<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
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(Name of Registrant as Specified in Its Charter)
[COMPANY NAME]
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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.
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[ ] 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
March 24, 1997
To Our Shareholders:
You are cordially invited to attend our second Annual Meeting of Shareholders.
This year's meeting will be held on Tuesday, April 29, 1997 at 9:30 a.m. at the
Radisson Plaza Hotel in Kalamazoo, Michigan, USA. At the meeting, Dr. Goran
Ando, the Company's Executive Vice President for Worldwide Science and
Technology, will lead a discussion on the Company's research program. After this
discussion, the formal meeting will begin with the election of four directors to
serve for a term of three years. The meeting will also provide an opportunity
for shareholders to meet members of the Board and ask questions or make comments
if they wish.
For shareholders unable to attend the meeting in Kalamazoo, an informational
meeting will be held at the Globe Arena in Stockholm, Sweden, at 4:00 p.m. on
Monday, May 5, 1997. This meeting will include the presentations made at the
Annual Meeting in Kalamazoo, and provide an opportunity for shareholders to ask
questions and make comments, but no votes will be taken.
Persons who were shareholders of record of the Company at the close of
business on March 7, 1997, are entitled to have their votes counted at the
meeting. The enclosed proxy card appoints the Chairman of the Board and the
Chief Executive Officer of the Company as proxies or agents to vote your shares
at the meeting as you direct. Whether or not you expect to personally attend the
meeting in Kalamazoo, please sign the enclosed proxy card and return it promptly
in the envelope provided to make sure your vote is counted.
R.H. BROWN J. EKBERG
R.H. Brown J. Ekbert
Chairman of the Board President and Chief Executive Officer
Notice of Rights Dividend:
In order to protect shareholders against inadequate hostile bids to acquire
control of the Company, the Board of Directors recently approved a Stockholder
Protection Rights Plan and declared a dividend of one right for each share of
the Company's Common Stock. The rights are not currently exercisable and will be
evidenced by and transferred with the Company's shares until becoming
exercisable. The rights, which will become exercisable after a person has
acquired 15% or more, or commenced a tender offer for 15% or more, of the
Company's Common Stock, will entitle the holder (other than the person acquiring
15% or more of the Company's Common Stock) to acquire stock at a discounted
price. Because of the dilutive effect exercise of the rights would cause and the
ability of the Company's Board of Directors to redeem the rights for nominal
value before becoming exercisable, the rights will encourage possible acquirers
to negotiate with the Company in advance and provide more time for the Board to
pursue alternatives in order to maximize shareholder value. The Rights Plan was
not adopted in response to any specific effort to acquire control of the Company
and will not prevent a takeover of the Company at a full and fair price.
<PAGE> 3
PHARMACIA & UPJOHN, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
KALAMAZOO, MICHIGAN, U.S.A.
APRIL 29, 1997
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The Annual Meeting of Shareholders of Pharmacia & Upjohn, Inc., a Delaware
corporation, will be held on Tuesday, April 29, 1997, at 9:30 a.m., at the
Radisson Plaza Hotel, Kalamazoo Center, Kalamazoo, Michigan. The purposes of the
Annual Meeting are to:
1. Elect four directors for a term of three years; and
2. Transact such other business as may properly come before the meeting.
There will also be an informational meeting for shareholders on Monday, May 5,
1997 at 4:00 p.m. at the Globe Arena, Stockholm, Sweden. This meeting will
include the presentations provided during the Annual Meeting in Kalamazoo, 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 7, 1997 are
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof.
By Order of the Board
March 24, 1997 Kenneth M. Cyrus
Secretary
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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.
7000 PORTAGE ROAD
KALAMAZOO, MICHIGAN 49001
PROXY STATEMENT
This proxy statement is being distributed to shareholders of Pharmacia &
Upjohn, Inc. (the "Company") on or about March 24, 1997 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 Radisson Plaza Hotel, Kalamazoo Center, Kalamazoo, Michigan, on Tuesday,
April 29, 1997, at 9:30 a.m.
Any shareholder 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.
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 7, 1997 are entitled
to notice of and to vote at the meeting. At the close of business on January 31,
1997, the Company had 508,673,725 shares (excluding 257,242 treasury 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 the calendar year.
At the close of business on January 31, 1997, shares of Convertible Perpetual
Preferred Stock of the Company were held by The Pharmacia & Upjohn Employee
Stock Ownership Trust pursuant to The Pharmacia & Upjohn Employee Savings Plan.
These shares have votes equivalent to 10,313,615 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 election of directors, since the
nominees receiving the four highest vote "for" totals will be elected as
directors of the Company, abstentions and broker non-votes will not be counted.
If an individual has signed the Company's proxy card but failed to indicate a
vote, such proxy will be voted for all nominees and in the proxies' discretion
on any other matters that may properly come before the meeting. 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.
