compensation which is
comparable to that of chief executive officers of other international
businesses similar in size and complexity to the Company and that properly
reflects his position relative to other executive officers of the Company. On
the basis of the foregoing factors and considering that the Company's
performance in 1994, though improved, was below budget, the Committee
recommended (and the Board of Directors approved) for Mr. Sissener a 1994 bonus
of $75,000 and 1995 base compensation (payable partially by the Company and
partially by the Company's Norwegian subsidiary) of approximately $425,000
(based on the applicable exchange rate at March 15, 1995). He is also eligible
for a cash bonus for 1995 of up to 100% of his base compensation. Prior to the
Combination Transaction, Mr. Sissener was not eligible for stock option awards
under the Company's 1983 Incentive Stock Option Plan since he was not an
employee of the Company or any of its subsidiaries. Since the Combination
Transaction, Mr. Sissener is an employee of the Company's Norwegian subsidiary
and (except for his membership on the Compensation Committee) would be eligible
for stock option awards in 1995.
With respect to Mr. Smith, the Compensation Committee considered favorably
his achievements as chief financial officer (including the bank refinancing in
connection with the Combination Transaction), his contributions to the lengthy
process of planning, analyzing and negotiating the Combination Transaction on
behalf of the Company and his performance in working with Mr. Sissener to
achieve the successful
- 24 -
<PAGE>
reorganization of the Company's operations following the Combination
Transaction. The 1994 bonus of $50,000 recommended for Mr. Smith reflected the
Committee's view of his individual performance (including the factors described
above), the Company's overall earnings performance and Mr. Smith's salary level
in view of the termination of the OCE. Although Mr. Smith no longer has
responsibilities as a member of the OCE, his responsibilities as chief
financial officer have increased due to the expansion of international
operations and investment community activities resulting from the Combination
Transaction. In granting stock options for 9,000 shares to Mr. Smith, the
Compensation Committee sought to provide additional long-term motivation and
incentive for Mr. Smith to continue his efforts on behalf of the Company.
Each of the other named executive officers of the Company (Messrs. David E.
Cohen, George S. Barrett and Niels L. Graugaard) had responsibility during 1994
for a separate principal business group of the Company. The Compensation
Committee's 1994 bonus determination for Mr. Cohen was largely influenced by
the performance of the animal health group and, to a lesser extent, his
individual performance and the Company's overall performance. Mr. Barrett's
bonus determination included recognition of the bonus payments to which he is
contractually entitled and a judgment that, while performance of the U.S.
pharmaceutical group for which Mr. Barrett is responsible improved in 1994, the
extent of improvement would be better assessed over a longer period.
Consequently, the Committee authorized an additional bonus for 1994 to be paid
to Mr. Barrett in late 1995 if the U.S. pharmaceutical group meets certain
performance criteria to be set by the Chief Executive Officer for the first
nine months of 1995. In view of Mr. Graugaard's announced resignation, he
received no bonus for 1994.
By the Compensation
Committee:
Thomas G. Gibian (Chairman)
I. Roy Cohen
Glen E. Hess
Einar W. Sissener
- 25 -
<PAGE>
PERFORMANCE GRAPH
The following graph compares the Company's cumulative total stockholder
return during the last five years with the Media General Financial Services
Index for Pharmaceutical Companies (which index includes 248 corporations that
describe themselves as drug manufacturers and are publicly traded) and The New
York Stock Exchange Index. The graph assumes $100 invested on December 31, 1989
in the Company's Class A Stock and $100 invested at that time in each of the
selected indices. The comparison assumes that all dividends are reinvested.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
A.L. Pharma Inc. $100 $140.06 $204.51 $217.74 $118.91 $173.52
Media General Financial
Services Index for
Pharmaceutical Companies $100 $119.93 $195.67 $160.52 $145.57 $156.61
NY Stock Exchange Index $100 $ 95.92 $124.12 $129.96 $147.56 $144.69
</TABLE>
- 26 -
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH A.L. INDUSTRIER
Transactions Prior to the Combination Transaction. During 1994, as in prior
years, the Company engaged in a variety of transactions, including the
Company's purchase of products and its licensing of technology from, and the
sale of goods to, the Related Norwegian Businesses. The Company acted as
distributor in the United States for pharmaceutical grade bacitracin and feed
grade zinc bacitracin manufactured by A.L. Industrier. During 1994 (prior to
the consummation of the Combination Transaction), the Company's animal health
and bulk antibiotics group purchased $5,901,000 of products, principally
bacitracin antibiotics, from A.L. Industrier; A.L. Industrier and its
subsidiaries purchased $365,000 of pharmaceutical and animal health products
from the Company and its subsidiaries, principally on a contract manufacturing
basis; and the Company and its subsidiaries incurred an aggregate of $1,443,000
payable to A.L. Industrier as fees payable under the Technology Agreement
(defined below).
