<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] 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 Rule 14a-11(c) or Rule 14a-12
PHARMACIA & UPJOHN, INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
PHARMACIA & UPJOHN LOGO
April 3, 1996
To Our Shareholders:
Welcome to the first Annual Meeting of Shareholders of Pharmacia & Upjohn,
Inc. This year's meeting will be held on Monday, May 6, 1996, at the Globe
Arena in Stockholm, Sweden. Next year's Annual Meeting will be held in
Kalamazoo, Michigan, and thereafter, the Annual Meeting will alternate between
the two sites. A discussion of the Company's research program will begin at
2:00 p.m., led by Dr. Goran Ando, the Company's Executive Vice President for
Worldwide Science and Technology, followed by the formal Annual Meeting, which
will begin at 3:00 p.m. There will be a short break between Dr. Ando's
discussion and the actual Annual Meeting.
For shareholders unable to attend the meeting in Stockholm, an informational
meeting will be held at the Radisson Plaza Hotel in Kalamazoo, Michigan at 10:00
a.m. on Wednesday, May 8, 1996. This meeting will include the presentations made
at the Annual Meeting in Stockholm, as well as provide an opportunity for
shareholders to ask questions and make comments, but no votes will be taken.
Persons who were shareholders of the Company as of March 8, 1996, the date
used to determine who can vote at the meeting, are receiving the attached proxy
statement describing the matters scheduled for action at the Annual Meeting and
providing certain background information on the Company's management.
Shareholders will have an opportunity to vote their shares in advance of the
meeting by completing and mailing the enclosed proxy card. The proxy card
appoints the Chairman of the Board and the Chief Executive Officer of the
Company as proxies or agents to vote your shares as you direct. Traditionally,
most shareholders of American companies vote in advance of the meeting by
signing and mailing in their proxy cards, even if they expect to attend the
meeting in person. Accordingly, we request that you please mark and sign the
enclosed proxy card and return it in the envelope provided, even if you expect
to attend the meeting.
At the meeting, five directors will be elected for a term of three years. The
remaining directors will continue in office until their terms expire next year
or the year thereafter. Approximately one-third of the Board of Directors will
be elected each year to serve for three-year terms. The meeting will also
consider the shareholder proposal included in the proxy statement and provide an
opportunity for shareholders to meet members of the Board and ask questions or
make comments if they wish.
Again, we are delighted to welcome you to our new Company and its first Annual
Meeting. These are exciting times, and we eagerly look ahead toward a promising
future.
/s/ JAN EKBERG /s/ JOHN L. ZABRISKIE
-------------- ---------------------
Jan Ekberg John L. Zabriskie
Chairman of the Board President and Chief Executive Officer
<PAGE> 3
PHARMACIA & UPJOHN, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
STOCKHOLM, SWEDEN
MAY 6, 1996
- --------------------------------------------------------------------------------
The Annual Meeting of Shareholders of Pharmacia & Upjohn, Inc., a Delaware
corporation, will be held on Monday, May 6, 1996, at 3:00 p.m., at the Globe
Arena, Stockholm, Sweden. A discussion of the Company's research efforts and new
products led by Dr. Goran Ando will be held before the formal meeting, beginning
at 2:00 p.m. The purposes of the Annual Meeting are to:
1. Elect five directors for a term of three years.
2. Vote on a shareholder proposal.
3. Transact such other business as may properly come before the meeting.
There will also be an informational meeting for shareholders on Wednesday, May
8, 1996 at 10:00 a.m. at the Radisson Plaza Hotel, 100 West Michigan Avenue,
Kalamazoo, Michigan. This meeting will include the presentations provided during
the Annual Meeting in Stockholm, but no votes will be taken at this
informational meeting.
Shareholders will have an opportunity to ask questions and make comments at
either meeting.
Only shareholders of record at the close of business on March 8, 1996 are
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof.
By Order of the Board
April 3, 1996 Kenneth M. Cyrus
Secretary
- --------------------------------------------------------------------------------
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, THE BOARD OF DIRECTORS
REQUESTS THAT YOU SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE
PROVIDED.
<PAGE> 4
PHARMACIA & UPJOHN, INC.
KNYVETT HOUSE, THE CAUSEWAY
STAINES, MIDDLESEX TW18 3BA ENGLAND
PROXY STATEMENT
This proxy statement is being distributed to shareholders of Pharmacia &
Upjohn, Inc. (the "Company") on or about April 3, 1996 in connection with the
solicitation by the Company's Board of Directors of proxies to be used at the
Annual Meeting of Shareholders of the Company. The Annual Meeting will be held
at the Globe Arena, Stockholm, Sweden, on Monday, May 6, 1996, at 3:00 p.m.
Any person giving a proxy has the power to revoke it at any time before it is
voted. The Company will bear the costs of solicitation of proxies. The Company
may also reimburse persons holding stock in their names or in those of their
nominees for their reasonable expenses in sending proxy material to their
principals and obtaining their proxies. The Company has engaged the services of
D. F. King & Co., Inc. to assist in the solicitation of proxies for a fee not to
exceed $20,000, plus out-of-pocket expenses.
It is the Company's policy that all proxies, ballots and voting tabulations
that identify how shareholders voted will be kept confidential, except where
disclosure may be required by applicable law, where disclosure is expressly
requested by a shareholder, and in proxy solicitations not approved and
recommended by the Board of Directors, and that the tabulators and the
inspectors of election be independent and not employees of the Company.
Shareholders of record at the close of business on March 8, 1996 are entitled
to notice of and to vote at the meeting. At the close of business on January 31,
1996, the Company had 507,256,263 shares of Common Stock outstanding, each share
being entitled to one vote. These shares will be voted as specified in the
shareholder's proxy card or by the shareholder in person or through his nominee
at the Annual Meeting. The Company's fiscal year is a calendar year.
At the close of business on January 31, 1996, shares of Convertible Perpetual
Preferred Stock of the Company were held by The Employee Stock Ownership Trust
pursuant to The Company's Employee Savings Plan. These shares have votes
equivalent to 10,460,704 shares of Common Stock. Each participant in the Plan
may direct State Street Bank and Trust Company, as the Trustee of the Plan, how
to vote the shares allocated to the participant's account under the Plan. A
participant may also direct the Trustee how to vote the participant's
"proportionate share" of the votes attributable to shares which have not been
allocated to participant accounts or for which no instructions were timely
received. If a participant is also a shareholder of record, the proxy card given
by such person will govern the voting of shares held by the participant both
directly and through the Plan.
Matters submitted to a vote of shareholders, other than the election of
directors, must be approved by the holders of a majority of the shares voting at
the Annual Meeting whether in person, by nominee or by proxy card. In
determining whether a quorum exists at the meeting, all votes "for" or
"against," as well as all abstentions (including votes to withhold authority to
vote in certain cases), with respect to the proposal receiving the most such
votes, will be counted. With respect to the shareholder proposal, abstentions
will be counted in the denominator of the fraction used to determine if this
proposal has been approved by a majority of the shares voted, while broker non-
votes will not be counted in the denominator. Thus, an abstention will have the
same effect as a vote "against" the shareholder proposal, while a broker
non-vote will merely reduce the number of shares voting on the proposal. With
respect to the election of directors, neither abstentions nor broker non-votes
will have the effect of a vote "against" a particular nominee, as the nominees
receiving the five highest vote "for" totals will be elected as directors of the
Company. If an individual has signed the Company's proxy card but failed to
indicate a vote "for," "against" or "abstaining" from a particular proposal,
such proxy will be voted for all nominees, against all shareholder proposals and
in the proxies' discretion on any other matters that may properly come before
the meeting.