1
<PAGE> 5
ELECTION OF FOUR 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 Frank C. Carlucci, Soren Gyll, William
U. Parfet and Ulla Reinius as directors.
These nominees have indicated a willingness to 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
Aktiebolag ("Pharmacia").
<TABLE>
<S> <C>
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
FOR THREE-YEAR TERM EXPIRING IN 2000
FRANK C. CARLUCCI, AGE 66, CHAIRMAN, THE CARLYLE GROUP, A
FRANK C. CARLUCCI MERCHANT BANK. Mr. Carlucci had been Vice Chairman of The
PHOTO Carlyle Group from 1989 to 1993. He served as U.S. Secretary
of Defense from 1987 to 1989. Mr. Carlucci is currently on
the boards of directors of Ashland, Inc., BDM International,
Bell Atlantic Corporation, General Dynamics Corporation,
Kaman Corporation, Massachusetts Mutual Life Insurance
Company, Neurogen Corporation, Northern Telecom Limited, The
Quaker Oats Company, SunResorts, Ltd., N.V., Texas
Biotechnology 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, 56, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF AB
SOREN GYLL PHOTO VOLVO, AN AUTOMOBILE MANUFACTURER. Mr. Gyll had been
Chairman of Procordia AB, the predecessor of Pharmacia, from
1992 until 1995 and before that had served as Procordia's
President and Chief Executive Officer. Mr. Gyll is a member
of the boards of directors of AB Catena, SAS Sverige AB, 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 Swedish
National Association of Engineering Industries and the Board
of the Swedish Works Association. He had served as a
Director of Pharmacia before the Combination. He is a member
of the Compensation and Executive Committees of the Board of
Directors.
</TABLE>
2
<PAGE> 6
<TABLE>
<S> <C>
WILLIAM U. PARFET, AGE 50, CO-CHAIRMAN OF MPI RESEARCH, LLC,
WILLIAM U. PARFET A PRE-CLINICAL TOXICOLOGY AND CLINICAL PHARMACEUTICAL
PHOTO TESTING LABORATORY. Mr. Parfet had previously 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 before that. Mr. Parfet serves as a member of the
boards of directors of CMS Energy Corporation, the Financial
Accounting Foundation, 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 Executive and the Nominating and Corporate
Governance Committees of the Board of Directors. From time
to time, the Company has retained MPI Research, LLC (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 59, PRESIDENT OF FINANSFAKTA AB, FINANCIAL
ULLA REINIUS PHOTO AND INFORMATION CONSULTANTS. Ms. Reinius is a member of the
boards of directors of Uppsala University Capital and
Property Administration, the Swedish Association for Share
Promotion and Abovo 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.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING IN 1998
GUSTAF DOUGLAS, AGE 59, CHAIRMAN OF INVESTMENT AB LATOUR, AN
GUSTAF DOUGLAS INVESTMENT HOLDING COMPANY. Mr. Douglas is also Vice
PHOTO Chairman of Securitas AB and Sveriges Television AB, and is
a member of the boards of directors of Assa Abloy AB, AB
Fagerhult, Munksjo AB, and Stiftelsen Svenska Dagbladet. He
had served as a Director of Pharmacia before the
Combination. He is Chairman of the Audit Committee of the
Board of Directors.
DARYL F. GRISHAM, AGE 70, PRESIDENT AND CHIEF EXECUTIVE
DARYL F. GRISHAM OFFICER, PARKER HOUSE SAUSAGE COMPANY, A FOOD COMPANY. Mr.
PHOTO Grisham is a former director for G. D. Searle and Company,
Illinois Bell Telephone Company and Harris Bankcorp, Inc. He
is a trustee of Northwestern University and the Chicago
Museum of Science and Industry. He also serves as a director
of the Lyric Opera of Chicago, the Rehabilitation Institute
of Chicago and the Lincoln Park Zoological Society. He had
served as a Director of Upjohn before the Combination. He is
a member of the Compensation Committee of the Board of
Directors.
</TABLE>
3
<PAGE> 7
<TABLE>
<S> <C>
WILLIAM E. LAMOTHE, AGE 70, FORMER CHAIRMAN OF THE BOARD AND
WILLIAM E. CHIEF EXECUTIVE OFFICER OF KELLOGG COMPANY, A FOOD COMPANY.
LAMOTHE PHOTO Mr. LaMothe is also a former director of Kimberly Clark
Corporation, Unisys Corporation, Sears Roebuck Inc. and the
Allstate Insurance Company. He is currently a director of
the Kellogg 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 had served as a Director of Upjohn
before the Combination. He is Chairman of the Nominating and
Corporate Governance Committee of the Board of Directors.
OLOF LUND, AGE 66, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF
OLOF LUND PHOTO CELSIUS AB, A 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 War Sciences. He had served as a Director of
Pharmacia before the Combination. He is a member of the
Executive and the Nominating and Corporate Governance
Committees of the Board of Directors.
