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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
CYTEC INDUSTRIES INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
3) Filing Party:
___________________________________________________________________________
4) Date Filed:
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[FORM OF FRONT OF PROXY]
CYTEC INDUSTRIES INC.
ANNUAL MEETING OF COMMON STOCKHOLDERS
May 12, 1997
THIS PROXY IS SOLICITED ON BEHALF OF
THE COMPANY'S BOARD OF DIRECTORS
The undersigned hereby appoints D. D. Fry, J. P. Cronin and E. F.
Jackman, and each of them jointly and severally, Proxies with full power of
substitution, to vote as designated on the reverse side and, in their
discretion, upon such other business as may properly come before the meeting all
shares of Common Stock of Cytec Industries Inc. held of record by the
undersigned on March 13, 1997 at the Annual Meeting of Common Stockholders to be
held on May 12, 1997 or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
NOMINEES TO SERVE AS DIRECTORS, "FOR" THE INCREASE IN THE AUTHORIZED COMMON
STOCK, AND "FOR" APPROVAL OF AMENDMENTS TO THE 1993 STOCK AWARD AND INCENTIVE
PLAN. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED ON THE
REVERSE SIDE. IF NO DIRECTION IS GIVEN IN THE SPACE PROVIDED ON THE REVERSE
SIDE, THIS PROXY WILL BE VOTED (i) "FOR" THE ELECTION OF THE DIRECTORS, (ii)
"FOR" THE INCREASE IN THE AUTHORIZED COMMON STOCK AND (iii) FOR APPROVAL OF
AMENDMENTS TO THE 1993 STOCK AWARD AND INCENTIVE PLAN.
[FORM OF REVERSE OF PROXY]
1. ELECTION OF DIRECTORS
<TABLE>
<CAPTION>
FOR the election of WITHHOLD To withhold authority to vote for Will
F. W. Armstrong AUTHORITY the election of any individual attend
G. A. Burns to vote for the candidate, write that person's Annual
election of Directors name on this line. Meeting
<S> <C> <C> <C>
---- ---- --------------------------------- ----
</TABLE>
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE.
2. Increase in Authorized Common Stock
FOR AGAINST ABSTAIN
--- --- ---
3. Amend 1993 Stock Award and Incentive Plan
FOR AGAINST ABSTAIN
--- --- ---
Signature_______________ Signature_____________ Date______ 1997
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
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CYTEC LOGO
CYTEC INDUSTRIES INC.
5 GARRET MOUNTAIN PLAZA
WEST PATERSON, NJ 07424
Notice of Annual Meeting
of Common Stockholders to be held
May 12, 1997 March 26, 1997
To the Holders of Common Stock
The Annual Meeting of Common Stockholders of Cytec Industries Inc. will be
held at the Sheraton Crossroads Hotel, Crossroads Corporate Center, Mahwah, NJ
07495, on Monday, May 12, 1997, at 11:00 a.m., for the purpose of (i) electing
two directors for terms ending in the year 2000; (ii) approving an increase in
the authorized Common Stock of the company; and (iii) approving certain
amendments to the 1993 Stock Award and Incentive Plan, and to transact such
other business as may properly come before the meeting or any adjournment
thereof.
Only holders of Common Stock of record at the close of business on March 13,
1997, are entitled to notice of and to vote at the meeting or any adjournment
thereof.
Since no action can be taken at the meeting unless a majority of the
outstanding shares of Common Stock is represented, it is important, regardless
of the number of shares which you hold, that you be personally present or
represented by proxy at the meeting. Accordingly, if you cannot attend the
meeting, it is requested that you promptly sign and date the enclosed proxy and
mail it in the enclosed envelope, which requires no postage if mailed in the
United States.
By Order of the Board of Directors,
E. F. Jackman
Secretary
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CYTEC LOGO
CYTEC INDUSTRIES INC.
5 GARRET MOUNTAIN PLAZA
WEST PATERSON, NJ 07424
Proxy Statement for
Annual Meeting of Common Stockholders
to be held May 12, 1997
March 26, 1997
The enclosed proxy is solicited by the Board of Directors of Cytec Industries
Inc. (the "Company") and is revocable at any time before it is exercised.
Revocation may be by written notice or by furnishing a proxy subsequent in time.
The shares represented by all properly executed proxies received by the Company
in time to be voted will be voted as specified on the proxies, and in the
absence of specific direction will be voted for the election of directors and
the approval of the proposed increase in the authorized Common Stock and the
proposed amendments to the 1993 Stock Award and Incentive Plan. For persons who
participate in the Cytec Employees' Savings and Profit Sharing Plan, those
shares held for the participant's account under this plan will automatically be
voted in accordance with the proxy returned by the participant.
The cost of soliciting proxies will be borne by the Company, including
reimbursement of banks, brokerage firms, custodians, nominees and fiduciaries
for their expenses in sending proxy material to the beneficial owners of Common
Stock. In addition to the use of the mail, proxies may be solicited by employees
of the Company personally, by telephone or by telefax. The Company has engaged
Georgeson & Company Inc. to assist in the solicitation of proxies from
stockholders at a fee of $8,500 plus reimbursement of its out-of-pocket
expenses.
Only holders of Common Stock of record at the close of business on March 13,
1997, are entitled to notice of and to vote at the meeting or any adjournment
thereof. On such date, there were outstanding 45,520,022 shares of Common Stock,
each share of which is entitled to one vote.
If no specific direction is given, but the proxy is otherwise properly
executed and dated, it will be voted FOR (i) Election of Directors, (ii) the
increase in the authorized Common Stock of the Company and (iii) approval of the
amendments to the 1993 Stock Award and Incentive Plan.
ELECTION OF DIRECTORS
At the meeting, the Board of Directors will nominate Mr. F. W. Armstrong
and Mr. G. A. Burns for election as directors for three-year terms ending in
the year 2000. Messrs. Armstrong and Burns are currently directors of the
Company. The affirmative vote of the holders of a plurality of the shares of
Common Stock present at the meeting in person or by proxy and voting on the
election of directors will be required to elect the directors. Accordingly,
an abstention or a broker non-vote constitutes neither an affirmative nor a
negative vote, and hence will have no effect on the outcome of the election.
If at the time of the meeting either or both of the nominees is not available
to serve as director -- an event which the Board does not anticipate -- the
proxies will be voted for a substitute nominee or nominees designated by or at
the direction of the Board, unless the Board has taken prior action to reduce
its membership. After the elections of the directors at the meeting, the Company
will have seven directors, including Mr. Fry, Mr. Lilley, Mr. Powell, and Mr.
Satrum whose terms currently extend beyond the date of the meeting to 1999,
1998, 1998, and 1999, respectively, and one director who will be elected by the
holder of the Series C Preferred Stock for a term of one year.
The following information is submitted concerning the nominees and other
directors of the Company whose terms of office will continue after the meeting.
Frederick W. Armstrong, age 66, retired from American Cyanamid Company
("Cyanamid") effective January 1992. Prior to his retirement he served for many
years as the Director of Cyanamid's Corporate Development and Planning Division
and, from 1985 until his retirement, as a Vice President of Cyanamid. He is a
director of MGI Pharma, Inc.
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Gene A. Burns, age 71, served as Executive Vice President, Chief Financial
Officer and Director of CPC International Inc., before retiring in 1988.
Darryl D. Fry, age 58, has been the Chairman of the Board and Chief Executive
Officer of the Company since December, 1993. He also was President of the
Company from December, 1993, until January 8, 1997. From January 1991 to
December 1993, he was an Executive Vice President of Cyanamid and President of
the Chemicals Group of Cyanamid. From August 1989 to January 1991, he was a
Group Vice President of Cyanamid responsible for the global agricultural
businesses.
Louis L. Hoynes, Jr., age 61, is Senior Vice-President and General Counsel of
American Home Products Corporation, having served in that capacity since 1990.
Prior to that he was a partner in the law firm of Willkie, Farr & Gallagher. He
serves as the Director of the Company elected by Cyanamid as holder of the
Company's outstanding Series C Preferred Stock.
David Lilley, age 50, was elected President and Chief Operating Officer and a
member of the Board of Directors effective January 8, 1997. From 1994 until that
date, he was a Vice President of American Home Products Corporation, responsible
for the Global Medical Device business. Prior to that time, he was Vice
President and a member of the Executive Committee of Cyanamid.
William P. Powell, age 41, has been a Managing Director of Dillon, Read &
Co. Inc. since January 1991, and prior thereto was employed by Dillon Read
since 1982 in a number of other capacities.
Jerry R. Satrum, age 52, has served as Chief Executive Officer of Georgia
Gulf Corporation since February 1991 and as President since 1989, and prior
thereto served as Vice President - Finance and Treasurer from its inception.
Mr. Satrum has been a director of Georgia Gulf Corporation since its
inception. Mr. Satrum is also a director of NationsBank N.A. (South).
Each person named above became a director of the Company on December 17,
1993, the date the Company was incorporated, except for Mr. Hoynes, who was
elected by Cyanamid on December 2, 1994; Mr. Satrum, who was elected by
stockholders at the 1996 Annual Meeting; and Mr. Lilley, who was elected by the
Board effective January 8, 1997.
The Audit Committee among other things considers the overall scope and
approach and recommendations of the audit performed by the independent
accountants; recommends the appointment of independent accountants; reviews
procedures for internal controls; and considers significant accounting methods
adopted or proposed to be adopted. Messrs. Burns and Powell are members of the
Audit Committee. The Audit Committee held three meetings during 1996.
The Compensation and Management Development Committee approves compensation
arrangements for the Company's officers, administers certain compensation plans
and makes recommendations thereunder. Messrs. Armstrong, Burns, and Satrum are
members of the Compensation and Management Development Committee. The Committee
held six meetings during 1996.
The Pension Committee reviews on behalf of the Board actions taken by the
Committee on Investment of Pension Funds (which oversees investments of the
Company's funded benefit plans). Messrs. Armstrong and Powell are members of
this Committee. The Committee held two meetings during 1996.
The Environmental, Health and Safety Committee serves as the environmental
oversight committee referred to under "Certain Relationships and Related
Transactions." It reviews, monitors and, as it deems appropriate, advises the
Board of Directors with respect to the policies and practices of the Company in
the areas of occupational health and safety and environmental affairs. Messrs.
Hoynes and Fry are members of this Committee. The Committee held two meetings
during 1996.
The Board of Directors held seven meetings during 1996. All members of the
Board attended at least 75% of the meetings of the Board and of the Committees
on which they serve. The Company has no Nominating Committee.
INCREASE IN AUTHORIZED COMMON STOCK
The Board of Directors has approved an amendment (the "Amendment") to Article
IV of the Company's Certificate of Incorporation (the "Certificate") to increase
the authorized common stock of the Company from 75 million shares to 150 million
shares. The first paragraph of Article Fourth of the Certificate will be amended
to read as follows:
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Fourth: The total number of shares of stock which the Corporation shall have
the authority to issue is 170 million, consisting of 150 million shares of
common stock, par value $0.01 per share (the "Common Stock"), and 20 million
shares of preferred stock, par value $0.01 per share (the "Preferred Stock").
Amendment of Article Fourth of the Certificate of Incorporation will require
the affirmative vote of a majority of the outstanding shares. Therefore,
abstentions and broker non-votes will have the same effect as negative votes.
As of February 1, 1997, there were 75 million shares of Common Stock
authorized, of which approximately 48.2 million were issued and outstanding or
held in treasury. Originally, there were approximately 12.9 million shares
outstanding, leaving approximately 62.1 million available for future issuance.
Since that time, the Company has made a public offering of approximately 3.5
million shares and effectuated a three-for-one stock split, in the form of a
stock dividend, as well as issued approximately 0.3 million shares (net of
forfeitures and deferrals) under the 1993 Stock Award and Incentive Plan (see
the next section of this proxy statement for a discussion of this plan).
Accordingly, there are at present only 26.8 million authorized but unissued
shares available, a portion of which is reserved for issuance under the 1993
Stock Award and Incentive Plan. The amendment would increase this number to
approximately 101.8 million shares (less shares so reserved for issuance). The
Board believes that it is desirable to have this larger number of shares
available for possible future acquisitions, financings, stock dividends, stock
splits or other stock distributions, none of which is under consideration at
this time. Although the Company is frequently engaged in discussions relating to
potential acquisitions, there are no present agreements or discussions which
would require the issuance of any of the additional shares to be authorized.
The holders of the Company's Common Stock do not have preemptive rights to
purchase any shares of authorized capital stock of the Company. The Board of
Directors may authorize the issuance of such shares without further stockholder
approval, except to the extent that such approval may be required to meet
certain requirements of the Internal Revenue Code of 1986, as amended, in
connection with issuance of shares under employee benefit plans and of the New
York Stock Exchange in connection with the listing of additional shares under
certain circumstances.
An increase in the authorized shares of stock could, under certain
circumstances, have an antitakover effect by, for example, allowing issuance of
stock that would dilute the stock ownership of a person seeking to effect a
change in the composition of the Board of Directors or contemplating a tender
offer or other transaction for the combination of the Company with another
company. However, this proposal to amend the Certificate is not in response to
any effort of which the Company is aware to accumulate the Company's stock or to
obtain control of the Company, nor is it part of a plan by management to
recommend a series of similar amendments to the Board of Directors and
stockholders. The Board does not contemplate recommending the adoption of any
other amendments to the Certificate which could be construed to affect the
ability of third parties to take over or change control of the Company.
AMENDMENTS TO 1993 STOCK AWARD AND INCENTIVE PLAN
At its meeting held January 27, 1997, the Board of Directors approved certain
amendments to the Company's 1993 Stock Award and Incentive Plan (the "1993
Plan") and recommend that the stockholders approve the 1993 Plan as so amended.
The affirmative vote of the holders of a majority of the shares represented
in person or by proxy and entitled to vote on the item will be required for
approval of the 1993 Plan as amended. A properly executed proxy marked "ABSTAIN"
with respect to any such matter will not be voted, although it will be counted
for purposes of determining whether there is a quorum. Accordingly, an
abstention will have the effect of a vote against the matter in question.
In accordance with the rules of the New York Stock Exchange, brokers and
nominees may be precluded from exercising their voting discretion with respect
to certain matters to be acted upon and thus, in the absence of specific
instructions from the beneficial owner of the shares, will not be empowered to
vote the shares on such matters. Therefore, such non-votes will not be counted
in determining the number of shares necessary for approval. Shares represented
by such broker non-votes will, however, be counted for purposes of determining
whether there is a quorum.
The amendments to the 1993 Plan do not materially change the basic terms of
the 1993 Plan or increase the number of shares of Common Stock authorized for
awards under it. Stockholder approval of the 1993 Plan as amended is required to
permit certain awards granted under the 1993 Plan to be fully tax deductible by
the Company pursuant to Section 162(m) of the Internal Revenue Code. Certain
other changes are made in recognition of regulatory changes
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since the 1993 Plan was adopted or to clarify or improve the Plan. If the Plan
as amended is not approved, the Plan will remain in effect and Awards will
continue to be granted under it, but the Company may lose the tax-deductibility
of compensation paid to the Chief Executive Officer and the four other
highest-paid officers to the extent it exceeds the limits set forth in Section
162(m), unless such excess is deferred or otherwise restructured.