1
<PAGE> 5
ELECTION OF FIVE DIRECTORS
The Board of Directors is composed of three classes of members. One class of
directors is elected each year to hold office for a three-year term and until
successors of such class are duly elected and qualified. Except where the
authority to do so has been withheld, it is the intention of the persons named
in the Company's proxy to vote to elect Richard H. Brown, M. Kathryn Eickhoff,
Jan Ekberg, Berthold Lindqvist and Bengt Samuelsson as directors.
It is expected these nominees will serve, but if, for any unforeseen cause,
any of them should decline or be unable to serve, the proxies will be voted to
fill any vacancy so arising before the Annual Meeting of Shareholders in
accordance with the discretionary authority of the proxies.
Information with respect to the nominees for election and the directors
continuing in office with respect to age and positions with the Company or other
principal occupations for the past five years follows. Each individual was
initially elected as a director of the Company in November 1995 following the
combination (the "Combination") of The Upjohn Company ("Upjohn") and Pharmacia
AB ("Pharmacia").
<TABLE>
<CAPTION>
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
FOR THREE-YEAR TERM EXPIRING IN 1999
<S> <C>
RICHARD H. BROWN, AGE 48, PRESIDENT AND CHIEF EXECUTIVE OFFICER, H&R
RICHARD H. BLOCK, INC., TAX AND OTHER FINANCIAL SERVICES. Prior to joining H&R Block
BROWN PHOTO in August 1995, Mr. Brown had been Vice Chairman of Ameritech Corp, a
telecommunications company. He had held such position since January 1993,
and before that had been President and Chief Executive Officer of Illinois
Bell Telephone Company. He is a member of the Board of Directors of H&R
Block, Inc. and is Vice Chairman of the board of trustees of Ohio
University Foundation. He also serves actively in many non-profit
organizations. He had served as a Director of Upjohn before the
Combination. He is a member of the Executive and the Compensation
Committees of the Board of Directors.
M. KATHRYN EICKHOFF, AGE 56, PRESIDENT, EICKHOFF ECONOMICS INCORPORATED,
M. KATHRYN ECONOMIC CONSULTANTS. Ms. Eickhoff is the former Associate Director for
EICKHOFF PHOTO Economic Policy, United States Office of Management and Budget. She also
serves as a director of AT&T, and Tenneco Inc. Ms. Eickhoff is a member of
several business organizations including the Conference of Business
Economists, the Economic Club of New York and the National Association of
Business Economists. She had served as a Director of Upjohn before the
Combination. She is a member of the Audit Committee of the Board of
Directors. The Company has retained Eickhoff Economics Incorporated to
provide economic consulting services to the Company for an annual fee of
$25,000.
JAN EKBERG, AGE 59, CHAIRMAN OF THE BOARD OF THE COMPANY. Prior to the
JAN EKBERG Combination, Mr. Ekberg had been President and Chief Executive Officer of
PHOTO Pharmacia, and, before that, had been President and Chief Executive
Officer of Pharmacia's predecessor companies. He is a member of the boards
of directors of Oy Partek AB, AB Volvo Personvagnar and Nobelpharma AB. He
is a member of the Federation of Swedish Industries and the Royal Swedish
Academy of Engineering Sciences. He is also a member of the Supervisory
Board of Huhtamaki Oy. He had served as a Director of Pharmacia before the
Combination. He is a member of the Executive Committee of the Board of
Directors.
</TABLE>
2
<PAGE> 6
<TABLE>
<S> <C>
BERTHOLD LINDQVIST, AGE 57, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF
BERTHOLD GAMBRO AB, A GLOBAL MEDICAL TECHNOLOGY COMPANY. Mr. Lindqvist is also a
LINDQVIST PHOTO board member of Gambro AB, Besam AB, PLM AB, Inductus AB and Securitas AB.
He had served as a Director of Pharmacia before the Combination. He is a
member of the Compensation Committee of the Board of Directors.
BENGT SAMUELSSON, M.D., AGE 61, PROFESSOR OF MEDICAL AND PHYSIOLOGICAL
BENGT CHEMISTRY, AND, FORMERLY, PRESIDENT, KAROLINSKA INSTITUTE, STOCKHOLM. He
SAMUELSSON, was the Nobel Laureate in Physiology of Medicine in 1982 and is currently
M.D. PHOTO Chairman of the Nobel Foundation. He is also a member of the boards of
directors of Svenska Handelsbanken and the Liposome Company. Dr.
Samuelsson is a member of the Royal Swedish Academy of Sciences, the
American Academy of Arts and Sciences, the Association of American
Physicians, Academie des Sciences, Paris, the U.S. National Academy of
Sciences, and the Royal Society, London. He had served as a Director of
Pharmacia before the Combination. He is a member of the Nominating
Committee of the Board of Directors.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING IN 1997
FRANK C. CARLUCCI, AGE 65, CHAIRMAN, THE CARLYLE GROUP, A MERCHANT BANK.
FRANK C. Mr. Carlucci had been Vice Chairman of The Carlyle Group from 1989 to
CARLUCCI PHOTO 1993. He served as U.S. Secretary of Defense from 1987 to 1989. Mr.
Carlucci is currently on the boards of directors of Ashland Oil, Inc., BDM
International, Bell Atlantic Corporation, CB Commercial Real Estate Group,
Inc., General Dynamics Corporation, Kaman Corporation, Massachusetts
Mutual Life Insurance Company, Neurogen Corporation, Northern Telecom
Limited, The Quaker Oats Company, SunResorts, Ltd., N.V., Texas
Biotechnological Corporation, and Westinghouse Electric Corporation. He
also serves on the board of trustees for the nonprofit Rand Corporation.
He had served as a Director of Upjohn before the Combination. He is a
member of the Audit Committee of the Board of Directors.
SOREN GYLL, AGE 55, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF AB VOLVO, AN
SOREN GYLL AUTOMOBILE MANUFACTURER. Mr. Gyll had been Chairman of Procordia AB, the
PHOTO predecessor of Pharmacia, since 1992 and before that had served as
Pharmacia's President and Chief Executive Officer. Mr. Gyll is a member of
the boards of directors of AB Catena, AB Custos, Svensk Interkontinental
Lufttrafik, AB Volvo, the Federation of Swedish Industries, and the
Swedish Employer's Confederation. Mr. Gyll is also a member of the Royal
Swedish Academy of Engineering Sciences, the Central Board of the
Association of Swedish Engineering Industries, and the board of the
Swedish Engineering Employers' Association. He had served as a Director of
Pharmacia before the Combination. He is a member of the Executive
Committee of the Board of Directors.
</TABLE>
3
<PAGE> 7
<TABLE>
<S> <C>
GORAN LINDEN, AGE 52, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF SWEDISH
GORAN LINDEN MATCH AB, AN INTERNATIONAL MANUFACTURER AND MARKETER OF TOBACCO PRODUCTS,
PHOTO MATCHES AND DISPOSABLE LIGHTERS. Mr. Linden is also a member of the Board
of Partena AB, Retriva AB, Procordia Fastigheter AB, Swedish Match AB,
Alfred Berg Holding AB, Cultor AB, Lithells AB, Pripps-Ringnes AB and
Monark Stiga AB. He had served as a Director of Pharmacia before the
Combination. He is a member of the Audit Committee of the Board of
Directors.