WILLIAM D. MULHOLLAND, AGE 70, FORMER CHAIRMAN OF THE BOARD
WILLIAM D. AND CHIEF EXECUTIVE OFFICER OF THE BANK OF MONTREAL. Mr.
MULHOLLAND PHOTO Mulholland is a director of Canadian Pacific Limited and of
the Canadian Pacific Railway Company. He was formerly a
member of the board of 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 is a
Trustee of Queen's University and 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.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING IN 1999
RICHARD H. BROWN, AGE 49, CHAIRMAN OF THE BOARD OF THE
RICHARD H. BROWN COMPANY (SINCE JANUARY 1997) AND PRESIDENT AND CHIEF
PHOTO EXECUTIVE OFFICER, CABLE AND WIRELESS PLC, A
TELECOMMUNICATIONS COMPANY. Prior to joining Cable and
Wireless plc, Mr. Brown had been President and Chief
Executive Officer of H&R Block, Inc., a tax and financial
services company, since August 1995, and Vice Chairman of
Ameritech Corp, a telecommunications company, since January
1993. Before that had been President and Chief Executive
Officer of Illinois Bell Telephone Company. He is a member
of the Board of Directors of Cable and Wireless plc and a
member of the Board of Trustees of Ohio University
Foundation. He had served as a Director of Upjohn before the
Combination. He is Chairman of the Compensation Committee
and a member of the Executive Committee of the Board of
Directors.
</TABLE>
4
<PAGE> 8
<TABLE>
<S> <C>
M. KATHRYN EICKHOFF, AGE 57, PRESIDENT, EICKHOFF ECONOMICS
M. KATHRYN INCORPORATED, ECONOMIC CONSULTANTS. Ms. Eickhoff is the
EICKHOFF PHOTO former Associate Director for Economic Policy, United States
Office of Management and Budget. She also serves as a
director of AT&T, Tenneco Inc. and Fleet Bank, NA. 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 60, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF
JAN EKBERG PHOTO THE COMPANY (SINCE JANUARY 1997) AND BEFORE THAT CHAIRMAN OF
THE BOARD OF THE COMPANY. Mr. Ekberg, who is expected to
resume being Chairman of the Board after the Company's new
President and Chief Executive Officer is appointed, had,
prior to the Combination, been President and Chief Executive
Officer of Pharmacia, and, before that, had been President
and Chief Executive Officer of Pharmacia's predecessor
company, Procordia AB. Mr. Ekberg is Chairman of the Board
of Nobel Biocare AB and Bongs Industries AB. He is also a
member of the boards of directors of Oy Partek AB, AB Volvo
Personvagnar, AB Volvo Aero, Christianova AB and the
Federation of Swedish Industries. He is a member of the
Royal Swedish Academy of Engineering Sciences. He had served
as a Director of Pharmacia before the Combination. He is
Chairman of the Executive Committee of the Board of
Directors.
BERTHOLD LINDQVIST, AGE 58, PRESIDENT AND CHIEF EXECUTIVE
BERTHOLD OFFICER OF GAMBRO AB, A GLOBAL MEDICAL TECHNOLOGY
LINDQVIST PHOTO COMPANY. Mr. Lindqvist is also a board member of Gambro AB,
Trelleborg AB, PLM AB and Securitas AB. Mr. Lindquist 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 Compensation Committee of the Board of
Directors.
BENGT SAMUELSSON, M.D., AGE 62, PROFESSOR OF MEDICAL AND
BENGT SAMUELSSON, PHYSIOLOGICAL CHEMISTRY, AND, FORMERLY, PRESIDENT,
M.D. PHOTO KAROLINSKA INSTITUTE. Dr. Samuelsson was the Nobel Iaureate
in Physiology or Medicine in 1982 and is currently 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 and Corporate Governance 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 what the
Company believes were the holders of 5% or more of the Company's Common Stock as
of December 31, 1996:
SHARES OF COMMON STOCK BENEFICIALLY OWNED
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP % OF CLASS
------------------- -------------------- ----------
<S> <C> <C>
Ministry of Industry and Commerce(1)........................ 35,766,282 7.0
Putnam Investments, Inc.(2)................................. 25,518,949 5.1
</TABLE>
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(1) 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.
(2) The address for Putnam Investments, Inc. is One Post Office Square, Boston,
Massachusetts 02109 USA.