The principal amendments to the 1993 Plan are as follows:
(1) Awards may be made under the Plan to the Chief Executive Officer and the
four other most highly-compensated officers which qualify as
"performance-based" compensation under Section 162(m) of the Internal Revenue
Code ("Performance-based Awards"). Other awards may be made to such individuals,
under the Plan or otherwise, which do not qualify as Performance-based Awards.
(2) The total value as of the date of grant of "Performance-based Awards" in
any year to any of such officers cannot exceed the greater of $5 million or 50%
of the base salary of such officer. The Committee may establish performance
goals which must be achieved in order for the Performance-based Awards to be
paid, using the Performance Measures (which cannot be changed without
stockholder approval) which are now set forth in Exhibit A to the Plan. Stock
option and SAR grants are not subject to the restrictions in this paragraph (2).
(3) Deferred Cash Awards may now be made under the 1993 Plan. These awards
would earn Interest Equivalents at the rate paid from time to time on 10-year
Treasury notes, plus 1%. Free-standing Interest Equivalents could also be
awarded.
(4) The requirement that stock options be non-transferable has been
eliminated.
(5) Awards may now be made to prospective employees.
(6) The requirement that options granted to officers only become exercisable
in one-third increments over a three-year period has been eliminated.
(7) The requirement that a limited SAR granted to an officer not mature until
six months after the date of grant has been eliminated.
(8) The Plan makes explicit that it is not the exclusive vehicle for awarding
incentive compensation. In addition, the Committee may determine, even in the
case of the Chief Executive Officer and the other four most highly compensated
officers, that an award will not be governed by new section 6A (which is the new
section of the Plan that contains most of the rules pertaining to
Performance-based Awards).
The principal features of the 1993 Plan, as so amended, are set forth below.
The complete text of the Plan, including the amendments, is set forth as Exhibit
I to this Proxy Statement, and the following description is qualified by such
reference.
The 1993 Plan provides for various types of awards ("Awards") which may be
granted to present and prospective employees (including officers), directors and
independent contractors. Under present guidelines, approximately 355 employees
are eligible to receive awards. Awards may consist of stock options, stock
appreciation rights, restricted stock, restricted stock units, interest
equivalents, dividend equivalents, deferred cash awards, deferred stock awards,
and other stock-based or cash-based awards. The 1993 Plan is intended to satisfy
the requirements of Rule 16b-3 promulgated under Section 16 of the Securities
Exchange Act of 1934. The Plan is not exclusive and the Board may adopt, or
permit the adoption of, other compensation and benefit plans or arrangements.
A maximum of 12,900,000 shares of Common Stock (after adjustment in respect
of the July 1996 stock split) were originally reserved for issuance under the
1993 Plan, subject to further equitable adjustment in the event of future stock
splits, stock dividends, mergers, consolidations, recapitalizations,
reorganizations or similar corporate transactions. There is no limitation on the
amount of Awards which can be made other than in stock.
The 1993 Plan is administered by the Committee, the composition of which
shall at all times satisfy the provisions of Rule 16b-3 under the Securities
Exchange Act of 1934 (the "Exchange Act"). The Committee has full authority,
subject to the provisions of the 1993 Plan and except with respect to automatic
grants to nonemployee directors as discussed below, to construe and interpret
the 1993 Plan and any Award, to make rules and regulations relating to the 1993
Plan, to determine, among other things, the persons to whom the Awards will be
made, the size of such Awards, and the specific terms and conditions applicable
to Awards, including, but not limited to, the duration, vest-
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ing and exercise or other realization periods, the circumstances for forfeiture
and the form and timing of payment with respect to any Award, except that the
types of performance measures are set forth in the Plan and cannot be changed
without stockholder approval. Under the Plan, the Committee may delegate to the
Executive Committee certain of its authority to make Awards, and establish the
terms of Awards, in respect of persons who are not executive officers of the
Company; and therefore, the term "Committee" as used herein includes the
Executive Committee when acting pursuant to such delegated authority.
See the "Summary Compensation Table," "Option/SAR Grants in Last Fiscal Year"
and "Long-Term Incentive Plans-Awards in Last Fiscal Year" tables elsewhere in
this Proxy Statement with respect to Awards and options granted in 1996 to the
Chief Executive Officer and the four other most highly compensated executive
officers. All executive officers as a group received Awards totaling 40,290
shares of restricted stock; $990,965 in performance cash; and options covering
451,950 shares; for all employees, these figures were 56,712 shares, $1,313,115
and 864,005 shares, respectively. See "Compensation of Directors" elsewhere in
this Proxy Statement for a description of the terms of options granted to
nonemployee directors. These grants would not have been different if the
amendments to the 1993 Plan had been in effect with respect to 1996.
STOCK OPTIONS
Stock options granted under the 1993 Plan may be either "Incentive Stock
Options" ("ISOs"), as such term is defined in Section 422 of the Internal
Revenue Code, or nonqualified stock options. ISOs may be granted only to
employees. Nonqualified options may be granted to nonemployee directors and
independent contractors, as well as employees and prospective employees. No one
person may be granted options under the 1993 Plan covering more than fifteen
percent of the shares of Common Stock authorized under the Plan.
The exercise price under an option is the fair market value of the Common
Stock on the date of grant. The exercise price must be paid at the time of
exercise, in cash, unless the Committee permits the purchase price to be paid by
an exchange of previously-owned stock, or by combination of cash and stock, or
in whole or in part by having shares withheld by the Company or sold by a
broker-dealer.
Options must be exercised, if at all and to the extent exercised, no later
than ten years from the date of grant. In the event of termination of employment
or independent contractor relationship, an option, to the extent not theretofore
exercised, terminates except under certain circumstances as provided in the
grant letter. Nothing in any option shall confer on any person any right to
continue in the employ of the Company of any of its subsidiaries or affiliates
or interfere in any way with the right of the Company or any subsidiary to
terminate such employment at any time.
CHANGE OF CONTROL
In the event of a "change of control" (as defined in the Plan), unless
specifically provided to the contrary in the Award Agreement or grant letter
establishing the Award, (i) any Award, including nonemployee directors' Awards,
carrying a right to exercise that was not previously exercisable and vested will
become fully exercisable and vested, (ii) the restrictions, deferral
limitations, payment conditions and forfeiture applicable to any other Award,
including nonemployee directors' Awards, granted under the Plan will lapse, and
such Awards will be deemed fully vested, and (iii) any performance conditions
imposed with respect to Awards shall be deemed to be fully achieved.
AMENDMENT
The Plan may, at any time and from time to time, be altered, amended,
suspended, or terminated by the Board of Directors, in whole or in part;
provided, that, no amendment that requires stockholder approval in order for the
Plan to continue to comply with Rule 16b-3 promulgated under the Exchange Act
and no amendment changing the types of performance measures which may be
utilized under the Plan, will be effective unless such amendment has received
the requisite approval of stockholders. In addition, no amendment may be made
that adversely affects any of the rights of a grantee under any Award
theretofore granted, without such grantee's consent.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary states federal income tax consequence of stock options
to participants in the 1993 Plan and to the Company.
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NONQUALIFIED STOCK OPTIONS ("NQSOS")
A grantee will not recognize any income, and the Company will not be entitled
to a deduction, upon the grant of a NQSO. Except as noted below, upon the
exercise of the NQSO the grantee will recognize ordinary income equal to the
excess of the fair market value of the Common Stock acquired over the option
price. The Company generally will be entitled to deduct a corresponding amount
at that time (subject to the discussion in "Limitation on Deductions" below). If
an option is exercised within six months of the date of grant and the sale of
Common Stock acquired on exercise could subject the holder to suit under Section
16(b) of the Exchange Act, then the recognition and determination of the amount
of income, and the corresponding deduction by the Company, will be postponed
until the earlier of six months after exercise or the first day on which the
sale would not subject the holder to such suit. However, the holder may elect
under Section 83(b) of the Code, within thirty days after exercise, to be taxed
as of the exercise date in the manner described above.
Except as stated in the next sentence, a holder's basis for Common Stock
acquired upon exercise of a NQSO will be equal to the fair market value of such
stock on the date that governs the determination of the holder's ordinary
income, and the holding period for such stock will commence on the day after
such date and, accordingly, will not include the period during which the NQSO
was held. The number of shares acquired upon the noncash exercise of a NQSO that
is equal in number to the shares surrendered will have a basis equal to the
basis of shares surrendered and the holding period for such shares will include
the holding period for the shares surrendered.
Generally, upon a sale or other disposition of Common Stock acquired pursuant
to the exercise of a NQSO, the holder will recognize capital gain or loss in an
amount equal to the difference between the amount realized on such sale or other
disposition and the holder's basis in such stock. Such gain or loss will be
long-term capital gain or loss if the holding period for such stock is more than
one year.
INCENTIVE STOCK OPTIONS ("ISOS")
An employee will not recognize any income, and the Company will not be
entitled to a deduction, upon the grant of an ISO or its timely exercise. The
timely exercise of an ISO may, however, affect the computation of the employee's
alternative minimum tax. Exercise of an ISO will be timely if made while the
employee is employed by the Company or within three months after the cessation
of such employment (one year if the employee is disabled within the meaning of
Section 22(e)(3) of the Internal Revenue Code). If the exercise of an ISO is not
timely, the ISO will be taxed according to the rules described above for NQSOs.
An employee's aggregate basis for Common Stock acquired upon cash exercise of
an ISO will be equal to the option price paid for such stock. The holding period
for such stock will begin on the day after the date of exercise and,
accordingly, will not include the period during which the ISO was held. See
"Exercise of Options with Shares" below for a discussion of basis and holding
period consequences regarding noncash exercises of ISOs.
If an employee disposes of Common Stock acquired pursuant to an ISO, and such
stock was held for more than two years from the date of the granting of such ISO
and one year from the transfer of such stock to the employee, then any gain or
loss realized upon such disposition will be treated as a long-term capital gain
or loss. Under such circumstances, the Company will not be entitled to any
deduction. If an employee disposes of such Common Stock not held for such period
(a "Disqualifying Disposition"), then, in general, any gain realized will be
taxable as ordinary income to the extent of the option profit (fair market value
less option price) at exercise, with the balance taxable as capital gain. In
that case, the Company will be entitled to deduct the ordinary income amount.
EXERCISE OF OPTIONS WITH SHARES
NQSOs. A holder who pays the option price upon exercise of a NQSO, in whole
or in part, by delivering Common Stock already owned by him will recognize no
gain or loss on the stock surrendered, but otherwise will be taxed according to
the rules described above for NQSOs.
If the shares so delivered are shares previously acquired by the holder
through exercise of an ISO ("ISO Stock"), then a like amount of Common Stock
acquired in exchange for such ISO Stock will itself be treated as ISO Stock.
ISOs. Under proposed Treasury regulations, if an ISO is exercised, and the
option price is paid with ISO Stock and, at exercise, the applicable holding
period requirement for such ISO Stock has not been met, the exercise will
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constitute a Disqualifying Disposition of the ISO Stock that may result in
ordinary income to the employee and a corresponding deduction to the Company as
discussed in "Incentive Stock Options" above (but, not any additional capital
gain). If the shares surrendered either do not constitute ISO Stock or
constitute ISO Stock for which the applicable holding period requirement has
been met, then, in general, (i) no gain or loss will be recognized as a result
of the exchange, (ii) the number of shares acquired upon exercise that is equal
in number to the shares surrendered will have a basis equal to the basis of the
shares surrendered and (except for purposes of determining whether a disposition
will be a Disqualifying Disposition) will have a holding period that includes
the holding period for the shares surrendered, and (iii) any additional shares
acquired will have a zero basis and will have a holding period that begins on
the day after the date of the exchange. If any Common Stock so acquired is
disposed of within two years from the date of the grant of the ISO or within one
year after exercise of the ISO, shares with the lowest basis will be deemed to
be disposed of first, and such disposition will be a Disqualifying Disposition.
Any gain realized upon such Disqualifying Disposition will result in ordinary
income to the employee and a corresponding deduction to the Company as discussed
in "Incentive Stock Options" above.
LIMITATION ON DEDUCTIONS
If a limited SAR is exercised, or if the termination of any restriction,
limitation or condition, or acceleration of any vesting or exercise right with
respect to any Award under the Plan is due to a change in control of the Company
or similar event, payments with respect such limited SAR or other Award may be
nondeductible to the Company in whole or in part and may subject the holder to a
nondeductible 20% federal excise tax on all or a portion of such payments (in
additional to other taxes ordinarily payable).
7
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
As of February 1, 1997, Mr. Fry owned beneficially 1.5%, no other officer or
director individually owned beneficially as much as 1%, and all officers and
directors as a group owned beneficially approximately 4.4%, of the total shares
of outstanding Common Stock. The following table sets forth, as of February 1,
1997, the total beneficial ownership of the Company's Common Stock by the
Company's directors, nominees for directorships, the Chief Executive Officer and
the four other most highly compensated executive officers named in the Summary
Compensation table (see "Executive Compensation" elsewhere in this proxy
statement):
Shares Beneficially
Name Owned(1)
---- -------------------
F. W. Armstrong 36,141
G. A. Burns 16,500
J. P. Cronin 173,733
S. M. Crum 220,095
D. D. Fry 770,485
L. L. Hoynes, Jr. 0
D. Lilley 46,750
H. Porosoff 151,151
W. P. Powell 16,500
C. A. Ruibal 278,295
J. R. Satrum 1,395
All directors and officers as a group (16 persons) 2,114,461
- ------
(1) Included as beneficially owned are shares held by the Cytec Employees'
Savings and Profit Sharing Plan, as to which shares the named individual
possesses the right to vote (Mr. Cronin, 22,135 shares; Mr. Crum, 10,050
shares; Mr. Fry, 18,603 shares; Mr. Porosoff, 1,136 shares; Mr. Ruibal,
3,200 shares; and all officers and directors as a group, 116,501 shares);
performance shares granted in 1995, 1996, and 1997 under the 1993 Stock
Award and Incentive Plan, as to which shares the named individual possesses
the right to vote (Mr. Cronin, 11,253 shares; Mr. Crum, 13,095 shares; Mr.
Fry, 37,535 shares; Mr. Lilley, 4,750 shares; Mr. Porosoff, 7,601 shares;
Mr. Ruibal, 10,095 shares; and all officers and directors as a group,
111,674 shares); deferred stock awards (i.e., unsecured grants of common
stock payable, generally after termination of employment) granted under the
1993 Stock Award and Incentive Plan (Mr. Cronin, 34,554 shares; Mr. Crum,
47,250 shares; Mr. Fry, 118,506 shares; Mr. Porosoff, 26,700 shares; Mr.
Ruibal, 47,250 shares; and all directors and officers as a group, 332,535
shares); restricted shares granted to non-employee directors and to Mr.
Lilley in order to induce him to join the Company as to which shares the
named individual possesses the right to vote (Mr. Armstrong 6,000 shares,
Mr. Burns and Mr. Powell, 4,500 shares each; Mr. Satrum, 1,395 shares; Mr.
Lilley 42,000 shares; all officers and directors as a group, 58,395 shares);
and shares which the following have the right to acquire within 60 days
through the exercise of vested stock options (Mr. Armstrong, 9,000 shares;
Mr. Burns, 1,500 shares; and Mr. Powell, 9,000 shares; Mr. Cronin, 109,650
shares; Mr. Crum, 207,000 shares; Mr. Fry, 594,500 shares; Mr. Porosoff,
130,200 shares; Mr. Ruibal, 268,200 shares; and all directors and officers
as a group, 1,613,310 shares). No voting or investment power exists with
respect to stock option shares prior to acquisition.