Pursuant to an agency agreement, a Danish subsidiary of the Company purchased
and resold pharmaceutical products manufactured by the Related Norwegian
Businesses and was reimbursed for its promotion costs in connection with such
sales. During 1994 (prior to consummation of the Combination Transaction), such
subsidiary purchased $4,463,000 of such products from A.L. Industrier and
received a promotion cost reimbursement of $555,000.
Under a Technical Support and Technology Agreement dated September 30, 1983
(the "Technology Agreement"), the Related Norwegian Businesses provided the
Company on an ongoing basis with fermentation, technical, engineering and
managerial advice and services, including the manufacturing and technical know-
how of the Related Norwegian Businesses with respect to the manufacture and
sale of bacitracin methylene disalicylate antibiotic ("BMD") feed grade and
soluble BMD antibiotic in North America. In connection with the Combination
Transaction, the Technology Agreement and such manufacturing and technical
know-how were transferred to A.L. Oslo before it became a wholly-owned
subsidiary of the Company. For its services and license under the Technology
Agreement, the Company paid A.L. Industrier prior to the Combination
Transaction 2 1/2% of the net sales of its production of BMD antibiotic
(excluding soluble BMD antibiotic), 1/3% of the consolidated net sales value of
certain pharmaceutical and antibiotic products and 10% of the net sales of
soluble BMD antibiotic.
Such transactions have generally been continued after the Combination
Transaction but are now transactions among subsidiaries of the Company.
The Combination Transaction. On October 3, 1994, the Company acquired through
a series of related transactions the Related Norwegian Businesses. The
Consideration was paid by the Company directly to the shareholders of A.L.
Industrier and consisted of $23.6 million and Warrants to purchase 3,600,000
shares of Class A Stock. As stockholders of A.L. Industrier, Mr. Sissener,
Swekk and certain of Mr. Sissener's relatives each received their pro rata
portion of the Consideration, consisting in the aggregate of approximately
$12.41 million and Warrants to purchase 1,894,755.06 shares of Class A Stock.
See "Security Ownership of Certain Beneficial Owners -- Ownership of Warrants."
The Combination Transaction was approved by the Company's Board of Directors,
after a recommendation by the special committee of the Board which was formed
to assess the Combination Transaction, and by holders of a majority of the
Company's outstanding shares of Class A Stock, voting as a separate class.
- 27 -
<PAGE>
Transactions After the Combination Transaction. In connection with the
Combination Transaction, A.L. Industrier and A.L. Oslo entered into a lease
(the "Skoyen Lease") pursuant to which A.L. Industrier leases to A.L. Oslo the
land and facility in Oslo, Norway where the Related Norwegian Businesses'
principal administrative offices and fermentation plant for its bulk
antibiotics and animal health businesses are located. The Skoyen Lease has a
term of 20 years, which term is renewable, at the option of A.L. Oslo, for four
additional consecutive five year terms. Basic rent during the initial 20-year
term is $1.00 per year and, during any renewal term thereafter, basic rent will
be the then prevailing fair rental value of the premises. In addition to basic
rent, A.L. Oslo pays documented expenses of ownership and operation of such
facility, such as taxes and maintenance expenses. A.L. Oslo has the right to
terminate the Skoyen Lease at any time during its term upon twelve months
written notice to A.L. Industrier.
In connection with the Combination Transaction, A.L. Oslo also entered into
an administrative services agreement (the "Administrative Services Agreement")
with A.L. Industrier, pursuant to which A.L. Oslo provides certain
administrative services to A.L. Industrier. Such services are provided on a
full cost basis, except that A.L. Industrier is required to pay A.L. Oslo a
minimum fee for services rendered during calendar years 1994, 1995 and 1996
equal to NOK 5,650,000, NOK 4,000,000 and NOK 3,000,000, respectively. In 1994,
A.L. Industrier paid A.L. Oslo NOK 5,650,000 (or $820,000 based on the NOK
exchange rates in effect on the dates such fees were paid), which included
payments prior to the closing of the Combination Transaction. The
Administrative Services Agreement has an initial term of three years and will
be automatically extended for one-year terms thereafter unless terminated by
either of the parties thereto.
