PRELIMINARY MATERIALS
[FORM OF FRONT OF PROXY]
CYTEC INDUSTRIES INC.
ANNUAL MEETING OF COMMON STOCKHOLDERS
May 12, 1997
THIS PROXY IS SOLICITED ON BEHALF OF
THE COMPANY'S BOARD OF DIRECTORS
The undersigned hereby appoints D. D. Fry, J. P. Cronin and E. F.
Jackman, and each of them jointly and severally, Proxies with full power of
substitution, to vote as designated on the reverse side and, in their
discretion, upon such other business as may properly come before the meeting all
shares of Common Stock of Cytec Industries Inc. held of record by the
undersigned on March 13, 1997 at the Annual Meeting of Common Stockholders to be
held on May 12, 1997 or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
NOMINEES TO SERVE AS DIRECTORS, "FOR" THE INCREASE IN THE AUTHORIZED COMMON
STOCK, AND "FOR" APPROVAL OF AMENDMENTS TO THE 1993 STOCK AWARD AND INCENTIVE
PLAN. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED ON THE
REVERSE SIDE. IF NO DIRECTION IS GIVEN IN THE SPACE PROVIDED ON THE REVERSE
SIDE, THIS PROXY WILL BE VOTED (i) "FOR" THE ELECTION OF THE DIRECTORS, (ii)
"FOR" THE INCREASE IN THE AUTHORIZED COMMON STOCK AND (iii) FOR APPROVAL OF
AMENDMENTS TO THE 1993 STOCK AWARD AND INCENTIVE PLAN.
[FORM OF REVERSE OF PROXY]
1. ELECTION OF DIRECTORS
FOR the election of WITHHOLD To withhold authority to vote for Will
F. W. Armstrong AUTHORITY the election of any individual attend
G. A. Burns to vote for the candidate, write that person's Annual
election of Directors name on this line. Meeting
---- ---- --------------------------------- ----
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE.
2. Increase in Authorized Common Stock
FOR AGAINST ABSTAIN
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3. Amend 1993 Stock Award and Incentive Plan
FOR AGAINST ABSTAIN
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Signature_______________ Signature_____________ Date______ 1997
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
PRELIMINARY MATERIALS
[GRAPHIC OMITTED]
CYTEC INDUSTRIES INC.
5 GARRET MOUNTAIN PLAZA
WEST PATERSON, NJ 07424
Notice of Annual Meeting
of Common Stockholders to be held
May 12, 1997 March 20, 1997
To the Holders of Common Stock
The Annual Meeting of Common Stockholders of Cytec Industries Inc. will
be held at the Sheraton Crossroads Hotel, One International Boulevard, Mahwah,
NJ 07495, on Monday, May 12, 1997, at 11:00 a.m., for the purpose of (i)
electing two directors for terms ending in the year 2000; (ii) approving an
increase in the authorized Common Stock of the company; and (iii) approving
certain amendments to the 1993 Stock Award and Incentive Plan, and to transact
such other business as may properly come before the meeting or any adjournment
thereof.
Only holders of Common Stock of record at the close of business on
March 13, 1997, are entitled to notice of and to vote at the meeting or any
adjournment thereof.
Since no action can be taken at the meeting unless a majority of the
outstanding shares of Common Stock is represented, it is important, regardless
of the number of shares which you hold, that you be personally present or
represented by proxy at the meeting.
Accordingly, if you cannot attend the meeting, it is requested that you promptly
sign and date the enclosed proxy and mail it in the enclosed envelope, which
requires no postage if mailed in the United States.
By Order of the Board of Directors,
E. F. Jackman
Secretary
[GRAPHIC OMITTED]
CYTEC INDUSTRIES INC.
5 GARRET MOUNTAIN PLAZA
WEST PATERSON, NJ 07424
Proxy Statement for
Annual Meeting of Common Stockholders
to be held May 12, 1997
March 20, 1997
The enclosed proxy is solicited by the Board of Directors of Cytec
Industries Inc. (the "Company") and is revocable at any time before it is
exercised. Revocation may be by written notice or by furnishing a proxy
subsequent in time. The shares represented by all properly executed proxies
received by the Company in time to be voted will be voted as specified on the
proxies, and in the absence of specific direction will be voted for the election
of directors and the approval of the proposed increase in the authorized Common
Stock and the proposed amendments to the 1993 Stock Award and Incentive Plan.
For persons who participate in the Cytec Employees' Savings and Profit Sharing
Plan, those shares held for the participant's account under this plan will
automatically be voted in accordance with the proxy returned by the participant.
The cost of soliciting proxies will be borne by the Company, including
reimbursement of banks, brokerage firms, custodians, nominees and fiduciaries
for their expenses in sending proxy material to the beneficial owners of Common
Stock. In addition to the use of the mail, proxies may be solicited by employees
of the Company personally, by telephone or by telefax. The Company has engaged
Georgeson & Company Inc. to assist in the solicitation of proxies from
stockholders at a fee of $8,500 plus reimbursement of its out-of-pocket
expenses.
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Only holders of Common Stock of record at the close of business on
March 13, 1997, are entitled to notice of and to vote at the meeting or any
adjournment thereof. On such date, there were outstanding _______________ shares
of Common Stock, each share of which is entitled to one vote.
If no specific direction is given, but the proxy is otherwise properly
executed and dated, it will be voted FOR (i) Election of Directors, (ii) for the
increase in the authorized Common Stock of the Company and (iii) for approval of
the amendments to the 1993 Stock Award and Incentive Plan.
ELECTION OF DIRECTORS
At the meeting, the Board of Directors will nominate Mr. F. W.
Armstrong and Mr. G. A. Burns for election as directors for three-year terms
ending in the year 2000. Messrs. Armstrong and Burns are currently directors of
the Company. The affirmative vote of the holders of a plurality of the shares of
Common Stock present at the meeting in person or by proxy and voting on the
election of directors will be required to elect the directors. Accordingly, an
abstention or a broker non-vote constitutes neither an affirmative nor a
negative vote, and hence will have no effect on the outcome of the election.
If at the time of the meeting either or both of the nominees is not
available to serve as director - an event which the Board does not anticipate -
the proxies will be voted for a substitute nominee or nominees designated by or
at the direction of the Board, unless the Board has taken
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prior action to reduce its membership. After the elections of the directors at
the meeting, the Company will have seven directors, including Mr. Fry, Mr.
Lilley, Mr. Powell, and Mr. Satrum whose terms currently extend beyond the date
of the meeting to 1999, 1998, 1998, and 1999, respectively, and one director who
will be elected by the holder of the Series C Preferred Stock for a term of one
year.
The following information is submitted concerning the nominees and
other directors of the Company whose terms of office will continue after the
meeting.
Frederick W. Armstrong, age 66, retired from American Cyanamid Company
("Cyanamid") effective January 1992. Prior to his retirement he served for many
years as the Director of Cyanamid's Corporate Development and Planning Division
and, from 1985 until his retirement, as a Vice President of Cyanamid. He is a
director of MGI Pharma, Inc.
Gene A. Burns, age 71, served as Executive Vice President, Chief
Financial Officer and Director of CPC International Inc., before retiring in
1988.
Darryl D. Fry, age 58, has been the Chairman of the Board, President
and Chief Executive Officer of the Company since December, 1993. From January
1991 to December 1993, he was an Executive Vice President of Cyanamid and
President of the Chemicals Group of Cyanamid. From August 1989 to January 1991,
he was a Group Vice President of Cyanamid responsible for the global
agricultural businesses.
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L. L. Hoynes, Jr., age 61, is Senior Vice-President and General Counsel
of American Home Products Corporation, having served in that capacity since
1990. Prior to that he was a partner in the law firm of Willkie, Farr &
Gallagher. He serves as the Director of the Company elected by Cyanamid as
holder of the Company's outstanding Series C Preferred Stock.
David Lilley, age 50, was elected President and Chief Operating Officer
and a member of the Board of Directors effective January 8, 1997. From 1994
until that date, he was a Vice President of American Home Products Corporation,
responsible for the Global Medical Device business. Prior to that time, he was
Vice President and a member of the Executive Committee of American Cyanamid
Company.
William P. Powell, age 41, has been a Managing Director of Dillon, Read
& Co. Inc. since January 1991, and prior thereto was employed by Dillon Read
since 1982 in a number of other capacities.
Jerry R. Satrum, age 52, has served as Chief Executive Officer of
Georgia Gulf Corporation since February 1991 and as President since 1989, and
prior thereto served as Vice President - Finance and Treasurer from its
inception. Mr. Satrum has been a director of Georgia Gulf Corporation since its
inception. Mr. Satrum is also a director of NationsBank N.A. (South).
Each person named above became a director of the Company on December
17, 1993, the date the Company was incorporated, except for Mr. Hoynes, who was
elected by Cyanamid on
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December 2, 1994; Mr. Satrum, who was elected by stockholders at the 1996 Annual
Meeting; and Mr. Lilley, who was elected by the Board effective January 8, 1997.
The Audit Committee among other things considers the overall scope and
approach and recommendations of the audit performed by the independent
accountants; recommends the appointment of independent accountants; reviews
procedures for internal controls; and considers significant accounting methods
adopted or proposed to be adopted. Messrs. Burns and Powell are members of the
Audit Committee. The Audit Committee held three meetings during 1996.
The Compensation and Management Development Committee approves
compensation arrangements for the Company's officers, administers certain
compensation plans and makes recommendations thereunder. Messrs. Armstrong,
Burns, and Satrum are members of the Compensation and Management Development
Committee. The Committee held six meetings during 1996.
The Pension Committee reviews on behalf of the Board actions taken by
the Committee on Investment of Pension Funds (which oversees investments of the
Company's funded benefit plans). Messrs. Armstrong and Powell are members of
this Committee. The Committee held two meetings during 1996.
The Environmental, Health and Safety Committee serves as the
environmental oversight committee referred to under "Certain Relationships and
Related Transactions." It reviews, monitors and, as it deems appropriate,
advises the Board of Directors with respect to the policies
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and practices of the Company in the areas of occupational health and safety and
environmental affairs. Messrs. Hoynes and Fry are members of this Committee. The
Committee held two meetings during 1996.
The Board of Directors held seven meetings during 1996. All members of
the Board attended at least 75% of the meetings of the Board and of the
Committees on which they serve. The Company has no Nominating Committee.
INCREASE IN AUTHORIZED COMMON STOCK
The Board of Directors has approved an amendment (the "Amendment") to
Article IV of the Company's Certificate of Incorporation (the "Certificate") to
increase the authorized common stock of the Company from 75 million shares to
150 million shares. The first paragraph of Article Fourth of the Certificate
will be amended to read as follows:
Fourth: The total number of shares of stock which the
Corporation shall have the authority to issue is 170 million,
consisting of 150 million shares of common stock, par value
$0.01 per share (the "Common Stock"), and 20 million shares of
preferred stock, par value $0.01 per share (the "Preferred
Stock").
Amendment of Article Fourth of the Certificate of Incorporation will
require the affirmative vote of a majority of the outstanding shares. Therefore,
abstentions and broker non-votes will have the same effect as negative votes.
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As of February 1, 1997, there were 75 million shares of Common Stock
authorized, of which approximately _____ million were issued and outstanding or
held in treasury. Originally, there were approximately 12.9 million shares
outstanding, leaving approximately 62.1 million available for future issuance.
Since that time, the Company has made a public offering of approximately 3.5
million shares and effectuated a three-for-one stock split, in the form of a
stock dividend, as well as issued approximately _____ shares under the 1993
Stock Option and Incentive Plan (see page _____). Accordingly, there are at
present only 29 million authorized but unissued shares available. The amendment
would increase this number to approximately 104 million shares. The Board
believes that it is desirable to have this larger number of shares available for
possible future acquisitions, financings, stock dividends, stock splits or other
stock distributions, none of which is under consideration at this time. Although
the Company is frequently engaged in discussions relating to potential
acquisitions, there are no present agreements or discussions which would require
the issuance of any of the additional shares to be authorized.
The holders of the Company's Common Stock do not have preemptive rights
to purchase any shares of authorized capital stock of the Company. The Board of
Directors may authorize the issuance of such shares without further stockholder
approval, except to the extent that such approval may be required to meet
certain requirements of the Internal Revenue Code of 1986, as amended, in
connection with issuance of shares under employee benefit plans and of the New
York Stock Exchange in connection with the listing of additional shares under
certain circumstances.
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An increase in the authorized shares of stock could, under certain
circumstances, have an antitakover effect by, for example, allowing issuance of
stock that would dilute the stock ownership of a person seeking to effect a
change in the composition of the Board of Directors or contemplating a tender
offer or other transaction for the combination of the Company with another
company. However, this proposal to amend the Certificate is not in response to
any effort of which the Company is aware to accumulate the Company's stock or to
obtain control of the Company, nor is it part of a plan by management to
recommend a series of similar amendments to the Board of Directors and
stockholders. The Board does not contemplate recommending the adoption of any
other amendments to the Certificate which could be construed to affect the
ability of third parties to take over or change control of the Company.
AMENDMENTS TO 1993 STOCK AWARD AND INCENTIVE PLAN
At its meeting held January 27, 1997, the Board of Directors approved
certain amendments to the Company's 1993 Stock Award and Incentive Plan (the
"1993 Plan") and recommend that the stockholders approve the 1993 Plan as so
amended.
The affirmative vote of the holders of a majority of the shares
represented in person or by proxy and entitled to vote on the item will be
required for approval of the 1993 Plan as amended. A properly executed proxy
marked "ABSTAIN" with respect to any such matter will not be voted, although it
will be counted for purposes of determining whether there is a quorum.
Accordingly, an abstention will have the effect of a vote against the matter in
question.
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In accordance with the rules of the New York Stock Exchange, brokers
and nominees may be precluded from exercising their voting discretion with
respect to certain matters to be acted upon and thus, in the absence of specific
instructions from the beneficial owner of the shares, will not be empowered to
vote the shares on such matters and therefore will not be counted in determining
the number of shares necessary for approval. Shares represented by such broker
non-votes will, however, be counted for purposes of determining whether there is
a quorum.
The amendments to the 1993 Plan do not materially change the basic
terms of the 1993 Plan or increase the number of shares of Common Stock
authorized for awards under it. Stockholder approval of the 1993 Plan as amended
is required to assure that certain awards granted under the 1993 Plan will be
fully tax deductible for the Company pursuant to Section 162(m) of the Internal
Revenue Code. Certain other changes are made in recognition of regulatory
changes since the 1993 Plan was adopted or to clarify or improve the Plan. If
the Plan as amended is not approved, the Plan will remain in effect and Awards
will continue to be granted under it, but the Company may lose the
tax-deductibility of compensation paid to the Chief Executive Officer and the
four other highest-paid officers to the extent it exceeds the limits set forth
in Section 162(m), unless such excess is deferred or otherwise restructured.
The principal amendments to the 1993 Plan are as follows:
(1) Awards may be made under the Plan to the Chief Executive Officer
and the four other most highly-compensated officers which qualify as
"performance-based" compensation under Section 162(m) of the Internal Revenue
Code ("Performance-based Awards"). Other awards may
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be made to such individuals, under the Plan or otherwise, which do not qualify
as Performance-based Awards.
(2) The total value as of the date of grant of "Performance-based
Awards" in any year to any of such officers cannot exceed the greater of $5
million or 50% of the base salary of such officer.