(2) The table does not include any shares of Common Stock or Preferred Stock
beneficially owned by Cyanamid. See "Security Ownership of Certain
Beneficial Owners". Mr. L. L. Hoynes, Jr., Senior Vice President and
General Counsel of American Home Products Corporation and a Director of
the Company, disclaims beneficial ownership of any shares of Common Stock
and Preferred Stock beneficially owned by Cyanamid.
(3) The number of shares shown includes the following shares as to which
beneficial ownership is disclaimed: 2,291 shares owned by Mr. Porosoff's
wife, individually and as custodian for a minor child; and 16,637 shares for
all directors and officers as a group.
8
<PAGE>
Based solely on its review of the copies of the forms received by it, the
Company believes that during 1996 all filing requirements required under Section
16(a) of the Securities Exchange Act of 1934 were complied with by its
directors, officers and greater than ten-percent beneficial owners, except for
the late filing by Mr. Fry of a Form 4 relating to a gift of 600 shares to a
family member.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AS OF FEBRUARY 1, 1997
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of Beneficial Percent of
Title of Class of Beneficial Owner Ownership Class
-------------- ------------------- ----------------- ----------
<S> <C> <C> <C>
Series C Cumulative American Cyanamid Co.(1) Direct 4,000 Shares 100%
Preferred Stock c/o American Home
Products Corporation
Five Giralda Farms,
Madison, NJ 07940
Common Stock FMR Corp.(2) Direct 4,387,665 Shares 9.45%
82 Devonshire Street,
Boston, MA 02109
Common Stock Janus Capital Indirect 7,309,290 Shares 15.7 %
Corporation(3)
100 Fillmore Street
Suite 300
Denver, CO 80206-4923
Common Stock Vanguard Fiduciary Trust Direct 4,107,652 Shares 9.0 %
Company on behalf of the
Cytec Employees' Savings
and Profit Sharing Plan (4)
500 Admiral Nelson Blvd.,
Malvern, PA 19355
Common Stock The Equitable Companies
Incorporated(5) Indirect 3,266,705 Shares 7.0 %
787 7th Avenue
New York, NY 10019
</TABLE>
- ------
(1) In December 1994, American Home Products Corporation, Five Giralda Farms,
Madison, New Jersey 07940, became the beneficial owner of 100% of the Common
Stock of Cyanamid.
(2) Information taken from Schedule 13G, Amendment No. 5, dated February 14,
1997 filed on behalf of a group consisting of FMR Corp., Mr. Edward C.
Johnson 3d, and Abigail P. Johnson. The Schedule reports sole power to
vote as to 489,700 shares, shared power to vote as to none, and sole
power to dispose as to all.
(3) Information taken from Schedule 13G dated February 10, 1997 filed on behalf
of a group consisting of Janus Capital Corporation, Mr. Thomas H. Bailey and
Janus Fund. The Schedule reports sole voting power as to none, shared voting
power as to all, sole dispositive power as to none and shared power to
dispose as to all.
(4) Schedule 13G, Amendment No. 3, dated February 10, 1997 reports shared
power to vote and dispose as to all shares.
(5) Information taken from Schedule 13G dated February 12, 1997 filed on behalf
of a group, reporting beneficial ownership by The Equitable Life Assurance
Society of the United States and Alliance Capital Management L.P. The
schedule reports sole voting power as to 3,229,550 shares, shared voting
power as to none, sole dispositive power as to 3,266,705
shares and shared dispositive power as to none.
9
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 17, 1993 (the "Effective Date"), in connection with a spin-off of
Cyanamid's chemical businesses to it, the Company issued to Cyanamid all of the
Company's common stock which Cyanamid in turn distributed to its stockholders,
3,820,895 shares of its Series A Cumulative Adjustable Preferred Stock,
4,175,105 shares of its Series B Cumulative Convertible Preferred Stock, and
4,000 shares of its Series C Cumulative Preferred Stock.
During 1995, the Company repurchased the Series A and Series B Preferred
Stock from Cyanamid. The Company also agreed to pay to Cyanamid an additional
amount if, during the two year period commencing November 7, 1995, any person
announces an offer to acquire and thereafter acquires more than 50% of the
Company's issued and outstanding Common Stock (a "Transaction"). The additional
amount will equal, subject to antidilution adjustments, 6,297,111 shares
multiplied by the excess, if any, of the purchase price per share of Common
Stock paid in the Transaction over the greater of the average price of Common
Stock during a defined period of time preceding announcement of the Transaction
and $17.66. The additional amount payable will be proportionately reduced if the
Transaction and any related transactions collectively constitute an offer to
acquire less than 100% of the Company. In order to induce the Company to agree
to pay such additional amount, Cyanamid agreed on behalf of itself and American
Home Products Corporation that, during such two year period, neither company
would directly or indirectly take any action having the purpose of inducing any
person to seek to acquire the Company and Cyanamid further agreed that it would
reject any request for a waiver, consent or approval in connection with an offer
or possible offer to acquire the Company made to it, including any waiver,
consent or approval under the Series C Stock. The Company also agreed not to
redeem the Series C Stock prior to December 16, 1999.
Aggregate liquidation and redemption value of the Series C Preferred is
$100,000. The Series C stock, which is not transferable, gives Cyanamid the
right to elect one director and contains certain restrictive covenants,
violation of which would give the holder the right, among others, to approve
capital expenditures and elect a majority of the Board.
In connection with the spin-off, financial responsibility for substantially
all the liabilities of Cyanamid's chemicals businesses was assumed by the
Company, including substantially all environmental liabilities related to the
chemicals businesses and plants used in that business (except the remediation of
the plant located at Bound Brook, NJ), including plants and businesses disposed
of prior to the Effective Date, and disposal sites owned by third parties to
which wastes of the chemical businesses were sent. The Company is required to
establish an environmental oversight committee of the Board of Directors,
consisting of two members, both of whom must concur in any action and one of
whom is the Director appointed by Cyanamid as holder of the Series C Preferred
Stock; this committee reviews and approves the Company's annual environmental
remediation plan and reviews compliance with the plan and environmental
administration standards and makes recommendations to the Board concerning, and
reviews and approves proposed challenges to governmental requirements relating
to, environmental liabilities assumed from Cyanamid. The Company must also pay
an annual fee, $316,728 in 1996, for oversight services rendered by Cyanamid's
environmental affairs department.
In connection with the spinoff, the Company and Cyanamid entered into a
number of administrative, consulting, manufacturing and other service agreements
pursuant to which one party renders to the other, both in the U.S. and in
foreign locations, services for a period of time after the spinoff. In addition,
there were certain leases and supply agreements. Pursuant to these agreements,
the Company paid $5.7 million to Cyanamid in 1996 and received $8.5 million over
the same time period. Most of these agreements are subject to termination by
either party on six months' or less notice.
Certain intellectual property relating to the chemicals businesses (such as
patent rights, trade secrets and know-how) was assigned to the Company by
Cyanamid, and Cyanamid received back an exclusive license to use such rights in
the medical and agricultural business and a right to a non-exclusive license to
use them in other businesses to the extent not already used for such purposes by
the Company. Cyanamid granted to the Company an exclusive license to use in the
chemicals businesses intellectual property rights retained by Cyanamid and a
right to a non-exclusive license for uses other than medical and agricultural to
the extent not already used by Cyanamid. Trademarks relating to the chemicals
businesses were also assigned to the Company.
Dillon, Read and Co., Inc., of which Mr. William Powell, a Director of the
Company, is a Managing Director, has provided investment banking and consulting
services to the Company during 1996.
10
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996, Messrs. Affleck, Armstrong, Burns, and Satrum, all outside
directors, served on the Compensation and Management Development Committee.
Mr. Affleck retired from the Board of Directors at the time of the 1996
Annual Meeting of Common Stockholders.
EXECUTIVE COMPENSATION
The following tabulation summarizes compensation paid to the Chief Executive
Officer and the four other most highly compensated executive officers for
services rendered in all capacities in 1994, 1995, and 1996 to the Company and
its subsidiaries:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation(1)(2) Long Term Compensation
--------------------------------- -----------------------------
Awards Payouts(1)
------------------------------ -----------
Restricted Long-Term
Name and Stock Stock Options/ Incentive All Other
Principal Position Year Salary Bonus Awards(3) SARS(4) Payouts(5) Compensation(6)
------------------ ---- ------ ----- ----------- ------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
D. D. Fry 1996 $480,000 $587,520 $322,753 150,000 $320,000 $43,200
Chairman of the Board, 1995 $450,000 $485,100 $193,750 150,000 $275,100 $33,750
President and Chief Executive 1994 $430,000 $473,250 $751,612 444,900 $275,100 $19,470
Officer
C. A. Ruibal 1996 $260,000 $217,464 $111,191 52,500 $110,250 $23,400
Executive Vice President 1995 $250,000 $200,900 $ 71,953 52,500 $110,250 $18,562
1994 $240,000 $197,050 $301,219 163,200 $110,250 $10,889
S. M. Crum 1996 $260,000 $217,464 $111,191 52,500 $110,250 $20,800
Executive Vice President 1995 $240,000 $200,900 $ 71,953 52,500 $110,250 $14,400
1994 $220,000 $180,650 $301,219 154,000 $110,250 $ 8,852
J. P. Cronin 1996 $240,000 $217,464 $ 95,968 44,250 $ 95,200 $15,340
Executive Vice President and 1995 $206,000 $167,280 $ 52,766 36,000 $ 80,150 $12,360
Chief Financial Officer 1994 $187,500 $120,750 $218,981 72,300 $ 80,150 $ 8,620
H. Porosoff 1996 $213,000 $130,356 $ 62,834 28,500 $ 62,300 $19,170
Vice President & Chief 1995 $205,000 $120,540 $ 43,172 28,500 $ 62,300 $15,262
Technology Officer 1994 $197,000 $118,450 $170,212 33,900 $ 62,300 $ 8,985
since June 1995; from December
1993 to June 1995, Vice
President-Research &
Development
</TABLE>
- ------
(1) Includes amounts earned with respect to fiscal year, whether paid in that
year or deferred.
(2) There was no disclosable "Other Annual Compensation" paid, payable or
accrued to any of the named officers during 1994-1996.
(3) Represents the value at the date of grant of Performance Shares granted
under the Company's 1993 Stock Award and Incentive Plan. These shares vest,
in the case of the 1995 and 1996 grants, after completion of the respective
1997 and 1998 performance periods, and in the case of the 1994 grant,
one-third after completion of the 1994, 1995 and 1996 performance periods,
depending upon the achievement of earnings targets; the targets for the 1995
and 1996 performance periods were exceeded; the one-third of the shares
granted in 1994 which would thereupon have vested were canceled and, in lieu
thereof, the participants received grants of an equal number of deferred
shares which become payable after retirement. As of December 31, 1996, and
after giving effect to vestings and forfeitures occurring in January 1997
with respect to the 1996 performance period, the total Performance Shares
and deferred shares held had values as follows (deferred shares are in
parenthesis): Mr. Fry 28,785 shares -- $1,169,391 (118,506 shares --
$4,814,306); Mr. Ruibal 10,095 shares -- $410,109 (47,250 shares --
$1,919,531); Mr. Crum 10,095 shares -- $410,109 (47,250 shares --
$1,919,531); Mr. Porosoff 5,901 shares -- $239,728
11
<PAGE>
(26,700 shares -- $1,084,688); and Mr. Cronin 8,253 shares -- $335,278
(34,554 shares -- $1,403,756). Holders of Performance Shares are entitled to
vote and receive dividends on such shares; holders of deferred shares are
not entitled to vote and are entitled to receive dividend equivalents upon
vesting.
(4) Options granted by the Company in 1994, 1995, and 1996 were granted without
tandem SARs. Option amounts are adjusted for three-for-one stock split in
July 1996.
(5) Amounts for 1994, 1995, and 1996 represent Performance Cash received for the
1994, 1995, and 1996 performance periods for grants under the 1993 Stock
Award and Incentive Plan, based upon achievement of earnings and cash flow
targets. See text following Long-Term Incentive Plans - Awards in Last
Fiscal Year table.
(6) The amount listed for each named officer consists entirely of matching
contributions and profit sharing contributions to the Cytec Employees'
Savings and Profit Sharing Plan and the Cytec Supplemental Savings and
Profit Sharing Plan for 1994, 1995, and 1996.
(7) Mr. Ruibal resigned as an officer of the Company effective January 31, 1997.
In connection with the termination of his employment, (i) pursuant to the
Executive Income Continuity Plan, he will receive $366,600, an amount equal
to one year's salary and bonus, (ii) all of his stock options were declared
by the Committee to be exercisable, (iii) his Performance Stock and
Performance Cash Awards made in 1995 and 1996 were partially forfeited, (iv)
receipt of his deferred stock was accelerated, (v) he was granted a
supplemental pension benefit which is included under Compensation Under
Retirement Plans and (vi) he agreed to perform consulting services for the
Company for two years at a cost of $130,000 per year to the Company.
(8) The Company has adopted a Deferred Compensation Plan pursuant to which
compensation in any year which exceeds the limits imposed by Section 162(m)
of the Internal Revenue Code on deductibility of compensation which is not
performance related within the meaning of that Section will be deferred
until the year following retirement or death (or upon an earlier change of
control of the Company). Amounts so deferred will bear interest at a rate
equal to the rate paid on 10-year U.S. Treasury Notes, plus 1%. Mr. Fry
deferred $50,000 with respect to 1996.
The following tabulation shows, as to the executive officers named,
information with respect to employee stock options.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Percent of Total Potential Realizable
Options/SARs Value at Assumed
Options/SARs Granted to Exercise Annual Rates of Stock
Granted employees in Price Per Expiration Price Appreciation for
Name (shares) fiscal year Share Date Option Term
--------------- -------------- ---------------- ----------- ------------ ----------------------------
5% 10%
------------ ------------
<S> <C> <C> <C> <C> <C> <C>
D. D. Fry ..... 150,000 17.36% $25.083 02/15/06 $2,366,185 $5,996,376
J. P. Cronin .. 44,250 5.12% $25.083 02/15/06 $ 698,024 $1,768,931
S. M. Crum .... 52,500 6.08% $25.083 02/15/06 $ 828,165 $2,098,732
C. A. Ruibal .. 52,500 6.08% $25.083 02/15/06 $ 828,165 $2,098,732
H. Porosoff ... 28,500 3.30% $25.083 02/15/06 $ 449,575 $1,139,312
</TABLE>
- ------
Options become exercisable in cumulative amounts of one-third of the amount of
the grant one year after the date of grant and each year thereafter. All options
were granted without tandem stock appreciation rights. The number of shares and
option exercise prices have been adjusted for the three-for-one stock split on
July 23, 1996.
12
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Value of
Number of Unexercised In-
Unexercised The-Money
Options/SARs Held Options/SARs at
at Fiscal Year End Fiscal Year End (3)
-------------------------- ------------------------------
Shares Acquired Value Exercis- Unexercis- Exercis- Unexercis-
Name on Exercise Realized able (2) able (2) able (2) able (2)
--------------- --------------- ---------- ---------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
D. D. Fry ..... -- -- 346,600 398,300 $11,817,782 $10,302,646
J. P. Cronin .. -- -- 60,200 92,350 $ 2,023,190 $ 2,194,315
S. M. Crum .... -- -- 120,500 139,000 $ 4,107,705 $ 3,591,667
C. A. Ruibal .. -- -- 126,300 141,900 $ 4,311,913 $ 3,693,771
H. Porosoff ... -- -- 77,300 81,400 $ 2,648,373 $ 2,195,000
</TABLE>
- ------
(1) All options/shares are Company options/shares. None of the options were
issued with tandem stock appreciation rights.