During 1994, as in prior years, the Related Norwegian Businesses engaged in
commercial transactions with subsidiaries of A.L. Industrier. These
transactions were intercompany transactions prior to the Combination
Transaction and became related party transactions after the Company acquired
the Related Norwegian Businesses in the Combination Transaction. During 1994
(after the consummation of the Combination Transaction), the Company through
A.L. Oslo and its subsidiaries sold $589,000 of products, primarily
multivitamins and adhesive products, to a subsidiary of A.L. Industrier for
distribution of these products to retail food stores. In addition, during 1994
(after the consummation of the Combination Transaction) A.L. Oslo paid $80,000
to A.L. Industrier to reimburse A.L. Industrier for costs incurred in producing
an aquatic animal health product for A.L. Oslo.
All transactions with A.L. Industrier are subject to review by, and in
certain circumstances prior approval of, the Audit Committee. See "Board of
Directors and Committees -- Committees of the Board" above.
CERTAIN OTHER TRANSACTIONS AND RELATIONSHIPS
Mr. I. Roy Cohen, who as of January 15, 1991 retired as President and Chief
Executive Officer, has a contract to act as a special consultant to the Company
for a ten-year period following such retirement (the "Consultant Term"). During
the Consultant Term, the Company is required to pay him a minimum annual
consideration ($131,900 for 1994) which may be increased to reflect services
rendered in excess of 40 days during the year, inflation and other factors, and
to provide him with an automobile allowance and certain other employee
benefits. Total amounts earned under such contract in 1994 were $216,920, all
of which were deferred by Mr. Cohen. The contract provides, in the event of Mr.
Cohen's disability, death or termination during the Consultant Term, for
continued payments to Mr. Cohen (or his wife or children in the case of his
death) of the remaining amounts he would otherwise be entitled to receive.
- 28 -
<PAGE>
Mr. Glen E. Hess' professional corporation is a partner of Kirkland & Ellis,
a law firm which since 1978 has performed and continues to perform significant
legal services for the Company.
Mr. David E. Cohen, a Vice President of the Company and President of the
Company's Animal Health Division, is the nephew of Mr. I. Roy Cohen.
Mr. Gert W. Munthe is a director of A.L. Industrier and the son-in-law of Mr.
Einar W. Sissener.
INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P. has been selected to serve as the Company's
independent certified public accountants for the fiscal year ending December
31, 1995. A representative of that firm will be present at the Annual Meeting
with the opportunity to make a statement if he desires to do so and to respond
to questions of stockholders. The appointment of the auditors has been approved
by the Company's Board of Directors based upon the recommendation of the Audit
Committee.
STOCKHOLDERS' PROPOSALS FOR THE 1996 ANNUAL MEETING
In order to be considered for inclusion in the proxy statement for the 1996
Annual Meeting of Stockholders, stockholder proposals must be submitted to the
Company on or before December 12, 1995.
SECTION 16A OF EXCHANGE ACT
For the 1994 fiscal year, I. Roy Cohen did not timely file his required
statement of changes of beneficial ownership with the Commission, which report
relates to Mr. Cohen's acquisition of 1,000 shares of Class A Stock on November
15, 1994. In making these statements, the Company has relied on representations
made by Mr. Cohen.
OTHER BUSINESS
As of the date hereof, the foregoing is the only business which management
intends to present, or is aware that others will present, at the Annual
Meeting. If any other proper business should be presented at the Annual
Meeting, the proxies will be voted in respect thereof in accordance with the
discretion and judgment of the person or persons voting the proxies.
By order of the Board of
Directors
Beth P. Hecht
Secretary
A.L. Pharma Inc.
YOUR VOTE IS IMPORTANT PLEASE PROMPTLY COMPLETE AND SIGN THE ENCLOSED FORM OF
PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE
- 29 -
<PAGE>
A.L. PHARMA INC.
One Executive Drive, P.O. Box 1399, Fort Lee, New Jersey 07024
Proxy for Annual Meeting of Stockholders on June 7, 1995
Jeffrey E. Smith, Vice President and Chief Financial Officer, Beth P. Hecht,
Secretary, and Gale R. Cataraso, Assistant Secretary, or any one of them, with
full power of substitution, are hereby authorized to vote the shares of Class A
Common Stock of A.L. Pharma Inc. (the "Company"), which the undersigned is
entitled to vote at the 1995 Annual Meeting of Stockholders to be held at The
Regency Hotel, 540 Park Avenue, New York, New York on Wednesday, June 7, 1995 at
10:00 a.m., local time, and at all adjournments thereof, as follows on the
reverse side:
The Board of Directors recommends that the Stockholders vote FOR (i) the
nominees set forth in item 1 and (ii) item 2. Shares represented by this proxy
when properly executed will be voted in the manner directed by the undersigned
stockholder and in the discretion of the proxy holders as to any other matter
that may properly come before the Annual Meeting of Stockholders or, if no
direction is indicated, will be voted FOR (i) the nominees set forth in item 1
and (ii) item 2; and in the discretion of the proxy holders as to any other
matter that may properly come before the Annual Meeting of Stockholders.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
<PAGE>
(Continued from reverse side)
[X] Please mark
votes as in
this example
1. ELECTION OF DIRECTORS
Nominees: James Balog, Thomas G. Gibian,
Peter G. Tombros
[_] FOR [_] WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
[_]
--------------------------------------
For all nominees except as noted above
2. Approval of the amendment to the FOR AGAINST ABSTAIN
Company's 1983 Incentive Stock Option
Plan described in the accompanying Proxy [_] [_] [_]
Statement.