(3) The Committee must establish performance goals which must be
achieved in order for the Performance-based Awards to be paid, using the
Performance Measures which are now set forth in Exhibit A to the Plan which
cannot be changed without stockholder approval.
(4) Stock option and SAR grants are not subject to the restriction in
(2) and (3) above.
(5) Deferred Cash Awards may now be made under the 1993 Plan. These
awards would earn Interest Equivalents at the rate paid from time to time on
10-year Treasury notes, plus 1%. Free-standing Interest Equivalents could also
be awarded.
(6) The requirement that stock options be non-transferable has been
eliminated.
(7) Awards may now be made to prospective employees.
(8) The requirement that options granted to officers only become
exercisable in one-third increments over a three-year period has been
eliminated.
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(9) The requirement that a limited SAR granted to an officer not mature
until six months after the date of grant has been eliminated.
(10) The Plan makes explicit that it is not the exclusive vehicle for
awarding incentive compensation. In addition, the Committee may determine, even
in the case of the Chief Executive Officer and the other four most highly
compensated officers, that an award will not be governed by new section 6A
(which is the new section of the Plan that contains most of the rules pertaining
to Performance-based Awards).
The principal features of the 1993 Plan, as so amended, are set forth
below. The complete text of the Plan, including the amendments, is set forth as
Exhibit I to this Proxy Statement, and the following description is qualified by
such reference.
The 1993 Plan provides for various types of awards ("Awards") which may
be granted to present and prospective employees (including officers), directors
and independent contractors. Under present guidelines, approximately 355
employees are eligible to receive awards. Awards may consist of stock options,
stock appreciation rights, restricted stock, restricted stock units, interest
equivalents, dividend equivalents, deferred cash awards, deferred stock awards,
and other stock-based or cash-based awards. The 1993 Plan is intended to satisfy
the requirements of Rule 16b-3 promulgated under Section 16 of the Securities
Exchange Act of 1934. The Plan is not exclusive and the Board may adopt, or
permit the adoption of, other compensation and benefit plans or arrangements.
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A maximum of 12,900,000 shares of Common Stock (after adjustment in
respect of the July 1996 stock split) were originally reserved for issuance
under the 1993 Plan, subject to further equitable adjustment in the event of
future stock splits, stock dividends, mergers, consolidations,
recapitalizations, reorganizations or similar corporate transactions. There is
no limitation on the amount of awards which can be made other than in stock.
The 1993 Plan is administered by the Committee, the composition of
which shall at all times satisfy the provisions of Rule 16b-3 under the
Securities Exchange Act of 1934 (the "Exchange Act"). The Committee has full
authority, subject to the provisions of the 1993 Plan and except with respect to
automatic grants to nonemployee directors as discussed below, to construe and
interpret the 1993 Plan and any Award, to make rules and regulations relating to
the 1993 Plan, to determine, among other things, the persons to whom the awards
under the 1993 Plan ("Awards") will be made, the size of such Awards, and the
specific terms and conditions applicable to Awards, including, but not limited
to, the duration, vesting and exercise or other realization periods, the
circumstances for forfeiture and the form and timing of payment with respect to
any Award, except that the types of performance measures are set forth in the
Plan and cannot be changed without stockholder approval. Under the Plan, the
Committee may delegate to the Executive Committee certain of its authority to
make Awards, and establish the terms of Awards, in respect of persons who are
not executive officers of the Company; and therefore, the term "Committee" as
used herein includes the Executive Committee when acting pursuant to such
delegated authority.
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See the "Summary Compensation Table," "Option/SAR Grants in Last Fiscal
Year" and "Long-Term Incentive Plans-Awards in Last Fiscal Year" tables
elsewhere in this Proxy Statement with respect to Awards and options granted in
1996 to the Chief Executive Officer and the four other most highly compensated
executive officers. All executive officers as a group received Awards totaling
40,290 shares of restricted stock; $990,965 in performance cash; and options
covering 451,950 shares; for all employees, these figures were 56,712 shares,
$1,313,115 and 864,005 shares, respectively. See "Awards to Nonemployee
Directors" elsewhere in this Proxy Statement for a description of the terms of
options granted to nonemployee directors. These grants would not have been
substantially different if the amendments to the 1993 Plan had been in effect
with respect to 1996.
Stock Options
Stock options granted under the 1993 Plan may be either "Incentive
Stock Options" ("ISOs"), as such term is defined in Section 422 of the Internal
Revenue Code, or nonqualified stock options. ISOs may be granted only to
employees. Nonqualified options may be granted to nonemployee directors and
independent contractors, as well as employees and prospective employees. No one
person may be granted options under the 1993 Plan covering more than fifteen
percent of the shares of Common Stock authorized under the Plan.
The exercise price under an option is the fair market value of the
Common Stock on the date of grant. The exercise price must be paid at the time
of exercise, in cash, unless the Committee permits the purchase price to be paid
by an exchange of previously-owned stock, or
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by combination of cash and stock, or in whole or in part by having shares
withheld by the Company or sold by a broker-dealer.
Options must be exercised, if at all and to the extent exercised, no
later than ten years from the date of grant.
In the event of termination of employment or independent contractor
relationship, an option, to the extent not theretofore exercised, terminates
except under certain circumstances as provided in the grant letter.
Nothing in any option shall confer on any person any right to continue
in the employ of the Company of any of its subsidiaries or affiliates or
interfere in any way with the right of the Company or any subsidiary to
terminate such employment at any time.
Change of Control
In the event of a "change of control" (as defined in the Plan), unless
specifically provided to the contrary in the Award Agreement or grant letter
establishing the Award, (i) any Award, including nonemployee directors' Awards,
carrying a right to exercise that was not previously exercisable and vested will
become fully exercisable and vested, (ii) the restrictions, deferral
limitations, payment conditions and forfeiture applicable to any other Award,
including nonemployee directors' Awards, granted under the Plan will lapse, and
such Awards will be deemed fully vested, and (iii) any performance conditions
imposed with respect to Awards shall be deemed to be fully achieved.
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Amendment
The Plan may, at any time and from time to time, be altered, amended,
suspended, or terminated by the Board of Directors, in whole or in part;
provided, that, no amendment that requires stockholder approval in order for the
Plan to continue to comply with Rule 16b-3 promulgated under the Exchange Act
and no amendment changing the types of performance measures which may be
utilized under the Plan, will be effective unless such amendment has received
the requisite approval of stockholders. In addition, no amendment may be made
that adversely affects any of the rights of a grantee under any Award
theretofore granted, without such grantee's consent.
Certain Federal Income Tax Considerations
The following summary states federal income tax consequence of stock
options to participants in the 1993 Plan and to the Company.
Nonqualified Stock Options ("NQSOs")
A grantee will not recognize any income, and the Company will not be
entitled to a deduction, upon the grant of a NQSO. Except as noted below, upon
the exercise of the NQSO the grantee will recognize ordinary income equal to the
excess of the fair market value of the Common Stock acquired over the option
price. The Company generally will be entitled to deduct a corresponding amount
at that time (subject to the discussion in "Limitation on Deductions" below). If
an option is exercised within six months of the date of grant and the sale of
Common Stock acquired on exercise could subject the holder to suit under Section
16(b) of the Exchange Act, then the recognition and determination of the amount
of income, and the corresponding
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deduction by the Company, will be postponed until the earlier of six months
after exercise or the first day on which the sale would not subject the holder
to such suit. However, the holder may elect under Section 83(b) of the Code,
within thirty days after exercise, to be taxed as of the exercise date in the
manner described above.
Except as stated in the next sentence, a holder's basis for Common
Stock acquired upon exercise of a NQSO will be equal to the fair market value of
such stock on the date that governs the determination of the holder's ordinary
income, and the holding period for such stock will commence on the day after
such date and, accordingly, will not include the period during which the NQSO
was held. The number of shares acquired upon the noncash exercise of a NQSO that
is equal in number to the shares surrendered will have a basis equal to the
basis of shares surrendered and the holding period for such shares will include
the holding period for the shares surrendered.
Generally, upon a sale or other disposition of Common Stock acquired
pursuant to the exercise of a NQSO, the holder will recognize capital gain or
loss in an amount equal to the difference between the amount realized on such
sale or other disposition and the holder's basis in such stock. Such gain or
loss will be long-term capital gain or loss if the holding period for such stock
is more than one year.
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Incentive Stock Options ("ISOs")
An employee will not recognize any income, and the Company will not be
entitled to a deduction, upon the grant of an ISO or its timely exercise. The
timely exercise of an ISO may, however, affect the computation of the employee's
alternative minimum tax. Exercise of an ISO will be timely if made while the
employee is employed by the Company or within three months after the cessation
of such employment (one year if the employee is disabled within the meaning of
Section 22(e)(3) of the Internal Revenue Code). If the exercise of an ISO is not
timely, the ISO will be taxed according to the rules described above for NQSOs.
An employee's aggregate basis for Common Stock acquired upon cash
exercise of an ISO will be equal to the option price paid for such stock. The
holding period for such stock will begin on the day after the date of exercise
and, accordingly, will not include the period during which the ISO was held. See
"Exercise of Options with Shares" below for a discussion of basis and holding
period consequences regarding noncash exercises of ISOs.
If an employee disposes of Common Stock acquired pursuant to an ISO,
and such stock was held for more than two years from the date of the granting of
such ISO and one year from the transfer of such stock to the employee, then any
gain or loss realized upon such disposition will be treated as a long-term
capital gain or loss. Under such circumstances, the Company will not be entitled
to any deduction. If an employee disposes of such Common Stock not held for such
period (a "Disqualifying Disposition"), then, in general, any gain realized will
be taxable as ordinary income to the extent of the option profit (fair market
value less option price) at exercise,
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with the balance taxable as capital gain. In that case, the Company will be
entitled to deduct the ordinary income amount.
Exercise of Options with Shares
NQSOs. A holder who pays the option price upon exercise of a NQSO, in
whole or in part, by delivering Common Stock already owned by him will recognize
no gain or loss on the stock surrendered, but otherwise will be taxed according
to the rules described above for NQSOs.
If the shares so delivered are shares previously acquired by the holder
through exercise of an ISO ("ISO Stock"), then a like amount of Common Stock
acquired in exchange for such ISO Stock will itself be treated as ISO Stock.
ISOs. Under proposed Treasury regulations, if an ISO is exercised, and
the option price is paid with ISO Stock and, at exercise, the applicable holding
period requirement for such ISO Stock has not been met, the exercise will
constitute a Disqualifying Disposition of the ISO Stock that may result in
ordinary income to the employee and a corresponding deduction to the Company as
discussed in "Incentive Stock Options" above (but, not any additional capital
gain). If the shares surrendered either do not constitute ISO Stock or
constitute ISO Stock for which the applicable holding period requirement has
been met, then, in general, (i) no gain or loss will be recognized as a result
of the exchange, (ii) the number of shares acquired upon exercise that is equal
in number to the shares surrendered will have a basis equal to the basis of the
shares surrendered and (except for purposes of determining whether a disposition
will be a Disqualifying Disposition) will have a holding period that includes
the holding period for the shares surrendered,
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and (iii) any additional shares acquired will have a zero basis and will have a
holding period that begins on the day after the date of the exchange. If any
Common Stock so acquired is disposed of within two years from the date of the
grant of the ISO or within one year after exercise of the ISO, shares with the
lowest basis will be deemed to be disposed of first, and such disposition will
be a Disqualifying Disposition. Any gain realized upon such Disqualifying
Disposition will result in ordinary income to the employee and a corresponding
deduction to the Company as discussed in "Incentive Stock Options" above.
Limitation on Deductions
If a limited SAR is exercised, or if the termination of any
restriction, limitation or condition, or acceleration of any vesting or exercise
right with respect to any Award under the Plan is due to a change in control of
the Company or similar event, payments with respect such limited SAR or other
Award may be nondeductible to the Company in whole or in part and may subject
the holder to a nondeductible 20% federal excise tax on all or a portion of such
payments (in additional to other taxes ordinarily payable).
SECURITY OWNERSHIP OF MANAGEMENT
As of February 1, 1997, Mr. Fry owned beneficially 1.5%, no other
officer or director individually owned beneficially as much as 1%, and all
officers and directors as a group owned beneficially approximately 4.4%, of the
total shares of outstanding Common Stock. The following table sets forth, as of
February 1, 1997, the total beneficial ownership of the Company's
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Common Stock by the Company's directors, nominees for directorships, the Chief
Executive Officer and the four other most highly compensated executive officers
named in the Summary Compensation table (see "Executive Compensation" elsewhere
in this proxy statement):
Shares Beneficially
Name Owned(1)
---- -------------------
F. W. Armstrong 31,641
G. A. Burns 16,500
J. P. Cronin 173,733
S. M. Crum 220,095
D. D. Fry 770,485
L. L. Hoynes, Jr. 0
D. Lilley 46,750
H. Porosoff 151,151
W. P. Powell 12,000
C. A. Ruibal 278,295
J. R. Satrum 1,395
All directors and officers as a group 2,105,461
(16 persons)
(1) Included as beneficially owned are shares held by the Cytec Employees'
Savings and Profit Sharing Plan, as to which shares the named
individual possesses the right to vote (Mr. Cronin, 22,135 shares; Mr.
Crum, 10,050 shares; Mr. Fry, 18,603 shares; Mr. Porosoff, 1,241
shares; Mr. Ruibal, 3,200 shares; and all officers and directors as a
group, 116,606 shares); performance shares granted in 1995, 1996, and
1997 under the 1993 Stock Award and Incentive Plan, as to which shares
the named individual possesses the right to vote (Mr. Cronin, 11,253
shares; Mr. Crum, 13,095 shares; Mr. Fry, 37,535 shares; Mr. Lilley,
4,750 shares; Mr. Porosoff, 7,601 shares; Mr. Ruibal, 10,095 shares;
and all officers and directors as a group, 111,671 shares); deferred
stock awards (i.e., unsecured grants of common stock payable, generally
after termination of employment) granted under the 1993 Stock Award and
Incentive Plan (Mr. Cronin, 34,554
- 20 -
shares; Mr. Crum, 47,250 shares; Mr. Fry, 118,506 shares; Mr. Porosoff,
26,700 shares; Mr. Ruibal, 47,250 shares; and all directors and
officers as a group, 332,535 shares); restricted shares granted to
non-employee directors and to Mr. Lilley in order to induce him to join
the Company as to which shares the named individual possesses the right
to vote (Mr. Armstrong 6,000 shares, Mr. Burns and Mr. Powell, 4,500
shares each; Mr. Satrum, 1,395 shares; Mr. Lilley 42,000 shares; all
directors as a group, 58,395 shares); and shares which the following
have the right to acquire within 60 days through the exercise of vested
stock options (Mr. Armstrong, 4,500 shares; Mr. Burns, 1,500 shares;
and Mr. Powell, 4,500 shares; Mr. Cronin, 109,650 shares; Mr. Crum,
207,000 shares; Mr. Fry, 594,500 shares; Mr. Porosoff, 130,200 shares;
Mr. Ruibal, 268,200 shares; and all directors and officers as a group,
1,604,310 shares). No voting or investment power exists with respect to
stock option shares prior to acquisition.
(2) The table does not include any shares of Common Stock or Preferred
Stock beneficially owned by Cyanamid. See "Security Ownership of
Certain Beneficial Owners". Mr. L. L. Hoynes, Jr., Senior Vice
President and General Counsel of American Home Products Corporation and
a Director of the Company, disclaims beneficial ownership of any shares
of Common Stock and Preferred Stock beneficially owned by Cyanamid.