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, 1997 of individual directors
and nominees, the Company's four executive officers and the next most highly
compensated officer of the Company, and all directors and such officers as a
group.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK BENEFICIALLY OWNED(1)(6)
---------------------------------------------------------------------
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............................ 67,000 2,000 65,000 *
Richard H. Brown(2)...................... 7,572 7,572(3) *
Frank C. Carlucci........................ 18,468 18,468(3) *
Kenneth M. Cyrus......................... 281,792 50,225(4) 231,567 *
Gustaf Douglas........................... 750 750 *
M. Kathryn Eickhoff...................... 5,262 5,262(3) *
Jan Ekberg(2)............................ 6,050 5,050 1,000 *
Daryl F. Grisham......................... 21,359 21,359(3) *
Soren Gyll............................... 6,500 6,500 *
William E. LaMothe(2).................... 27,955 27,955(3) *
Goran Linden............................. 1,050 1,050 *
Berthold Lindqvist....................... 750 750 *
Olof Lund................................ 1,125 1,125 *
William D. Mulholland.................... 11,397 11,397(3) *
William U. Parfet........................ 1,137,946 727,959(3)(4) 409,987(5) *
Ulla Reinius............................. 750 750 *
Robert C. Salisbury...................... 332,396 54,617(4) 277,779 *
Bengt Samuelsson......................... 500 500 *
Ley S. Smith(2).......................... 127,978 34,724(4) 93,254 *
Directors and Four Named Officers as a
Group (19 persons)(2).................. 2,056,600 978,013 410,987 667,600 *
</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, 41,374; W. U. Parfet, 637; R. C. Salisbury, 16,977; L. S. Smith,
17,361; and directors and such officers as a group, 76,349.
(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;
and 3,190 shares held by the spouse of L. S. Smith; and 5,446 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, 7,093; F. C. Carlucci,
17,740; M. K. Eickhoff, 2,587; D. F. Grisham, 21,214; W. E. LaMothe, 24,265;
W. D. Mulholland, 6,537; and W. U. Parfet, 241.
(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, 6,303; W. U. Parfet, 6,467; R. C. Salisbury,
6,577; L. S. Smith, 2,934; and directors and such officers as a group,
22,281.
(5) Includes shares held in trust over which voting and/or dispositive power is
shared in his capacity as trustee under various trusts.
(6) Excludes shares of Common Stock beneficially owned by J.L. Zabriskie, who
was President and Chief Executive Officer and member of the Board of
Directors of the Company until January 20, 1997. The Company believes that,
as of such date, Dr. Zabriskie held sole voting and/or dispositive power as
to 73,339 shares of the Company's Common Stock and 841,500 options to
purchase shares of the Company's Common Stock exercisable within 60 days.
The Company believes that Dr. Zabriskie's holdings constitute less than 1%
of the Company's outstanding Common Stock.
7
<PAGE> 11
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held 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 three times during
1996 to determine the compensation and benefits of the Board and the Company's
executive officers. Current members of the Compensation Committee are R. H.
Brown, Chairman, D. F. Grisham, S. Gyll and B. Lindqvist, none of whom is an
employee nor eligible for incentive compensation or stock option awards from the
Company.
The Audit Committee, which met five times in 1996, assists the Board in
overseeing the accounting, financial reporting, auditing, internal control,
business ethics and clinical development policies and procedures of the Company.
The Committee reviewed and recommended to the Board of Directors approval of the
Company's Business Ethics Policy; recommended to the Board of Directors the
selection of Coopers & Lybrand, LLP as the Company's independent auditors;
reviewed the annual financial statements and discussed them with the auditors
and financial staff of the Company prior to their submission to the Board of
Directors; reviewed the independence of the independent accountants conducting
the audit; reviewed the services provided by the independent accountants;
reviewed the scope of the Company's internal audit program; discussed with
management and the auditors the Company's accounting system and related systems
of internal control; reviewed the Company's information security program; and
consulted as it deemed necessary with the independent accountants, internal
auditors and the Company's internal financial staff. Current members of the
Audit Committee are G. Douglas, Chairman, F. C. Carlucci, M. K. Eickhoff and U.
Reinius. G. Linden, who is not standing for reelection at the Annual Meeting,
had been Chairman of the Audit Committee and now is a Committee member at-large.
The Nominating and Corporate Governance Committee of the Board met five times
during 1996. 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 at the
address set forth on the first page of this proxy statement. The Committee, with
the assistance of the Chairman of the Board and the President and Chief
Executive Officer of the Company, will also recommend to the Board one or more
candidates for election as President and Chief Executive Officer of the Company.
Current members of the Nominating and Corporate Governance 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. R. H. Brown, current Chairman of
the Board of the Company, will be paid at the Chairman's rate on a pro rata
basis for the period during which he serves in such capacity. The chairperson of
each Board committee receives an additional annual fee of $5,000. There are no
special fees for attending regular 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. As a result, J.
Ekberg, President and Chief Executive Officer of the Company and former Chairman
of the Board, will not receive separate compensation for serving on the Board of
Directors or the Board's committees while also serving as President and Chief
Executive Officer of the Company. Board members (other than the President and
Chief Executive Officer of the Company) involved in selecting a candidate for
election as President and Chief Executive Officer of the Company will receive
$1,500 for each official meeting attended, and the Chairman of the Nominating
and Corporate Governance Committee will receive an additional $5,000 for his
assistance in the selection process.