3. As such persons may in their discretion determine upon such matters as may
come before the meeting.
MARK HERE
FOR ADDRESS [_]
CHANGE AND
NOTE AT LEFT
NOTE: The signature should correspond exactly with the name of the stockholder
as it appears hereon. Where stock is registered in Joint Tenancy, all tenants
should sign. Persons signing as Executors, Administrators, Trustees, etc.,
should so indicate.
Signature: Date:
-------------------------------------- -----------------------
Signature: Date:
-------------------------------------- -----------------------
Please mark, sign and mail this proxy promptly in the enclosed envelope, which
requires no postage if mailed in the United States.
<PAGE>
Draft 04/07/95
As amended thru __/__/95
A.L. PHARMA INC.
----------------
1983 INCENTIVE STOCK OPTION PLAN
--------------------------------
1. Purpose of the Plan.
-------------------
This 1983 Incentive Stock Option Plan (the "Plan") of A.L. Pharma Inc. (the
"Company"), is designed to provide incentive to present and future executive,
managerial, marketing, technical and other key employees of the Company and of
its subsidiaries (hereinafter referred to as "Employees") by affording such
Employees an opportunity to acquire or increase their proprietary interest in
the Company through the acquisition of shares of its Class A Common Stock. By
encouraging stock ownership by such Employees, the Company seeks to attract and
retain in its and its subsidiaries' employ persons of exceptional competence and
seeks to furnish an added incentive for them to increase their efforts on behalf
of the Company.
2. Administration.
--------------
This Plan shall be administered by a committee of the Board of Directors of
the Company consisting of two or more directors (the "Options Committee")
appointed for such purpose; provided that if at any time Rule 16b-3 or any
successor rule ("Rule 16b-3") under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and Section 162(m) ("Section 162(m)") of the
Internal Revenue Code of 1986, as amended, or any successor statutory provision
thereof (the "Code"), and any implementing regulations (and any successor
provisions thereof), so permit without adversely affecting the ability of the
Plan to comply with the conditions for exemption from Section 16 of the Exchange
Act (or any successor provision) provided by Rule 16b-3 and the exemption from
the limitations on the deductibility of certain executive compensation provided
by Section 162(m), the Options Committee may delegate the administration of the
Plan in whole or in part, on such terms and conditions, to such other person or
persons as it may determine in its discretion. The membership of the Options
Committee or such successor committee shall be constituted so as to comply at
all times with the applicable requirements of Rule 16b-3 and Section 162(m). No
member of the Options Committee shall have within one year prior to his
appointment received awards under the Plan or under any other plan, program or
arrangement of the Company or any of its affiliates if such receipt would cause
such member to cease to be a "disinterested person" under Rule 16b-3; provided
that if at any time Rule 16b-3 so permits without adversely affecting the
ability of the Plan to comply with the conditions for exemption from Section 16
of the Exchange Act (or any successor provision) provided by Rule 16b-3, one or
more members of the Options Committee may cease to be a "disinterested person."
All questions of interpretation and application of this Plan, of options
granted hereunder (the "Options"), of any related agreements and instruments,
and of the value of shares of
<PAGE>
Class A Common Stock subject to Options, shall be subject to the good faith
determination of the Options Committee, which shall be final and binding. If
for any reason an Options Committee shall not have been appointed, all authority
and duties of the Options Committee under this Plan shall be vested in and
exercised by the Board of Directors of the Company.
3. Option Shares.
-------------
The stock subject to the Options and other provisions of this Plan shall be
shares of the Company's Class A Common Stock, par value $.20 per share
(hereinafter referred to as the "Common Stock"). The total amount of the Common
Stock with respect to which Options may be granted shall not exceed in the
aggregate 2,500,000/1/ shares; provided, however, that the type and aggregate
number of shares which may be subject to Options granted hereunder shall be
subject to adjustment in accordance with the provisions of paragraph 16 hereof,
and further provided that if Incentive Stock Options (as defined below) are
granted, the aggregate fair market value (determined as of the time the option
is granted) of the Stock with respect to which Options are exercisable for the
first time by any single Employee during any calendar year shall not exceed
$100,000. The maximum number of shares of Common Stock which any single Employee
may acquire pursuant to a grant of Options (including under the alternative cash
settlement right described below) in any one taxable year of the Company shall
not exceed 100,000 shares of Common Stock (subject to adjustment in accordance
with the provisions of paragraph 16 hereof). Such shares may be treasury shares
or authorized but unissued shares.