WILLIAM U. PARFET, AGE 49, CO-CHAIRMAN OF MPI RESEARCH, LLC, A PRE-
WILLIAM U. CLINICAL AND CLINICAL PHARMACEUTICAL TESTING LABORATORY. Previously he
PARFET PHOTO served from October 1993 to January 1996 as President and Chief Executive
Officer of Richard-Allan Medical Industries, a medical device
manufacturer. Prior to that, he had served as Vice Chairman of the Board
of Upjohn (during 1993), and was President (1991-93) and Executive Vice
President (1989-91) of Upjohn. Mr. Parfet serves as a member of the boards
of directors of Bissell, Inc., CMS Energy Corporation, the Financial
Accounting Foundation, Flint Ink Corporation, Old Kent Financial
Corporation, Stryker Corporation and Universal Foods, Inc. He had served
as a Director of Upjohn before the Combination. He is a member of the
Nominating Committee of the Board of Directors. From time to time, the
Company has retained MPI Research, Inc. (or its predecessor, International
Research and Development Corporation) to conduct pre-clinical and clinical
testing work for the Company. Mr. Parfet is the brother of Donald R.
Parfet, Senior Vice President of the Company.
ULLA REINIUS, AGE 58, PRESIDENT OF FINANSFAKTA AB, FINANCIAL AND
ULLA REINIUS INFORMATION CONSULTANTS. Ms. Reinius is a member of the boards of
PHOTO directors of Uppsala University/Capital and Property Administration, the
Swedish Association for Share Promotion and Aboro Consultants. She is a
former member of the Swedish Government Ethical Committee. She had served
as a Director of Pharmacia before the Combination. She is a member of the
Audit Committee of the Board of Directors.
JOHN L. ZABRISKIE, PH.D., AGE 56, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF
JOHN L. THE COMPANY. Prior to joining Upjohn as Chairman and Chief Executive
ZABRISKIE PHOTO Officer in 1994, Dr. Zabriskie had spent his entire career with Merck &
Co., Inc., having served as Executive Vice President of Merck & Co., Inc.,
and President, Merck Manufacturing Division before joining Upjohn. He was
formerly active in the Pharmaceutical Research and Manufacturers
Association of America and in the debate over health care reform as a
member of the Healthcare Leadership Council and the Jackson Hole Group for
Healthcare Reform. Dr. Zabriskie has served on the boards of First of
America Bank Corporation, Penjerdel Corporation, Pennsylvania
Biotechnology Association, the National Pharmaceutical Council, Inc.,
Morristown Memorial Hospital and Wells College. He is currently a director
of Kellogg Company. He had served as Chairman of the Board of Directors of
Upjohn before the Combination. He is a member of the Executive Committee
of the Board of Directors.
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING IN 1998
<S> <C>
GUSTAF DOUGLAS, AGE 58, CHAIRMAN OF INVESTMENT AB LATOUR, AN INVESTMENT
DOUGLAS GUSTAF HOLDING COMPANY. Mr. Douglas is also Vice Chairman of Securitas AB and
PHOTO Sveriges Television AB, and is a member of the boards of directors of Assa
Abloy AB, Hagstromer & Qviberg, Munksjo, and Stiftelsen Svenska Dagbladet.
He had served as a Director of Pharmacia before the Combination. He is a
member of the Compensation Committee of the Board of Directors.
DARYL F. GRISHAM, AGE 69, PRESIDENT AND CHIEF EXECUTIVE OFFICER, PARKER
DARYL F. HOUSE SAUSAGE COMPANY, A FOOD COMPANY. Mr. Grisham is a former director
GRISHAM PHOTO for G. D. Searle and Company and Illinois Bell Telephone Co. He currently
serves as a director of Harris Bankcorp, Inc.; Lincoln Park Zoological
Society; the Rehabilitation Institute of Chicago and Lyric Opera of
Chicago. He is a trustee of Northwestern University. He had served as a
Director of Upjohn before the Combination. He is a member of the
Compensation Committee of the Board of Directors.
WILLIAM E. LAMOTHE, AGE 69, FORMER CHAIRMAN OF THE BOARD AND CHIEF
WILLIAM E. EXECUTIVE OFFICER OF KELLOGG COMPANY, A FOOD COMPANY. Mr. LaMothe is also
LAMOTHE PHOTO a former director of the Food and Drug Law Institute, Kimberly Clark
Corporation, Unisys Corporation and the Western Michigan University
Foundation. He is currently a director of Allstate Insurance Companies,
Kellogg Company and Sears Roebuck and Company. He is a member of the board
of the W. K. Kellogg Foundation and a trustee of the W. K. Kellogg
Foundation Trust. He also serves on the board of the Battle Creek
Community Foundation. He had served as a Director of Upjohn before the
Combination. He is a member of the Nominating Committee of the Board of
Directors.
OLOF LUND, AGE 65, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF CELSIUS AB, A
OLOF LUND PHOTO DEFENSE MANUFACTURING COMPANY. Mr. Lund is the Chairman of AssiDoman AB,
Hasselfors AB and Enator AB, and is a member of the board of directors of
the Federation of Swedish Industries. Mr. Lund is also a member of the
Royal Academy of Sciences. He had served as a Director of Pharmacia before
the Combination. He is a member of the Executive and Nominating Committees
of the Board of Directors.
WILLIAM D. MULHOLLAND, AGE 69, FORMER CHAIRMAN OF THE BOARD AND CHIEF
WILLIAM D. EXECUTIVE OFFICER OF THE BANK OF MONTREAL. Mr. Mulholland is currently a
MULHOLLAND director of Canadian Pacific Ltd. He was formerly a member of the board of
PHOTO directors of the Bank of Montreal, Harris Trust and Savings Bank,
Kimberly-Clark Corporation, Rio Tinto Zinc Corporation, Standard Life
Assurance Company and Consolidated Bathurst Corporation. Mr. Mulholland
has received honorary Doctor of Laws degrees from Memorial University and
Queen's University. He had served as a Director of Upjohn before the
Combination. He is a member of the Executive Committee of the Board of
Directors.
</TABLE>
5
<PAGE> 9
INFORMATION CONCERNING SECURITY OWNERSHIP
Under regulations of the United States Securities and Exchange Commission,
persons who have power to vote or dispose of shares of the Company, either alone
or jointly with others, are deemed to be beneficial owners of such shares.
Set forth in the following table is the beneficial ownership of holders of 5%
or more of the Company's Common Stock as of February 14, 1996:
SHARES OF COMMON STOCK BENEFICIALLY OWNED
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP % OF CLASS
- --------------------------------------------------------------------- -------------------- ----------
<S> <C> <C>
AB Volvo(1).......................................................... 69,765,766 14.7
Ministry of Industry and Commerce(2)(3).............................. 35,766,282 7
</TABLE>
- -------------------------
(1) Based on information available to the Company, it is believed that these
shares are held by AB Volvo through Fyrstegen AB, S-405 08 Goteborg, Sweden.
(2) Based on information available to the Company, it is believed that these
shares are held by the Ministry of Industry and Commerce of the Kingdom of
Sweden through Forvaltningsaktiebolaget Stattum, Fredsgatan 8, S-103 33,
Stockholm, Sweden.
(3) In the form of Swedish Depositary Shares.