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 cash and equity
compensation and long-term 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 median
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 30% 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 Corporation, Astra AB, Bristol-Myers Squibb Company, Eli Lilly and
Company, Glaxo Wellcome plc, Hoffmann-LaRoche and Company, Ltd, Merck & Company,
Inc., Pfizer Inc., Rhone-Poulenc Rorer, Inc., Schering-Plough Corporation,
SmithKline Beecham plc and Zeneca Group plc. 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 median 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.
For 1996, 50% of targeted incentive compensation was dependent upon Total
Market Return and the relative growth in Earnings Per Share as the external
standards of competitive performance, with each factor weighted equally and
measured against the group of comparable global
9
<PAGE> 13
pharmaceutical companies, and the remaining 50% of targeted incentive
compensation was determined by the achievement of specific internal performance
measurements established for each executive. For 1997, 30% of targeted incentive
compensation will be based on external measures compared to the group of
comparable global pharmaceutical companies, and the remaining 70% will be based
on growth in the Company's sales, earnings and cash flow and on individual
performance.
LONG-TERM EQUITY-BASED COMPENSATION
The Committee grants annual stock options, with ten-year terms at an exercise
price equal to the fair market value on the date of grant. The stock options
have 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, since
the annual incentive compensation plan reserves some discretion for the
Committee to adjust awards to ensure that the efforts of the incentive
compensation group are compensated fairly and appropriately, such awards may not
be fully deductible under the Internal Revenue Code.
CHIEF EXECUTIVE OFFICER COMPENSATION
The compensation of J. L. Zabriskie, who was President and Chief Executive
Officer of the Company during 1996, was established by the Committee based on an
analysis of his past performance as Chairman and Chief Executive Officer of
Upjohn, review of comparable compensation of chief executive officers of other
leading global pharmaceutical companies and application of the compensation
policies described above. J. L. Zabriskie's annual base salary for 1996 was
$950,000 and his incentive compensation target for 1996 was $850,000. He was
also granted stock options for 180,000 shares of the Company's Common Stock,
which can be exercised until January 20, 2002 at $37.8125 per share.
J. Ekberg, who began serving as President and Chief Executive Officer of the
Company on January 20, 1997 following the resignation of J. L. Zabriskie, will
receive compensation at the rate provided to J. L. Zabriskie in 1996 ($950,000
salary and $850,000 bonus) on a pro rata basis for the period during which he
serves as the Company's President and Chief Executive Officer. This amount will
be paid after the new President and Chief Executive Officer assumes office, or
if the new President and Chief Executive Officer has not assumed office by
December 31, 1997, a partial payment will be made on December 31, 1997. J.
Ekberg may elect to receive his payment for serving as President and Chief
Executive Officer in either cash or the equivalent value on the date of payment
of Company stock options. He will also be entitled to reimbursement of any
expenses incurred in serving as President and Chief Executive Officer. J. Ekberg
was previously retained as a consultant by the Company to assist in the process
of integrating the businesses of Upjohn and Pharmacia, for which he received a
total fee of $225,000.
The Committee will recommend the compensation to be paid to the Company's new
President and Chief Executive Officer after reviewing the compensation he
receives from his prior employer, the comparable compensation of chief executive
officers of other leading global pharmaceutical
10
<PAGE> 14
companies and application of the compensation policies described above. The
Committee will be assisted in this process by an independent compensation
consulting firm.
The Board of Directors will evaluate the performance of the Company's
President and 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 will not
assign relative weights or rankings to particular factors but will make its
determination based upon a consideration of all such factors.
COMPENSATION COMMITTEE
R. H. Brown G. Douglas* D. F. Grisham B. Lindqvist
- -----------------
* At the meeting of the Board of Directors on February 25, 1997, after this
report was prepared, G. Douglas became Chairman of the Audit Committee and was
replaced on the Compensation Committee by S. Gyll.