If for any reason the full number of shares covered by any Option are not
issued before the Option expires or terminates, shares not issued under such
Option shall again be available for the grant of Options under this Plan.
4. Authority to Grant Options.
--------------------------
The Options Committee may grant Options from time to time to such eligible
Employees as it shall determined; provided, however, that no Options may be
granted to any person who is a member of the Options Committee at the time of
such grant. Subject only to any applicable limitations set forth in this Plan,
the number of shares of Common Stock which may be purchased pursuant to any
Option shall be as determined by the Options Committee.
In the discretion of the Options Committee, Options granted under this Plan
may be "incentive stock options" as such term is defined in Section 422A of the
Internal Revenue Code of 1986 ("Incentive Stock Options"), or Options which do
not meet such definition. The option agreement with respect to any Option
intended to qualify as an Incentive Stock Option shall so identify such Option.
- - ---------------
/1/ Reflects 1985, 1986 and 1991 stock splits, additional shares approved at
the 1986, 1988, 1989, 1991, 1993 and 1995 stockholders' meetings.
2
<PAGE>
5. Limitation on Value of Shares Covered by Incentive Stock Options Granted to
---------------------------------------------------------------------------
any Employee.
- - ------------
The aggregate fair market value (determined as of the time the Option is
granted) of the Common Stock with respect to which any employee may be granted
Incentive Stock Options under this Plan and any other plans of the Company or
any parent or subsidiary of the Company shall not exceed the amount permitted by
Section 422A of the Internal Revenue Code of 1986.
6. Eligibility.
-----------
The individuals who shall be eligible to participate in the Plan shall be
such Employees from the class of executive, managerial, marketing, technical and
other key employees as the Options Committee shall determine from time to time.
7. Option Price.
------------
The price at which shares may be purchased pursuant to any Option shall be
specified by the Options Committee at the time the Option is granted, and shall
be equal to or greater than the fair market value, as determined by the Options
Committee, of the shares of Common Stock on the date the Option is granted.
8. Terms of the Options; Vesting.
-----------------------------
The Options Committee shall determine the term of each Option which shall
in no event exceed ten years and one month from the date of grant. Unless the
Committee shall otherwise determine at the time of grant, Options shall vest at
the rate of 25% per year that the Employee holds such Option so that Options
shall not become fully exercisable until four years from the date of grant.
Accordingly, unless the Committee shall otherwise determine at the time of
grant, Options cannot be exercised until one year after the Option has been
granted and then 25% of the Option Shares may be purchased during the second
year, 50% during the third year, 75% during the fourth year, and 100% after four
years. Subject to the limitations contained in paragraph 12 hereof, the Options
Committee may, in its discretion: (a) accelerate the time at which any
outstanding Option or part thereof shall become exercisable and (b) extend the
time during which any outstanding Option may be exercised, provided that no
Option may be exercised more than ten years and one month after the date of
grant. There shall be deemed to be part of the conditions and terms of every
Option granted hereunder as an Incentive Stock Option each condition, term,
limitation or restriction which is required under Section 422A of the Internal
Revenue Code and the applicable regulations for such Option to qualify as an
Incentive Stock Option.
9. Amount Exercisable.
------------------
Each Option may be exercised, so long as it has vested and is valid and
outstanding, from time to time, in part or in whole, subject to any limitations
with respect to the number of shares
3
<PAGE>
for which the Option may be exercised at a particular time and to such other
conditions as the Options Committee in its discretion, may specify.
10. Exercise of Options.
-------------------
Options shall be exercised by the delivery of written notice to the Company
(Attention: Treasurer) setting forth the number of shares with respect to which
the Option is to be exercised and the address to which the certificates for such
shares are to be mailed, together with (i) cash (including checks, bank drafts
or postal or express money orders payable to the order of the Company) or (ii),
if permitted by the Options Committee and in accordance with Section 10C, shares
of Common Stock previously acquired, in an aggregate amount equal to the option
price of such shares. As promptly as practicable after receipt of such written
notification and payment and subject to Section 10B, the Company shall deliver
to the optionee certificates for the number of shares with respect to which such
Option has been so exercised, issued in the optionee's name; provided, that such
delivery shall be deemed effected for all purposes when such certificates shall
have been deposited in the United States mail, addressed to the optionee, at the
address specified pursuant to this paragraph. For all purposes, an optionee
shall be deemed to have exercised an Option and to have purchased and become the
holder of the Option Shares as of the date the Company receives written
notification of exercise and payment as provided herein and in Section 10B.