(2) Options become exercisable in cumulative amounts of one-third of the amount
of the grant one year after the date of grant and each year thereafter.
(3) Total value of options based on fair market value of Company stock of
$40.625 as of December 31, 1996.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Performance or Estimated Future
Number of Other Period Until Payouts
Shares, Units or Maturation or ----------------------
Name other Rights* Payout Target Maximum
--------------- ---------------- ------------------ -------- -----------
<S> <C> <C> <C> <C>
D. D. Fry ..... 12,975 3 Years 0 $320,000
J. P. Cronin .. 3,858 3 Years 0 $ 95,200
S. M. Crum .... 4,470 3 Years 0 $110,250
C. A. Ruibal .. 1,862** 3 Years 0 $ 45,936**
H. Porosoff ... 2,526 3 Years 0 $ 62,300
</TABLE>
- ------
*Adjusted for July, 1996 Stock Split.
Long-term incentive plan awards are made under the Company's 1993 Plan.
Awards were made in February, 1996. The awards to which this table relates are
Performance Cash Awards for the 1998 performance period. These awards are paid
dependent upon the extent to which specified earnings targets for full vesting
of Performance Stock are exceeded for 1998 and certain additional cash flow
objectives are attained for 1997 and 1998. At target performance levels, none of
the Performance Cash vests. For 1996, the targets were exceeded to the extent
that 100% of the Performance Cash was earned and is reported under "Long Term
Incentive Payouts" in the Summary Compensation Table. Estimated Future Payouts
relate to 1998.
- ------
**See footnote 7 to Summary Compensation Table.
13
<PAGE>
EMPLOYMENT AND SEVERANCE ARRANGEMENTS
All salaried Company employees in the United States, including the named
officers, have signed employment agreements either on Cyanamid's standard form,
which have been assigned to the Company, or on Cytec's standard form. The
agreements provide for the initial salary paid to the employee for services
performed by the employee, the confidentially and non-use of proprietary
information, assignment of inventions and improvements, a non-competition clause
and termination of employment. The notice of termination period for salaried
employees, including the named officers, ranges from one month to six months
(depending on the standard form in use at the time), except in the case of
termination for cause, when no prior notice is required.
In the event of a "change of control" (as defined in the 1993 Plan), (i) any
Award under that Plan, including non-employee directors' Awards, carrying a
right to exercise that was not previously exercisable and vested will become
fully exercisable and vested, (ii) the restrictions, deferral limitations,
payment conditions and forfeiture applicable to any other Award, including
non-employee directors' Awards, granted under the 1993 Plan will lapse and such
Awards will be deemed fully vested and (iii) any performance conditions imposed
with respect to Awards shall be deemed to be fully achieved.
The Board of Directors has adopted an executive income continuity plan to aid
in the retention of key employees and to reinforce and encourage the continuing
attention, dedication and loyalty of executives in the senior management group
without the distraction of concern over the possibility of involuntary or
constructive termination of employment resulting from unforeseen developments,
by providing income continuity for a limited period. The plan provides for
payments to members upon termination of employment, unless such termination is
(i) on account of death or retirement, (ii) by the Company for disability or
cause, or (iii) by the member without good reason (as defined in the plan),
generally, actions by the Company inconsistent with the participant's status or
with the Company's traditional compensation policies. Members of the plan
consist of the chairman, president, corporate vice presidents, and such other
employees as are designated by the Compensation and Management Development
Committee. In general, the plan provides for payments upon termination of
employment, in the case of the executive officers, and in the case of other
members meeting certain age and service requirements, of an amount equal to
annual salary and bonus (two times annual salary and two times bonus after a
"change in control" as defined in the plan). The plan also provides for certain
miscellaneous payments, including relocation payments, legal fees, and expenses
incurred in seeking new employment. The benefits of this Plan are not available
to any employee who is then currently eligible to retire with a pension based on
credited service to age 65 or, in any event, for any period beyond the
employee's sixty-fifth birthday.
Under the Company's Executive Supplemental Employees Retirement Plan, in the
event of a change in control, the Treasurer, the Controller and each officer of
corporate vice president rank or higher is automatically elected a member of the
plan. In this event, each such officer will be credited with five additional
years of service (but not beyond age 65), there will be included in pensionable
compensation the amount, if any, by which such officer's target incentive
compensation exceeds one third of base compensation and, under certain
conditions the value of the benefit under this plan, as well as the benefit
under other non-qualified pension plans, would be paid immediately as a lump-sum
distribution.
The Board of Directors has adopted a Compensation Taxation Equalization Plan
providing for the payment to any employee, officer or director who becomes
subject to the tax imposed by Section 4999 of the Internal Revenue Code of 1986
of reimbursement for the tax, plus all taxes imposed upon the reimbursement. A
20% excise tax applies to compensatory payments (i) the present value of which
equals or exceeds three times the "base amount" of the recipient, and (ii) that
are contingent upon change "in the ownership or effective control" of the
Company. The "base amount" is the average annual compensation included in
taxable income over the five-year period ending before the year during which the
change in the ownership or effective control occurs.
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE REPORT
The Compensation and Management Development Committee of the Company's Board
of Directors (the "Committee") is composed entirely of independent outside
directors. Their responsibilities include the administration of the compensation
program for the Company's executive officers, currently consisting of ten
executives. Specific duties include determining the executive salaries, setting
the performance criteria for annual and long-term incentive plans, determining
their awards under the annual incentive program, and administering the Company's
1993 Stock Award and Incentive Plan.
14
<PAGE>
The Company's executive compensation program consists of four elements:
o Base Salary: Base compensation set to attract and retain qualified
management, when combined with the other components of the compensation
program.
o Annual Bonus: An opportunity to earn additional cash reward for yearly
business success and individual efforts.
o Performance Stock and Performance Cash: Long-term incentives which
provide a reward for business success in future years and, being based
on performance, are linked to stockholders' interests.
o Stock Options: Grants which will encourage stock ownership and reward
executives for increases in stockholder value.
The annual bonus, performance stock and performance cash are all "at risk" forms
of compensation in that they do not become payable except to the extent that the
Company's business objectives are attained. Similarly, stock options are "at
risk" in that their value depends upon success in enhancing stockholder value.
The compensation program is designed to contribute to the viability and
long-term success of the Company by meeting the following objectives:
o To compensate fairly for financial and strategic success and the
enhancement of stockholder value.
o To attract and retain competent managers and professionals who are
performance-oriented.
o To reinforce a commitment to take action which will contribute to the
long-term success of the Company.
o To encourage the ownership of Cytec stock so that management's long-term
financial interests are closely linked with success in serving the
long-term interests of the Company's stockholders.
There is strong emphasis in the compensation program on long-term performance
and success as exemplified by the program's structure. The Company's philosophy
is to maintain lower fixed costs associated with its compensation program and
correspondingly offer significant upside potential based upon achievement of
individual, financial and stock-based performance. The Company's executive base
salaries, therefore, are generally set somewhat below median salaries paid at
comparable companies. Therefore, the combination of base salaries and annual
bonus targets are also somewhat below the median at comparable companies. The
objective in setting long-term compensation, consisting of long-term performance
stock awards payable upon attainment of target objectives and stock option
grants, is to be above the median level for comparable companies. The overall
objective is to set total compensation for target performance slightly above the
median of the compensation group, with an above-average portion of total cash
compensation, including performance cash awards and additional annual bonus,
payable if target performance is exceeded. As an example, for the chief
executive officer ("CEO"), at target compensation levels, more than 70% of total
potential compensation is at risk for performance.
The comparison group for compensation purposes is a group of mid-size
specialty and commodity chemical companies which the Company views as
competitors for business, employee talent and stockholder investments.
Base Salaries -- Base salaries are reviewed annually using competitive
compensation information provided by an independent nationally-recognized
executive compensation consulting firm. Increases in base salaries are granted
after considering relative competitive positions, individual performance and
general salary increases within the Company and the comparable industry group.
Annual Bonus -- The Committee determines an annual incentive target for each
officer, expressed as a percentage of base salary, also after reviewing
competitive compensation information, and also determines the amounts by which
annual bonuses will increase or decrease depending on the degree of attainment
or non-attainment of corporate performance goals. Also, at the beginning of each
year, the Committee approves the performance goals for the officers for the
year. The goals for 1996 bonuses consisted of specific components weighted as
follows: earnings per share (50%); cash flow (25%); and other specific factors
which are measured subjectively (25%). After the end of the year, the Committee
evaluates the Company's and individuals' performances, as described above, and
awards incentive compensation based on that evaluation.
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Long-Term Incentives -- Long-term incentives granted in 1996 and payable in
future years consist of two types of grants: (1) performance stock (shares of
Company stock) and related performance cash, which may be earned at the end of
the 1998 performance period assuming attainment of specific earnings per share
and cash flow goals set by the Committee, and (2) stock options which encourage
executives to enhance the value of the Company's Common Stock by offering them
an opportunity to buy the shares at a pre-set price over the term of the option
contract. The Committee determines for each officer the amount and proportion of
each type of long-term incentive after reviewing competitive information.
Performance stock is the Company's Common Stock registered in the executive's
name, carrying dividends (if declared) and voting rights, but restricted from
resale until earned by achievement of performance targets, and forfeited if
performance targets are not achieved during the performance period. The
performance stock grants are accompanied by related grants of performance cash,
which become payable only if the targets for full performance stock vesting are
exceeded.
CEO Compensation -- In 1996 the Committee took the following actions
regarding the compensation of Cytec's CEO, Darryl D. Fry. Mr. Fry's salary was
increased from $450,000 to $480,000, and his target bonus was increased by three
percentage points so that it is now equal to 60% of his salary. Both salary and
target bonus are below the competitive median, based upon the competitive data.
The annual bonus target for Mr. Fry is designed, in combination with his salary,
to provide compensation which, at target levels, is below-median against the
group, with the opportunity to earn additional annual bonus if certain
performance objectives are exceeded. Based upon the level of achievement of the
Company's earnings, cash flow and other factors weighted as described earlier in
this report, the Committee awarded Mr. Fry an annual bonus of $587,520, which is
122.4% of his base salary.
In 1996 Mr. Fry was awarded a stock option award, a performance stock award,
and a related performance cash award. In the aggregate, these grants were
believed to be above the median levels for comparable companies. Based upon the
level of earnings and cash flow achieved in 1996, the performance stock and cash
previously awarded to Mr. Fry for 1996 performance was earned at the maximum
level.
Tax-Deductibility of Compensation -- The Committee's policy on the tax
deductibility of compensation for the CEO and other executive officers is to
maximize the deductibility, to the extent possible and under normal conditions,
while preserving the Committee's flexibility to maintain competitive
compensation programs and to deal with extraordinary situations. Some
compensation may be mandatorily deferred if it is not currently deductible, and
in other cases affected executives may be encouraged to elect deferral of
compensation that would not be currently deductible. All executive compensation
paid and awarded in 1996 is expected to be fully tax deductible either currently
or in the future by the Company under the Revenue Reconciliation Act of 1993. In
order to assist the Committee in structuring programs which are tax deductible,
amendments to the 1993 Stock Award and Incentive Plan are being submitted for
stockholder approval.
The Committee believes that the compensation program established for the
Company has contributed to retaining and motivating highly qualified management
personnel, and to the significant increases in stockholder value achieved by the
Company during the past three years.
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE
F. W. Armstrong, Chairman
G. A. Burns January 27, 1997
J. R. Satrum
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PERFORMANCE GRAPH
The graph set forth below is based on the assumption that $100 had been
invested in the Company's Common Stock and in each index on December 31, 1993,
with reinvestment of dividends at market prices. The total cumulative dollar
returns represent the value such investments would have had on December 31,
1996.
CYTEC INDUSTRIES INC.
THREE-YEAR CUMULATIVE TOTAL STOCKHOLDER RETURN
[GET GRAPH]
The Common Stock of the Company began "when issued" trading on December 22,
1993 and "regular-way" trading on January 25, 1994. Accordingly, it is not
possible to include in the performance graph a comparison of the yearly
percentage change in the Company's cumulative total stockholder return with
indexes for 1993. The high and low prices in 1993 on a "when issued" basis were
$4.66 per share on December 22, 1993, the first day on which the stock traded,
and $4.50 per share and $4.42 per share, respectively, on December 30, 1993, the
last day on which the stock traded (all figures are adjusted for the July, 1996
stock split).
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COMPENSATION UNDER RETIREMENT PLANS
The Cytec employees' retirement program provides Cytec employees, including
the officers named in the Summary Compensation Table, with an annual defined
pension benefit upon retirement which is made up of the sum of three components:
(i) a benefit which, in general, is equal to 1.67% of the retiree's average base
salary plus actual annual bonus (up to one-third of base salary) during the
highest five of the last ten years of service (but not beyond the year 2003)
times the number of years of service at Cyanamid, subject to certain adjustments
including a social security offset, plus (ii) a benefit which, in general, is
equal to 1.33% of the retiree's base salary plus actual annual bonus (up to
one-third of base salary) for each year of service at Cytec (for any Cytec
employee whose pension calculated as provided in (i) and (ii) above would exceed
the limit on benefits payable from a pension plan qualified under the Internal
Revenue Code, such excess is payable from the general funds of the Company),
plus (iii) for persons whom the Compensation and Management Development
Committee has elected to membership in the Executive Supplemental Employees
Retirement Plan, in case of retirement on or after age 60 (or earlier in certain
circumstances) a supplemental benefit (also payable from general funds of the
Company) calculated by (x) determining the benefit under the formula under (i)
above based on the highest three of the last ten years of service and utilizing
target bonus (not limited to one third of base salary) instead of actual bonus
and (y) crediting to the retiree additional years of service under the formula
described in (ii) above (but not more than five and not beyond age 65) at a rate
of compensation equal to base salary plus target bonus for the final year of
actual service.
The estimated annual pensions payable under this program upon retirement
at age 65 and reflecting the normal form of benefit which includes a 50%
joint and survivor annuity in favor of the retiree's spouse to the five
officers named in the Summary Compensation Table, based upon their current
salaries and annual bonuses, with years of actual service projected to age 65
(or in the case of Mr. Ruibal, to actual retirement date) are: Mr. Cronin,
$142,150; Mr. Crum, $170,380; Mr. Fry, $447,500; Mr. Porosoff, $162,580; and
Mr. Ruibal, $155,053.
COMPENSATION OF DIRECTORS
Directors who are employees or who are elected by the holders of Preferred
Stock are not entitled to extra compensation by reason of their directorships or
their attendance at meetings of the Board of Directors of the Company, any
committee thereof, or of the stockholders. Directors who are not employees of
the Company or of any of its subsidiaries (provided that they are not elected by
the holders of Preferred Stock) are paid a retainer of $20,000 per year. Such
directors also receive annual retainers while chairmen ($3,000) or members
($1,500) of committees of the Board of Directors of the Company on which such
directors serve. Each such director is also paid a fee of $1,500 for attendance
at a meeting of the Board of Directors and stockholders of the Company and a fee
of $2,000 (in the case of Committee Chairman) or $1,000 (in the case of other
Committee members) for attending committee meetings.