11
<PAGE> 15
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 former President and Chief Executive
Officer of the Company, by the other three executive officers of the Company
during 1996 (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
-------------------------------------------
BASE OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
J. L. Zabriskie, 1996 $950,000 $ 477,955 $165,640
Former President and 1995 $904,167 $1,172,760 0
Chief Executive Officer 1994 $800,000 $ 731,272 0
L. S. Smith, 1996 $575,000 $ 263,970 0
Executive Vice President 1995 $541,047 $ 575,576 0
1994 $480,000 $ 431,262 0
G. A. Ando, 1996 $535,000 $ 193,994 $170,840
Executive Vice President 1995 $407,430 $ 201,368 $120,000
R. C. Salisbury, 1996 $425,000 $ 168,690 $152,665
Executive Vice President 1995 $369,797 $ 298,822 0
and Chief Financial 1994 $300,042 $ 205,514 0
Officer
K. M. Cyrus, 1996 $365,000 $ 118,083 $150,665
Senior Vice President, 1995 $318,287 $ 263,110 0
Secretary and General 1994 $281,875 $ 184,849 0
Counsel
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------------------------
RESTRICTED STOCK SECURITIES
AND PERFORMANCE UNDERLYING
SHARE AWARDS OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION (2)(3) (# OF SHARES) COMPENSATION(4)
- --------------------------- --------------------------------------------------
<S> <C> <C> <C>
J. L. Zabriskie, $ 0 180,000 0
Former President and $336,250 174,000 $6,525
Chief Executive Officer $490,508 507,500 0
L. S. Smith, $ 0 75,000 $4,425
Executive Vice President $168,125 87,000 $6,525
$152,686 46,400 $4,675
G. A. Ando, 0 65,000 0
Executive Vice President 0 0 0
R. C. Salisbury, $ 0 65,000 0
Executive Vice President $ 78,481 40,600 $6,525
and Chief Financial $114,500 34,800 $4,596
Officer
K. M. Cyrus, $ 0 32,000 0
Senior Vice President, $ 71,756 37,120 $6,525
Secretary and General $114,500 34,800 $4,610
Counsel
</TABLE>
- -------------------------
(1) Includes, among other things, amounts for reimbursement of taxes in excess
of those that would have been incurred in the individual's home country,
assistance in preparing required income tax returns, use of a Company car, a
cost-of-living allowance in the amount of $135,000 for J. L. Zabriskie, R.
C. Salisbury and K. M. Cyrus, and in the case of G. A. Ando, a supplemental
pension contribution equal to approximately $130,000 in 1996 and $111,000 in
1995.
(2) In 1994, J. L. Zabriskie earned the restricted stock, which is included in
the table at $204,258, which represented the market value on the date of
grant. A portion of the restricted stock was earned in 1995, and the
remainder was earned on May 1, 1996, having a market value on such date of
$562,498.
(3) The Performance Shares included in the table represent the fair market value
of the corresponding number of shares of Upjohn Common Stock on the date of
grant. These performance shares were earned in 1996 and had a value on the
date earned as follows: J.L. Zabriskie, $467,481; L.S. Smith, $242,442; R.C.
Salisbury, $152,510; and K.M. Cyrus, $148,370.
(4) All other compensation represents the Company match under the Company's
Employee Savings Plan.
12
<PAGE> 16
STOCK OPTION GRANTS
During 1996, the following officers were granted stock options to purchase
shares of the Company's Common Stock at an exercise price equal to the market
price on date of grant. Stock options 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.
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 termination of
employment approved by the Compensation Committee of the Board, stock options
may be exercised for periods up to five years (but not beyond the original
expiration date of the option).
ORIGINAL STOCK OPTION GRANTS IN LAST FISCAL YEAR
<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(1)........ 180,000 5.74% 37.8125 1/20/02 4,281,174 10,849,158
L. S. Smith............... 75,000 2.39% 37.8125 1/22/06 1,783,808 4,520,483
G. A. Ando................ 65,000 2.07% 37.8125 1/22/06 1,545,967 3,917,752
R. C. Salisbury........... 65,000 2.07% 37.8125 1/22/06 1,545,967 3,917,752
K. M. Cyrus............... 32,000 1.02% 37.8125 1/22/06 761,091 1,928,739
</TABLE>
- -------------------------
(1) The Compensation Committee of the Board of Directors provided that these
stock options granted to J. L. Zabriskie would become exercisable on January
20, 1997 prior to his resignation from the Company.
13
<PAGE> 17
RELOADED STOCK OPTIONS RECEIVED IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
FOR REMAINDER
INDIVIDUAL GRANTS OF THE OPTION TERM
- --------------------------------------------------------------------------------------- ----------------------
RELOADED
STOCK
OPTIONS EXERCISE PRICE EXPIRATION
NAME RECEIVED($)(1) ($/SH)(2) DATE 5%($) 10%($)
- ------------------------------------- -------------- -------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
L. S. Smith.......................... 5,004 38.3750 2/24/97 19,682 40,326
5,842 38.3750 2/16/98 35,337 74,205
4,803 38.3750 2/21/99 39,720 85,540
2,605 38.3750 2/15/04 55,213 135,748
R. C. Salisbury...................... 1,610 41.6250 2/16/98 10,563 22,184
5,607 41.6250 2/21/99 50,296 108,324
12,163 41.6250 11/16/03 206,104 579,000
9,234 41.6250 2/15/04 183,614 521,963
K. M. Cyrus.......................... 6,547 41.0625 2/20/00 73,495 164,125
5,420 41.0625 2/15/04 121,917 254,513
</TABLE>
- -------------------------
(1) The number of reloaded stock options received is equal to the number of
shares tendered in a qualifying stock-for-stock option exercise.