(3) The number of shares shown includes the following shares as to which
beneficial ownership is disclaimed: 2,291 shares owned by Mr.
Porosoff's wife, individually and as custodian for a minor child; and
16,637 shares for all directors and officers as a group.
- 21 -
Based solely on its review of the copies of the forms received by it,
the Company believes that during 1996 all filing requirements required under
Section 16(a) of the Securities Exchange Act of 1934 were complied with by its
directors, officers and greater than ten-percent beneficial owners, except for
the late filing by Mr. Fry of a Form 4 relating to a gift of 600 shares to a
family member.
- 22 -
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AS OF FEBRUARY 1, 1997
Amount and Nature
Name and Address of Beneficial Percent of
Title of Class of Beneficial Owner Ownership Class
- -------------- ------------------- ------------------- ----------
Series C Cumulative American Cyanamid Co.(1) Direct 4,000 Shares 100%
Preferred Stock c/o American Home
Products Corporation
Five Giralda Farms,
Madison, NJ 07940
Common Stock FMR Corp.(2) Direct 4,387,665 9.45%
82 Devonshire Street, Shares
Boston, MA 02109
Common Stock Janus Capital Indirect 7,309,290 15.7%
Corporation(3) Shares
100 Fillmore Street
Suite 300
Denver, CO 80206-4923
Common Stock Vanguard Fiduciary Trust Direct 4,107,652 9.0%
Company on behalf of the Shares
Cytec Employees' Savings
and Profit Sharing Plan (4)
500 Admiral Nelson
Blvd.,
Malvern, PA 19355
- 23 -
(1) In December 1994, American Home Products Corporation, Five Giralda
Farms, Madison, New Jersey 07940, became the beneficial owner of 100%
of the Common Stock of Cyanamid.
(2) Information taken from Schedule 13G, Amendment No. 5, dated February
14, 1997 filed on behalf of a group consisting of FMR Corp., Mr. Edward
C. Johnson 3d, and Abigail P. Johnson. The Schedule reports sole power
to vote as to 489,700 shares, shared power to vote as to none, and sole
power to dispose as to all.
(3) Information taken from Schedule 13G dated February 10, 1997 filed on
behalf of a group consisting of Janus Capital Corporation, Mr. Thomas
H. Bailey and Janus Fund. The Schedule reports sole voting power as to
none, shared voting power as to all, sole dispositive power as to none
and shared power to dispose as to all.
(4) Schedule 13G, Amendment No. 3, dated February 10, 1997 reports shared
power to vote and dispose as to all shares.
- 24 -
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 17, 1993 (the "Effective Date"), in connection with a
spin-off of Cyanamid's chemical businesses to it, the Company issued to Cyanamid
all of the Company's common stock (which Cyanamid in turn distributed to its
stockholders, 3,820,895 shares of its Series A Cumulative Adjustable Preferred
Stock, 4,175,105 shares of its Series B Cumulative Convertible Preferred Stock,
and 4,000 shares of its Series C Cumulative Preferred Stock.
During 1995, the Company repurchased the Series A and Series B
Preferred Stock from Cyanamid. The Company also agreed to pay to Cyanamid an
additional amount if, during the two year period commencing November 7, 1995,
any person announces an offer to acquire and thereafter acquires more than 50%
of the Company's issued and outstanding Common Stock (a "Transaction"). The
additional amount will equal, subject to antidilution adjustments, 2,099,037
shares multiplied by the excess, if any, of the purchase price per share of
Common Stock paid in the Transaction over the greater of the average price of
Common Stock during a defined period of time preceding announcement of the
Transaction and $17.66. The additional amount payable will be proportionately
reduced if the Transaction and any related transactions collectively constitute
an offer to acquire less than 100% of the Company. In order to induce the
Company to agree to pay such additional amount, Cyanamid agreed on behalf of
itself and American Home Products Corporation that, during such two year period,
neither company would directly or indirectly take any action having the purpose
of inducing any person to seek to acquire the Company and Cyanamid further
agreed that it would reject any request for a waiver, consent or approval in
connection with an offer or possible offer to acquire the Company made to it,
- 25 -
including any waiver, consent or approval under the Series C Stock. The Company
also agreed not to redeem the Series C Stock prior to December 16, 1999.
Aggregate liquidation and redemption value of the Series C Preferred is
$100,000. The Series C stock, which is not transferable, gives Cyanamid the
right to elect one director and contains certain restrictive covenants,
violation of which would give the holder the right, among others, to approve
capital expenditures and elect a majority of the Board.
In connection with the spin-off, financial responsibility for
substantially all the liabilities of Cyanamid's chemicals businesses was assumed
by the Company, including substantially all environmental liabilities related to
the chemicals businesses and plants used in that business (except the
remediation of the plant located at Bound Brook, NJ), including plants and
businesses disposed of prior to the Effective Date, and disposal sites owned by
third parties to which wastes of the chemical businesses were sent. The Company
is required to establish an environmental oversight committee of the Board of
Directors, consisting of two members, both of whom must concur in any action and
one of whom is the Director appointed by Cyanamid as holder of the Series C
Preferred Stock; this committee reviews and approves the Company's annual
environmental remediation plan and reviews compliance with the plan and
environmental administration standards and makes recommendations to the Board
concerning, and reviews and approves proposed challenges to governmental
requirements relating to, environmental liabilities assumed from Cyanamid. The
Company must also pay an annual fee, $__________ in 1996, for oversight services
rendered by Cyanamid's environmental affairs department.
- 26 -
In connection with the spinoff, the Company and Cyanamid entered into a
number of administrative, consulting, manufacturing and other service agreements
pursuant to which one party renders to the other, both in the U.S. and in
foreign locations, services for a period of time after the spinoff. In addition,
there were certain leases and supply agreements. Pursuant to these agreements,
the Company paid $5.7 million to Cyanamid in 1996 and received $8.5 million over
the same time period. Most of these agreements are subject to termination by
either party on six months' or less notice.
Certain intellectual property relating to the chemicals businesses
(such as patent rights, trade secrets and know-how) was assigned to the Company
by Cyanamid, and Cyanamid received back an exclusive license to use such rights
in the medical and agricultural business and a right to a non-exclusive license
to use them in other businesses to the extent not already used for such purposes
by the Company. Cyanamid granted to the Company an exclusive license to use in
the chemicals businesses intellectual property rights retained by Cyanamid and a
right to a non-exclusive license for uses other than medical and agricultural to
the extent not already used by Cyanamid. Trademarks relating to the chemicals
businesses were also assigned to the Company.
Dillon, Read and Co., Inc., of which Mr. William Powell, a Director of
the Company, is a Managing Director, has provided investment banking and
consulting services to the Company during 1996.
- 27 -
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996, Messrs. Affleck, Armstrong, Burns, and Satrum, all outside
directors, served on the Compensation and Management Development Committee. Mr.
Affleck retired from the Board of Directors at the time of the 1996 Annual
Meeting of Common Stockholders.
EXECUTIVE COMPENSATION
The following tabulation summarizes compensation paid to the Chief
Executive Officer and the four other most highly compensated executive officers
for services rendered in all capacities in 1994, 1995, and 1996 to the Company
and its subsidiaries:
- 28 -
SUMMARY COMPENSATION TABLE
Annual Compensation(1)(2) Long Term Compensation
------------------------- ----------------------
Awards Payouts(1)
-------------------------- -------
Restricted Long-Term
Name and Stock Stock Options/ Incentive All Other
Principal Position Year Salary Bonus Awards(3) SARS(4) Payouts (5) Compensation (6)
- ------------------ ---- ------ ----- ---------- --------------- -------- ----------------
D. D. Fry 1996 $480,000 $587,520 $322,753 150,000 $320,000 $43,200
Chairman of the Board, 1995 $450,000 $485,100 $193,750 150,000 $275,100 $33,750
President and Chief Executive 1994 $430,000 $473,250 $751,612 444,900 $275,100 $19,470
Officer of the Company
C. A. Ruibal 1996 $260,000 $217,464 $111,191 52,500 $110,250 $23,400
Executive Vice President of 1995 $250,000 $200,900 $ 71,953 52,500 $110,250 $18,562
the Company 1994 $240,000 $197,050 $301,219 163,200 $110,250 $10,889
S. M. Crum 1996 $260,000 $217,464 $111,191 52,500 $110,250 $20,800
Executive Vice President of 1995 $240,000 $200,900 $ 71,953 52,500 $110,250 $14,400
the Company 1994 $220,000 $180,650 $301,219 154,000 $110,250 $ 8,852
J. P. Cronin 1996 $240,000 $217,464 $ 95,968 44,250 $ 95,200 $15,340
Vice President and Chief 1995 $206,000 $167,280 $ 52,766 36,000 $ 80,150 $12,360
Financial Officer of the 1994 $187,500 $120,750 $218,981 72,300 $ 80,150 $ 8,620
Company
H. Porosoff 1996 $213,000 $130,356 $ 62,834 28,500 $ 62,300 $19,170
Vice President & Chief 1995 $205,000 $120,540 $ 43,172 28,500 $ 62,300 $15,262
Technology Officer of the 1994 $197,000 $118,450 $170,212 33,900 $ 62,300 $ 8,985
Company since June 1995;
from December 1993 to June
1995, Vice President-
Research & Development of
the Company
(1) Includes amounts earned with respect to fiscal year, whether paid in
that year or deferred.
(2) There was no disclosable "Other Annual Compensation" paid, payable or
accrued to any of the named officers during 1994-1996.
(3) Represents the value at the date of grant of Performance Shares granted
under the Company's 1993 Stock Award and Incentive Plan. These shares
vest, in the case of
- 29 -
the 1995 and 1996 grants, after completion of the respective 1997 and
1998 performance periods, and in the case of the 1994 grant, one-third
after completion of the 1994, 1995 and 1996 performance periods,
depending upon the achievement of earnings targets; the targets for the
1995 and 1996 performance periods were exceeded; the one-third of the
shares granted in 1994 which would thereupon have vested were canceled
and, in lieu thereof, the participants received grants of an equal
number of deferred shares which vest upon retirement. At December 31,
1996, the total Performance Shares and deferred shares held had values
as follows (deferred shares are in parenthesis): Mr. Fry 88,341 shares
- $3,588,853 (118,506 shares - $4,814,306); Mr. Ruibal 33,720 shares -
$1,369,875 (47,250 shares - $1,919,531); Mr. Crum 33,720 shares -
$1,369,875 (47,250 shares - $1,919,531); Mr. Porosoff 19,251 shares -
$782,072 (26,700 shares - $1,084,688); and Mr. Cronin 25,632 shares -
$1,041,300 (34,554 shares - $1,403,756). Holders of Performance Shares
are entitled to vote and receive dividends on such shares; holders of
deferred shares are not entitled to vote and are entitled to receive
dividend equivalents upon vesting.
(4) Options granted by the Company in 1994, 1995, and 1996 were granted
without tandem SARs. Option amounts are adjusted for three-for-one
stock split in July 1996.
(5) Amounts for 1994, 1995, and 1996 represent Performance Cash received
for the 1994, 1995, and 1996 performance periods for grants under the
1993 Stock Award and Incentive Plan, based upon achievement of earnings
and cash flow targets. See text following Long-Term Incentive Plans -
Awards in Last Fiscal Year table.
- 30 -
(6) The amount listed for each named officer consists entirely of matching
contributions and profit sharing contributions to the Cytec Employees'
Savings and Profit Sharing Plan and the Cytec Supplemental Savings and
Profit Sharing Plan for 1994, 1995, and 1996.
(7) Mr. Ruibal resigned as an officer of the Company effective January 31,
1997. In connection with the termination of his employment, (i)
pursuant to the Executive Income Continuity Plan, he received
$__________, an amount equal to one year's salary and bonus, (ii) all
of his stock options were declared by the Committee to be exercisable,
(iii) his Performance Stock and Performance Cash Awards made in 1995
and 1996 were partially forfeited, (iv) receipt of his deferred stock
was accelerated, (v) he was granted a supplemental pension benefit
which is included under "Compensation Under Retirement Plans" and (vi)
he agreed to perform consulting services for the Company for two years
at a cost of $130,000 per year to the Company.
(8) The Company has adopted a Deferred Compensation Plan pursuant to which
compensation in any year which exceeds the limits imposed by Section
162(m) of the Internal Revenue Code on deductibility of compensation
which is not performance related within the meaning of that Section
will be deferred until the year following retirement or death (or upon
an earlier change of control of the Company). Amounts so deferred will
bear interest at a rate equal to the rate paid on 10-year U.S. Treasury
Notes, plus 1%. There was not any amount deferred with respect to 1996.
- 31 -
The following tabulation shows, as to the executive officers named,
information with respect to employee stock options.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Percent of Total Potential Realizable
Options/SARs Value at Assumed
Granted to Exercise Annual Rates of Stock
Options/SARs employees in Price Per Expiration Price Appreciation for
Name Granted (shares) fiscal year Share Date Option Term
---- ---------------- ----------- ----- ---- -----------
5% 10%
D. D. Fry 150,000 17.36% $25.083 02/15/06 $2,366,185 $5,996,376
J. P. Cronin 44,250 5.12% $25.083 02/15/06 $ 698,024 $1,768,931
S. M. Crum 52,500 6.08% $25.083 02/15/06 $ 828,165 $2,098,732
C. A. Ruibal 52,500 6.08% $25.083 02/15/06 $ 828,165 $2,098,732
H. Porosoff 28,500 3.30% $25.083 02/15/06 $ 449,575 $1,139,312
- -------------------------
Options become exercisable in cumulative amounts of one-third of the amount of
the grant one year after the date of grant and each year thereafter. All options
were granted without tandem stock appreciation rights. The number of shares and
option exercise prices have been adjusted for the three-for-one stock split on
July 23, 1996.
- 32 -
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
Value of
Number of Unexercised In-
Unexercised The-Money
Options/SARs Held Options/SARs at
at Fiscal Year End Fiscal Year End (3)
------------------ -------------------
Shares Acquired Value Exercis- Unexercis- Exercis- Unexercis-
Name on Exercise Realized able (2) able (2) able (2) able (2)
---- --------------- -------- -------- -------- -------- --------
D.D. Fry --- --- 346,600 398,300 $11,817,782 $10,302,646
J. P. Cronin --- --- 60,200 92,350 $ 2,023,190 $ 2,194,315
S.M. Crum --- --- 120,500 139,000 $ 4,107,705 $ 3,591,667
C. A. Ruibal --- --- 126,300 141,900 $ 4,311,913 $ 3,693,771
H. Porosoff --- --- 77,300 81,400 $ 2,648,373 $ 2,195,000
- ------------------------
(1) All options/shares are Company options/shares. None of the options were
issued with tandem stock appreciation rights.
(2) Options become exercisable in cumulative amounts of one-third of the
amount of the grant one year after the date of grant and each year
thereafter.
(3) Total value of options based on fair market value of Company stock of
$40.625 as of December 31, 1996.
- 33 -
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
Performance or
Number of Other Period Until Estimated Future
Shares, Units or Maturation or Payouts
------------------------------
Name other Rights* Payout Target Maximum
---- ------------- ------ ------ -------
D. D. Fry 12,975 3 Years 0 $ 320,000
J. P. Cronin 3,858 3 Years 0 $ 95,200
S. M. Crum 4,470 3 Years 0 $ 110,250
C. A. Ruibal 4,470 3 Years 0 $ 73,500*
H. Porosoff 2,526 3 Years 0 $ 62,300
*Adjusted for July, 1996 Stock Split.