Pursuant to the 1993 Plan, the original non-employee directors (for purposes
of the 1993 Plan, a non-employee director does not include any employee of the
Company or its subsidiaries or affiliates or any director elected by the holders
of the Preferred Stock) received a grant of 7,500 restricted shares of Common
Stock. Each non-employee director who thereafter is elected to serve as a
director of the Company for the first time, will automatically receive a grant
of restricted shares of Common Stock equal to the lesser of (a) 7,500 shares and
(b) the nearest number of whole shares determined by multiplying 7,500 by a
fraction the numerator of which is the fair market value of the Common Stock
upon which the initial grants to non-employee directors were made and the
denominator of which is the fair market value of the Common Stock on the date on
which the director is duly elected and qualified. The restrictions on the shares
of Common Stock granted to non-employee directors will lapse one-fifth each year
over a five-year period commencing on the date of grant if the non-employee
director continues to be a director of the Company on each such date. If a
non-employee director's service on the Board terminates before the award is
entirely vested, any portion of the award that is not vested will revert to the
Company; provided, however, that if the non-employee director's service
terminates by reason of death or disability (as defined in the 1993 Plan), then
any installment with respect to which the grantee had commenced (but not
completed) serving the requisite amount of time to vest in such installment,
will become vested. If a director elects to defer vesting until the year
following his or her 70th birthday, as permitted by the 1993 Plan, then during
the extended deferral period there exist certain additional grounds upon which
reversion can be waived. In addition, each original non-employee director has
received a grant of options to purchase 4,500 shares of Common Stock. Each
non-employee director who is elected in the future to serve as a director of the
Company for the first time will, at the time such director is elected and duly
qualified, automatically receive an option
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to purchase 4,500 shares of Common Stock. In addition, on the date of each
annual meeting of stockholders, each continuing non-employee director will
automatically receive an option to purchase 4,500 shares of Common Stock, unless
the Board acts to reduce the number of shares. Such options will have an
exercise price per share equal to the fair market value of a share of Common
Stock on the date of grant. Generally, options granted to a non-employee
director will become exercisable as to one-third of the shares covered by such
options on the first anniversary of the date of grant, and with respect to an
additional one-third of the shares covered by such options on each of the next
two succeeding anniversaries of the date of grant if the optionee continues to
be a director of the Company on each such date. All options held by non-employee
directors, to the extent exercisable but not exercised, expire on the earlier of
(i) the tenth anniversary of the date of grant or (ii) three years following the
optionee's termination of his or her directorship with the Company. Upon the
occurrence of a "Change in Control" (as defined in the 1993 Plan), all
outstanding options held by non-employee directors will become immediately
exercisable and all restricted stock awards will become immediately
nonforfeitable in full.
Other personal benefit-type compensation for the entire group of directors
and officers is not individually significant or reportable.
The Company has entered into a Deferred Compensation Agreement with Mr. F. W.
Armstrong, pursuant to which receipt of his retainer and attendance fee amounts
is deferred until the year after his 70th birthday or until an earlier change of
control of the Company. Amounts so deferred will bear interest at a rate equal
to the rate paid on ten-year U.S. Treasury Notes, plus 1%. Vesting of Mr.
Armstrong's Restricted Stock is also deferred until the same time, and is
conditioned upon his continuing to serve as a director until such time, subject
to certain exceptions.
INFORMATION CONCERNING INDEPENDENT PUBLIC ACCOUNTANTS
The independent certified public accounting firm of KPMG Peat Marwick LLP has
audited the Company's accounts for the fiscal year ended December 31, 1996. The
audit services include examination of annual financial statements and review of
quarterly financial information. A representative of KPMG Peat Marwick LLP is
expected to be present at the meeting, and will have an opportunity to make a
statement and to respond to appropriate questions. The Board of Directors
expects to select the independent certified public accounting firm for the 1997
fiscal year at its June meeting.
TIMELY SUBMISSION OF STOCKHOLDER PROPOSALS
It is anticipated that the 1998 annual meeting of stockholders will be held
on May 7, 1998. Proposals which stockholders intend to present at such meeting
must be received by the Company at its executive offices in West Paterson, New
Jersey, by November 22, 1997, for inclusion in its notice, proxy statement and
proxy relating to that meeting. In addition, the Company's By-Laws provide that
in order for any business not specified in the notice of meeting to be properly
brought before a stockholders' meeting by a stockholder, the stockholder must
have given written notice to the Secretary of the Company which must be received
at the principal office of the Company not less than 60 nor more than 90 days
prior to the meeting. (If less than 75 days notice or public disclosure of the
date of the meeting was given, then such notice must be received by the close of
business on the 15th day following the date of notice or public disclosure of
the date of the meeting). The notice must describe the business desired to be
brought before the meeting, the name, record address and number and class and
series of shares owned by the stockholder and any material interest of the
stockholder in such business.
ATTENDANCE AT ANNUAL MEETING
The 1997 Annual Meeting of Stockholders will be held at 11:00 a.m. on May 12,
1997 at the Sheraton Crossroads Hotel, Crossroads Corporate Center, Mahwah, NJ
07495. Admission to the meeting is limited to stockholders of the Company or
their designated representatives. One admission ticket to the meeting is
attached to each proxy used. If you intend to attend the meeting, please detach
and retain the admission ticket and check the "will attend" box on the form of
proxy itself to validate the admission ticket. Only ticket-holders will be
admitted to the Annual Meeting.
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OTHER MATTERS
The management knows of no further business intended to be presented to the
meeting, but if any further business properly comes before the meeting, the
persons named in the enclosed form of proxy will vote all proxies in accordance
with their best judgment.
E. F. Jackman
Secretary
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EXHIBIT I
CYTEC INDUSTRIES INC.
1993 STOCK AWARD AND INCENTIVE PLAN
1. Purpose; Types of Awards; Construction.
The purpose of the 1993 Stock Award and Incentive Plan of Cytec Industries
Inc., as amended (the "Plan"), is to afford an incentive to selected employees,
prospective employees, non-employee Directors and independent contractors of
Cytec Industries Inc., or any Subsidiary or Affiliate which now exists or
hereafter is organized or acquired, to acquire a proprietary interest in the
Company, to continue as, or become, employees, directors, or independent
contractors, as the case may be, to increase their efforts on behalf of the
Company and to promote the success of the Company's business. Pursuant to
Section 6 of the Plan, there may be granted Stock Options (including "incentive
stock options" and "nonqualified stock options"), stock appreciation rights and
limited stock appreciation rights (either in connection with options granted
under the Plan or independently of options), restricted stock, restricted stock
units, interest equivalents, dividend equivalents, deferred cash awards,
deferred stock awards, and other stock-based or cash-based awards. The Plan is
intended to satisfy the requirements of Rule 16b-3 promulgated under Section 16
of the Exchange Act and shall be interpreted in a manner consistent with the
requirements thereof.
2. Definitions.
For purposes of the Plan, the following terms shall be defined as set forth
below:
(a) "Affiliate" means any entity if, at the time of granting of an Award,
(i) the Company, directly or indirectly, owns at least 20% of the combined
voting power of all classes of stock of such entity or at least 20% of the
ownership interests in such entity or (ii) such entity, directly or
indirectly, owns at least 20% of the combined voting power of all classes of
stock of the Company.
(b) "Award" means any Option, SAR (including a Limited SAR), Restricted
Stock, Restricted Stock Unit, Interest Equivalent, Dividend Equivalent,
Deferred Cash Award, Deferred Stock Award, Director's Restricted Stock, or
Other Stock-Based Award or other Cash-Based Award granted under the Plan.
(c) "Award Agreement" means any written agreement, contract, grant
letter, resolution of the Committee, or other instrument, document or
resolution evidencing an Award.
(d) "Beneficiary" means the person, persons, trust or trusts which have
been designated by a Grantee in his or her most recent written beneficiary
designation filed with the Company to receive the benefits specified under
the Plan upon his or her death, or, if there is no designated Beneficiary or
surviving designated Beneficiary, then the person, persons, trust or trusts
entitled by will or the laws of descent and distribution to receive such
benefits.
(e) "Board" means the Board of Directors of the Company.
(f) "Change in Control" means a change in control of the Company which
will be deemed to have occurred if:
(i) any "person," as such term is used in Sections 13(d) and 14(d) of
the Exchange Act (other than (1) the Company, (2) any trustee or other
fiduciary holding securities under an employee benefit plan of the
Company, or (3) any corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as
their ownership of Stock), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 50% or more of the combined voting
power of the Company's then outstanding voting securities; or
(ii) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board, and any new director
(other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in clause
(i), (iii), or (iv) of this Section 2(f) whose election by the Board or
nomination for election by the Company's stockholders was approved by a
vote of at least two-thirds ( 2/3 ) of the directors then still in office
who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for
any reason to constitute at least a majority thereof; or
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(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (A) a
merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving or parent entity) 50% or more of the combined
voting power of the voting securities of the Company or such surviving or
parent entity outstanding immediately after such merger or consolidation
or (B) a merger or consolidation effected to implement a recapitalization
of the Company (or similar transaction) in which no "person" (as
hereinabove defined) acquired 50% or more of the combined voting power of
the Company's then outstanding securities; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets (or any
transaction having a similar effect).
(g) "Change in Control Price" means the higher of (i) the highest price
per share paid in any transaction constituting a Change in Control or (ii)
the highest Fair Market Value per share at any time during the 60-day period
preceding or following a Change in Control.
(h) "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
(i) "Committee" means the committee consisting of directors who are
appointed by the Board to administer the Plan, the composition of which shall
at all times satisfy the provisions of Rule 16b-3 and Section 162(m) of the
Code.
(j) "Common Stock Account" means the common stock account established in
the name of an employee or independent contractor, as specified in Section
6(h).
(k) "Company" means Cytec Industries Inc., a corporation organized under
the laws of the State of Delaware, or any successor corporation.
(l) "Deferred Cash Account" means the deferred cash account established
in the name of an employee or independent contractor, as specified in Section
6(h).
(m) "Deferred Cash Award" means any Award of cash made pursuant to
Section 6(h) which is to be credited to a Deferred Cash Account and paid in
the future.
(n) "Deferred Stock Award" means any Award of Stock made pursuant to
Section 6(h) which is to be credited to a Common Stock Account and paid in
the future.
(o) "Dividend Equivalent" means a right, granted to a Grantee under
Section 6(g), to receive cash, Stock, or other property equal in value to
dividends paid with respect to a specified number of shares of Stock.
Dividend Equivalents may be awarded on a free-standing basis or in connection
with another Award, and may be paid currently or on a deferred basis.
(p) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and as now or hereafter construed, interpreted and applied
by regulations, rulings and cases.
(q) "Fair Market Value" means, with respect to Stock or other property,
the fair market value of such Stock or other property determined by such
methods or procedures as shall be established (except as provided below) from
time to time by the Committee in its sole discretion. Unless otherwise
determined by the Committee, the per share Fair Market Value of Stock as of a
particular date shall mean (i) the closing sales price per share of Stock on
the national securities exchange on which the Stock is principally traded,
for the last preceding date on which there was a sale of such Stock on such
exchange (or, if there is no such preceding date, on the first succeeding
date), or (ii) if the shares of Stock are then traded in an over-the-counter
market, the average of the closing bid and asked prices for the shares of
Stock in such over-the-counter market for the last preceding date on which
there was a sale of such Stock in such market, or (iii) if the shares of
Stock are not then listed on a national securities exchange or traded in an
over-the counter market, such value as the Committee, in its sole discretion,
shall determine. For purposes of Sections 8 and 9, only, of this Plan, the
per share Fair Market Value of Stock as of a particular date shall mean (i)
the closing sales price per share of Stock on the national securities
exchange on which the Stock is principally traded, for the last preceding
date on which there was a sale of such Stock on
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such exchange, or (ii) if the shares of Stock are then traded in an
over-the-counter market, the average of the closing bid and asked prices for
the shares of Stock in such over-the-counter market for the last preceding
date on which there was a sale of such Stock in such market.
(r) "Grantee" means a person who, (i) as an employee, prospective
employee, or independent contractor of the Company, a Subsidiary or an
Affiliate, or (ii) as a Non-Employee Director of the Company, has been
granted an Award under the Plan.
(s) "Interest Equivalent" means a right granted to a Grantee under
Section 6(g) to receive cash, which may be deferred or paid currently, equal
to the interest which would be earned on a specified amount of money,
including money deferred in a Deferred Cash Account. Interest Equivalents may
be awarded on a free-standing basis or in connection with another Award, and
may be paid currently or on a deferred basis. Unless the Committee otherwise
provides to the contrary or except as otherwise provided in the Plan,
Interest Equivalents paid on a deferred basis will be compounded on a
quarterly basis.
(t) "ISO" means any Option intended to be, and designated as, an
incentive stock option within the meaning of Section 422 of the Code.
(u) "Limited SAR" means a right granted pursuant to Section 6(c) which
shall, in general, be automatically exercised for cash upon a Change in
Control.
(v) "Non-Employee Director" means a member of the Board of Directors who
is neither (i) an employee of the Company, a Subsidiary or Affiliate nor (ii)
a person elected to the Board of Directors by the holders of the Company's
Series C Cumulative Preferred Stock.
(w) "NQSO" means any Option that is designated as a nonqualified stock
option.
(x) "Option" means a right, granted to a Grantee under Section 6(b) or
Section 8, to purchase shares of Stock. An Option may be either an ISO or an
NQSO, provided that an ISO may not be granted to independent contractors or
Non-Employee Directors.
(y) "Other Cash-Based Award" means cash awarded under Section 6(i),
including cash awarded as a bonus or upon the attainment of specified
performance criteria or otherwise as permitted under the Plan.
(z) "Other Stock-Based Award" means a right or other interest granted to
a Grantee under Section 6(i) that may be denominated or payable in, valued in
whole or in part by reference to, or otherwise based on, or related to,
Stock, including, but not limited to (1) unrestricted Stock awarded as a
bonus or upon the attainment of specified performance criteria or otherwise
as permitted under the Plan and (2) a right granted to a Grantee to acquire
Stock from the Company for cash and/or a promissory note containing terms and
conditions prescribed by the Committee.
(aa) "Performance Goals" shall have the meaning specified in Section
6A(c) of the Plan.
(bb) "Performance Measures" means the performance measures set forth as
Exhibit A to the Plan, as provided in Section 6A(c) of the Plan.
(cc) "Plan" means this Cytec Industries Inc. 1993 Stock Award and
Incentive Plan, as amended from time to time.
(dd) "Restricted Stock" means an Award of shares of Stock to a Grantee
under Section 6(d), including Stock that may be designated as performance
stock, that may be subject to certain restrictions and to a risk of
forfeiture.
(ee) "Restricted Stock Unit" means a right granted to a Grantee under
Section 6(e) to receive Stock or cash at the end of a specified deferral
period, which right may be conditioned on the satisfaction of specified
performance or other criteria.
(ff) "Rule 16b-3" means Rule 16b-3, as from time to time in effect,
promulgated by the Securities and Exchange Commission under Section 16 of the
Exchange Act, including any successor to such Rule.
(gg) "Stock" means shares of the common stock, par value $.01 per share,
of the Company.