10A. Alterative Cash Settlement Method.
---------------------------------
The Options Committee, in its discretion, may confer upon the grantee of
any Option granted pursuant to this Plan the right to exercise, with respect to
shares of Common Stock which could be purchased under an Option otherwise
exercisable hereunder, an alternative cash settlement right as set forth below
in lieu of purchasing shares under such Option. Such right may be conferred at
the time the Options are granted or with respect to outstanding Options.
The alternative cash settlement right shall mean the right, in lieu of
purchasing shares under an Option which is otherwise exercisable under this
Plan, to receive a payment in cash equal to the excess of the value of one share
of Common Stock over the option price set forth in the Option times the number
of shares as to which the alternative cash settlement right is exercised.
Notwithstanding the other provisions of this Plan, exercise of an alternative
cash settlement right (i) shall be subject to the approval of the Committee at
the time of such exercise and (ii) may only be exercised in connection with and
at the same time that an Option is being exercised under Section 10 of this Plan
and may not be exercised with respect to more shares of Common Stock than are
then being purchased upon such exercise under Section 10. For purposes of
determining an alternative cash settlement, the value per share of Common Stock
shall be the closing price on the principal stock exchange on which the Common
Stock is listed for trading on the date of the exercise of the Option (or, if no
such closing price is available, the value shall be determined in such other
manner as the Options Committee may deem appropriate).
4
<PAGE>
Exercise of alternative cash settlement rights shall be made by notice
delivered to the Company as provided in Section 10 of this Plan. Exercise of an
Option through exercise of an alternative cash settlement right shall for
purposes of this Plan have the same effect as if the shares of Common Stock as
to which such right was exercised were issued under this Plan; accordingly there
shall be a decrease in the number of shares of Common Stock which thereafter may
be available for purposes of granting Options under this Plan by the number of
shares of Common Stock as to which an alternative cash settlement right is
exercised.
10B. Withholding Tax Requirements.
----------------------------
It shall be a condition of exercise of any Option (including any exercise
of an alternative cash settlement right) that the Employee exercising the Option
make appropriate payment or other provision acceptable to the Company with
respect to any withholding tax requirement arising from such exercise. The
amount of withholding tax required, if any, with respect to any Option exercise
(the "Withholding Amount") shall be determined by the Treasurer or other
appropriate officer of the Company, and the Employee shall furnish such
information and make such representations as such officer requires to make such
determination. In the event of an exercise involving an alternative cash
settlement right, the Company shall withhold the Withholding Amount from the
amount otherwise payable to the Employee. If the Company determines that
withholding tax is required with respect to any Option exercise not involving an
alternative case settlement right, the Company shall notify the Employee of the
Withholding Amount, and the Employee shall pay to the Company, by check or other
means acceptable to the Company, an amount not less than the Withholding Amount.
In lieu of making such payment, the Employee may elect to pay the Withholding
Amount by either (i) delivering to the Company a number of shares of Common
Stock having an aggregate value (determined as set forth in Section 10A) as of
the "measurement date" (as hereinafter defined) not less than the Withholding
Amount or (ii) directing the Company to withhold (and not to deliver or issue to
Employee) a number of shares of Common Stock otherwise issuable upon the Option
exercise having an aggregate value (determined as set forth in Section 10A) as
of the measurement date not less than the Withholding Amount; provided that if
the Employee is an officer or director subject to Section 16(b) of the Exchange
Act, the election to meet withholding tax requirements by the delivery or
direction to withhold shares of Common Stock may only be exercised (i) during a
ten-day "window" period specified in Rule 16b-3 or (ii) at least six months
prior to the measurement date or (iii) at such other time as will not, in the
opinion of counsel for the Company, result in any liability of such Employee
under said Section 16(b). If the Company approves, an Employee may elect
pursuant to the prior sentence to deliver or direct the withholding of shares of
Common Stock having an aggregate value in excess of the minimum Withholding
Amount but not in excess of the Employee's applicable highest marginal combined
federal income and state income tax rate, as estimated in good faith by the
Employee. Any fractional share interests resulting from the delivery or
withholding of shares of Common Stock to meet withholding tax requirements shall
be settled in cash. All amounts paid to or withheld by the Company and the value
of all shares of Common Stock delivered to or withheld by the Company pursuant
to this Section 10B shall be deposited in accordance with applicable law by the
Company as withholding tax for the Employee's account. If the Treasurer or
5
<PAGE>
other appropriate officer of the Company determines that no withholding tax is
required with respect to the exercise of any Option (because such Option is an
Incentive Stock Option or otherwise), but subsequently it is determined that the
exercise resulted in taxable income as to which withholding is required (as a
result of a disposition of shares or otherwise), the Employee shall promptly,
upon being notified of the withholding requirement, pay to the Company by means
acceptable to the Company the amount required to be withheld; and at its
election the Company may condition any transfer of shares issued upon exercise
of an Incentive Stock Option upon receipt of such payment. The term "measurement
date" as used in this Section 10B shall mean the date on which any taxable
income resulting from the exercise of an Option is determined under applicable
federal income tax provisions.