- -------------------------
Long-term incentive plan awards are made under the Company's 1993 Plan.
Awards were made in February, 1996. The awards to which this table relates are
Performance Cash Awards for the 1998 performance period. These awards are paid
dependent upon the extent to which specified earnings targets for full vesting
of Performance Stock are exceeded for 1998 and certain additional cash flow
objectives are attained for 1997 and 1998. At target performance levels, none of
the Performance Cash vests. For 1996, the targets were exceeded to the extent
that 100% of the Performance Cash was earned and is reported under "Long Term
Incentive Payouts" in the Summary Compensation Table. Estimated Future Payouts
relate to 1998.
*See footnote 7 to Summary Compensation Table.
- 34 -
EMPLOYMENT AND SEVERANCE ARRANGEMENTS
All salaried Company employees in the United States, including the
named officers, have signed employment agreements either on Cyanamid's standard
form, which have been assigned to the Company, or on Cytec's standard form. The
agreements provide for the initial salary paid to the employee for services
performed by the employee, the confidentially and non-use of proprietary
information, assignment of inventions and improvements, a non-competition clause
and termination of employment. The notice of termination period for salaried
employees, including the named officers, ranges from one month to six months
(depending on the standard form in use at the time), except in the case of
termination for cause, when no prior notice is required.
In the event of a "change of control" (as defined in the 1993 Plan),
(i) any Award under that Plan, including non-employee directors' Awards,
carrying a right to exercise that was not previously exercisable and vested will
become fully exercisable and vested, (ii) the restrictions, deferral
limitations, payment conditions and forfeiture applicable to any other Award,
including non-employee directors' Awards, granted under the 1993 Plan will lapse
and such Awards will be deemed fully vested and (iii) any performance conditions
imposed with respect to Awards shall be deemed to be fully achieved.
The Board of Directors has adopted an executive income continuity plan
to aid in the retention of key employees and to reinforce and encourage the
continuing attention, dedication and loyalty of executives in the senior
management group without the distraction of concern over the
- 35 -
possibility of involuntary or constructive termination of employment resulting
from unforeseen developments, by providing income continuity for a limited
period. The plan provides for payments to members upon termination of
employment, unless such termination is (i) on account of death or retirement,
(ii) by the Company for disability or cause, or (iii) by the member without good
reason (as defined in the plan), generally, actions by the Company inconsistent
with the participant's status or with the Company's traditional compensation
policies. Members of the plan consist of the chairman, president, corporate vice
presidents, and such other employees as are designated by the Compensation and
Management Development Committee. In general, the plan provides for payments
upon termination of employment, in the case of the executive officers, and in
the case of other members meeting certain age and service requirements, of an
amount equal to annual salary and bonus (two times annual salary and two times
bonus after a "change in control" as defined in the plan). The plan also
provides for certain miscellaneous payments, including relocation payments,
legal fees, and expenses incurred in seeking new employment. The benefits of
this Plan are not available to any employee who is then currently eligible to
retire with a pension based on credited service to age 65 or, in any event, for
any period beyond the employee's sixty-fifth birthday.
Under the Company's Executive Supplemental Employees Retirement Plan,
in the event of a change in control, the Treasurer, the Controller and each
officer of corporate vice president rank or higher is automatically elected a
member of the plan. In this event, each such officer will be credited with five
additional years of service (but not beyond age 65), there will be included in
pensionable compensation the amount, if any, by which such officer's target
incentive compensation exceeds one third of base compensation and, under certain
conditions the value of
- 36 -
the benefit under this plan, as well as the benefit under other non-qualified
pension plans, would be paid immediately as a lump-sum distribution.
The Board of Directors has adopted a Compensation Taxation Equalization
Plan providing for the payment to any employee, officer or director who becomes
subject to the tax imposed by Section 4999 of the Internal Revenue Code of 1986
of reimbursement for the tax, plus all taxes imposed upon the reimbursement. A
20% excise tax applies to compensatory payments (i) the present value of which
equals or exceeds three times the "base amount" of the recipient, and (ii) that
are contingent upon change "in the ownership or effective control" of the
Company. The "base amount" is the average annual compensation included in
taxable income over the five-year period ending before the year during which the
change in the ownership or effective control occurs.
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE REPORT
The Compensation and Management Development Committee of the Company's
Board of Directors (the "Committee") is composed entirely of independent outside
directors. Their responsibilities include the administration of the compensation
program for the Company's executive officers, currently consisting of ten
executives. Specific duties include determining the executive salaries, setting
the performance criteria for annual and long-term incentive plans, determining
their awards under the annual incentive program, and administering the Company's
1993 Stock Award and Incentive Plan.
- 37 -
The Company's executive compensation program consists of four elements:
o Base Salary: Base compensation set to attract and retain
qualified management, when combined with the other components
of the compensation program.
o Annual Bonus: An opportunity to earn additional cash reward
for yearly business success and individual efforts.
o Performance Stock and Performance Cash: Long-term incentives
which provide a reward for business success in future years
and, being based on performance, are linked to stockholders'
interests.
o Stock Options: Grants which will encourage stock ownership and
reward executives for increases in stockholder value.
The annual bonus, performance stock and performance cash are all "at risk" forms
of compensation in that they do not become payable except to the extent that the
Company's business objectives are attained. Similarly, stock options are "at
risk" in that their value depends upon success in enhancing stockholder value.
The compensation program is designed to contribute to the viability and
long-term success of the Company by meeting the following objectives:
- 38 -
o To compensate fairly for financial and strategic success and
the enhancement of stockholder value.
o To attract and retain competent managers and professionals who
are performance- oriented.
o To reinforce a commitment to take action which will contribute
to the long-term success of the Company.
o To encourage the ownership of Cytec stock so that management's
long-term financial interests are closely linked with success
in serving the long-term interests of the Company's
stockholders.
There is strong emphasis in the compensation program on long-term
performance and success as exemplified by the program's structure. The Company's
philosophy is to maintain lower fixed costs associated with its compensation
program and correspondingly offer significant upside potential based upon
achievement of individual, financial and stock-based performance. The Company's
executive base salaries, therefore, are generally set somewhat below median
salaries paid at comparable companies. Therefore, the combination of base
salaries and annual bonus targets are also somewhat below the median at
comparable companies. The objective in setting long-term compensation,
consisting of long-term performance stock awards payable upon attainment of
target objectives and stock option grants, is to be above the median level for
comparable companies. The overall objective is to set total compensation for
target performance slightly above the median of the compensation group, with an
above-average portion of total cash compensation, including performance cash
awards and additional annual bonus, payable if target
- 39 -
performance is exceeded. As an example, for the chief executive officer ("CEO"),
at target compensation levels, more than 75% of total potential compensation is
at risk for performance.
The comparison group for compensation purposes is a group of mid-size
specialty and commodity chemical companies which the Company views as
competitors for business, employee talent and stockholder investments.
Base Salaries -- Base salaries are reviewed annually using competitive
compensation information provided by an independent nationally-recognized
executive compensation consulting firm. Increases in base salaries are granted
after considering relative competitive positions, individual performance and
general salary increases within the Company and the comparable industry group.
Annual Bonus -- The Committee determines an annual incentive target for
each officer, expressed as a percentage of base salary, also after reviewing
competitive compensation information, and also determines the amounts by which
annual bonuses will increase or decrease depending on the degree of attainment
or non-attainment of performance goals. Also, at the beginning of each year, the
Committee approves the performance goals for the officers for the year. The
goals for 1996 bonuses consisted of specific components weighted as follows:
earnings per share (50%); cash flow (25%); and other specific factors which are
measured subjectively (25%). After the end of the year, the Committee evaluates
the Company's and individuals' performances, as described above, and awards
incentive compensation based on that evaluation.
- 40 -
Long-Term Incentives -- Long-term incentives granted in 1996 and
payable in future years consist of two types of grants: (1) performance stock
(shares of Company stock) and related performance cash, which may be earned at
the end of the 1998 performance period assuming attainment of specific earnings
per share and cash flow goals set by the Committee, and (2) stock options which
encourage executives to enhance the value of the Company's Common Stock by
offering them an opportunity to buy the shares at a pre-set price over the term
of the option contract. The Committee determines for each officer the amount and
proportion of each type of long-term incentive after reviewing competitive
information.
Performance stock is the Company's Common Stock registered in the
executive's name, carrying dividends (if declared) and voting rights, but
restricted from resale until earned by achievement of performance targets, and
forfeited if performance targets are not achieved during the performance period.
The performance stock grants are accompanied by related grants of performance
cash, which become payable only if the targets for full performance stock
vesting are exceeded.
CEO Compensation -- In 1996 the Committee took the following actions
regarding the compensation of Cytec's CEO, Darryl D. Fry. Mr. Fry's salary was
increased from $450,000 to $480,000, and his target bonus was increased by three
percentage points so that it is now equal to 60% of his salary. Both salary and
target bonus are below the competitive median, based upon the competitive data.
The annual bonus target for Mr. Fry is designed, in combination with his salary,
to provide compensation which, at target levels, is below-median against the
group, with the opportunity to earn additional annual bonus if certain
performance objectives are exceeded.
- 41 -
Based upon the level of achievement of the Company's earnings, cash flow and
other factors weighted as described earlier in this report, the Committee
awarded Mr. Fry an annual bonus of $587,520, which is 122.4% of his base salary.
In 1996 Mr. Fry was awarded a stock option award, a performance stock
award, and a related performance cash award. In the aggregate, these grants were
believed to be above the median levels for comparable companies. Based upon the
level of earnings and cash flow achieved in 1996, the performance stock and cash
previously awarded to Mr. Fry for 1996 performance was earned at the maximum
level.
Tax-Deductibility of Compensation -- The Committee's policy on the tax
deductibility of compensation for the CEO and other executive officers is to
maximize the deductibility, to the extent possible and under normal conditions,
while preserving the Committee's flexibility to maintain competitive
compensation programs and to deal with extraordinary situations. Some
compensation may be mandatorily deferred if it is not currently deductible, and
in other cases affected executives may be encouraged to elect deferral of
compensation that would not be currently deductible. All executive compensation
paid and awarded in 1996 is expected to be fully tax deductible either currently
or in the future by the Company under the Revenue Reconciliation Act of 1993. In
order to assist the Committee in structuring programs which are tax deductible,
amendments to the 1993 Stock Award and Incentive Plan are being submitted for
stockholder approval.
- 42 -
The Committee believes that the compensation program established for
the Company has contributed to retaining and motivating highly qualified
management personnel, and to the significant increases in shareholder value
achieved by the Company during the past three years.
Compensation and Management Development Committee
F. W. Armstrong, Chairman
G. A. Burns January 27, 1997
J. R. Satrum
- 43 -
PERFORMANCE GRAPH
The graph set forth below is based on the assumption that $100 had been
invested in the Company's Common Stock and in each index on December 31, 1993,
with reinvestment of dividends at market prices. The total cumulative dollar
returns represent the value such investments would have had on December 31,
1996.
Cytec Industries Inc.
Three-Year Cumulative Total Stockholder Return
----------------------------------------------------------------
$1,000 --| |
|---------------------------------------------------------o----|
$ 900 --| |
|--------------------------------------------------------------|
$ 800 --| |
$ |--------------------------------------------------------------|
$ 700 --| |
D |--------------------------------------------------------------|
O $ 600 --| |
L |--------------------------------------------------------------|
L $ 500 --| |
A |-------------------------------------o------------------------|
R $ 400 --| |
S |--------------------------------------------------------------|
$ 300 --| o |
|--------------------------------------------------------------|
$ 200 --| |_|x|
|------------------------------------|_|x----------------------|
$ 100 --o|_|x |_|x |
----------------------------------------------------------------
12/31/93 12/31/94 12/31/95 12/31/96
----------------------------------------------
| o Cytec |_| S&P 500 x S&P Chemicals |
----------------------------------------------
------------------------------------------------------------------------
| | 12/31/93 | 12/31/94 | 12/31/95 | 12/31/96 |
|-------------------|------------|-----------|------------|------------|
| Cytec | $100.0 | $294.3 | $470.7 | $919.7 |
|-------------------|------------|-----------|------------|------------|
| S&P 500 | $100.0 | $101.4 | $139.3 | $171.2 |
|-------------------|------------|-----------|------------|------------|
| S&P Chemicals | $100.0 | $115.8 | $151.2 | $199.6 |
------------------------------------------------------------------------
- 44 -
The Common Stock of the Company began "when issued" trading on December
22, 1993 and "regular-way" trading on January 25, 1994. Accordingly, it is not
possible to include in the performance graph a comparison of the yearly
percentage change in the Company's cumulative total stockholder return with
indexes for 1993. The high and low prices in 1993 on a "when issued" basis were
$4.66 per share on December 22, 1993, the first day on which the stock traded,
and $4.50 per share and $4.42 per share, respectively, on December 30, 1993, the
last day on which the stock traded (all figures are adjusted for the July, 1996
stock split).
COMPENSATION UNDER RETIREMENT PLANS
The Cytec employees' retirement program provides Cytec employees,
including the officers named in the Summary Compensation Table, with an annual
defined pension benefit upon retirement which is made up of the sum of three
components: (i) a benefit which, in general, is equal to 1.67% of the retiree's
average base salary plus actual annual bonus (up to one-third of base salary)
during the highest five of the last ten years of service (but not beyond the
year 2003) times the number of years of service at Cyanamid, subject to certain
adjustments including a social security offset, plus (ii) a benefit which, in
general, is equal to 1.33% of the retiree's base salary plus actual annual bonus
(up to one-third of base salary) for each year of service at Cytec (for any
Cytec employee whose pension calculated as provided in (i) and (ii) above would
exceed the limit on benefits payable from a pension plan qualified under the
Internal Revenue Code, such excess is payable from the general funds of the
Company), plus (iii) for persons whom the Compensation and Management
Development Committee has elected to membership in the Executive
- 45 -
Supplemental Employees Retirement Plan, in case of retirement on or after age 60
(or earlier in certain circumstances) a supplemental benefit (also payable from
general funds of the Company) calculated by (x) determining the benefit under
the formula under (i) above based on the highest three of the last ten years of
service and utilizing target bonus (not limited to one third of base salary)
instead of actual bonus and (y) crediting to the retiree additional years of
service under the formula described in (ii) above (but not more than five and
not beyond age 65) at a rate of compensation equal to base salary plus target
bonus for the final year of actual service.
The estimated annual pensions payable under this program upon
retirement at age 65 and reflecting the normal form of benefit which includes a
50% joint and survivor annuity in favor of the retiree's spouse to the five
officers named in the Summary Compensation Table, based upon their current
salaries and annual bonuses, with years of actual service projected to age 65
(or in the case of Mr. Ruibal, to actual retirement date) are: Mr. Cronin,
$__________; Mr. Crum, $__________; Mr. Fry, $__________; Mr. Porosoff,
$__________; and Mr. Ruibal,
$__________.
COMPENSATION OF DIRECTORS
Directors who are employees or who are elected by the holders of
Preferred Stock are not entitled to extra compensation by reason of their
directorships or their attendance at meetings of the Board of Directors of the
Company, any committee thereof, or of the stockholders. Directors who are not
employees of the Company or of any of its subsidiaries (provided that they are
not
- 46 -
elected by the holders of Preferred Stock) are paid a retainer of $20,000 per
year. Such directors also receive annual retainers while chairmen ($3,000) or
members ($1,500) of committees of the Board of Directors of the Company on which
such directors serve. Each such director is also paid a fee of $1,500 for
attendance at a meeting of the Board of Directors and stockholders of the
Company and a fee of $2,000 (in the case of Committee Chairman) or $1,000 (in
the case of other Committee members) for attending committee meetings.