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(hh) "SAR" or "Stock Appreciation Right" means the right, granted to a
Grantee under Section 6(c), to be paid an amount measured by the appreciation
in the Fair Market Value of Stock from the date of grant to the date of
exercise of the right, with payment to be made in cash, Stock, or property as
specified in the Award or determined by the Committee.
(ii) "Subsidiary" means any entity in an unbroken chain of entities
beginning with the Company if, at the time of granting of an Award, each of
the entities (other than the last entity in the unbroken chain) owns stock or
other indicia of ownership possessing 50% or more of the total combined
voting power of all classes of stock or other indicia of ownership in one of
the other entities in the chain.
3. Administration.
The Plan shall be administered by the Committee; provided that such
administrative authority shall not extend to Section 8 ("Non-Employee Director
Options") or Section 9 ("Non-Employee Director Restricted Stock"), the intent
being that, as to the Awards made under those Sections, this Plan shall
constitute a formula plan. The Committee shall have the authority in its
discretion, subject to and not inconsistent with the express provisions of the
Plan (including the preceding sentence), to administer the Plan and to exercise
all the powers and authorities either specifically granted to it under the Plan
or necessary or advisable in the administration of the Plan, including, without
limitation, the authority to grant Awards; to determine the persons to whom and
the time or times at which Awards shall be granted; to determine the type and
number of Awards to be granted, the number of shares of Stock to which an Award
may relate and the terms, conditions, restrictions and performance criteria
relating to any Award; to certify as to the extent to which any performance
criteria have been attained; and to determine whether, to what extent, and under
what circumstances an Award may be settled, canceled, forfeited, exchanged, or
surrendered; to make adjustments in the terms and conditions of, and the
criteria and performance objectives (if any) included in, Awards in recognition
of unusual or non-recurring events affecting the Company or any Subsidiary or
Affiliate or the financial statements of the Company or any Subsidiary or
Affiliate, or in response to changes in applicable laws, regulations, or
accounting principles; to designate Affiliates; to construe and interpret the
Plan and any Award; to prescribe, amend and rescind rules and regulations
relating to the Plan; to determine the terms and provisions of the Award
Agreements (which need not be identical for each Grantee); and to make all other
determinations deemed necessary or advisable for the administration of the Plan.
The Committee may appoint a chairman and a secretary and may make such rules
and regulations for the conduct of its business as it shall deem advisable, and
shall keep minutes of its meetings. All determinations of the Committee shall be
made by a majority of its members either present in person or participating by
conference telephone at a meeting or by written consent. All decisions,
determinations and interpretations of the Committee shall be final and binding
on all persons, including the Company, and any Subsidiary, Affiliate or Grantee
(or any person claiming any rights under the Plan from or through any Grantee)
and any stockholder. The Committee may delegate to one or more of its members or
to one or more agents such administrative duties as it may deem advisable, and
the Committee or any person to whom it has delegated duties as aforesaid may
employ one or more persons to render advice with respect to any responsibility
the Committee or such person may have under the Plan. The Committee may, upon
such terms and conditions and with such limitations as it deems appropriate,
delegate to the Chief Executive Officer, any Committee of the Board of Directors
or the Executive Committee authority to make Awards (and determine the terms of
such Awards) to persons who are not officers of the Company (assistant officers
not being considered officers for such purpose); provided that all such Awards
shall be reported to the Committee and (except in the case of such Awards made
by a Committee of the Board) shall be revoked unless ratified by the Committee.
No member of the Board or Committee shall be liable for any action taken or
determination made in good faith with respect to the Plan or any Award granted
hereunder.
4. Eligibility.
Awards may be granted to selected employees and independent contractors of
the Company and its present or future Subsidiaries and Affiliates, in the
discretion of the Committee. In determining the persons to whom Awards shall be
granted and the type of any Award (including the number of shares to be covered
by such Award), the Committee shall take into account such factors as the
Committee shall deem relevant in connection with accomplishing the purposes of
the Plan. Awards to Non-Employee Directors shall be solely in the form of NQSOs
and Restricted Stock, which shall be subject to the provisions of Section 8 and
9 of the Plan.
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5. Stock Subject to the Plan.
The maximum number of shares of Stock reserved for the grant of Awards under
the Plan shall be (i) prior to the July 1996 three-for-one stock split, four
million three hundred thousand (4,300,000) shares of Stock, subject to
adjustment as provided herein and (ii) after, and in order to adjust for, said
stock split, twelve million nine hundred thousand (12,900,000) shares of Stock;
provided that in order to determine the number of shares of Stock remaining
available under the Plan after said stock split, each of the following events
occurring on or prior to the July 2, 1996 record date of the stock split (or the
July 23, 1996 distribution date in the case of Option exercises) shall be deemed
to involve three times the number of shares of Stock that were actually
involved: (x) grants, exercises and forfeitures of Options; (y) grants, vesting
and forfeitures of Restricted Stock (including performance stock and Director's
Restricted Stock); and (z) grants and forfeitures of Deferred Stock Awards.
The shares reserved for Awards under the Plan may, in whole or in part, be
authorized but unissued shares or shares that shall have been or may be
reacquired by the Company in the open market, in private transactions or
otherwise. If any shares subject to an Award are forfeited, canceled, exchanged
or surrendered or if an Award otherwise terminates or expires without a
distribution of shares to the Grantee, the shares of stock with respect to such
Award shall, to the extent of any such forfeiture, cancellation, exchange,
surrender, termination or expiration, again be available for Awards under the
Plan; provided that, in the case of forfeiture, cancellation, exchange or
surrender of shares of Restricted Stock or Restricted Stock Units with respect
to which dividends or Dividend Equivalents have been paid or accrued, the number
of shares with respect to such Awards shall not be available for Awards
hereunder unless, in the case of shares with respect to which dividends or
Dividend Equivalents were accrued but unpaid, or in the case of shares with
respect to which a stock split in the form of a stock dividend was paid, such
dividends and Dividend Equivalents are also forfeited, canceled, exchanged or
surrendered. Upon the exercise of any Award granted in tandem with any other
Awards or Awards, such related Award or Awards shall be canceled to the extent
of the number of shares of Stock as to which the Award is exercised and,
notwithstanding the foregoing, such number of shares shall no longer be
available for Awards under the Plan.
In the event that the Committee shall determine that any dividend or other
distribution (whether in the form of cash, Stock, or other property),
recapitalization, Stock split, reverse split, reorganization, merger,
consolidation, spinoff, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the Stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of Grantees under the Plan, then the Committee shall make such equitable
changes or adjustments as it deems necessary or appropriate to any or all of (i)
the number and kind of shares of Stock which may thereafter be issued in
connection with Awards, (ii) the number and kind of shares of Stock issued or
issuable in respect of outstanding Awards, and (iii) the exercise price, grant
price, or purchase price relating to any Award; provided that, with respect to
ISOs, such adjustment shall be made in accordance with Section 424(h) of the
Code and; provided, further, that in the case of Awards under Sections 8 and 9,
equitable changes or adjustments of the types specified in clauses (i), (ii) and
(iii) above shall be made.
6. Specific Terms of Awards.
(a) General. The term of each Award shall be for such period as may be
determined by the Committee. Subject to the terms of the Plan and any
applicable Award Agreement, payments to be made by the Company or a
Subsidiary or Affiliate upon the grant, maturation, or exercise of an Award
may be made in such forms as the Committee shall determine at the date of
grant or thereafter, including, without limitation, cash, Stock, or other
property, and may be made in a single payment or transfer, in installments,
or on a deferred basis. The Committee may make rules relating to installment
or deferred payments with respect to Awards, including the rate of interest
to be credited with respect to such payments. In addition to the foregoing,
the Committee may impose on any Award or the exercise thereof, at the date of
grant or thereafter, such additional terms and conditions, not inconsistent
with the provisions of the Plan, as the Committee shall determine. The
authority given to the Committee under this Section 6 is, however, subject to
Section 6A of this Plan in the case of Awards to Officers as defined in
Section 6A.
(b) Options. The Committee is authorized to grant Options to Grantees
on the following terms and conditions:
(i) Type of Award. The Award Agreement evidencing the grant of an
Option under the Plan shall designate the Option as an ISO or an NQSO.
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(ii) Exercise Price. The exercise price per share of Stock purchasable
under an Option shall be not less than the Fair Market Value of a share
on the date of the grant of such Option; provided that in no event shall
the exercise price for the purchase of shares be less than par value. The
exercise price for Stock subject to an Option may be paid in cash or (if
so permitted by the Committee or if so provided in the Award Agreement)
by an exchange of Stock previously owned by the Grantee, or a combination
of both, in an amount having a combined value equal to such exercise
price. A Grantee may also elect to pay all or a portion of the aggregate
exercise price by having shares of Stock with a Fair Market Value on the
date of exercise equal to the aggregate exercise price (i) withheld by
the Company, if so permitted by the Committee or so provided in the Award
Agreement, or (ii) sold by a broker-dealer under circumstances meeting
the requirements of 12 C.F.R. Section 220 or any successor thereof.
(iii) Term and Exercisability of Options. The date on which the
Committee adopts a resolution expressly granting an Option shall be
considered the day on which such Option is granted, unless the Committee
shall determine that the Option shall be granted effective as of a
specified date in the future, in which case such specified future date
shall be considered the day on which such Option is granted. Options
shall be exercisable over the exercise period (which shall not exceed ten
years from the date of grant), at such times and upon such conditions as
the Committee may determine, as reflected in the Award Agreement;
provided that, the Committee shall have the authority to accelerate the
exercisability of any outstanding Option at such time and under such
circumstances as it, in its sole discretion, deems appropriate. An Option
may be exercised to the extent of any or all full shares of Stock as to
which the Option has become exercisable, by giving written notice of such
exercise to the Committee or its designated agent.
(iv) Termination of Employment, etc. An Option may not be exercised
unless the Grantee is then in the employ of, or then maintains an
independent contractor relationship with, the Company or a Subsidiary or
an Affiliate (or a company or a parent or subsidiary company of such
company issuing or assuming the Option in a transaction to which Section
424(a) of the Code applies), and unless the Grantee has remained
continuously so employed, or continuously maintained such relationship,
since the date of grant of the Option (or, in the case of a Grantee who
on the date of grant was a "prospective employee," since the date of
first becoming an employee); provided that, the Award Agreement may
contain provisions extending the exercisability of Options to a date not
later than the expiration date of such Option.
(v) Maximum Number of Shares. Options may not be granted hereunder to
any one person in any ten- year period in an amount greater than fifteen
(15%) percent of the total number of shares of Stock originally available
for grant of Awards under this Plan (i.e. not more than 15% of 12,900,000
after giving effect to the stock split; and for purposes of calculating
this 15% figure, Options granted to any Grantee prior to July 23, 1996
shall be deemed to have been tripled).
(vi) Other Provisions. Options may be subject to such other
conditions including, but not limited to, restrictions on
transferability of the shares acquired upon exercise of such Options,
as the Committee may prescribe in its discretion.
(c) SARs and Limited SARs. The Committee is authorized to grant SARs
and Limited SARs to Grantees on the following terms and conditions:
(i) In General. Unless the Committee determines otherwise, an SAR
or a Limited SAR (1) granted in tandem with an NQSO may be granted at the
time of grant of the related NQSO or at any time thereafter or (2)
granted in tandem with an ISO may only be granted at the time of grant of
the related ISO. An SAR or Limited SAR granted in tandem with an Option
shall be exercisable only to the extent the underlying Option is
exercisable.
(ii) SARs. An SAR shall confer on the Grantee a right to receive with
respect to each share subject thereto, upon exercise thereof, the excess
of (1) the Fair Market Value of one share of Stock on the date of
exercise over (2) the grant price of the SAR (which in the case of an SAR
granted in tandem with an Option shall be equal to the exercise price of
the underlying Option, and which in the case of any other SAR shall be
such price as the Committee may determine).
(iii) Limited SARs. A Limited SAR shall confer on the Grantee a right
to receive with respect to each share subject thereto, automatically upon
the occurrence of a Change in Control, an amount equal to the
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excess of (1) the Change in Control Price (or in the case of a Limited
SAR granted in tandem with an ISO, the Fair Market Value of one share on
the date of such Change in Control) over (2) the grant price of the
Limited SAR (which in the case of a Limited SAR granted in tandem with an
Option shall be equal to the exercise price of the underlying Option, and
which in the case of any other Limited SAR shall be such price as the
Committee determines).
(d) Restricted Stock. The Committee is authorized to grant Restricted
Stock (which may be designated as "performance stock") to Grantees on the
following terms and conditions:
(i) Issuance and Restrictions. Restricted Stock shall be subject to
such restrictions on transferability and other restrictions, if any, as
the Committee may impose at the date of grant or thereafter, which
restrictions may lapse separately or in combination at such times, under
such circumstances, in such installments, or otherwise, as the Committee
may determine. Except to the extent restricted under the Award Agreement
relating to the Restricted Stock, a Grantee granted Restricted Stock
shall have all of the rights of a stockholder including, without
limitation, the right to vote Restricted Stock and the right to receive
dividends thereon.
(ii) Forfeiture. Upon termination of employment or termination of the
independent contractor relationship during the applicable restriction
period, Restricted Stock and any accrued but unpaid dividends or Dividend
Equivalents that are at that time subject to restrictions shall be
forfeited; provided that, the Committee may provide, by rule or
regulation or in any Award Agreement, or may determine in any individual
case, that restrictions or forfeiture conditions relating to Restricted
Stock will be waived in whole or in part in the event of terminations
resulting from specified causes, and the Committee may in other cases
waive in whole or in part the forfeiture of Restricted Stock.
(iii) Certificates for Stock. Restricted Stock granted under the Plan
may be evidenced in such manner as the Committee shall determine. If
certificates representing Restricted Stock are registered in the name of
the Grantee, such certificates shall bear an appropriate legend referring
to the terms, conditions, and restrictions applicable to such Restricted
Stock, and/or the Company shall retain physical possession of the
certificate.
(iv) Dividends. Dividends paid on Restricted Stock shall be either
paid at the dividend payment date, or deferred for payment to such date
as determined by the Committee, in cash or in shares of unrestricted
Stock having a Fair Market Value equal to the amount of such dividends.
Stock distributed in connection with a stock split or stock dividend, and
other property distributed as a dividend, shall be subject to
restrictions and a risk of forfeiture to the same extent as the
Restricted Stock with respect to which such Stock or other property has
been distributed.
(e) Restricted Stock Units. The Committee is authorized to grant
Restricted Stock Units to Grantees, subject to the following terms and
conditions:
(i) Award and Restrictions. Delivery of Stock or cash, as determined
by the Committee, will occur upon expiration of the deferral period
specified for Restricted Stock Units by the Committee. In addition,
Restricted Stock Units shall be subject to such restrictions as the
Committee may impose, at the date of grant or thereafter, which
restrictions may lapse at the expiration of the deferral period or at
earlier or later specified times, separately or in combination, in
installments or otherwise, as the Committee may determine.
(ii) Forfeiture. Upon termination of employment or termination of
the independent contractor relationship during the applicable deferral
period or portion thereof to which forfeiture conditions apply, or upon
failure to satisfy any other conditions precedent to the delivery of
Stock or cash to which such Restricted Stock Units relate, all
Restricted Stock Units that are then subject to deferral or restriction
shall be forfeited; provided that, the Committee may provide, by rule
or regulation or in any Award Agreement, or may determine in any
individual case, that restrictions or forfeiture conditions relating to
Restricted Stock Units will be waived in whole or in part in the event
of termination resulting from specified causes, and the Committee may
in other cases waive in whole or in part the forfeiture of Restricted
Stock Units.