10C. Exchange of Previously Acquired Stock.
-------------------------------------
The Options Committee, in its discretion, may (subject to the provisos to
this sentence) permit the option price for the shares being acquired upon the
exercise of an Option to be paid, in full or in part, by the delivery to the
Company of a number of shares of Common Stock having an aggregate value
(determined as set forth in Section 10A) as of the "exercise measurement date"
(as hereinafter defined) equal to the exercise price for the shares being
acquired; provided that if the Employee exercising the Option is an officer or
director subject to Section 16(b) of the Exchange Act and such Employee is
permitted by the Options Committee to pay the exercise price under an Option by
delivery of previously acquired Common Stock, the election to deliver such
Common Stock may only be made (i) during a ten-day "window" period specified in
Rule 16(b)-3 or (ii) at least six months prior to the exercise measurement date
or (iii) as such other time as will not, in the opinion of counsel for the
Company, result in any liability of such Employee under said Section 16(b);
provided further that if the shares of Common Stock being delivered as payment
for all or part of the exercise price under an Option were acquired pursuant to
the exercise of another Option, such Common Stock must have been owned by the
Employee for at least six months preceding the exercise measurement date; and
provided further that this Section 10C shall only be available for, and
applicable to, Options granted subsequent to September 30, 1986. The term
"exercise measurement date" as used in this Section 10C shall mean the date on
which the Option is exercised in accordance with Section 10.
11. Transferability of Options.
--------------------------
Options shall not be transferable otherwise than by will or the laws of
descent and distribution and shall be exercisable during the optionee's lifetime
only by him or by his guardian or legal representative.
12. Termination of Employment or Death of Optionee.
----------------------------------------------
Except as expressly provided herein, Options shall terminate on the earlier
of:
a. the date of expiration thereof, specified pursuant to paragraph 8 of
this Plan;
6
<PAGE>
b. immediately upon termination of the employment relationship between
the Company and the optionee for cause, or
c. thirty (30) days or, if the written option agreement (as specified
pursuant to paragraph 18 hereof) specifically provides, for a longer
period not to exceed one year after termination of the employment
relationship between the Company and the optionee without cause,
other than death or retirement in good standing from the employ of
the Company for reasons of age or disability under then established
rules of the Company or the subsidiary employing the optionee.
Whether authorized leave of absence, or absence on military or government
service, shall constitute termination of the employment's relationship shall be
determined by the Options Committee.
In the event of the death of the holder of an Option while in the employ of
the Company and before the date of expiration of such Option, such Option shall
terminate on the earlier of such date of expiration or one year following the
date of such death. After the death of the optionee, his executors,
administrators, or any person or persons to whom his Option may be transferred
by will or by the laws of descent and distribution, shall have the right, at any
time prior to such termination to exercise such Option which shall have vested
immediately prior to his death. If, before the date of expiration of an Option,
the optionee shall be retired in good standing from the employee of the Company
for reasons of age or disability under the then established rules of the
Company, such Option shall terminate on the earlier of such date of expiration
or 90 days after the date of such retirement unless the written option agreement
specifically provides for a longer period not to exceed one year after the date
of such retirement unless the written option agreement specifically provides for
a longer period not to exceed one year after the date of such retirement. In the
event of such retirement, the optionee shall have the right prior to the
termination of such Option to exercise the Option to the extent to which he was
entitled to exercise such Option immediately prior to such retirement.
For all purposes of this Plan, an employment relationship between the
Company and the optionee shall be deemed to exist during any period in which the
optionee is employed by the Company or by any subsidiary of the Company.
13. Requirements Imposed by Law.
---------------------------
The Company shall not be required to sell or issue any shares under any
Option if the issuance of such shares shall constitute a violation by the
optionee or by the Company of any provisions of any law or regulation of any
governmental authority. Any determination in this connection by the Options
Committee shall be final, binding and conclusive.