(2) The exercise price is equal to the market price of the Company's Common
Stock on the date the reloaded stock option was received.
STOCK OPTION EXERCISES
The following table shows the number of stock options exercised and the value
realized by the named officers during 1996 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 $39.625:
AGGREGATED STOCK OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END(#) FY-END($)
SHARES --------------- -------------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- ----------------------------------- ----------- ----------- --------------- -------------------
<S> <C> <C> <C> <C>
J. L. Zabriskie.................... 20,000 $ 426,823 661,500/180,000 $12,419,500/326,250
L. S. Smith........................ 398,626 $7,182,498 18,254/ 75,000 $ 22,817/135,937
G. A. Ando......................... 0 0 0/ 65,000 $ 0/117,812
R. C. Salisbury.................... 59,393 $1,169,665 236,761/ 65,000 $ 2,516,227/117,812
K. M. Cyrus........................ 29,351 $ 545,725 199,567/ 32,000 $ 2,497,635/ 58,000
</TABLE>
14
<PAGE> 18
COMPARISON OF CUMULATIVE TOTAL SHAREHOLDER RETURN
Since the Company only became public on November 2, 1995, the Company's
cumulative total shareholder return over a five-year period cannot be provided.
However, 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 & Company,
Merck & Company, Inc., Pfizer, Inc., Schering-Plough Corporation and the
Company) for the period from November 2, 1995, when public trading in the
Company's Common Stock began, until December 31, 1996. The graph assumes $100
was invested on November 2, 1995. The stock performance as shown on the
following graph should not be interpreted as a prediction of future stock
performance.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD PHARMACIA S&P 500 S&P HEALTH
(FISCAL YEAR COVERED) & UPJOHN CARE-DRUGS
<S> <C> <C> <C>
11/2/95 100.00 100.00 100.00
11/95 98.61 102.98 105.03
12/95 106.52 104.96 112.29
1/96 116.16 108.53 119.01
2/96 115.85 109.54 116.66
3/96 110.32 110.59 115.73
4/96 106.57 112.22 112.65
5/96 113.89 115.12 119.40
6/96 123.64 115.66 122.07
7/96 115.33 110.45 115.98
8/96 117.79 112.78 118.30
9/96 115.69 119.13 128.51
10/96 101.72 122.41 133.69
11/96 109.14 131.67 147.36
12/96 111.96 129.06 140.03
</TABLE>
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 for the period from August 18, 1995,
the last trading day prior to the public announcement of the Combination of
Upjohn and Pharmacia, until December 31, 1996. Since the Company's Common Stock
was not publicly traded until November 2, 1995, the graph was constructed by
measuring the cumulative total shareholder return of Upjohn divided by 1.45 (the
conversion ratio between Upjohn's and the Company's Common Stock) to reflect the
return on what would have been the equivalent amount of the Company's Common
Stock prior to November 2, 1995. The graph
15
<PAGE> 19
assumes $100 was invested on August 18, 1995. The stock performance as shown on
the following graph should not be interpreted as a prediction of future stock
performance.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD PHARMACIA S&P 500 S&P HEALTH
(FISCAL YEAR COVERED) & UPJOHN CARE-DRUGS
<S> <C> <C> <C>
8/18/95 100.00 100.00 100.00
8/95 106.94 100.57 103.20
9/95 112.62 104.82 114.22
10/95 129.01 104.44 120.24
11/95 132.24 109.03 126.20
12/95 142.83 111.13 134.91
1/96 154.43 114.91 142.98
2/96 155.35 115.97 140.17
3/96 147.93 117.09 139.05
4/96 142.91 118.82 135.35
5/96 152.71 121.88 143.46
6/96 165.79 122.36 146.66
7/96 154.66 116.94 139.33
8/96 157.95 119.41 142.13
9/96 155.13 126.13 154.40
10/96 136.40 129.61 160.62
11/96 148.34 139.40 177.05
12/96 150.13 136.64 168.25
</TABLE>
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
the officer's final three-year average annual salary and cash bonus compensation
prior to retirement from the Company, provided the officer retires at age 65
with at least ten years of service under the Plan. 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.
The following table illustrates the estimated annual benefits that would be
payable under the Company's Global Officer Pension Plan (before deductions for
social security or other governmental retirement income and before deduction of
any other sources of retirement income from the Company, its predecessors and
any prior employers) if the individual had retired at the end of last
16
<PAGE> 20
year (assuming he was at least age 55, the minimum age for retirement under the
Plan) and upon reaching age 65:
GLOBAL OFFICER PENSION PLAN TABLE (1)
<TABLE>
<CAPTION>
AGE AT ANNUAL BENEFIT AT ANNUAL BENEFIT AT
DECEMBER 31, 1996 DECEMBER 31, 1996(3) AGE 65
----------------- -------------------- -----------------
<S> <C> <C> <C>
J. L. Zabriskie(2).............. 57 $771,000 --
L. S. Smith..................... 62 $523,000 $544,000
G.A. Ando(3).................... 47 $100,000 $474,000
R.C. Salisbury(3)............... 53 $153,000 $386,000
K. M. Cyrus..................... 58 $204,000 $314,000
</TABLE>
- -------------------------
(1) For purposes of this table, the individual's Final Average Salary under the
Plan for both December 31, 1996 and at age 65 is deemed to be the amounts
listed for 1996 Base Salary and Bonus under "Annual Compensation" in the
Summary Compensation Table shown above.