Set forth in the following table are the beneficial ownership of the Company's
Common Stock (either as Common Stock or in the form of Swedish Depositary
Shares) as of the close of business on January 31, 1996 of individual directors
and nominees, the five most highly compensated officers of the Company, and all
directors and such officers as a group.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK BENEFICIALLY OWNED(1)
-------------------------------------------------------------------------
SHARED
TOTAL SOLE VOTING VOTING OPTIONS
AMOUNT OF AND/OR AND/OR EXERCISABLE
BENEFICIAL DISPOSITIVE DISPOSITIVE WITHIN 60 % OF
OWNERSHIP POWER POWER DAYS CLASS
--------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Goran A. Ando....................... 1,000 1,000 *
Richard H. Brown(2)................. 5,323 5,323(3) *
Frank C. Carlucci................... 16,057 16,057(3) *
Kenneth M. Cyrus.................... 259,124 42,173(4) 216,951 *
Gustaf Douglas...................... 120,250 120,250 *
M. Kathryn Eickhoff................. 4,692 4,692(3) *
Jan Ekberg(2)....................... 4,550 4,550 *
Daryl F. Grisham.................... 18,861 18,861(3) *
Soren Gyll.......................... 6,000 6,000 *
William E. LaMothe(2)............... 25,236 25,236(3) *
Goran Linden........................ 550 550 *
Berthold Lindqvist.................. 250 250 *
Olof Lund........................... 725 725 *
William D. Mulholland............... 10,719 10,719(3) *
William U. Parfet................... 1,356,561 727,369(3)(4) 409,987(5) 219,205 *
Ulla Reinius........................ 250 250 *
Robert C. Salisbury................. 280,074 35,298(4) 244,776 *
Bengt Samuelsson.................... *
Ley S. Smith(2)..................... 429,105 30,479(4) 398,626 *
John L. Zabriskie(2)................ 660,985 51,985(4) 609,000 *
Directors and Five Named Officers as
a Group (20 persons)(2)........... 3,200,312 968,192 543,562 1,688,558 *
</TABLE>
- -------------------------
* Less Than 1%
(notes continued on following page)
6
<PAGE> 10
(1) Excludes the following share units which were awarded under the Company's
prior Incentive Compensation Plans but payment of which is deferred: K. M.
Cyrus, 32,040; W. U. Parfet, 794; R. C. Salisbury, 14,660; L. S. Smith,
13,211; J. L. Zabriskie, 7,057; and directors and such officers as a group,
67,762.
(2) Excludes 507 shares held by the spouse of R. H. Brown; 610 shares held by
the spouse of J. Ekberg; 1,139 shares held by the spouse of W. E. LaMothe;
3,190 shares held by the spouse of L. S. Smith; and 145 shares held by the
spouse of J. L. Zabriskie; and 5,591 shares held by the spouses of directors
and such officers as a group.
(3) Includes the following number of shares representing deferred directors'
fees payable in stock which are held in trust with respect to which the
individual has shared voting power: R. H. Brown, 4,844; F. C. Carlucci,
15,332; M. K. Eickhoff, 2,517; D. F. Grisham, 18,716; W. E. LaMothe, 22,046;
W. D. Mulholland, 6,359; and W. U. Parfet, 234.
(4) Includes the following number of shares or share equivalents credited under
the Company's Employee Savings Plan with respect to which the individual has
sole voting power: K. M. Cyrus, 8,021; W. U. Parfet, 6,249; R. C. Salisbury,
6,247; L. S. Smith, 2,588; J. L. Zabriskie, 140; and directors and such
officers as a group, 23,245.
(5) Includes shares held in trust over which voting and/or dispositive power is
shared in his capacity as trustee under various trusts.
7
<PAGE> 11
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held only one meeting after the Combination during 1995
but plans seven meetings during 1996. The Board consists entirely of
non-employee directors except for the President and Chief Executive Officer of
the Company.
The Compensation Committee of the Board of Directors met once during 1995 to
establish the initial compensation of the Board and the Company's executive
officers. Current members of the Compensation Committee are R. H. Brown,
Chairman, G. Douglas, D. F. Grisham, and B. Lindqvist, none of whom is an
employee nor eligible for incentive compensation or stock option awards from the
Company.
The Audit Committee assists the Board in overseeing the accounting, financial
reporting, auditing, internal control and business ethics policies and
procedures of the Company. The Committee met once in 1995, and recommended to
the Board the appointment of Coopers & Lybrand, LLP and KPMG Peat Marwick, LLP
as independent auditors of the Company. Current members of the Audit Committee
are G. Linden, Chairman, F. C. Carlucci, M. K. Eickhoff and U. Reinius.
The Nominating Committee of the Board met once during 1995. The Committee
makes recommendations to the Board regarding Board and committee nominees and
membership, director performance, officer candidates and plans for management
succession. The Committee also reviews and recommends to the Board appropriate
corporate governance policies and practices. The Committee will consider
director nominees recommended by shareholders. Any such recommendations should
be made in writing to the Secretary of the Company. Current members of the
Nominating Committee are W. E. LaMothe, Chairman, O. Lund, W.U. Parfet and B.
Samuelsson.
BOARD OF DIRECTORS COMPENSATION
Annual compensation for non-employee members of the Board of Directors
consists of a retainer fee of $50,000 ($100,000 for the Chairman of the Board)
and 500 shares of the Company's Common Stock. In addition, the chairperson of
each Board committee receives an annual fee of $5,000. There are no special fees
for attending meetings or serving on regular Board committees. The Company's
President and Chief Executive Officer does not receive separate compensation for
serving on the Board of Directors. The Company has retained J. Ekberg, Chairman
of the Board of the Company, to assist in the process of combining the
businesses of Upjohn and Pharmacia for a fee of $169,000 during 1996 and a fee
of $56,000 during 1997.
8
<PAGE> 12
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee, consisting of four independent directors, none of
whom has ever served as an officer or employee of the Company or has any known
conflicts, is responsible for the establishment and oversight of executive
compensation policies and practices.
COMPENSATION POLICIES
In general, the Company seeks to encourage and reward executive efforts which
create shareholder value through achievement of corporate objectives, business
strategies and performance goals, by blending annual and long-term cash and
equity compensation and, in so doing, to align the interests of executives with
those of shareholders. More specifically, the Committee's compensation policies
can be summarized as:
(a) total executive compensation should be targeted at or near the mean
competitive level of comparable global pharmaceutical companies for
competitive performance, and, similarly, differentiated performance should
be recognized;
(b) incentive-based (at-risk) compensation should be at least 30% of total cash
compensation, with the higher-ranking executives having a greater proportion
of incentive-based compensation;
(c) with respect to incentive-based (at-risk) compensation, at least 50% should
be based upon external standards of competitive performance rather than
internally established goals; and
(d) equity-based compensation should be used to further link executive
performance to shareholder interests, promote and encourage stock ownership
in the Company and provide an incentive to create long-term shareholder
value.
It is the Committee's belief that a compensation program designed around these
policies will enhance the returns to the Company's shareholders relative to the
group of comparable global pharmaceutical companies, consisting of American Home
Products, Astra Pharmaceutical Products Group, Bristol-Myers Squibb Co., Eli
Lilly and Company, Glaxo Wellcome Group, Hoffman-LaRoche, Merck & Co., Inc.,
Pfizer Inc., Rhone-Poulenc Rorer, Schering-Plough Corporation, SmithKline
Beecham and Zeneca Pharmaceuticals Group. Each component of compensation (base
salary, annual incentive bonus, and long-term equity-based compensation) is
described more fully below.