Pursuant to the 1993 Plan, the original non-employee directors (for
purposes of the 1993 Plan, a non-employee director does not include any employee
of the Company or its subsidiaries or affiliates or any director elected by the
holders of the Preferred Stock) received a grant of 7,500 restricted shares of
Common Stock. Each non-employee director who thereafter is elected to serve as a
director of the Company for the first time, will automatically receive a grant
of restricted shares of Common Stock equal to the lesser of (a) 7,500 shares and
(b) the nearest number of whole shares determined by multiplying 7,500 by a
fraction the numerator of which is the fair market value of the Common Stock
upon which the initial grants to non-employee directors were made and the
denominator of which is the fair market value of the Common Stock on the date on
which the director is duly elected and qualified. The restrictions on the shares
of Common Stock granted to non-employee directors will lapse one-fifth each year
over a five-year period commencing on the date of grant if the non-employee
director continues to be a director of the Company on each such date. If a
non-employee director's service on the Board terminates before the award is
entirely vested, any portion of the award that is not vested will revert to the
Company; provided, however, that if the non-employee director's service
terminates by reason of death or disability (as defined in the 1993 Plan), then
any installment with respect to which the
- 47 -
grantee had commenced (but not completed) serving the requisite amount of time
to vest in such installment, will become vested. If a director elects to defer
vesting until the year following his or her 70th birthday, as permitted by the
1993 Plan, then during the extended deferral period there exist certain
additional grounds upon which reversion can be waived. In addition, each
original non-employee director has received a grant of options to purchase 4,500
shares of Common Stock. Each non-employee director who is elected in the future
to serve as a director of the Company for the first time will, at the time such
director is elected and duly qualified, automatically receive an option to
purchase 4,500 shares of Common Stock. In addition, on the date of each annual
meeting of stockholders, each continuing non-employee director will
automatically receive an option to purchase 4,500 shares of Common Stock, unless
the Board acts to reduce the number of shares. Such options will have an
exercise price per share equal to the fair market value of a share of Common
Stock on the date of grant. Generally, options granted to a non-employee
director will become exercisable as to one-third of the shares covered by such
options on the first anniversary of the date of grant, and with respect to an
additional one-third of the shares covered by such options on each of the next
two succeeding anniversaries of the date of grant if the optionee continues to
be a director of the Company on each such date. All options held by non-employee
directors, to the extent exercisable but not exercised, expire on the earlier of
(i) the tenth anniversary of the date of grant or (ii) three years following the
optionee's termination of his or her directorship with the Company. Upon the
occurrence of a "Change in Control" (as defined in the 1993 Plan), all
outstanding options held by non-employee directors will become immediately
exercisable and all restricted stock awards will become immediately
nonforfeitable in full.
- 48 -
Other personal benefit-type compensation for the entire group of
directors and officers is not individually significant or reportable.
The Company has entered into a Deferred Compensation Agreement with Mr.
F. W. Armstrong, pursuant to which receipt of his retainer and attendance fee
amounts is deferred until the year after his 70th birthday or until an earlier
change of control of the Company. Amounts so deferred will bear interest at a
rate equal to the rate paid on ten-year U.S. Treasury Notes, plus 1%. Vesting of
Mr. Armstrong's Restricted Stock is also deferred until the same time, and is
conditioned upon his continuing to serve as a director until such time, subject
to certain exceptions.
INFORMATION CONCERNING INDEPENDENT PUBLIC ACCOUNTANTS
The independent certified public accounting firm of KPMG Peat Marwick
LLP has audited the Company's accounts for the fiscal year ended December 31,
1996. The audit services include examination of annual financial statements and
review of quarterly financial information. A representative of KPMG Peat Marwick
LLP is expected to be present at the meeting, and will have an opportunity to
make a statement and to respond to appropriate questions. The Board of Directors
expects to select the independent certified public accounting firm for the 1997
fiscal year at its June meeting.
TIMELY SUBMISSION OF STOCKHOLDER PROPOSALS
It is anticipated that the 1998 annual meeting of stockholders will be
held on May 7, 1998. Proposals which stockholders intend to present at such
meeting must be received by the Company
- 49 -
at its executive offices in West Paterson, New Jersey, by November 22, 1997, for
inclusion in its notice, proxy statement and proxy relating to that meeting. In
addition, the Company's By-Laws provide that in order for any business not
specified in the notice of meeting to be properly brought before a stockholders'
meeting by a stockholder, the stockholder must have given written notice to the
Secretary of the Company which must be received at the principal office of the
Company not less than 60 nor more than 90 days prior to the meeting. (If less
than 75 days notice or public disclosure of the date of the meeting was given,
then such notice must be received by the close of business on the 15th day
following the date of notice or public disclosure of the date of the meeting).
The notice must describe the business desired to be brought before the meeting,
the name, record address and number and class and series of shares owned by the
stockholder and any material interest of the stockholder in such business.
ATTENDANCE AT ANNUAL MEETING
The 1997 Annual Meeting of Stockholders will be held at 11:00 a.m. on
May 12, 1997 at the Sheraton Crossroads Hotel, One International Boulevard
[revise], Mahwah, NJ 07495. Admission to the meeting is limited to stockholders
of the Company or their designated representatives. One admission ticket to the
meeting is attached to each proxy used. If you intend to attend the meeting,
please detach and retain the admission ticket and check the "will attend" box on
the form of proxy itself to validate the admission ticket. Only ticket-holders
will be admitted to the Annual Meeting.
- 50 -
OTHER MATTERS
The management knows of no further business intended to be presented to
the meeting, but if any further business properly comes before the meeting, the
persons named in the enclosed form of proxy will vote all proxies in accordance
with their best judgment.
E. F. Jackman
Secretary
- 51 -
EXHIBIT I
CYTEC INDUSTRIES INC.
1993 STOCK AWARD AND INCENTIVE PLAN
1. Purpose; Types of Awards; Construction.
The purpose of the 1993 Stock Award and Incentive Plan of
Cytec Industries Inc., as amended (the "Plan"), is to afford an incentive to
selected employees, prospective employees, non-employee Directors and
independent contractors of Cytec Industries Inc., or any Subsidiary or Affiliate
which now exists or hereafter is organized or acquired, to acquire a proprietary
interest in the Company, to continue as, or become, employees, directors, or
independent contractors, as the case may be, to increase their efforts on behalf
of the Company and to promote the success of the Company's business. Pursuant to
Section 6 of the Plan, there may be granted Stock Options (including "incentive
stock options" and "nonqualified stock options"), stock appreciation rights and
limited stock appreciation rights (either in connection with options granted
under the Plan or independently of options), restricted stock, restricted stock
units, interest equivalents, dividend equivalents, deferred cash awards,
deferred stock awards, and other stock-based or cash-based awards. The Plan is
intended to satisfy the requirements of Rule 16b-3 promulgated under Section 16
of the Exchange Act and shall be interpreted in a manner consistent with the
requirements thereof.
2. Definitions.
For purposes of the Plan, the following terms shall be defined
as set forth below:
(a) "Affiliate" means any entity if, at the time of
granting of an Award, (i) the Company, directly or indirectly, owns at least 20%
of the combined voting power of all classes of stock of such entity or at least
20% of the ownership interests in such entity or (ii) such entity, directly or
indirectly, owns at least 20% of the combined voting power of all classes of
stock of the Company.
(b) "Award" means any Option, SAR (including a
Limited SAR), Restricted Stock, Restricted Stock Unit, Interest Equivalent,
Dividend Equivalent, Deferred Cash Award, Deferred Stock Award, Director's
Restricted Stock, or Other Stock-Based Award or other Cash-Based Award granted
under the Plan.
(c) "Award Agreement" means any written agreement,
contract, grant letter, resolution of the Committee, or other instrument,
document or resolution evidencing an Award.
I-1
(d) "Beneficiary" means the person, persons, trust
or trusts which have been designated by a Grantee in his or her most recent
written beneficiary designation filed with the Company to receive the benefits
specified under the Plan upon his or her death, or, if there is no designated
Beneficiary or surviving designated Beneficiary, then the person, persons, trust
or trusts entitled by will or the laws of descent and distribution to receive
such benefits.
(e) "Board" means the Board of Directors of the
Company.
(f) "Change in Control" means a change in control
of the Company which will be deemed to have occurred if:
(i) any "person," as such term is used in
Sections 13(d) and 14(d) of the Exchange Act (other than (1) the Company, (2)
any trustee or other fiduciary holding securities under an employee benefit plan
of the Company, or (3) any corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of Stock), is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 50% or more of the combined voting power of the Company's
then outstanding voting securities; or
(ii) during any period of two consecutive
years, individuals who at the beginning of such period constitute the Board, and
any new director (other than a director designated by a person who has entered
into an agreement with the Company to effect a transaction described in clause
(i), (iii), or (iv) of this Section 2(f)) whose election by the Board or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute at least
a majority thereof; or
(iii) the stockholders of the Company
approve a merger or consolidation of the Company with any other corporation,
other than (A) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving or parent entity) 50% or more of the combined voting
power of the voting securities of the Company or such surviving or parent entity
outstanding immediately after such merger or consolidation or (B) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no "person" (as hereinabove defined) acquired 50%
or more of the combined voting power of the Company's then outstanding
securities; or
I-2
(iv) the stockholders of the Company approve
a plan of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets
(or any transaction having a similar effect).
(g) "Change in Control Price" means the higher of
(i) the highest price per share paid in any transaction constituting a Change in
Control or (ii) the highest Fair Market Value per share at any time during the
60-day period preceding or following a Change in Control.
(h) "Code" means the Internal Revenue Code of 1986,
as amended from time to time.
(i) "Committee" means the committee consisting of
directors who are appointed by the Board to administer the Plan, the composition
of which shall at all times satisfy the provisions of Rule 16b-3 and Section
162(m) of the Code.
(j) "Common Stock Account" means the common stock
account established in the name of an employee or independent
contractor, as specified in Section 6(h).
(k) "Company" means Cytec Industries Inc., a
corporation organized under the laws of the State of Delaware, or
any successor corporation.
(l) "Deferred Cash Account" means the deferred cash
account established in the name of an employee or independent
contractor, as specified in Section 6(h).
(m) "Deferred Cash Award" means any Award of cash
made pursuant to Section 6(h) which is to be credited to a Deferred Cash Account
and paid in the future.
(n) "Deferred Stock Award" means any Award of Stock
made pursuant to Section 6(h) which is to be credited to a Common Stock Account
and paid in the future.
(o) "Dividend Equivalent" means a right, granted to
a Grantee under Section 6(g), to receive cash, Stock, or other property equal in
value to dividends paid with respect to a specified number of shares of Stock.
Dividend Equivalents may be awarded on a free-standing basis or in connection
with another Award, and may be paid currently or on a deferred basis.
(p) "Exchange Act" means the Securities Exchange Act
of 1934, as amended from time to time, and as now or hereafter construed,
interpreted and applied by regulations, rulings and cases.
(q) "Fair Market Value" means, with respect to Stock
or other property, the fair market value of such Stock or other property
determined by such methods or procedures as shall be established (except as
provided below) from time to time by the Committee in its sole discretion.
Unless otherwise determined by
I-3
the Committee, the per share Fair Market Value of Stock as of a particular date
shall mean (i) the closing sales price per share of Stock on the national
securities exchange on which the Stock is principally traded, for the last
preceding date on which there was a sale of such Stock on such exchange (or, if
there is no such preceding date, on the first succeeding date), or (ii) if the
shares of Stock are then traded in an over-the-counter market, the average of
the closing bid and asked prices for the shares of Stock in such
over-the-counter market for the last preceding date on which there was a sale of
such Stock in such market, or (iii) if the shares of Stock are not then listed
on a national securities exchange or traded in an over-the counter market, such
value as the Committee, in its sole discretion, shall determine. For purposes of
Sections 8 and 9, only, of this Plan, the per share Fair Market Value of Stock
as of a particular date shall mean (i) the closing sales price per share of
Stock on the national securities exchange on which the Stock is principally
traded, for the last preceding date on which there was a sale of such Stock on
such exchange, or (ii) if the shares of Stock are then traded in an
over-the-counter market, the average of the closing bid and asked prices for the
shares of Stock in such over-the-counter market for the last preceding date on
which there was a sale of such Stock in such market.
(r) "Grantee" means a person who, (i) as an employee
or independent contractor of the Company, a Subsidiary or an Affiliate, or (ii)
as a Non-Employee Director of the Company, has been granted an Award under the
Plan.
(s) Interest Equivalents means a right granted to a
Grantee under Section 6(g) to receive cash, which may be deferred or paid
currently, equal to the interest which would be earned on a specified amount of
money, including money deferred in a Deferred Cash Account. Interest Equivalents
may be awarded on a free-standing basis or in connection with another Award, and
may be paid currently or on a deferred basis. Unless the Committee otherwise
provides to the contrary or except as otherwise provided in the Plan, Interest
Equivalents paid on a deferred basis will be compounded on a quarterly basis.
(t) "ISO" means any Option intended to be, and
designated as, an incentive stock option within the meaning of
Section 422 of the Code.
(u) "Limited SAR" means a right granted pursuant to
Section 6(c) which shall, in general, be automatically exercised for cash upon a
Change in Control.
(v) "Non-Employee Director" means a member of the
Board of Directors who is neither (i) an employee of the Company, a Subsidiary
or Affiliate nor (ii) a person elected to the Board of Directors by the holders
of the Corporation's Series C Cumulative Preferred Stock.
I-4
(w) "NQSO" means any Option that is designated as a
nonqualified stock option.
(x) "Option" means a right, granted to a Grantee
under Section 6(b) or Section 8, to purchase shares of Stock. An Option may be
either an ISO or an NQSO, provided that an ISO may not be granted to independent
contractors or Non-Employee Directors.
(y) "Other Cash-Based Award" means cash awarded
under Section 6(i), including cash awarded as a bonus or upon the attainment of
specified performance criteria or otherwise as permitted under the Plan.
(z) "Other Stock-Based Award" means a right or other
interest granted to a Grantee under Section 6(i) that may be denominated or
payable in, valued in whole or in part by reference to, or otherwise based on,
or related to, Stock, including, but not limited to (1) unrestricted Stock
awarded as a bonus or upon the attainment of specified performance criteria or
otherwise as permitted under the Plan and (2) a right granted to a Grantee to
acquire Stock from the Company for cash and/or a promissory note containing
terms and conditions prescribed by the Committee.
(aa) "Performance Goals" shall have the meaning
specified in Section 6A(c) of the Plan.
(bb) "Performance Measures" means the performance
measures set forth as Exhibit A to the Plan, as provided in Section
6A(c) of the Plan.
(cc) "Plan" means this Cytec Industries Inc. 1993
Stock Award and Incentive Plan, as amended from time to time.
(dd) "Restricted Stock" means an Award of shares of
Stock to a Grantee under Section 6(d), including Stock that may be designated as
performance stock, that may be subject to certain restrictions and to a risk of
forfeiture.
(ee) "Restricted Stock Unit" means a right granted
to a Grantee under Section 6(e) to receive Stock or cash at the end of a
specified deferral period, which right may be conditioned on the satisfaction of
specified performance or other criteria.