The Company shall not be required to issue any shares upon exercise of any
Option unless the Company has received the optionee's representation or other
evidence satisfactory to it to the effect that the holder of such Option will
not transfer such Shares in any manner which would
7
<PAGE>
constitute a violation of any securities or other law, or which would not be in
compliance with such other conditions as the Options Committee may deem
appropriate.
14. No Rights as Stockholders.
-------------------------
No optionee shall have rights as a stockholder with respect to shares
covered by his Option until the date of exercise of such Option; and, except as
otherwise provided in paragraph 16 hereof, no adjustment for dividends, or
otherwise, shall be made if the record date therefor is prior to the date of
such exercise of such Option.
15. No Employment Obligation.
------------------------
The granting of any Option shall not impose upon the Company any obligation
to employ or continue to employ any optionee; and the right of the Company to
terminate the employment of any officer or other employee shall not be
diminished or affected by reason of the fact that an Option has been granted to
him.
16. Changes in the Firm's Capital Structure.
---------------------------------------
The existence of outstanding Options shall not affect in any way the right
or power of the Company or its stockholders to make or authorize any or all
adjustments, recapitalizations, reorganizations, or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, or preferred or prior preference
stock senior to or otherwise affecting the Common Stock or the rights thereof,
or the dissolution or liquidation of the Company, or any sale or transfer of all
or any part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
If the Company shall effect a subdivision or consolidation of shares or
other capital readjustment, or pay a dividend in shares of its Class A or Class
B Common Stock, then (a) the number, type, and per share price of shares of
stock subject to outstanding Options hereunder shall be appropriately adjusted
in such a manner as to entitle each optionee to receive upon exercise of his
Option, for the same aggregate consideration, the same total number and type of
shares as he would have received as a result of the event requiring the
adjustment had he exercised his Option in full immediately prior to such event;
provided, however, that, if any such adjustment would result in the right to
purchase a fractional share, the number of shares subject to the Option will be
decreased to the next lower whole number; (b) the number and type of shares then
reserved for issuance under the Plan shall be adjusted by substituting for the
total number of shares of Common Stock then reserved that number and type of
shares of stock that would have been received by the owner of an equal number of
outstanding shares of Common Stock as the result of the event requiring the
adjustment; and (c) the maximum number of shares of Common Stock that any
Employee may acquire pursuant to a grant of Options (including under the
alternative cash settlement right) in any one taxable year of the Company as set
forth in the third sentence of the first paragraph of paragraph 3 shall be
adjusted by substituting for such number of shares that number
8
<PAGE>
of shares of stock that would have been received by the owner of an equal number
of outstanding shares of Common Stock as the result of the event requiring
adjustment.
If the Company shall be a party to any merger or consolidation or effect
any recapitalization which causes a change in the Common Stock which does not
effect an adjustment under the prior paragraph, the Options Committee, in its
discretion, may, if it considers it to be appropriate to carry out the intent
and purpose of the Plan, make such adjustments in the nature or amount of
securities subject to the Options or the Option price as it considers
appropriate, and such adjustments shall be binding and conclusive on all holders
of Options.
Except as expressly provided herein, the issue by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
for cash or property, or for labor or services either upon direct sale, or upon
the exercise of rights or warrants to subscribe therefore, or upon conversion of
other securities, shall not affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of shares of Common Stock then subject
to outstanding Options.
17. Amendment or Termination of Plan.
--------------------------------
The Board of the Directors of the Company may modify revise or terminate
this Plan at any time and from time to time, except that neither the aggregate
number of shares issuable pursuant to this Plan nor the minimum option price
specified in paragraph 7 of this Plan shall, other than by operation of
paragraph 16, hereof, be adjusted without the consent of the holders of Class A
and Class B Common Stock having a majority of the voting power.
18. Written Agreement.
-----------------
Each Option granted hereunder shall be embodied in a written option
agreement which shall be subject to the terms and conditions prescribed above
and shall be signed by the optionee and by the President or a Vice President of
the Company for and in the name and on behalf of the Company. Such an option
agreement shall contain such other provisions as the Options Committee in its
discretion shall deem advisable.
19. Director and Stockholder Approval; Duration of Plan.
---------------------------------------------------
This Plan was initially duly adopted by the Board of Directors on September
26, 1983 and approved by the stockholders of the Company on January 25, 1984.
Amendments to this Plan since such dates have been duly approved by the Board of
Directors and, as required by this Plan or Rule 16b-3 or Section 162(m) as in
effect from time to time, have been approved by the stockholders of the Company.
Options may not be granted under this Plan after September 26, 2003. This Plan
shall terminate (a) when the total amount of Common Stock with respect to which
Options may be granted shall have been issued upon the exercise of Options, or
(b) by action of the Board of Directors pursuant to paragraph 17 hereof,
whichever shall first occur.
9