BASE SALARIES
Executive salaries are based on several factors: competitive labor market
position determined from market surveys, level of job responsibility, and
individual performance. Our objective is to ensure a base salary component that
is competitive (at a level near the mean of comparable global pharmaceutical
companies) and allows for attracting and retaining key talent. Officer
performance ratings and salary increases are reviewed by the Committee annually.
INCENTIVE-BASED COMPENSATION
Payments under the Company's Incentive Compensation Plan are the "at-risk" or
variable component of annual executive compensation, constituting at least 30%
of total cash compensation, with senior executives having the highest proportion
of incentive-based compensation.
In 1996, 50% of targeted incentive compensation will be dependent upon Total
Market Return and the relative growth in Earnings Per Share as the external
standards of competitive performance.
9
<PAGE> 13
Each factor is weighted equally and measured against the group of comparable
global pharmaceutical companies. The remaining 50% of targeted incentive
compensation will be determined by the achievement of specific internal
performance measurements established for such executives.
LONG-TERM EQUITY-BASED COMPENSATION
The Committee each year grants annual stock options, with ten-year terms at an
exercise price equal to the fair market value on the date of grant, having a
value based on the level of stock price appreciation over the market price on
the date of grant. This provides an incentive for executives to develop
shareholder value and rewards them in proportion to the gain received by other
shareholders. The Committee considers the level of stock options granted by the
group of comparable global pharmaceutical companies and the number of Company
stock options previously granted in reaching its decision to make additional
grants of stock options, but does not have a specific weighting formula for each
factor.
POLICY ON DEDUCTIBILITY OF COMPENSATION
The U.S. Internal Revenue Code limits to $1 million the corporate tax
deduction for compensation paid to certain executive officers unless the
compensation is based upon non-discretionary, pre-established performance goals.
The Committee believes the stock options granted to the Company's executive
officers meet the requirements for fully deductible compensation. However, the
annual incentive compensation plan reserves some discretion for the Committee in
determining awards in order to ensure that the efforts of the incentive
compensation group are compensated fairly and appropriately. As a result, such
awards may not be fully deductible under the Internal Revenue Code.
CHIEF EXECUTIVE OFFICER COMPENSATION
The compensation of J. L. Zabriskie, President and Chief Executive Officer of
the Company, was established by the Committee based on an analysis of his past
performance as Chairman and Chief Executive Officer of Upjohn, which exceeded
both internal and external performance measurements, consideration of his
expanded responsibilities as President and Chief Executive Officer of a much
larger and more complex business, review of comparable compensation of chief
executive officers of other leading global pharmaceutical companies and
application of the compensation policies described above. Consideration was also
given to the key role J. L. Zabriskie played in bringing Upjohn and Pharmacia
together, his progress in implementing the merger and the significant increase
in shareholder value as a result. Since August 20, 1995, when the combination
was announced, until March 1, 1996, the aggregate market capitalization of the
two companies increased from $13.2 billion to $21.8 billion, a gain of 65.2%.
The Committee will evaluate the performance of the Company's Chief Executive
Officer at least annually based upon both the Company's financial performance
and the extent to which the strategic and business goals established for the
Company are met. The Committee does not assign relative weights or rankings to
particular factors but makes its determination based upon a consideration of all
such factors.
J. L. Zabriskie's annual base salary for 1996 has been set at $950,000. He
also received an incentive compensation target for 1996 of $850,000, and was
granted stock options for 180,000 shares of the Company's Common Stock, which
will become exercisable after January 22, 1997 at $37.8125 per share.
COMPENSATION COMMITTEE
R. H. Brown G. Douglas D. F. Grisham B. Lindqvist
10
<PAGE> 14
EXECUTIVE COMPENSATION
The following table shows the total compensation received for the last three
calendar years (or for such shorter period that the individual has been employed
by the Company and its predecessors) by the Chief Executive Officer of the
Company, by the remaining three executive officers of the Company (G. A. Ando,
R. C. Salisbury and K. M. Cyrus) and by the next most highly compensated officer
of the Company. Compensation shown was received by the individual from the
Company, and prior to the Combination, from either Upjohn or Pharmacia.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------- ------------------------------------------------------
RESTRICTED
STOCK SECURITIES
AND PERFORMANCE UNDERLYING
NAME AND PRINCIPAL BASE SHARE AWARDS OPTIONS ALL OTHER
POSITION (4) YEAR SALARY BONUS (1)(2) (# OF SHARES) COMPENSATION(3)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
J. L. Zabriskie, (4) 1995 $904,167 $1,172,760 $ 336,250 174,000 $ 6,525
President and 1994 $800,000 $ 731,272 $ 490,508 507,500 0
Chief Executive Officer
L. S. Smith, (4) 1995 $541,047 $ 575,576 $ 168,125 87,000 $ 6,525
Executive Vice President 1994 $480,000 $ 431,262 $ 152,686 46,400 $ 4,575
1993 $415,417 $ 462,408 0 58,000 $ 5,494
G. A. Ando, (4)(5) 1995 $407,430 $ 201,368 $111,000
Executive Vice President
R. C. Salisbury, (4) 1995 $369,797 $ 298,822 $ 78,481 40,600 $ 6,525
Executive Vice President 1994 $300,042 $ 205,514 $ 114,500 34,800 $ 4,596
and Chief Financial Officer 1993 $275,000 $ 206,876 0 65,250 $ 6,368
K. M. Cyrus, (4) 1995 $318,287 $ 263,110 $ 71,756 37,120 $ 6,525
Senior Vice President, 1994 $281,875 $ 184,849 $ 114,500 34,800 $ 4,610
Secretary and General Counsel 1993 $260,000 $ 193,126 0 58,000 $ 6,368
</TABLE>
- -------------------------
(1) In 1994, J. L. Zabriskie received restricted stock, which will become
non-forfeitable on May 1, 1996, which is included in the table at $204,258,
which represents the fair market value on the date of grant. As of December
31, 1995, based on the closing market price of the Company's Common Stock on
that date of $38.75, the restricted stock was valued at $395,328.
(2) The Performance Shares included in the table represent the fair market value
of the number of shares of the Company's Common Stock on the date of grant.
The performance shares were to have been earned over two and three year
periods based on certain financial measurements of The Upjohn Company.
However, in February 1996, the Compensation Committee of Upjohn determined
that the Performance Share measurements were no longer valid for the new
Company, and the amount of proportionate payout as of such time will be paid
to the recipients. The estimated value of the payments which will be made in
shares of the Company's Common Stock are as follows: J. L. Zabriskie,
$315,000; L. S. Smith, $164,000; R. C. Salisbury, $105,000; and K. M. Cyrus,
$103,000.
(3) All other compensation represents the Company match under the Company's
Employee Savings Plan and, for G. A. Ando, the amount of a supplemental
pension contribution.
(4) Until elected as a new officer of the Company, J. L. Zabriskie had been
Chairman of the Board and Chief Executive Officer of Upjohn; L. S. Smith had
been President and Chief Operating Officer of Upjohn; G. A. Ando had been
Executive Vice President and Deputy Chief Executive Officer of Pharmacia
(hired on February 15, 1995); R. C. Salisbury had been Executive Vice
President and Chief Financial Officer of Upjohn; and K. M. Cyrus had been
Executive Vice President, Secretary and General Counsel of Upjohn.