(ff) "Rule 16b-3" means Rule 16b-3, as from time to
time in effect, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act, including any successor to such Rule.
(gg) "Stock" means shares of the common stock, par
value $.01 per share, of the Company.
I-5
(hh) "SAR" or "Stock Appreciation Right" means the
right, granted to a Grantee under Section 6(c), to be paid an amount measured by
the appreciation in the Fair Market Value of Stock from the date of grant to the
date of exercise of the right, with payment to be made in cash, Stock, or
property as specified in the Award or determined by the Committee.
(ii) "Subsidiary" means any entity in an unbroken
chain of entities beginning with the Company if, at the time of granting of an
Award, each of the entities (other than the last entity in the unbroken chain)
owns stock or other indicia of ownership possessing 50% or more of the total
combined voting power of all classes of stock or other indicia of ownership in
one of the other entities in the chain.
3. Administration.
The Plan shall be administered by the Committee; provided that
such administrative authority shall not extend to Section 8 ("Non-Employee
Director Options") or Section 9 ("Non-Employee Director Restricted Stock"), the
intent being that, as to the Awards made under those Sections, this Plan shall
constitute a formula plan. The Committee shall have the authority in its
discretion, subject to and not inconsistent with the express provisions of the
Plan (including the preceding sentence), to administer the Plan and to exercise
all the powers and authorities either specifically granted to it under the Plan
or necessary or advisable in the administration of the Plan, including, without
limitation, the authority to grant Awards; to determine the persons to whom and
the time or times at which Awards shall be granted; to determine the type and
number of Awards to be granted, the number of shares of Stock to which an Award
may relate and the terms, conditions, restrictions and performance criteria
relating to any Award; to certify as to the extent to which any performance
criteria have been attained; and to determine whether, to what extent, and under
what circumstances an Award may be settled, canceled, forfeited, exchanged, or
surrendered; to make adjustments in the terms and conditions of, and the
criteria and performance objectives (if any) included in, Awards in recognition
of unusual or non-recurring events affecting the Company or any Subsidiary or
Affiliate or the financial statements of the Company or any Subsidiary or
Affiliate, or in response to changes in applicable laws, regulations, or
accounting principles; to designate Affiliates; to construe and interpret the
Plan and any Award; to prescribe, amend and rescind rules and regulations
relating to the Plan; to determine the terms and provisions of the Award
Agreements (which need not be identical for each Grantee); and to make all other
determinations deemed necessary or advisable for the administration of the Plan.
The Committee may appoint a chairman and a secretary and may
make such rules and regulations for the conduct of its business as it shall deem
advisable, and shall keep minutes of its meetings. All determinations of the
Committee shall be made by a majority of its members either present in person or
participating by conference
I-6
telephone at a meeting or by written consent. All decisions, determinations and
interpretations of the Committee shall be final and binding on all persons,
including the Company, and any Subsidiary, Affiliate or Grantee (or any person
claiming any rights under the Plan from or through any Grantee) and any
stockholder. The Committee may delegate to one or more of its members or to one
or more agents such administrative duties as it may deem advisable, and the
Committee or any person to whom it has delegated duties as aforesaid may employ
one or more persons to render advice with respect to any responsibility the
Committee or such person may have under the Plan. The Committee may, upon such
terms and conditions and with such limitations as it deems appropriate, delegate
to the Chief Executive Officer, any Committee of the Board of Directors or the
Executive Committee authority to make Awards (and determine the terms of such
Awards) to persons who are not officers of the Company (assistant officers not
being considered officers for such purpose); provided that all such Awards shall
be reported to the Committee and (except in the case of such Awards made by a
Committee of the Board) shall be revoked unless ratified by the Committee.
No member of the Board or Committee shall be liable for any
action taken or determination made in good faith with respect to the Plan or any
Award granted hereunder.
4. Eligibility.
Awards may be granted to selected employees and independent
contractors of the Company and its present or future Subsidiaries and
Affiliates, in the discretion of the Committee. In determining the persons to
whom Awards shall be granted and the type of any Award (including the number of
shares to be covered by such Award), the Committee shall take into account such
factors as the Committee shall deem relevant in connection with accomplishing
the purposes of the Plan. Awards to Non-Employee Directors shall be solely in
the form of NQSOs and Restricted Stock, which shall be subject to the provisions
of Section 8 and 9 of the Plan.
5. Stock Subject to the Plan.
The maximum number of shares of Stock reserved for the grant
of Awards under the Plan shall be (i) prior to the July 1996 three-for-one stock
split, four million three hundred thousand (4,300,000) shares of Stock, subject
to adjustment as provided herein and (ii) after, and in order to adjust for,
said stock split, twelve million nine hundred thousand (12,900,000) shares of
Stock; provided that in order to determine the number of shares of Stock
remaining available under the Plan after said stock split, each of the following
events occurring on or prior to the July 2, 1996 record date of the stock split
(or the July 23, 1996 distribution date in the case of Option exercises) shall
be deemed to involve three times the number of shares of Stock that were
actually involved: (x) grants, exercises and forfeitures of Options; (y) grants,
vesting and forfeitures of Restricted Stock
I-7
(including performance stock and Director's Restricted Stock); and (z) grants
and forfeitures of Deferred Stock Awards.
The shares reserved for Awards under the Plan may, in whole or
in part, be authorized but unissued shares or shares that shall have been or may
be reacquired by the Company in the open market, in private transactions or
otherwise. If any shares subject to an Award are forfeited, canceled, exchanged
or surrendered or if an Award otherwise terminates or expires without a
distribution of shares to the Grantee, the shares of stock with respect to such
Award shall, to the extent of any such forfeiture, cancellation, exchange,
surrender, termination or expiration, again be available for Awards under the
Plan; provided that, in the case of forfeiture, cancellation, exchange or
surrender of shares of Restricted Stock or Restricted Stock Units with respect
to which dividends or Dividend Equivalents have been paid or accrued, the number
of shares with respect to such Awards shall not be available for Awards
hereunder unless, in the case of shares with respect to which dividends or
Dividend Equivalents were accrued but unpaid, or in the case of shares with
respect to which a stock split in the form of a stock dividend was paid, such
dividends and Dividend Equivalents are also forfeited, canceled, exchanged or
surrendered. Upon the exercise of any Award granted in tandem with any other
Awards or Awards, such related Award or Awards shall be canceled to the extent
of the number of shares of Stock as to which the Award is exercised and,
notwithstanding the foregoing, such number of shares shall no longer be
available for Awards under the Plan.
In the event that the Committee shall determine that any
dividend or other distribution (whether in the form of cash, Stock, or other
property), recapitalization, Stock split, reverse split, reorganization, merger,
consolidation, spinoff, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the Stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of Grantees under the Plan, then the Committee shall make such equitable
changes or adjustments as it deems necessary or appropriate to any or all of (i)
the number and kind of shares of Stock which may thereafter be issued in
connection with Awards, (ii) the number and kind of shares of Stock issued or
issuable in respect of outstanding Awards, and (iii) the exercise price, grant
price, or purchase price relating to any Award; provided that, with respect to
ISOs, such adjustment shall be made in accordance with Section 424(h) of the
Code and; provided , further, that in the case of Awards under Sections 8 and 9,
equitable changes or adjustments of the types specified in clauses (i), (ii) and
(iii) above shall be made.
6. Specific Terms of Awards.
(a) General. The term of each Award shall be for
such period as may be determined by the Committee. Subject to the terms of the
Plan and any applicable Award Agreement, payments to be made by the Company or a
Subsidiary or Affiliate upon the grant, maturation, or exercise of an Award may
be made in such forms as
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the Committee shall determine at the date of grant or thereafter, including,
without limitation, cash, Stock, or other property, and may be made in a single
payment or transfer, in installments, or on a deferred basis. The Committee may
make rules relating to installment or deferred payments with respect to Awards,
including the rate of interest to be credited with respect to such payments. In
addition to the foregoing, the Committee may impose on any Award or the exercise
thereof, at the date of grant or thereafter, such additional terms and
conditions, not inconsistent with the provisions of the Plan, as the Committee
shall determine. The authority given to the Committee under this Section 6 is,
however, subject to Section 6A of this Plan in the case of Awards to Officers as
defined in Section 6A.
(b) Options. The Committee is authorized to grant
Options to Grantees on the following terms and conditions:
(i) Type of Award. The Award Agreement
evidencing the grant of an Option under the Plan shall designate the Option as
an ISO or an NQSO.
(ii) Exercise Price. The exercise price per
share of Stock purchasable under an Option shall be not less than the Fair
Market Value of a share on the date of the grant of such Option; provided that
in no event shall the exercise price for the purchase of shares be less than par
value. The exercise price for Stock subject to an Option may be paid in cash or
(if so permitted by the Committee or if so provided in the Award Agreement) by
an exchange of Stock previously owned by the Grantee, or a combination of both,
in an amount having a combined value equal to such exercise price. A Grantee may
also elect to pay all or a portion of the aggregate exercise price by having
shares of Stock with a Fair Market Value on the date of exercise equal to the
aggregate exercise price (i) withheld by the Company, if so permitted by the
Committee or so provided in the Award Agreement, or (ii) sold by a broker-dealer
under circumstances meeting the requirements of 12 C.F.R. ss.220 or any
successor thereof.
(iii) Term and Exercisability of Options.
The date on which the Committee adopts a resolution expressly granting an Option
shall be considered the day on which such Option is granted, unless the
Committee shall determine that the Option shall be granted effective as of a
specified date in the future, in which case such specified future date shall be
considered the day on which such Option is granted. Options shall be exercisable
over the exercise period (which shall not exceed ten years from the date of
grant), at such times and upon such conditions as the Committee may determine,
as reflected in the Award Agreement; provided that, the Committee shall have the
authority to accelerate the exercisability of any outstanding Option at such
time and under such circumstances as it, in its sole discretion, deems
appropriate. An Option may be exercised to the extent of any or all full shares
of Stock as to which the Option has become exercisable, by giving written notice
of such exercise to the Committee or its designated agent.
I-9
(iv) Termination of Employment, etc. An
Option may not be exercised unless the Grantee is then in the employ of, or then
maintains an independent contractor relationship with, the Company or a
Subsidiary or an Affiliate (or a company or a parent or subsidiary company of
such company issuing or assuming the Option in a transaction to which Section
424(a) of the Code applies), and unless the Grantee has remained continuously so
employed, or continuously maintained such relationship, since the date of grant
of the Option; provided that, the Award Agreement may contain provisions
extending the exercisability of Options to a date not later than the expiration
date of such Option.
(v) Maximum Number of Shares. Options may
not be granted hereunder to any one person in any ten-year period in an amount
greater than fifteen (15%) percent of the total number of shares of Stock
originally available for grant of Awards under this Plan (i.e. not more than 15%
of 12,900,000 after giving effect to the stock split; and for purposes of
calculating this 15% figure, Options granted to any Grantee prior to July 23,
1996 shall be deemed to have been tripled).
(vi) Other Provisions. Options may be
subject to such other conditions including, but not limited to, restrictions on
transferability of the shares acquired upon exercise of such Options, as the
Committee may prescribe in its discretion.
(c) SARs and Limited SARs. The Committee
is authorized to grant SARs and Limited SARs to Grantees on the
following terms and conditions:
(i) In General. Unless the Committee
determines otherwise, an SAR or a Limited SAR (1) granted in tandem with an NQSO
may be granted at the time of grant of the related NQSO or at any time
thereafter or (2) granted in tandem with an ISO may only be granted at the time
of grant of the related ISO. An SAR or Limited SAR granted in tandem with an
Option shall be exercisable only to the extent the underlying Option is
exercisable.
(ii) SARs. An SAR shall confer on the
Grantee a right to receive with respect to each share subject thereto, upon
exercise thereof, the excess of (1) the Fair Market Value of one share of Stock
on the date of exercise over (2) the grant price of the SAR (which in the case
of an SAR granted in tandem with an Option shall be equal to the exercise price
of the underlying Option, and which in the case of any other SAR shall be such
price as the Committee may determine).
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(iii) Limited SARs. A Limited SAR shall
confer on the Grantee a right to receive with respect to each share subject
thereto, automatically upon the occurrence of a Change in Control, an amount
equal to the excess of (1) the Change in Control Price (or in the case of a
Limited SAR granted in tandem with an ISO, the Fair Market Value of one share on
the date of such Change in Control) over (2) the grant price of the Limited SAR
(which in the case of a Limited SAR granted in tandem with an Option shall be
equal to the exercise price of the underlying Option, and which in the case of
any other Limited SAR shall be such price as the Committee determines).
(d) Restricted Stock. The Committee is authorized
to grant Restricted Stock (which may be designated as "performance stock") to
Grantees on the following terms and conditions:
(i) Issuance and Restrictions. Restricted
Stock shall be subject to such restrictions on transferability and other
restrictions, if any, as the Committee may impose at the date of grant or
thereafter, which restrictions may lapse separately or in combination at such
times, under such circumstances, in such installments, or otherwise, as the
Committee may determine. Except to the extent restricted under the Award
Agreement relating to the Restricted Stock, a Grantee granted Restricted Stock
shall have all of the rights of a stockholder including, without limitation, the
right to vote Restricted Stock and the right to receive dividends thereon.
(ii) Forfeiture. Upon termination of
employment or termination of the independent contractor relationship during the
applicable restriction period, Restricted Stock and any accrued but unpaid
dividends or Dividend Equivalents that are at that time subject to restrictions
shall be forfeited; provided that, the Committee may provide, by rule or
regulation or in any Award Agreement, or may determine in any individual case,
that restrictions or forfeiture conditions relating to Restricted Stock will be
waived in whole or in part in the event of terminations resulting from specified
causes, and the Committee may in other cases waive in whole or in part the
forfeiture of Restricted Stock.
(iii) Certificates for Stock. Restricted
Stock granted under the Plan may be evidenced in such manner as the Committee
shall determine. If certificates representing Restricted Stock are registered in
the name of the Grantee, such certificates shall bear an appropriate legend
referring to the terms, conditions, and restrictions applicable to such
Restricted Stock, and/or the Company shall retain physical possession of the
certificate.
(iv) Dividends. Dividends paid on
Restricted Stock shall be either paid at the dividend payment date, or deferred
for payment to such date as determined by the Committee, in cash or in shares of
unrestricted Stock having a Fair Market Value equal to the amount of such
dividends. Stock distributed in
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connection with a stock split or stock dividend, and other property distributed
as a dividend, shall be subject to restrictions and a risk of forfeiture to the
same extent as the Restricted Stock with respect to which such Stock or other
property has been distributed.
(e) Restricted Stock Units. The Committee is
authorized to grant Restricted Stock Units to Grantees, subject to the following
terms and conditions:
(i) Award and Restrictions. Delivery of
Stock or cash, as determined by the Committee, will occur upon expiration of the
deferral period specified for Restricted Stock Units by the Committee. In
addition, Restricted Stock Units shall be subject to such restrictions as the
Committee may impose, at the date of grant or thereafter, which restrictions may
lapse at the expiration of the deferral period or at earlier or later specified
times, separately or in combination, in installments or otherwise, as the
Committee may determine.