(f) Stock Awards in Lieu of Cash Awards. The Committee is authorized to
grant Stock as a bonus, or to grant other Awards, in lieu of Company
commitments to pay cash under other plans or compensatory arrangements. Stock
or Awards granted hereunder shall have such other terms as shall be
determined by the Committee.
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(g) Dividend Equivalents and Interest Equivalents. The Committee is
authorized to grant Dividend Equivalents and Interest Equivalents to
Grantees.
(i) The Committee may provide, at the date of grant or thereafter,
that Dividend Equivalents and/or Interest Equivalents shall be paid or
distributed when accrued or shall be deemed to have been reinvested in
additional Stock or deferred cash, as the case may be, or other
investment vehicles as the Committee may specify, provided that Dividend
Equivalents or Interest Equivalents (other than freestanding Dividend
Equivalents or Interest Equivalents) shall be subject to all conditions
and restrictions of the underlying Awards to which they relate.
(ii) Interest Equivalents shall be computed at a market-based rate
which, unless the Committee otherwise determines, shall be compounded
quarterly at an annual rate equal to the annual rate on the last day of
the calendar quarter of 10-year U.S. Treasury Notes plus 1% per annum.
(h) Deferred Stock Awards and Deferred Cash Awards. The Committee is
authorized to grant Deferred Stock Awards and Deferred Cash Awards, subject
to the following terms and conditions:
(i) The Committee shall establish, in the name of each Grantee
receiving a Deferred Stock Award, a Common Stock Account to which the
Deferred Stock Award, and any Dividend Equivalents thereon (unless paid
currently in the discretion of the Committee), will be credited. The
Company shall not be under any obligation to acquire the Stock to pay a
Deferred Stock Award (or Dividend Equivalent) at any time prior to the
date on which such payment shall be due. The Committee shall establish,
in the name of each Grantee receiving a Deferred Cash Award, a Deferred
Cash Account to which the Deferred Cash Award, and any Interest
Equivalents thereon (unless paid currently in the discretion of the
Committee), will be credited.
(ii) The number of equivalent shares of Stock credited to a Common
Stock Account shall accrue Dividend Equivalents on such shares, as if
actual shares of Stock had been issued, from the date the Deferred Stock
is credited to the Common Stock Account to and including the date on
which the amount credited to the Common Stock Account is deemed to have
been paid. Such Dividend Equivalents will be credited to the Common Stock
Account as additional equivalent shares of Stock. In the case of a stock
dividend, the number of shares to be credited shall be the number of
shares of stock that would have been issued on the equivalent number of
shares of Stock in the Common Stock Account. In other cases, the number
of equivalent shares (including fractional shares) to be so credited will
be determined by dividing the Dividend Equivalents by the Fair Market
Value of the Stock for the day on which the related dividend is paid. If
any dividend is paid on the Stock of the Company, other than in cash or
Stock, the Committee shall conclusively determine the Fair Market Value
in cash of such dividend.
(iii) The amount of Deferred Cash credited to a Deferred Cash Account
shall accrue Interest Equivalents from the date the Deferred Cash is
credited to the Deferred Cash Account to and including the date on which
the amount credited to the Deferred Cash Account is deemed to have been
paid. Such Interest Equivalents will be credited to the Deferred Cash
Account as additional cash which shall, in turn, accrue further Interest
Equivalents. Interest Equivalents will be credited, as of the last day of
each calendar quarter on the average daily balance of deferred cash in
said account during said quarter. If any Deferred Cash is disbursed to a
Grantee or a Beneficiary on a date other than the last day of a calendar
quarter, Interest Equivalents (properly prorated for the partial quarter)
shall be credited on the Deferred Cash so disbursed for the partial
calendar quarter, but shall be computed based on the interest rate in
effect on the business day next preceding the date of disbursement.
(iv) Payments from Common Stock and Deferred Cash Accounts.
A. Except as provided below, payment of the total amount credited an
employee's Common Stock Account or Deferred Cash Account, as the case may
be, shall be made to him, or, in case of his death prior to the
commencement of payments on account of such total amount, to his
Beneficiary, in sixty (60) quarterly installments commencing the first
day of the calendar quarter, or as soon thereafter as practicable,
following the date on which he ceases, by reason of death or otherwise,
to be an employee. The amount of each payment shall be the amount
credited to such account multiplied by a factor, the numerator of which
is one (1) and the denominator of which is the number of quarterly
installments
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remaining to be paid. If the aggregate number of shares credited to a
Common Stock Account shall not be divisible into whole shares by the
applicable number of installments, each installment except the last shall
consist of the nearest number of whole shares into which such aggregate
number of shares shall be divisible by the applicable number of
installments. The last installment shall consist of the total amount of
whole shares of remaining Deferred Stock credited to such account and any
fractional share shall be paid in cash.
B. In case of the death of an employee after the commencement of
payments to him in respect of his Common Stock Account or Deferred Cash
Account, as the case may be, the then remaining unpaid portion thereof
shall continue to be paid in installments, at such times and in such
manner as if he were living, to his Beneficiary.
C. With respect to the total amount in a Common Stock Account or
Deferred Cash Account, as the case may be, or the then remaining unpaid
portion thereof, which shall be payable to any person who shall no longer
be an employee of the Company or one of its Subsidiaries or Affiliates or
to the Beneficiary of any such person, the Committee shall possess
absolute discretion to accelerate the time of payment of such total
amount or remaining unpaid portion, in whole or in part, as the case may
be. In addition, the Committee shall possess absolute discretion to
accelerate to any extent such total amount or remaining unpaid portion,
even while a person remains an employee, if there occurs financial
hardship or any other event which the Committee deems, in its absolute
discretion, to constitute an extraordinary circumstance.
(i) Other Stock- or Cash-Based Awards. The Committee is authorized to
grant to Grantees Other Stock-Based Awards or Other Cash-Based Awards as
an element of or supplement to any other Award under the Plan or in
addition to, or in lieu of, any other Award under the Plan, as deemed by
the Committee to be consistent with the purposes of the Plan. Such Awards
may be granted with value and payment contingent upon performance of the
Company or any other factors designated by the Committee, or valued by
reference to the performance of specified Subsidiaries or Affiliates.
Without limiting the generality of the foregoing, other Cash Based Awards
may be granted as annual bonus, as multi- year performance cash awards,
or otherwise. The Committee shall determine the terms and conditions of
such Awards at the date of grant or thereafter.
6A. Special Restrictions on Awards to Officers. Subject to Sections 6A(h) and
6A(j), this Section 6A applies to all Awards to "Officers"; provided that this
Section 6A applies to Options, SARs and Limited SARs only to the extent
specifically stated in this Section. For purposes of this Section 6A, an Officer
is any employee who would be treated at the time an Award is granted as an
officer of the Company pursuant to the executive compensation disclosure rules
under the Exchange Act. Notwithstanding the foregoing, the provisions of the
Plan disregarded under Section 6A(a) below shall be reinstated and fully
applicable to all Awards granted to Officers pursuant to this Section 6A to the
extent that, as of the end of the calendar year following the year in which the
Award is granted, they are not "covered employees" within the meaning of Section
162(m)(3) of the Code.
(a) Intent. Awards subject to this Section 6A are intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the
Code and the regulations promulgated thereunder. This Section 6A shall be
interpreted consistently with such intent and any provisions of the Plan
inconsistent therewith shall not apply to any Awards subject to this Section
6A. Without limiting the generality of the foregoing, the Committee shall
have no discretion to increase the value of any Awards subject to this
Section 6A. Notwithstanding the foregoing, Awards granted hereunder shall be
subject to such other provisions of the Plan (as modified by this Section 6A)
as may be determined by the Committee.
(b) Maximum Awards. The maximum Awards (other than Options, SARs and
Limited SARs) that may be granted to any Officer pursuant to this Section 6A
on account of any calendar year shall not exceed the greater of (i) five
hundred percent (500%) of the Officer's base salary for that year or (ii)
$5,000,000. Awards shall be considered to be on account of the calendar year
in which the relevant performance periods terminate. Awards granted pursuant
to Section 6A(h) shall not be taken into account in applying the foregoing
limit. The maximum number of shares of Stock subject to an Option, SAR or
Limited SAR that may be granted hereunder to an Officer during any ten-year
period is set forth in Section 6(b)(v).
(c) Designation of Performance Goals. The Committee shall establish
specific objective targets, schedules, thresholds or goals ("Performance
Goals") for each Award subject to this Section 6A; provided that, at the
time
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of the grant of any Award, the achievement of the Performance Goal shall be
substantially uncertain. The Performance Goals designated by the Committee
shall be determined based upon one or more of the business criteria set forth
in Exhibit A hereto ("Performance Measures"). To the extent applicable, the
Committee may specify a Performance Measure in relation to total Company
performance or in relation to the performance of identifiable business
unit(s) of the Company. A Performance Goal may be expressed in any form as
the Committee may determine including, but not limited to: (1) percentage
growth, (2) absolute growth, (3) cumulative growth, (4) performance in
relation to an index, (5) performance in relation to peer company
performance, (6) a designated absolute amount and (7) per share of Stock
outstanding. The Performance Goals so established may exclude the effects of
certain events or categories of events specifically identified by the
Committee. Nothing shall preclude the Committee from designating different
Performance Measures and Performance Goals for Awards granted to different
Officers in the same performance period.
(d) Determination of Awards. The Committee shall have discretion to
structure the types of Awards granted to Officers. Such Awards may be either
Awards having a performance period of one year or less (such as, for example,
an annual bonus plan providing for a cash or a Stock bonus) or Awards which
vest over longer periods (such as, for example, a Performance Stock Award or
Performance Cash Award which might vest after a period of two or more years).
No later than 90 days after the commencement of a performance period (but, in
any event, within the first 25% of such performance period, if earlier), the
Committee shall designate or approve as to the Awards relating to such
period, (i) the Officers who will be Grantees, if any, (ii) the types of
Awards (which will be selected from the types of Awards permitted under
Section 6), (iii) the Performance Measures applicable to each Award, (iv) if
there is more than one Performance Measure applicable to a single Award, the
weighting, or other role, of the Performance Measures in determining the
Award, (v) the Performance Goals and payout matrix or formula for each
Performance Measure, (vi) the performance period or periods, (vii) the target
Award or Awards for each Grantee, (viii) the extent to which, and the
circumstances under which, the Award may pay out at greater than, or less
than, target levels, and (ix) to the extent required under Code Section
162(m), the maximum dollar amount a Grantee may earn with respect to a
performance period.
(e) Payment of Awards. Subject to Section 7 of the Plan ("Change in
Control Provisions"), an Award subject to this Section 6A shall vest only to
the extent that the applicable Performance Goal or Goals, if any, have been
attained. As a condition to the vesting of any Award, the Committee shall
first certify, by resolution of the Committee, that the applicable
Performance Goal or Goals have been attained and the other applicable Plan
provisions have been satisfied. Following the end of a performance period,
the Committee shall determine the amount of each Award that vests for each
Grantee by:
(1) comparing actual performance for each Performance Measure
against the payout matrix approved for such period,
(2) multiplying the payout percentage from the payout matrix for each
Performance Measure by the appropriate weighting factor, if applicable,
and
(3) summing the applicable weighted payout percentages and
multiplying their overall payout percentage by the Grantee's Award
Notwithstanding anything contained in this Plan to the contrary (but provided
that the right to do so is specifically retained in the applicable Award
Agreement), the Committee in its sole discretion may reduce any Award to any
Grantee to any amount, including zero, prior to the certification by
resolution of the Committee of the amount of such Award. The amount of an
Award that vests for a calendar year or other performance period shall be
determined as soon as practicable after such period and shall be paid no later
than 75 days following the end of such year or other period.
(f) Grants of Options and SARs. The Committee may grant Options, SARs and
Limited SARs the vesting of which is not contingent upon the attainment of
any Performance Goal or Goals. Except as provided in Section 6A(h), but
subject to Section 6(b)(ii), the exercise or grant price, as applicable, of
each share of Stock subject to such Options, SARs and Limited SARs shall not
be less than the Fair Market Value of one share of Stock on the date of
grant.
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(g) Deferred Payments. The Committee, in its discretion, may elect to
defer payment of any Award until such date before or after retirement as a
Grantee may request upon such terms and conditions as may be approved or
established by the Committee in its sole judgment. Such terms may include the
payment of Interest or Dividend Equivalents on deferred amounts.
(h) Non-Performance-Based Compensation. Notwithstanding anything
contained in this Section 6A, the Committee may grant Awards to Officers that
are not subject to this Section 6A. All Awards granted by the Committee shall
indicate whether or not they are subject to this Section 6A.
(i) Valuation. Whenever in this Section 6A there is a reference to a
maximum dollar value of a stock-based Award (including but not limited to a
Restricted Stock, Restricted Stock Unit, a Deferred Stock Award or other
Stock-Based Award), the dollar value is determined as of the date of the
grant of the Award and not as of the date of vesting. If one type of Award is
substituted for another (such as, for example, a Deferred Stock Award being
substituted for a Restricted Stock Award or for an Award of Restricted Stock
Units, where each Award is based upon the same number of shares of Common
Stock), the value of the substitute Award for this purpose is the same as the
Award for which it is substituted. Whenever in this Section 6A there is a
reference to a maximum dollar value of an Award, Dividend Equivalents and
Interest Equivalents (other than free-standing Dividend Equivalents and
Interest Equivalents) shall not be counted in determining such maximum
amount.
(j) Grant-by-Grant Determination. The Committee may grant Awards a
portion of which satisfy the provisions of this Section 6A and a portion of
which do not. In such a case, the Award shall be deemed to be the grant of
two Awards, one subject to this Section 6A and the other granted pursuant to
Section 6A(h).
(k) Substitute Awards. The Committee may establish procedures under which
one Award is substituted for an equivalent Award of a different type; such as
a Deferred Stock Award being substituted for an Award of an equivalent number
of shares of Restricted Stock. Nothing contained in this Section 6A requires
the substitute Award to be subject to Performance Goals in addition to the
Performance Goals of the Award for which it was substituted.
7. Change in Control Provisions. In the event of a Change of Control:
(a) any Award carrying a right to exercise that was not previously
exercisable and vested shall become fully exercisable and vested; and
(b) the restrictions, deferral limitations, payment conditions, and
forfeiture conditions applicable to any other Award granted under the Plan
shall lapse and such Awards shall be deemed fully vested, and any performance
conditions imposed with respect to Awards shall be deemed to be fully
achieved.
8. Non-Employee Director Options. Notwithstanding any of the other provisions
of the Plan to the contrary, the provisions of this Section 8 shall apply only
to grants of Options to Non-Employee Directors. Except as set forth in this
Section 8, the other provisions of the Plan shall apply to grants of Options to
Non-Employee Directors to the extent not inconsistent with this Section.
(a) General. Non-Employee Directors shall receive NQSOs in accordance
with this Section 8 and may not be granted Stock Appreciation Rights or
Incentive Stock Options under this Plan. The purchase price per share of
Stock purchasable under Options granted to Non-Employee Directors shall be
the Fair Market Value of a Share on the date of grant. No Agreement with any
Non-Employee Director may alter the provisions of this Section and no Option
granted to a Non-Employee Director may be subject to a discretionary
acceleration of exercisability.