(5) In addition to the compensation shown in the table, G. A. Ando was
reimbursed for housing accommodations in Stockholm at a value of
approximately $27,500 and was provided use of a car valued at approximately
$10,500.
11
<PAGE> 15
STOCK OPTION GRANTS
During 1995, the following officers, who were then officers of Upjohn,
received the following stock options from Upjohn that have been converted into
options to purchase the Company's Common Stock following the Combination. These
stock options, which have an exercise price equal to the market price on date of
grant, provide value to the officers in proportion to the value provided to all
shareholders based on appreciation in the Company's stock price. The potential
realizable value of each grant is illustrated assuming that the market price of
the Company's stock appreciates in value at annualized 5% and 10% rates during
the ten-year term of the options. If the stock were to appreciate in value at
annualized 5% and 10% rates, the Company's total market capitalization would
increase from $21.8 billion, the value as of March 1, 1996, to $35.5 billion and
$56.5 billion, respectively. The Company is unable to predict or estimate the
Company's actual future stock price or place a reasonably accurate present value
on the options granted. Options can be exercised in full after one year of
employment from the date of grant with payment in either cash or shares of the
Company's Common Stock. Upon a stock-for-stock exercise, the optionee will
receive a new, non-qualified reloaded stock option at the then current market
price for the number of shares tendered to exercise the option. The reloaded
stock option will have an exercise term equal to the remaining term of the
exercised option. Options may only be exercised during employment or within
three months after employment ceases, except that following retirement at or
after age 65 or other approved termination of employment, stock options may be
exercised for periods up to five years (but not beyond the original expiration
date of the option).
STOCK OPTION GRANTS IN LAST FISCAL YEAR
(ADJUSTED TO REFLECT SHARES OF THE COMPANY'S COMMON STOCK)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS TEN-YEAR OPTION TERM
- --------------------------------------------------------------------------------------- -----------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ----------------------------- ---------- ------------ ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
J. L. Zabriskie.............. 174,000 6.79% 23.1896 2/21/05 2,537,584 6,430,735
L. S. Smith.................. 87,000 3.39% 23.1896 2/21/05 1,268,792 3,215,368
13,050* 24.4827 2/16/03 152,547 365,376
R. C. Salisbury.............. 40,600 1.58% 23.1896 2/21/05 592,103 1,500,505
12,746* 24.1379 2/16/03 146,895 351,838
4,303* 30.3448 2/16/03 62,343 149,323
9,971* 30.3448 2/15/04 166,814 410,872
K. M. Cyrus.................. 37,120 1.45% 23.1896 2/21/05 541,351 1,371,890
18,300* 24.1379 2/16/03 210,903 505,150
8,590* 30.6034 2/16/03 125,515 300,630
15,176* 30.6034 2/15/04 256,057 630,681
</TABLE>
- -------------------------
* Represents reloaded stock option grant received by L. S. Smith, R. C.
Salisbury and K. M. Cyrus in 1995 at the then current market price for the
number of shares tendered by them in a stock-for-stock option exercise during
the year.
12
<PAGE> 16
STOCK OPTION EXERCISES
The following table shows the number of stock options exercised and the value
realized by the named officers during 1995 and the number of unexercised stock
options remaining at year-end and the potential value thereof based on the
year-end closing market price of the Company's Common Stock of $38.75:
AGGREGATED STOCK OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END(#) FY-END($)
SHARES --------------- --------------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- ----------------------------------- ----------- ----------- --------------- --------------------
<S> <C> <C> <C> <C>
J. L. Zabriskie.................... 0 0 362,500/319,000 $6,781,251/5,420,010
L. S. Smith........................ 16,437 $ 82,893 311,626/ 87,000 $4,530,914/1,353,755
R. C. Salisbury.................... 43,965 $ 391,023 160,902/ 83,874 $2,145,897/1,230,480
K. M. Cyrus........................ 59,776 $ 513,295 134,315/ 82,636 $1,681,058/1,130,278
</TABLE>
COMPARISON OF CUMULATIVE TOTAL SHAREHOLDER RETURN
Since the Company became public only on November 2, 1995, the Company's
cumulative total shareholder return over a five-year period cannot be provided.
However, on August 20, 1995, when the Combination was first announced, the total
market capitalization of the two companies was $13.2 billion; on November 2,
1995, the effective date of the Combination, the total market capitalization of
the Company was $18.3 billion; and on March 1, 1996, the total market
capitalization of the Company was $21.8 billion. The following graph shows the
change in the Company's cumulative total shareholder return (stock price
appreciation plus the cumulative value of reinvested dividends) compared to the
Standard & Poor's 500 Stock Index and the Standard & Poor's Health Care (Drugs)
Index (which includes Eli Lilly & Co., Merck & Co., Pfizer, Inc.,
Schering-Plough and the Company). The graph shows the relative increase in value
of $100 invested on November 2, 1995, when public trading in the Company's
Common Stock began, until March 29, 1996. The stock
13
<PAGE> 17
performance as shown on the Performance Graph should not be interpreted as a
prediction of future stock performance.
TOTAL SHAREHOLDERS RETURN PREPARED FOR
PHARMACIA & UPJOHN INC
<TABLE>
<CAPTION>
S&P HEALTH
MEASUREMENT PERIOD PHARMACIA & S&P 500 IN- CARE (DRUGS)
(FISCAL YEAR COVERED) UPJOHN, INC. DEX INDEX
<S> <C> <C> <C>
NOV 2, 1995 100.00 100.00 100.00
MARCH 29, 1996 110.32 110.25 115.44
</TABLE>
This total shareholders return model assumes reinvested dividends. Prepared by
Standard & Poor's Compustat Services, a division of McGraw-Hill Companies.
RETIREMENT BENEFITS
The Company's executive officers participate in the Global Officer Pension
Plan, which supplements the officer's other sources of retirement income to
provide the officer with the actuarial value of an annual life annuity of 65% of
his final three-year average annual salary and cash bonus compensation prior to
retirement from the Company, provided the officer has had at least ten years of
service under the Plan and retires at age 65. Appropriate adjustments will be
made if the officer has less than ten years of service under the Plan or retires
before age 65. In no event will an executive officer receive a retirement
benefit less than what he would have received had he remained in his home
country pension plan for the duration of his employment with the Company. G. A.
Ando's home country pension plan is the Company's Swedish pension plan, although
the Global Officer Pension Plan will provide more, and therefore determine, the
final amount of his retirement benefits.
The following table illustrates the estimated annual benefits payable under
the Company's U.S. pension plan, which is the home country pension plan for J.
L. Zabriskie, L. S. Smith, R. C. Salisbury and K. M. Cyrus, upon normal
retirement. The amounts shown include additional non-qualified
14
<PAGE> 18
pension benefits, represent straight-life annuity amounts and are not subject to
any offset for Social Security benefits.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE*
----------------------------------------------------------------------------------
REMUNERATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS*
- -------------------- --------- --------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
$ 500,000.......... $ 147,000 $ 196,000 $ 245,000 $ 295,000 $ 307,000 $ 320,000
$ 700,000.......... $ 207,000 $ 276,000 $ 345,000 $ 415,000 $ 432,000 $ 450,000
$ 900,000.......... $ 267,000 $ 356,000 $ 445,000 $ 535,000 $ 557,000 $ 580,000
$1,100,000.......... $ 327,000 $ 436,000 $ 545,000 $ 655,000 $ 682,000 $ 710,000
$1,300,000.......... $ 387,000 $ 517,000 $ 646,000 $ 775,000 $ 805,000 $ 840,000
$1,500,000.......... $ 447,000 $ 573,000 $ 716,000 $ 859,000 $ 931,000 $ 969,000
$1,700,000.......... $ 507,000 $ 679,000 $ 849,125 $ 1,019,000 $ 1,057,000 $ 1,104,000
$1,900,000.......... $ 566,580 $ 758,860 $ 949,050 $ 1,138,860 $ 1,181,420 $ 1,233,860
$2,100,000.......... $ 626,220 $ 838,740 $ 1,048,950 $ 1,258,740 $ 1,305,780 $ 1,363,740
</TABLE>
- -------------------------
* Service in excess of 40 years is not counted under The Upjohn Retirement Plan.