(ii) Forfeiture. Upon termination of
employment or termination of the independent contractor relationship during the
applicable deferral period or portion thereof to which forfeiture conditions
apply, or upon failure to satisfy any other conditions precedent to the delivery
of Stock or cash to which such Restricted Stock Units relate, all Restricted
Stock Units that are then subject to deferral or restriction shall be forfeited;
provided that, the Committee may provide, by rule or regulation or in any Award
Agreement, or may determine in any individual case, that restrictions or
forfeiture conditions relating to Restricted Stock Units will be waived in whole
or in part in the event of termination resulting from specified causes, and the
Committee may in other cases waive in whole or in part the forfeiture of
Restricted Stock Units.
(f) Stock Awards in Lieu of Cash Awards. The
Committee is authorized to grant Stock as a bonus, or to grant other Awards, in
lieu of Company commitments to pay cash under other plans or compensatory
arrangements. Stock or Awards granted hereunder shall have such other terms as
shall be determined by the Committee.
(g) Dividend Equivalents and Interest Equivalents.
The Committee is authorized to grant Dividend Equivalents and
Interest Equivalents to Grantees.
(i) The Committee may provide, at the date
of grant or thereafter, that Dividend Equivalents and/or Interest Equivalents
shall be paid or distributed when accrued or shall be deemed to have been
reinvested in additional Stock or deferred cash, as the case may be, or other
investment vehicles as the Committee may specify, provided that Dividend
Equivalents or Interest Equivalents (other than freestanding Dividend
Equivalents or Interest Equivalents) shall be subject to all conditions and
restrictions of the underlying Awards to which they relate.
I-12
(ii) Interest Equivalents shall be computed
at a market-based rate which, unless the Committee otherwise determines, shall
be compounded quarterly at an annual rate equal to the annual rate on the last
day of the calendar quarter of 10- year U.S. Treasury Notes plus 1% per annum.
(h) Deferred Stock Awards and Deferred Cash Awards.
The Committee is authorized to grant Deferred Stock Awards and Deferred Cash
Awards, subject to the following terms and conditions:
(i) The Committee shall establish, in the
name of each Grantee receiving a Deferred Stock Award, a Common Stock Account to
which the Deferred Stock Award, and any Dividend Equivalents thereon (unless
paid currently in the discretion of the Committee), will be credited. The
Company shall not be under any obligation to acquire the Stock to pay a Deferred
Stock Award (or Dividend Equivalent) at any time prior to the date on which such
payment shall be due. The Committee shall establish, in the name of each Grantee
receiving a Deferred Cash Award, a Deferred Cash Account to which the Deferred
Cash Award, and any Interest Equivalents thereon (unless paid currently in the
discretion of the Committee), will be credited.
(ii) The number of equivalent shares of
Stock credited to a Common Stock Account shall accrue Dividend Equivalents on
such shares, as if actual shares of Stock had been issued, from the date the
Deferred Stock is credited to the Common Stock Account to and including the date
on which the amount credited to the Common Stock Account is deemed to have been
paid. Such Dividend Equivalents will be credited to the Common Stock Account as
additional equivalent shares of Stock. In the case of a stock dividend, the
number of shares to be credited shall be the number of shares of stock that
would have been issued on the equivalent number of shares of Stock in the Common
Stock Account. In other cases, the number of equivalent shares (including
fractional shares) to be so credited will be determined by dividing the Dividend
Equivalents by the Fair Market Value of the Stock for the day on which the
related dividend is paid. If any dividend is paid on the Stock of the Company,
other than in cash or Stock, the Committee shall conclusively determine the Fair
Market Value in cash of such dividend.
(iii) The amount of Deferred Cash credited
to a Deferred Cash Account shall accrue Interest Equivalents from the date the
Deferred Cash is credited to the Deferred Cash Account to and including the date
on which the amount credited to the Deferred Cash Account is deemed to have been
paid. Such Interest Equivalents will be credited to the Deferred Cash Account as
additional cash which shall, in turn, accrue further Interest Equivalents.
Interest Equivalents will be credited, as of the last day of each calendar
quarter on the average daily balance of deferred cash in said account during
said quarter. If any Deferred Cash is disbursed to a Grantee or a Beneficiary on
a date other than the last day of a calendar quarter, Interest Equivalents
I-13
(properly prorated for the partial quarter) shall be credited on the Deferred
Cash so disbursed for the partial calendar quarter, but shall be computed based
on the interest rate in effect on the business day next preceding the date of
disbursement.
(iv) Payments from Common Stock and Deferred
Cash Accounts.
A. Except as provided below,
payment of the total amount credited an employee's Common Stock Account or
Deferred Cash Account, as the case may be, shall be made to him, or, in case of
his death prior to the commencement of payments on account of such total amount,
to his Beneficiary, in sixty (60) quarterly installments commencing the first
day of the calendar quarter, or as soon thereafter as practicable, following the
date on which he ceases, by reason of death or otherwise, to be an employee. The
amount of each payment shall be the amount credited to such account multiplied
by a factor, the numerator of which is one (1) and the denominator of which is
the number of quarterly installments remaining to be paid. If the aggregate
number of shares credited to a Common Stock Account shall not be divisible into
whole shares by the applicable number of installments, each installment except
the last shall consist of the nearest number of whole shares into which such
aggregate number of shares shall be divisible by the applicable number of
installments. The last installment shall consist of the total amount of whole
shares of remaining Deferred Stock credited to such account and any fractional
share shall be paid in cash.
B. In case of the death of an
employee after the commencement of payments to him in respect of his Common
Stock Account or Deferred Cash Account, as the case may be, the then remaining
unpaid portion thereof shall continue to be paid in installments, at such times
and in such manner as if he were living, to his Beneficiary.
C. With respect to the total amount
in a Common Stock Account or Deferred Cash Account, as the case may be, or the
then remaining unpaid portion thereof, which shall be payable to any person who
shall no longer be an employee of the Company or one of its Subsidiaries or
Affiliates or to the Beneficiary of any such person, the Committee shall possess
absolute discretion to accelerate the time of payment of such total amount or
remaining unpaid portion, in whole or in part, as the case may be. In addition,
the Committee shall possess absolute discretion to accelerate to any extent such
total amount or remaining unpaid portion, even while a person remains an
employee, if there occurs financial hardship or any other event which the
Committee deems, in its absolute discretion, to constitute an extraordinary
circumstance.
(i) Other Stock- or Cash-Based Awards. The
Committee is authorized to grant to Grantees Other Stock-Based Awards or Other
Cash-Based Awards as an element of or supplement to any other Award under the
Plan or in addition to, or in lieu of,
I-14
any other Award under the Plan, as deemed by the Committee to be consistent with
the purposes of the Plan. Such Awards may be granted with value and payment
contingent upon performance of the Company or any other factors designated by
the Committee, or valued by reference to the performance of specified
Subsidiaries or Affiliates. Without limiting the generality of the foregoing,
other Cash Based Awards may be granted as annual bonus, as multi-year
performance cash awards, or otherwise. The Committee shall determine the terms
and conditions of such Awards at the date of grant or thereafter.
6A. Special Restrictions on Awards to Officers.
Subject to Sections 6A(h) and 6A(j), this Section 6A applies to all Awards to
"Officers"; provided that this Section 6A applies to Options, SARs and Limited
SARs only to the extent specifically stated in this Section. For purposes of
this Section 6A, an "Officer" is any employee who would be treated at the time
an Award is granted as an officer of the Company pursuant to the executive
compensation disclosure rules under the Exchange Act. Notwithstanding the
foregoing, the provisions of the Plan disregarded under Section 6A(a) below
shall be reinstated and fully applicable to all Awards granted to Officers
pursuant to this Section 6A to the extent that, as of the end of the calendar
year following the year in which the Award is granted, they are not "covered
employees" within the meaning of Section 162(m)(3) of the Code.
(a) Intent. Awards subject to this Section
6A are intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code and the regulations promulgated thereunder.
This Section 6A shall be interpreted consistently with such intent and any
provisions of the Plan inconsistent therewith shall not apply to any Awards
subject to this Section 6A. Without limiting the generality of the foregoing,
the Committee shall have no discretion to increase the value of any Awards
subject to this Section 6A. Notwithstanding the foregoing, Awards granted
hereunder shall be subject to such other provisions of the Plan (as modified by
this Section 6A) as may be determined by the Committee.
(b) Maximum Awards. The maximum Awards
(other than Options, SARs and Limited SARs) that may be granted to any Officer
pursuant to this Section 6A on account of any calendar year shall not exceed the
greater of (i) five hundred percent (500%) of the Officer's base salary for that
year or (ii) $5,000,000. Awards shall be considered to be on account of the
calendar year in which the relevant performance periods terminate. Awards
granted pursuant to Section 6A(h) shall not be taken into account in applying
the foregoing limit. The maximum number of shares of Stock subject to an Option,
SAR or Limited SAR that may be granted hereunder to an Officer during any
ten-year period is set forth in Section 6(b)(v).
I-15
(c) Designation of Performance Goals. The
Committee shall establish specific objective targets, schedules, thresholds or
goals ("Performance Goals") for each Award subject to this Section 6A; provided
that, at the time of the grant of any Award, the achievement of the Performance
Goal shall be substantially uncertain. The Performance Goals designated by the
Committee shall be determined based upon one or more of the business criteria
set forth in Exhibit A hereto ("Performance Measures"). To the extent
applicable, the Committee may specify a Performance Measure in relation to total
Company performance or in relation to the performance of identifiable business
unit(s) of the Company. A Performance Goal may be expressed in any form as the
Committee may determine including, but not limited to: (1) percentage growth,
(2) absolute growth, (3) cumulative growth, (4) performance in relation to an
index, (5) performance in relation to peer company performance, (6) a designated
absolute amount and (7) per share of Stock outstanding. The Performance Goals so
established may exclude the effects of certain events or categories of events
specifically identified by the Committee. Nothing shall preclude the Committee
from designating different Performance Measures and Performance Goals for Awards
granted to different Officers in the same performance period.
(d) Determination of Awards. The Committee
shall have discretion to structure the types of Awards granted to Officers. Such
Awards may be either Awards having a performance period of one year or less
(such as, for example, an annual bonus plan providing for a cash or a Stock
bonus) or Awards which vest over longer periods (such as, for example, a
Performance Stock Award or Performance Cash Award which might vest after a
period of two or more years). No later than 90 days after the commencement of a
performance period (but, in any event, within the first 25% of such performance
period, if earlier), the Committee shall designate or approve as to the Awards
relating to such period, (i) the Officers who will be Grantees, if any, (ii) the
types of Awards (which will be selected from the types of Awards permitted under
Section 6), (iii) the Performance Measures applicable to each Award, (iv) if
there is more than one Performance Measure applicable to a single Award, the
weighting, or other role, of the Performance Measures in determining the Award,
(v) the Performance Goals and payout matrix or formula for each Performance
Measure, (vi) the performance period or periods, (vii) the target Award or
Awards for each Grantee, (viii) the extent to which, and the circumstances under
which, the Award may pay out at greater than, or less than, target levels, and
(ix) to the extent required under Code Section 162(m), the maximum dollar amount
a Grantee may earn with respect to a performance period.
(e) Payment of Awards. Subject to Section 7
of the Plan ("Change in Control Provisions"), an Award subject to this Section
6A shall vest only to the extent that the applicable Performance Goal or Goals,
if any, have been attained. As a condition to the vesting of any Award, the
Committee shall first certify, by resolution of the Committee, that the
applicable Performance Goal or Goals have been attained and the other
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applicable Plan provisions have been satisfied. Following the end of a
performance period, the Committee shall determine the amount of each Award that
vests for each Grantee by:
(1) comparing actual performance for each
Performance Measure against the payout matrix
approved for such period,
(2) multiplying the payout percentage from
the payout matrix for each Performance Measure by the
appropriate weighting factor, if applicable, and
(3) summing the applicable weighted payout
percentages and multiplying their overall payout
percentage by the Grantee's Award
Notwithstanding anything contained in this Plan to the contrary (but provided
that the right to do so is specifically retained in the applicable Award
Agreement), the Committee in its sole discretion may reduce any Award to any
Grantee to any amount, including zero, prior to the certification by resolution
of the Committee of the amount of such Award. The amount of an Award that vests
for a calendar year or other performance period shall be determined as soon as
practicable after such period and shall be paid no later than 75 days following
the end of such year or other period.
(f) Grants of Options and SARs. The
Committee may grant Options, SARs and Limited SARs the vesting of which is not
contingent upon the attainment of any Performance Goal or Goals. Except as
provided in Section 6A(h), but subject to Section 6(b)(ii), the exercise or
grant price, as applicable, of each share of Stock subject to such Options, SARs
and Limited SARs shall not be less than the Fair Market Value of one share of
Stock on the date of grant.
(g) Deferred Payments. The Committee, in
its discretion, may elect to defer payment of any Award until such date before
or after retirement as a Grantee may request upon such terms and conditions as
may be approved or established by the Committee in its sole judgment. Such terms
may include the payment of Interest or Dividend Equivalents on deferred amounts.
(h) Non-Performance-Based Compensation.
Notwithstanding anything contained in this Section 6A, the Committee may grant
Awards to Officers that are not subject to this Section 6A. All Awards granted
by the Committee shall indicate whether or not they are subject to this Section
6A.
(i) Valuation. Whenever in this Section 6A
there is a reference to a maximum dollar value of a stock-based Award (including
but not limited to a Restricted Stock, Restricted Stock Unit, a Deferred Stock
Award or other Stock-Based Award), the dollar value is determined as of the date
of the grant of the Award and not as of the date of vesting. If one type of
Award is
I-17
substituted for another (such as, for example, a Deferred Stock Award being
substituted for a Restricted Stock Award or for an Award of Restricted Stock
Units, where each Award is based upon the same number of shares of Common
Stock), the value of the substitute Award for this purpose is the same as the
Award for which it is substituted. Whenever in this Section 6A there is a
reference to a maximum dollar value of an Award, Dividend Equivalents and
Interest Equivalents (other than free-standing Dividend Equivalents and Interest
Equivalents) shall not be counted in determining such maximum amount.
(j) Grant-by-Grant Determination. The
Committee may grant Awards a portion of which satisfy the provisions of this
Section 6A and a portion of which do not. In such a case, the Award shall be
deemed to be the grant of two Awards, one subject to this Section 6A and the
other granted pursuant to Section 6A(h).
(k) Substitute Awards. The Committee may
establish procedures under which one Award is substituted for an equivalent
Award of a different type; such as a Deferred Stock Award being substituted for
an Award of an equivalent number of shares of Restricted Stock. Nothing
contained in this Section 6A requires the substitute Award to be subject to
Performance Goals in addition to the Performance Goals of the Award for which it
was substituted.
7. Change in Control Provisions. In the event of a
Change of Control:
(a) any Award carrying a right to exercise that was
not previously exercisable and vested shall become fully
exercisable and vested; and
(b) the restrictions, deferral limitations, payment
conditions, and forfeiture conditions applicable to any other Award granted
under the Plan shall lapse and such Awards shall be deemed fully vested, and any
performance conditions imposed with respect to Awards shall be deemed to be
fully achieved.
8. Non-Employee Director Options. Notwithstanding any of the
other provisions of the Plan to the contrary, the provisions of this Section 8
shall apply only to grants of Options to Non-Employee Directors. Except as set
forth in this Section 8, the other provisions of the Plan shall apply to grants
of Options to Non-Employee Directors to the extent not inconsistent with this
Section.