(2) J. L. Zabriskie resigned from the Company on January 20, 1997. As provided
in his employment agreement, J. L. Zabriskie's benefit has been calculated
as if he had been employed by the Company for 28 years plus his actual years
of service with the Company and its predecessors, which benefit will be
reduced by the value of his pension from former employment.
(3) G. A. Ando and R. C. Salisbury would not have been entitled to actually
receive this benefit if they had retired at December 31, 1996 since they
were not age 55, the minimum age for retirement under the Plan.
EMPLOYMENT AGREEMENTS AND TERMINATION
AND CHANGE-IN-CONTROL ARRANGEMENTS
Dr. J. L. Zabriskie, President and Chief Executive Officer of the Company,
resigned from the Company on January 20, 1997. As a result of his resignation,
Dr. Zabriskie will receive 2.5 times his 1996 base salary and target incentive
bonus; 87,629 shares of the Company's Common Stock, plus accumulated, reinvested
dividends thereon, or the cash value of such shares and accumulated dividends,
representing the supplemental retirement bonus specified in his employment
agreement; an additional 60 days' base salary; the costs of relocation to the
United States; continued employee benefit coverage for up to 30 months; and a
period of 5 years to exercise all of his stock options that were outstanding on
January 20, 1997. Dr. Zabriskie will also receive retirement benefits 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 its predecessors as if he had been
employed through November 29, 1997, less the value of his pension from former
employment.
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 $130,000 during 1997. G. A. Ando and R. C. Salisbury
have entered into new employment agreements with the Company providing for the
payment of severance benefits equal to 2.5 times (if terminated prior to
November 29, 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. In addition, provided his employment is not terminated prior to November
29, 1997, a supplemental retirement bonus equal to 30,876 shares of the
Company's Common Stock, together with accumulated, reinvested dividends thereon,
will be paid to R. C. Salisbury. 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 under their prior agreements with Upjohn sufficient to
provide a cash benefit equal to 2.5 times their annualized salary and bonus
compensation, plus the value of any excise taxes payable on such amount, in the
event their employment terminates prior to November 2, 1997, or, in the case of
L. S. Smith, 90 days after the Company's new President and Chief Executive
Officer assumes office, if later.
17
<PAGE> 21
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Coopers & Lybrand, LLP, has been selected by the Board of Directors to be the
Company's independent accountants. Representatives from the firm will be present
at the Annual Meeting of Shareholders and will be given an opportunity to make a
statement, if so desired, and will be available to respond to appropriate
questions.
RECEIPT OF SHAREHOLDER PROPOSALS
For inclusion in the Company's 1998 proxy statement, all shareholder proposals
for consideration at the Annual Meeting of Shareholders of the Company to be
held in 1998 must be received by the Secretary of the Company at the address set
forth on the first page of this proxy statement by December 15, 1997. Such
proposals must also comply with all 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: March 24, 1997
18
<PAGE> 22
PHARMACIA & UPJOHN LOGO
97-178 3/97
<PAGE> 23
PROXY PROXY
PHARMACIA & UPJOHN, INC.
ANNUAL MEETING, APRIL 29, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints R.H. Brown and J. Ekberg, 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 the Company's
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 AND IN THE PROXIES' DISCRETION ON ANY OTHER MATTERS
PROPERLY COMING BEFORE THE MEETING.
/ / Check here for address change.
New Address:______________________
__________________________________
__________________________________
97-177 2/97 / / Check here if you plan to
attend the meeting.
PLEASE MARK VOTE IN OVAL USING DARK INK ONLY. /X/
PHARMACIA & UPJOHN, INC.
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The Board of Directors recommends a vote WITHHELD
FOR all nominees FOR all from all
nominees nominees FOR all nominees, except vote withheld from the following nominees:
1. NOMINEES: Frank C. Carlucci, / / / / / / _______________________________________________________
Soren Gyll, William U. Parfet
and Ulla Reinius for three-year
terms
FOR AGAINST
2. In their discretion on any other / / / / PLEASE SIGN EXACTLY AS YOUR
matters properly arising during NAME APPEARS. IF ACTING AS
the meeting 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 SAVING BANK
USING THE ENCLOSED ENVELOPE.
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