The compensation included as remuneration for the pension plan are the amounts
listed under "Annual Compensation" in the Summary Compensation Table shown
above. The current number of years of service credited for the following
individuals at December 31, 1995, were: J. L. Zabriskie, 30 years; L. S. Smith,
37 years; R. C. Salisbury, 21 years; and K. M. Cyrus, 24 years. As noted below,
J. L. Zabriskie's retirement benefit under the Company's plans will be reduced
by the value of his pension from former employment.
EMPLOYMENT AGREEMENTS
Under an agreement made with J. L. Zabriskie when he originally joined Upjohn,
he will receive a retirement benefit from the Company as if he had been employed
by the Company for 28 years plus his actual years of service with the Company
and Upjohn, less the value of his pension from former employment. This
commitment was assumed by the Company following the Combination. Under an
agreement made with G. A. Ando by Pharmacia and assumed by the Company, the
Company will make supplemental pension contributions to his pension fund equal
to approximately $315,000 over the next two years. J. L. Zabriskie, G. A. Ando
and R. C. Salisbury have entered into employment agreements with the Company
providing for the payment of severance benefits equal to 2.5 times (if
terminated prior to December 31, 1997, and 2 times thereafter) the officer's
annualized cash compensation (whether or not deferred) in the event such
officer's employment is terminated by the Company other than for cause or by the
employee with good reason. L. S. Smith and K. M. Cyrus did not enter into new
employment agreements with the Company but will be entitled to receive severance
benefits sufficient to provide a cash benefit equal to 2.5 times their
annualized compensation, plus the value of any excise taxes payable on such
amount, in the event their employment by the Company is terminated involuntarily
or by the officer for good reason prior to November 2, 1997. In addition,
provided their employment is not terminated prior to November 29, 1997, a
supplemental retirement bonus will be paid to the following individuals in
shares of the Company's Common Stock, together with accumulated, reinvested
dividends thereon: J. L. Zabriskie, 87,629 shares; and R. C. Salisbury, 30,876
shares.
15
<PAGE> 19
LONG-TERM INCENTIVE PLAN
The Company's Long-Term Incentive Plan ("LTIP") was adopted by the Board of
Directors and approved by Upjohn and Pharmacia as sole shareholders of the
Company, on November 2, 1995. The maximum number of shares that may be issued
under the LTIP for each calendar year is 1.25% of the total shares outstanding
as of the beginning of the year, subject to adjustment for certain changes in
capitalization. This number may be increased by shares available for issue in
prior years that were not granted and by shares subject to any award that
expires unexercised or that is forfeited, terminated or cancelled. No more than
500,000 shares of Common Stock may be granted pursuant to stock options or SARs
to any participant in any calendar year, subject to adjustment for certain
changes in capitalization.
The purpose of the LTIP is to promote the long-term financial interests of the
Company by encouraging officers and certain other key employees of the Company
and its subsidiaries to acquire a proprietary interest in the Company, thereby
providing such employees with an interest in the Company parallel to that of the
Company's shareholders. The LTIP authorizes the Committee to grant incentive and
non-statutory stock options as well as stock appreciation rights ("SARs"),
restricted stock, performance units and other performance and incentive awards
(collectively "Awards").
Administration. The LTIP is administered by the Compensation Committee. The
Committee has the authority to approve the selection of participants, determine
the number of shares under, and terms of, Awards to be granted to participants,
establish any regulations to further the purposes of the LTIP and interpret and
administer the LTIP. The Committee may authorize the President and Chief
Executive Officer of the Company to select, and determine the terms of Awards
made to, participants who are not officers of the Company.
Stock Options. The LTIP permits the granting of non-qualified stock options or
stock options that are intended to qualify as incentive stock options.
The exercise price per share of Common Stock subject to a stock option is
determined by the Committee, but is expected to be not less than 100% of the
fair market value of the shares on the date of the grant. The term of each
option is fixed by, and options are exercisable at such time or times as
determined by, the Committee. Unless extended by the Committee, upon termination
of employment (other than for death or disability) a participant's options, to
the extent exercisable upon termination, will remain exercisable for 90 days (or
one year following death or disability). The term of each stock option will not
exceed 10 years.
Stock Appreciation Rights. The Committee may also grant SARs alone or in
tandem with new or existing options. Upon exercise of an SAR, the holder thereof
is entitled to receive the excess of the fair market value of the shares for
which the right is exercised over the grant price of the SAR. The grant price
and other terms of the SAR are determined by the Committee. No SAR may be
exercised more than 10 years following grant, and tandem SARs will be
exercisable under the same terms as the related stock options.
Performance Shares. Awards of performance shares based on the achievement of
specified performance criteria during specified performance periods of 12 months
or more, as determined by the Committee, may also be granted under the LTIP.
Performance Share Awards may consist of actual shares of Common Stock or units
valued by reference to a designated number of shares of Common Stock. Such
Awards may be paid in cash, Common Stock or any combination thereof and, unless
otherwise determined by the Committee, a participant must be employed by the
Company at the end of the performance period to receive payment.
Restricted Stock. Awards of restricted stock may also be granted under the
LTIP. Restricted stock is Common Stock that is subject to forfeiture and is not
transferable until certain restrictions
16
<PAGE> 20
established by the Compensation Committee lapse. A participant generally will
have, with respect to restricted stock, all of the rights of a shareholder of
the Company, including the right to vote the shares and the right to receive any
cash dividends.
Deferred Awards. Under the LTIP, the Compensation Committee may grant Awards
of the right to receive shares of Common Stock that are not to be distributed
until the end of a specified deferral period.
Amendment and Termination. The Board may amend, suspend or terminate the LTIP
at any time, provided that (i) no amendment that would adversely affect the
rights of a participant under an Award may be made without such participant's
prior written consent, and (ii) no amendment may be made without stockholder
approval if such approval is required for compliance with Rule 16b-3 under the
Securities Exchange Act of 1934.
Change in Control. Upon a Change in Control of the Company (as defined in the
LTIP), (i) all stock options will become vested and exercisable in full, (ii)
all freestanding SARs will become vested and exercisable in full, (iii) all
restrictions applicable to shares of restricted stock will lapse, (iv) all
performance shares, including those granted in the form of share units, will be
deemed to have been earned in full and will be paid in Common Stock and (v) all
deferred awards will be paid in Common Stock.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the U.S. Federal income tax consequences
generally arising in connection with grants of stock options under the LTIP.
A participant will not recognize any income upon the grant of a stock option.