(a) General. Non-Employee Directors shall receive
NQSOs in accordance with this Section 8 and may not be granted Stock
Appreciation Rights or Incentive Stock Options under this Plan. The purchase
price per share of Stock purchasable under Options granted to Non-Employee
Directors shall be the Fair Market Value of a Share on the date of grant. No
Agreement with any Non-Employee Director may alter the provisions of this
Section and no
I-18
Option granted to a Non-Employee Director may be subject to a discretionary
acceleration of exercisability.
(b) Grants to New Non-Employee Directors. Each Non-
Employee Director who is elected to the Board for the first time will, at the
time such director is elected and duly qualified, be granted automatically,
without action by the Committee, an Option to purchase (i) for Options granted
prior to July 23, 1996, 1,500 shares of Stock and (ii) for Options granted on or
after July 23, 1996, 4,500 shares of stock.
(c) Grants to Continuing Directors. On the date of
each annual meeting of stockholders (in addition to any grant made under
subsection (b) of this Section on such date), each continuing Non-Employee
Director will be granted automatically, without action by the Committee, an
Option to purchase (i) for Options granted prior to July 23, 1996, 1,500 shares
of Stock and (ii) for Options granted on or after July 23, 1996, 4,500 shares of
stock.
(d) Vesting. Each Option shall be exercisable as to
33-1/3 percent of the Stock covered by the Option on the first anniversary of
the date the Option is granted and as to an additional 33-1/3 percent of the
Stock covered by the Option on each of the following two anniversaries of such
date of grant; provided, however, that each Option shall be immediately
exercisable in full upon a Change in Control. To the extent not exercised,
installments shall accumulate and be exercisable, in whole or in part, at any
time after becoming exercisable, but not later than the date the Option expires.
Section 6(b) hereof shall not apply to Options granted to Non-Employee
Directors.
(e) Duration. Subject to the immediately following
sentence, each Option granted to a Non-Employee Director shall be for a term of
10 years. Upon the cessation of a Non-Employee Director's membership on the
Board for any reason, Options granted to such Non-Employee Director shall
expire, except that, as to any portion of an Option which shall be exercisable
upon the date of such cessation, such Option may be exercised as to such portion
until the earlier of (i) three (3) years from the date of such cessation of
Board membership or (ii) expiration of the term of Option. The Committee may not
provide for an extended exercise period beyond the periods set forth in this
Section 8(e).
9. Non-Employee Director Restricted Stock. Notwithstanding any
of the other provisions of the Plan to the contrary, the provisions of this
Section 9 shall apply only to grants of Restricted Stock to Non-Employee
Directors ("Director's Restricted Stock"). Except as set forth in this Section
9, the other provisions of the Plan shall apply to grants of Director's
Restricted Stock, to the extent not inconsistent with this Section.
(a) General. Non-Employee Directors will receive
Director's Restricted Stock in accordance with this Section. No agreement with
any Non-Employee Director may alter the provisions of this Section and no
Director's Restricted Stock may be subject
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to a discretionary acceleration of vesting. Each person who was a Non-Employee
Director prior to the 1994 Annual Meeting of Stockholders was granted 2,500
shares of Director's Restricted Stock (equivalent to 7,500 shares on or after
July 23, 1996).
(b) Grants to New Non-Employee Directors. Each
Non-Employee Director who, on or after the 1994 Annual Meeting of Stockholders,
is elected to the Board for the first time, will, at the time such Director is
duly elected and qualified, be granted automatically, without action by the
Committee, a number of shares of Director's Restricted Stock equal to the lesser
of (i) 2,500 shares (7,500 shares on or after July 23, 1996) or (ii) the nearest
number of whole shares determined by multiplying 2,500 (7,500 on or after July
23, 1996) by a fraction, the numerator of which is the initial Fair Market Value
of the Stock determined under the formula utilized for initial grants of NQSQs
to Non-Employee Directors in February 1994 (such initial Fair Market Value being
$15.375 per share or, on or after July 23, 1996, $5.125 per share), and the
denominator of which is the Fair Market Value of the Stock on the date on which
such Director is duly elected and qualified.
(c) Vesting. (i) Each Award of Director's
Restricted Stock shall become non-forfeitable as to twenty percent of the Stock
covered by the Award on the first anniversary date of the Award and as to an
additional twenty percent of the Stock on each of the following four anniversary
dates of the Award; provided that each Award shall be immediately
non-forfeitable in full upon a Change in Control. If a Non-Employee Director's
service on the Board terminates prior to the Award becoming entirely
non-forfeitable, any portion of the Award which then remains forfeitable shall
revert to the Company, except that if the Non-Employee Director's service
terminates by reason of death or disability, any 20 percent installment with
respect to which such Non-Employee Director shall have begun (but not completed)
the requisite annual service shall become, as to such installment, also entirely
nonforfeitable. As used in the prior sentence, a "disability" shall exist if,
because of sickness or injury, the ability of the Non-Employee Director to
perform the duties of a member of the Board of Directors becomes significantly
impaired.
(ii) A Non-Employee Director may, on or prior to December 31,
1995 (or in the case of a Non-Employee Director who first becomes a Director
after December 31, 1995, within thirty days after becoming a Director), as to
his forfeitable shares of Director's Restricted Stock elect that such shares
shall become nonforfeitable on January 1 following the year in which he attains
his 70th birthday, but not earlier than the date upon which such shares become
nonforfeitable under subparagraph (i) of this paragraph (c) or later than the
date of a Change in Control. During such additional period, if any, that such
shares are forfeitable under this subparagraph (ii), the shares shall be
forfeited if such Non-Employee Director resigns from the Board of Directors or
refuses to stand for re-election to the Board of Directors, unless:
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A. Such resignation or refusal results from the disability
(as defined in subparagraph (i) above) or death of the Non-Employee
Director; or
B. Such Non-Employee Director furnishes to the Board of Directors an
opinion of counsel, reasonably satisfactory to a majority of the remaining
members, to the effect that continued membership on the Board will result in
such Non-Employee Director having a conflict of interest or suffering some other
significant legal liability; or
C. Such resignation or refusal is approved or requested by a
majority of the remaining members of the Board of Directors or by
stockholders owning a majority of the voting stock of the Company.
During such additional period, if any, that such shares are forfeitable
under this subparagraph (ii), if there occurs an event described in clause A.,
B. or C. of this subparagraph, the shares shall become nonforfeitable on the
date that the Non-Employee Director ceases to be a member of the Board of
Directors.
Any such election to defer vesting shall be made in writing addressed
to the Secretary of the Committee, and shall be irrevocable when received.
(d) Dividends; Voting. Except as set forth in this
Section 9, a Director granted Director's Restricted Stock shall have all of the
rights of a stockholder including, without limitation, the right to vote
Restricted Stock and the right to receive dividends thereon.
(e) The Director's Restricted Stock shall be subject
to the following provisions prior to becoming non-forfeitable:
(i) The Stock may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of; and neither the
right to receive Stock nor any interest therein under the Plan may be assigned,
and any attempted assignment shall be void.
(ii) The Stock certificates shall, at the
option of the Company, either (x) be held by the Company together with stock
powers endorsed by the Director in blank or (y) bear an appropriate restrictive
legend and be subject to appropriate "stop transfer" orders or (z) both.
(iii) Any additional Stock or other
securities or property (other than cash dividends) that may be issued with
respect to Director's Stock as a result of any stock dividend, stock split,
reorganization, recapitalization, merger, consolidation, split-up, combination
of shares or other event, shall be subject to the restrictions and other terms
and conditions of the Plan.
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10. General Provisions.
(a) Compliance with Local and Exchange Requirements.
The Plan, the granting and exercising of Awards, and the other obligations of
the Company under the Plan and any Award Agreement, promissory note or other
agreement shall be subject to all applicable federal, state and foreign laws,
rules and regulations, and to such approvals by any regulatory or governmental
agency as may be required. The Company, in its discretion, may postpone the
issuance or delivery of Stock under any Award until completion of such stock
exchange listing or registration or qualification of such Stock or other
required action under any state, federal or foreign law, rule or regulation as
the Company may consider appropriate, and may require any Grantee to make such
representations and furnish such information as it may consider appropriate in
connection with the issuance or delivery of Stock in compliance with applicable
laws, rules and regulations.
(b) Nontransferability. Except as may be
specifically provided to the contrary in any Award Agreement, Awards shall not
be transferable by a Grantee except by will or the laws of descent and
distribution or, if then permitted under Rule 16b-3, pursuant to a qualified
domestic relations order as defined under the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder, and
shall be exercisable during the lifetime of a Grantee only by such Grantee or
his guardian or legal representative.
(c) No Right to Continued Employment, etc.. Nothing
in the Plan or in any Award granted or any Award Agreement, or other agreement
entered into pursuant hereto shall confer upon any Grantee the right to continue
in the employ of or to continue as an independent contractor, or director of the
Company, any subsidiary or any Affiliate or to be entitled to any remuneration
or benefits not set forth in the Plan or such Award Agreement, or other
agreement or to interfere with or limit in any way the right of the Company or
any such Subsidiary or Affiliate or the stockholders to terminate such Grantee's
employment, directorship or independent contractor relationship.
(d) Taxes. The Company or any Subsidiary or
Affiliate is authorized to withhold from any Award granted, any payment relating
to an Award under the Plan, including from a distribution of Stock, or any other
payment to a Grantee, amounts of withholding and other taxes due in connection
with any transaction involving an Award, and to take such other actions as the
Committee may deem advisable to enable the Company and Grantees to satisfy
obligations for the payment of withholding taxes and other tax obligations
relating to any Award. This authority shall include authority to withhold or
receive Stock or other property and to make cash payments in respect thereof in
satisfaction of a Grantee's tax obligations.
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(e) Amendment and Termination of the Plan. The
Board may at any time and from time to time alter, amend, suspend, or terminate
the Plan in whole or in part; provided that, no amendment which requires
stockholder approval in order for the Plan to continue to comply with Rule 16b-3
or Section 162(m) of the Code, shall be effective unless the same shall be
approved by the requisite vote of the stockholders of the Company entitled to
vote thereon. Notwithstanding the foregoing, no amendment shall affect adversely
any of the rights of any Grantee, without such Grantee's consent, under any
Award theretofore granted under the Plan.
(f) No Rights to Awards; No Stockholder Rights. No
Grantee shall have any claim to be granted any Award under the Plan, and there
is no obligation for uniformity of treatment of Grantees. Except as provided
specifically herein, a Grantee or a transferee of an Award shall have no rights
as a stockholder with respect to any shares covered by the Award until the date
of the issuance of a stock certificate to him for such shares.
(g) Unfunded Status of Awards. The Plan is intended
to constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments not yet made to a Grantee pursuant to an Award, nothing
contained in the Plan or any Award shall give any such Grantee any rights that
are greater than those of a general creditor of the Company.
(h) No Fractional Shares. No fractional shares of
Stock shall be issued or delivered pursuant to the Plan or any Award. The
Committee shall determine whether cash, other Awards, or other property shall be
issued or paid in lieu of such fractional shares or whether such fractional
shares or any rights thereto shall be forfeited or otherwise eliminated.
(i) Not Exclusive. The Awards granted under this
Plan are not intended to be exclusive and, accordingly, the Board may adopt, or
permit the adoption of, other compensation and/or benefit plans or arrangements
of any type whatsoever, including but not limited to plans or arrangements that
provide for compensation in the same form as, or in form similar or dissimilar
to, types of compensation available under this Plan.
(j) Governing Law. The Plan and all determinations
made and actions taken pursuant hereto shall be governed by the laws of the
State of Delaware without giving effect to the conflict of laws principles
thereof.
(k) Effective Date; Plan Termination. The Plan has
been approved by stockholders. Amendments to the Plan effected at the January
27, 1997 meeting of the Board of Directors shall take effect upon their adoption
by the Board (the "Effective Date"), but the amendments to this Plan (and any
Awards made on or after such date and prior to the stockholder approval
mentioned herein), shall
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be subject to the approval of the amendments by the holders of a majority of the
issued and outstanding shares of Common Stock of the Company entitled to vote,
which approval must occur within twelve months of the date the Plan, as so
amended, is adopted by the Board; provided that Awards which could have been
made under the Plan as previously in effect shall not be affected by the lack of
stockholder approval of the amendments. In the absence of such approval, except
as so provided above, such Awards shall be null and void.
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EXHIBIT A TO 1993 STOCK AWARD AND INCENTIVE PLAN,
AS AMENDED JANUARY 27, 1997
PERFORMANCE MEASURES
(i) "Cash Flow" shall mean the consolidated increase (reduced by any
decrease) in cash, cash equivalents and related marketable securities of the
Company, as set forth in the Company's audited financial statements for a year
or other period, adjusted to offset the effects of financing activity, cash
dividends to common stockholders and purchases of treasury stock.
(ii) "Debt to Capital Ratio" shall mean Debt divided by Capital. "Debt"
shall mean the sum of short term debt, the current portion of long term debt and
long term debt, all as reported in or determined from a balance sheet at the end
of a year or other period. "Capital" shall mean the sum of (i) short term debt,
(ii) long term debt, (iii) current portion of long term debt, (iv) total
minority interest and (v) stockholders' equity, all as reported in or determined
from a balance sheet at the end of a year or other period.
(iii) "EBIT" shall mean, (i) in the case of the Company, the
consolidated earnings before interest and taxes of the Company as set forth in
Company's audited financial statements for such year or other period or (ii) in
the case of a business unit of the Company, the earnings before interest and
taxes of such business unit, for such year or other period, determined on a
basis consistent with the accounting principles used in determining EBIT in the
Company's audited financial statements.
(iv) "EPS" shall mean the consolidated fully-diluted earnings per share
of the Company, as set forth in the Company's audited financial statements for
such year or other period.
(v) "EVA" shall mean economic value added, calculated as NOPAT less a
capital charge as follows: the weighted average cost per dollar of Capital for
the year or other period times the amount of Capital invested. "NOPAT" shall
mean net Operating Profit after tax plus equity in net earnings of associated
companies, as set forth in the Company's financial statements for such year or
other period.
(vi) "Market Value" shall mean the Fair Market Value of a share of
Stock, as determined under clause (i), (ii) or (iii) as applicable, of the
second sentence of Section 2(q) of the Plan.
(vii) "Net Earnings" shall mean the consolidated net earnings available
to common stockholders, as set forth in the Company's financial statements for
such year or other period.
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(viii) "Operating Profit" shall mean operating profit before any
special charges or gains as reported in a statement of income or statement of
operations for a year or other period.
(ix) "Return on Capital" shall mean NOPAT divided by average Capital
for the year or other period.
(x) "Return on Equity" shall mean either Net Earnings or Cash Flow, as
designated by the Committee, divided by average Stockholders' Equity for the
year or other period.
(xi) "RONA" shall mean the return on net assets for a year or other
period, which is calculated as (i) Net Earnings minus financing charges divided
by (ii) net assets. Net assets means total assets minus nonfinancial
liabilities.
(xii) "Sales" shall mean net sales as reported in a statement of income
or statement of operations for a year or other period.
(xiii) "SG & A" shall mean selling, general and administrative costs as
reported in a statement of income or statement of operations for a year or other
period.
(xiv) "Tax Rate" shall mean the Company's effective tax rate, as set
forth in the Company's audited financial statements for such year or other
period.
(xv) "Total Return" shall mean the percent increase over a year or
other period in the value of an investor's holdings in the Company's Stock
assuming reinvestment of dividends.
In computing the foregoing Performance Measure with respect to any Award, there
shall be disregarded the impact of any accounting change mandated by Generally
Accepted Accounting Principles which becomes mandated and is implemented after
the related Performance Goal is established.
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