(b) Grants to New Non-Employee Directors. Each Non-Employee Director who
is elected to the Board for the first time will, at the time such director is
elected and duly qualified, be granted automatically, without action by the
Committee, an Option to purchase (i) for Options granted prior to July 23,
1996, 1,500 shares of Stock and (ii) for Options granted on or after July 23,
1996, 4,500 shares of stock.
(c) Grants to Continuing Directors. On the date of each annual meeting of
stockholders (in addition to any grant made under subsection (b) of this
Section on such date), each continuing Non-Employee Director will be granted
automatically, without action by the Committee, an Option to purchase (i) for
Options granted prior to July 23, 1996, 1,500 shares of Stock and (ii) for
Options granted on or after July 23, 1996, 4,500 shares of stock.
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(d) Vesting. Each Option shall be exercisable as to 33 1/3 percent of the
Stock covered by the Option on the first anniversary of the date the Option
is granted and as to an additional 33 1/3 percent of the Stock covered by the
Option on each of the following two anniversaries of such date of grant;
provided, however, that each Option shall be immediately exercisable in full
upon a Change in Control. To the extent not exercised, installments shall
accumulate and be exercisable, in whole or in part, at any time after
becoming exercisable, but not later than the date the Option expires. Section
6(b) hereof shall not apply to Options granted to Non-Employee Directors.
(e) Duration. Subject to the immediately following sentence, each Option
granted to a Non-Employee Director shall be for a term of 10 years. Upon the
cessation of a Non-Employee Director's membership on the Board for any
reason, Options granted to such Non-Employee Director shall expire, except
that, as to any portion of an Option which shall be exercisable upon the date
of such cessation, such Option may be exercised as to such portion until the
earlier of (i) three (3) years from the date of such cessation of Board
membership or (ii) expiration of the term of Option. The Committee may not
provide for an extended exercise period beyond the periods set forth in this
Section 8(e).
9. Non-Employee Director Restricted Stock. Notwithstanding any of the other
provisions of the Plan to the contrary, the provisions of this Section 9 shall
apply only to grants of Restricted Stock to Non-Employee Directors ("Director's
Restricted Stock"). Except as set forth in this Section 9, the other provisions
of the Plan shall apply to grants of Director's Restricted Stock, to the extent
not inconsistent with this Section.
(a) General. Non-Employee Directors will receive Director's Restricted
Stock in accordance with this Section. No agreement with any Non-Employee
Director may alter the provisions of this Section and no Director's
Restricted Stock may be subject to a discretionary acceleration of vesting.
Each person who was a Non-Employee Director prior to the 1994 Annual Meeting
of Stockholders was granted 2,500 shares of Director's Restricted Stock
(equivalent to 7,500 shares on or after July 23, 1996).
(b) Grants to New Non-Employee Directors. Each Non-Employee Director who,
on or after the 1994 Annual Meeting of Stockholders, is elected to the Board
for the first time, will, at the time such Director is duly elected and
qualified, be granted automatically, without action by the Committee, a
number of shares of Director's Restricted Stock equal to the lesser of (i)
2,500 shares (7,500 shares on or after July 23, 1996) or (ii) the nearest
number of whole shares determined by multiplying 2,500 (7,500 on or after
July 23, 1996) by a fraction, the numerator of which is the initial Fair
Market Value of the Stock determined under the formula utilized for initial
grants of NQSQs to Non-Employee Directors in February 1994 (such initial Fair
Market Value being $15.375 per share or, on or after July 23, 1996, $5.125
per share), and the denominator of which is the Fair Market Value of the
Stock on the date on which such Director is duly elected and qualified.
(c) Vesting. (i) Each Award of Director's Restricted Stock shall become
non-forfeitable as to twenty percent of the Stock covered by the Award on the
first anniversary date of the Award and as to an additional twenty percent of
the Stock on each of the following four anniversary dates of the Award;
provided that each Award shall be immediately non-forfeitable in full upon a
Change in Control. If a Non-Employee Director's service on the Board
terminates prior to the Award becoming entirely non-forfeitable, any portion
of the Award which then remains forfeitable shall revert to the Company,
except that if the Non-Employee Director's service terminates by reason of
death or disability, any 20 percent installment with respect to which such
Non-Employee Director shall have begun (but not completed) the requisite
annual service shall become, as to such installment, also entirely
nonforfeitable. As used in the prior sentence, a "disability" shall exist if,
because of sickness or injury, the ability of the Non-Employee Director to
perform the duties of a member of the Board of Directors becomes
significantly impaired.
(ii) A Non-Employee Director may, on or prior to December 31, 1995 (or
in the case of a Non-Employee Director who first becomes a Director
after December 31, 1995, within thirty days after becoming a Director),
as to his forfeitable shares of Director's Restricted Stock elect that
such shares shall become nonforfeitable on January 1 following the year
in which he attains his 70th birthday, but not earlier than the date upon
which such shares become nonforfeitable under subparagraph (i) of this
paragraph (c) or later than the date of a Change in Control. During such
additional period, if any, that such shares are forfeitable under this
subparagraph (ii), the shares shall be forfeited if such Non-Employee
Director resigns from the Board of Directors or refuses to stand for
re-election to the Board of Directors, unless:
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A. Such resignation or refusal results from the disability (as defined
in subparagraph (i) above) or death of the Non-Employee Director; or
B. Such Non-Employee Director furnishes to the Board of Directors an
opinion of counsel, reasonably satisfactory to a majority of the
remaining members, to the effect that continued membership on the Board
will result in such Non-Employee Director having a conflict of interest
or suffering some other significant legal liability; or
C. Such resignation or refusal is approved or requested by a
majority of the remaining members of the Board of Directors or by
stockholders owning a majority of the voting stock of the Company.
During such additional period, if any, that such shares are
forfeitable under this subparagraph (ii), if there occurs an event
described in clause A., B. or C. of this subparagraph, the shares shall
become nonforfeitable on the date that the Non-Employee Director ceases
to be a member of the Board of Directors.
Any such election to defer vesting shall be made in writing
addressed to the Secretary of the Committee, and shall be irrevocable
when received.
(d) Dividends; Voting. Except as set forth in this Section 9, a
Director granted Director's Restricted Stock shall have all of the rights of
a stockholder including, without limitation, the right to vote Restricted
Stock and the right to receive dividends thereon.
(e) The Director's Restricted Stock shall be subject to the following
provisions prior to becoming non-forfeitable:
(i) The Stock may not be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of; and neither the right to receive
Stock nor any interest therein under the Plan may be assigned, and any
attempted assignment shall be void.
(ii) The Stock certificates shall, at the option of the Company,
either (x) be held by the Company together with stock powers endorsed by
the Director in blank or (y) bear an appropriate restrictive legend and
be subject to appropriate "stop transfer" orders or (z) both.
(iii) Any additional Stock or other securities or property (other than
cash dividends) that may be issued with respect to Director's Stock as a
result of any stock dividend, stock split, reorganization,
recapitalization, merger, consolidation, split-up, combination of shares
or other event, shall be subject to the restrictions and other terms and
conditions of the Plan.
10. General Provisions.
(a) Compliance with Local and Exchange Requirements. The Plan, the
granting and exercising of Awards, and the other obligations of the Company
under the Plan and any Award Agreement, promissory note or other agreement
shall be subject to all applicable federal, state and foreign laws, rules and
regulations, and to such approvals by any regulatory or governmental agency
as may be required. The Company, in its discretion, may postpone the issuance
or delivery of Stock under any Award until completion of such stock exchange
listing or registration or qualification of such Stock or other required
action under any state, federal or foreign law, rule or regulation as the
Company may consider appropriate, and may require any Grantee to make such
representations and furnish such information as it may consider appropriate
in connection with the issuance or delivery of Stock in compliance with
applicable laws, rules and regulations.
(b) Nontransferability. Except as may be specifically provided to the
contrary in any Award Agreement, Awards shall not be transferable by a
Grantee except by will or the laws of descent and distribution or, if then
permitted under Rule 16b-3, pursuant to a qualified domestic relations order
as defined under the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder, and shall be
exercisable during the lifetime of a Grantee only by such Grantee or his
guardian or legal representative.
(c) No Right to Continued Employment, etc.. Nothing in the Plan or in any
Award granted or any Award Agreement, or other agreement entered into
pursuant hereto shall confer upon any Grantee the right to continue in the
employ of or to continue as an independent contractor, or director of the
Company, any subsidiary or any
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Affiliate or to be entitled to any remuneration or benefits not set forth in
the Plan or such Award Agreement, or other agreement or to interfere with or
limit in any way the right of the Company or any such Subsidiary or Affiliate
or the stockholders to terminate such Grantee's employment, directorship or
independent contractor relationship.
(d) Taxes. The Company or any Subsidiary or Affiliate is authorized to
withhold from any Award granted, any payment relating to an Award under the
Plan, including from a distribution of Stock, or any other payment to a
Grantee, amounts of withholding and other taxes due in connection with any
transaction involving an Award, and to take such other actions as the
Committee may deem advisable to enable the Company and Grantees to satisfy
obligations for the payment of withholding taxes and other tax obligations
relating to any Award. This authority shall include authority to withhold or
receive Stock or other property and to make cash payments in respect thereof
in satisfaction of a Grantee's tax obligations.
(e) Amendment and Termination of the Plan. The Board may at any time and
from time to time alter, amend, suspend, or terminate the Plan in whole or in
part; provided that, no amendment which requires stockholder approval in
order for the Plan to continue to comply with Rule 16b-3 or Section 162(m) of
the Code, shall be effective unless the same shall be approved by the
requisite vote of the stockholders of the Company entitled to vote thereon.
Notwithstanding the foregoing, no amendment shall affect adversely any of the
rights of any Grantee, without such Grantee's consent, under any Award
theretofore granted under the Plan.
(f) No Rights to Awards; No Stockholder Rights. No Grantee shall have any
claim to be granted any Award under the Plan, and there is no obligation for
uniformity of treatment of Grantees. Except as provided specifically herein,
a Grantee or a transferee of an Award shall have no rights as a stockholder
with respect to any shares covered by the Award until the date of the
issuance of a stock certificate to him for such shares.
(g) Unfunded Status of Awards. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Grantee pursuant to an Award, nothing contained in
the Plan or any Award shall give any such Grantee any rights that are greater
than those of a general creditor of the Company.
(h) No Fractional Shares. No fractional shares of Stock shall be issued
or delivered pursuant to the Plan or any Award. The Committee shall determine
whether cash, other Awards, or other property shall be issued or paid in lieu
of such fractional shares or whether such fractional shares or any rights
thereto shall be forfeited or otherwise eliminated.
(i) Not Exclusive. The Awards granted under this Plan are not intended to
be exclusive and, accordingly, the Board may adopt, or permit the adoption
of, other compensation and/or benefit plans or arrangements of any type
whatsoever, including but not limited to plans or arrangements that provide
for compensation in the same form as, or in form similar or dissimilar to,
types of compensation available under this Plan.
(j) Governing Law. The Plan and all determinations made and actions taken
pursuant hereto shall be governed by the laws of the State of Delaware
without giving effect to the conflict of laws principles thereof.
(k) Effective Date; Plan Termination. The Plan has been approved by
stockholders. Amendments to the Plan effected at the January 27, 1997 meeting
of the Board of Directors shall take effect upon their adoption by the Board
(the "Effective Date"), but the amendments to this Plan (and any Awards made
on or after such date and prior to the stockholder approval mentioned
herein), shall be subject to the approval of the amendments by the holders of
a majority of the issued and outstanding shares of Common Stock of the
Company entitled to vote, which approval must occur within twelve months of
the date the Plan, as so amended, is adopted by the Board; provided that
Awards which could have been made under the Plan as previously in effect
shall not be affected by the lack of stockholder approval of the amendments.
In the absence of such approval, except as so provided above, such Awards
shall be null and void.
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EXHIBIT A TO 1993 STOCK AWARD AND INCENTIVE PLAN,
AS AMENDED JANUARY 27, 1997
PERFORMANCE MEASURES
(i) "Cash Flow" shall mean the consolidated increase (reduced by any
decrease) in cash, cash equivalents and related marketable securities of the
Company, as set forth in the Company's audited financial statements for a year
or other period, adjusted to offset the effects of financing activity, cash
dividends to common stockholders and purchases of treasury stock.
(ii) "Debt to Capital Ratio" shall mean Debt divided by Capital. "Debt" shall
mean the sum of short term debt, the current portion of long term debt and long
term debt, all as reported in or determined from a balance sheet at the end of a
year or other period. "Capital" shall mean the sum of (i) short term debt, (ii)
long term debt, (iii) current portion of long term debt, (iv) total minority
interest and (v) stockholders' equity, all as reported in or determined from a
balance sheet at the end of a year or other period.
(iii) "EBIT" shall mean, (i) in the case of the Company, the consolidated
earnings before interest and taxes of the Company as set forth in Company's
audited financial statements for such year or other period or (ii) in the case
of a business unit of the Company, the earnings before interest and taxes of
such business unit, for such year or other period, determined on a basis
consistent with the accounting principles used in determining EBIT in the
Company's audited financial statements.
(iv) "EPS" shall mean the consolidated fully-diluted earnings per share of
the Company, as set forth in the Company's audited financial statements for such
year or other period.
(v) "EVA" shall mean economic value added, calculated as NOPAT less a capital
charge as follows: the weighted average cost per dollar of Capital for the year
or other period times the amount of Capital invested. "NOPAT" shall mean net
Operating Profit after tax plus equity in net earnings of associated companies,
as set forth in the Company's financial statements for such year or other
period.
(vi) "Market Value" shall mean the Fair Market Value of a share of Stock, as
determined under clause (i), (ii) or (iii) as applicable, of the second sentence
of Section 2(q) of the Plan.
(vii) "Net Earnings" shall mean the consolidated net earnings available to
common stockholders, as set forth in the Company's financial statements for such
year or other period.
(viii) "Operating Profit" shall mean operating profit before any special
charges or gains as reported in a statement of income or statement of operations
for a year or other period.
(ix) "Return on Capital" shall mean NOPAT divided by average Capital for the
year or other period.
(x) "Return on Equity" shall mean either Net Earnings or Cash Flow, as
designated by the Committee, divided by average Stockholders' Equity for the
year or other period.
(xi) "RONA" shall mean the return on net assets for a year or other period,
which is calculated as (i) Net Earnings minus financing charges divided by (ii)
net assets. Net assets means total assets minus nonfinancial liabilities.
(xii) "Sales" shall mean net sales as reported in a statement of income or
statement of operations for a year or other period.
(xiii) "SG & A" shall mean selling, general and administrative costs as
reported in a statement of income or statement of operations for a year or other
period.
(xiv) "Tax Rate" shall mean the Company's effective tax rate, as set forth in
the Company's audited financial statements for such year or other period.
(xv) "Total Return" shall mean the percent increase over a year or other
period in the value of an investor's holdings in the Company's Stock assuming
reinvestment of dividends.
In computing the foregoing Performance Measure with respect to any Award, there
shall be disregarded the impact of any accounting change mandated by Generally
Accepted Accounting Principles which becomes mandated and is implemented after
the related Performance Goal is established.
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