A participant will recognize compensation taxable as ordinary income (and
subject to income tax withholding) upon exercise of a non-qualified stock option
equal to the excess of fair market value of the shares purchased over their
exercise price, and the Company will be entitled to a corresponding deduction. A
participant will not recognize any income (except for purposes of the
alternative minimum tax) upon exercise of an incentive stock option. If the
shares acquired by exercise of an incentive stock option are held for at least
two years from the date the option was granted and one year from the date it was
exercised, any gain or loss arising from a subsequent disposition of such shares
will be taxed as long-term capital gain or loss, and the Company will not be
entitled to any deduction. If, however, such shares are disposed of within such
period, then in the year of such disposition the participant will recognize
compensation taxable as ordinary income equal to the excess of (a) the lesser of
(i) the amount realized upon such disposition and (ii) the fair market value of
such shares on the date of exercise over (b) the exercise price, and the Company
will be entitled to a corresponding deduction.
NEW PLAN BENEFITS
The grant of Awards under the LTIP to employees, including the executive
officers, is subject to the discretion of the Committee. The persons and groups
of persons identified in the table below
17
<PAGE> 21
have received the following grants of stock options under the LTIP in 1996. All
stock options have an exercise price equal to the fair market value of the
shares subject to the option on the date of grant.
<TABLE>
<CAPTION>
SECURITIES UNDERLYING AVERAGE EXERCISE
NAME OF INDIVIDUAL OR GROUP OPTIONS GRANTED (#) PRICE PER SHARE
- ------------------------------------------------------------------- --------------------- ----------------
<S> <C> <C>
J. L. Zabriskie.................................................... 180,000 $37.8125
President and Chief Executive Officer
G. A. Ando......................................................... 65,000 $37.8125
Executive Vice President
R. C. Salisbury.................................................... 65,000 $37.8125
Executive Vice President and Chief Financial Officer
K. M. Cyrus........................................................ 32,000 $37.8125
Senior Vice President, General Counsel and Secretary
All current Executive Officers as a Group.......................... 342,000 $37.8125
</TABLE>
SHAREHOLDER PROPOSAL
For approval, the following proposal must receive the affirmative vote of a
majority of the total number of shares voting at the Annual Meeting of
Shareholders. The name and address of the proponent of the following proposal
and the number of shares of the Common Stock of the Company owned will be
furnished, orally or in writing as requested, by the Secretary of the Company
promptly upon receipt of any written or oral request.
SHAREHOLDER PROPOSAL AND SHAREHOLDER'S STATEMENT IN SUPPORT
WHEREAS, in human fertilization, the uniting of the sperm and ovum, a cellular
process with unique genetic characteristics, different than the mother and
father, begins.
WHEREAS, many scientists and individuals believe a distinct human life is
formed after fertilization occurs. WHEREAS, cellular evidence of personhood is
admissible in a court of law.
WHEREAS, some of the Company's products have effects that inhibit the
development of this genetically distinct human life after fertilization.
WHEREAS, any product that inhibits the development of unborn human life may be
considered an abortifacient.
WHEREAS, considering the sensitive nature of the subject of abortion, women
should have as much information as possible in making informed decisions.
RESOLVED, the shareholders request the board of directors to form a committee.
The purpose of this committee would be to formulate an educational plan that
would inform literate and non-literate women of the possible abortifacient
action of any of the Company's products. The committee would report to the board
by November 1, 1996, with their specific recommendations. This report, excluding
any proprietary information, should be made available to all shareholders at
that time.
BOARD OF DIRECTORS' STATEMENT AGAINST THE SHAREHOLDER PROPOSAL
The Board believes that women should have all appropriate information
regarding any potential effects of the Company's products, including any
possible abortifacient effects. However, the Company believes a woman's
physician is in the best position to provide education about possible
abortifacient and other effects of our products. The Company provides detailed
information regarding the reproductive consequences of its products to
physicians and pharmacists as part of the product labeling. In addition, much of
this information is published in the Physician's Desk
18
<PAGE> 22
Reference, which is publicly available in many libraries and bookstores.
Accordingly, the Board recommends a vote AGAINST the Shareholder Proposal.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Coopers & Lybrand, LLP, and KPMG Peat Marwick, LLP, have been selected by the
Board of Directors to be the Company's independent accountants. Representatives
from both firms will be present at the Annual Meeting of Shareholders.
RECEIPT OF SHAREHOLDER PROPOSALS
For inclusion in the Company's 1997 proxy statement, all shareholder proposals
for consideration at the Annual Meeting of Shareholders of the Company to be
held in 1997 must be received at the Company's executive offices by December 13,
1996. Such proposals must also comply with all other regulations of the
Securities and Exchange Commission.
OTHER BUSINESS
The Company knows of no other business to come before the meeting. If,
however, other matters properly come before the meeting, it is the intention of
the persons named in the enclosed proxy to vote the shares represented thereby
in their discretion in accordance with their best judgment.
By order of the Board of Directors,
Kenneth M. Cyrus
Secretary
Dated: April 3, 1996
19
<PAGE> 23
PHARMACIA & UPJOHN LOGO
(RECYCLE LOGO) 97-178 3/96
<PAGE> 24
PROXY PROXY
PHARMACIA & UPJOHN, INC.
ANNUAL MEETING, MAY 6, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints J. Ekberg and J. L. Zabriskie, and each
of them, as proxies with power of substitution, to vote all the stock of
PHARMACIA & UPJOHN, INC. which the undersigned has the power to vote at its
Annual Meeting or at any adjournment thereof, as specified on the reverse side,
and in their discretion upon such other matters as may properly come before the
meeting. If applicable, this proxy shall also govern the voting of stock held
for the account of the undersigned in the Company's Employee Savings Plan.
IF YOU SIGN THIS PROXY WITHOUT MARKING ANY OVALS, THIS PROXY SHALL BE
VOTED FOR ALL NOMINEES, AGAINST THE SHAREHOLDER PROPOSAL AND IN THE PROXIES'
DISCRETION ON ANY OTHER MATTERS PROPERLY COMING BEFORE THE MEETING.
/ / Check here for address change.
New Address:_____________________________
_________________________________________
_________________________________________
/ / Check here if you plan to attend the meeting.
97-177 2/96
<TABLE>
<S><C>
PLEASE MARK VOTE IN OVAL USING DARK INK ONLY. / /
PHARMACIA & UPJOHN, INC.
[ ]
WITHHELD
1. NOMINEES: Richard H. Brown, M. Kathryn Eickhoff, FOR from all FOR
Jan Ekberg, Berthold Lindqvist and Bengt Samuelsson, M.D. all nominees all nominees, except vote withheld from the
for three-year terms. / / / / / / following nominees:
The Board of Directors recommends a vote FOR all nominees. ____________________________________________
FOR AGAINST ABSTAIN FOR AGAINST
2. SHAREHOLDER PROPOSAL / / / / / / 3. In their discretion on any / / / /
other matters properly
The Board of Directors recommends a vote AGAINST arising during the meeting
the shareholder proposal.
PLEASE SIGN EXACTLY AS YOUR NAME
APPEARS. IF ACTING AS ATTORNEY,
EXECUTOR, TRUSTEE, OR IN
REPRESENTATIVE CAPACITY, SIGN NAME AND
INDICATE TITLE.
______________________ ______________
Signature Date
______________________ ______________
Signature Date
PLEASE VOTE, SIGN, DATE, AND RETURN
THIS PROXY CARD PROMPTLY TO HARRIS
TRUST AND SAVINGS BANK USING THE
ENCLOSED ENVELOPE.
</TABLE>
