April 1994
Dear Shareholder:
At this year's Annual Meeting, in addition to the slate of
directors and the ratification of Ogden's auditors, Ogden's
shareholders are being asked to vote in favor of an amendment to
Ogden's 1990 Stock Option Plan and the adoption of a formula bonus
plan for Ogden's Chief Executive Officer.
The Ogden Board of Directors, following the recommendation of the
Compensation Committee, is seeking your approval to amend the 1990
Plan to, among other things, reserve an additional 3.2 million
shares of Ogden common stock for issuance under that plan, which
will be linked to a 3.2 million stock repurchase program. The
formula bonus plan for Ogden's Chief Executive Officer has been
designed to tie directly to performance and preserve the
corporation's ability to deduct the Chief Executive Officer's
annual bonus by meeting the requirements of the new tax law. The
details of the proposed amendment and formula bonus plan are
described in Proposal (3) and Proposal (4) of the enclosed Proxy,
which I urge you to read carefully.
I am writing to you principally to explain why the Compensation
Committee of the Ogden Board of Directors believes the amendment to
Ogden's 1990 Stock Option Plan should be supported by its
shareholders.
In 1993, Ogden achieved strong financial results as evidenced by a
15% increase in total revenues and an 11.2% increase in pretax
income reflecting, in large measure, the results of its waste-to-
energy business. The stock market did not treat waste management
related companies very kindly this past year. Many of those
companies saw their share prices decline significantly, and the
companies as a group averaged a total return to their shareholders
of negative 27% in 1993. Nevertheless, Ogden's 1993 share price
held its ground, supported by its $1.25 per share annual dividend,
resulting in a 5.5% total return to Ogden's shareholders. In fact,
under R. Richard Ablon's three year tenure as Ogden's Chief
Executive Officer, Ogden's cumulative total return to shareholders
has been an impressive 45%. We think that this is strong evidence
that Ogden's diversified service strategy makes sense.
However, Ogden faces many tough challenges as it seeks to create
greater economic value for its shareholders over the next decade.
Ogden management is aggressively pursuing global expansion for its
core service businesses. At the same time, they must focus their
energies on opportunities and businesses that have the most
significant impact on the bottom line.
Ogden Corporation seeks to be the premier service company worldwide
in its core specialties. Translating these strategies and tactics
into significant new shareholder value will require the commitment
of existing talent at all levels. Furthermore, Ogden must attract
new employees with international expertise. The Compensation
Committee believes that stock option grants help achieve these
goals by offering performance-sensitive pay opportunities that
directly align employee interests with the interests of
shareholders.
Substantially all of the shares previously authorized under the
1990 Stock Option Plan have been granted to approximately 150
employees. Therefore, in early 1994 the Compensation Committee
recommended that 3.2 million additional shares be made available
for stock option grants. The Compensation Committee determined
that a sizeable grant of new options to Ogden's senior executive
management would best tie their interests to those of Ogden's
shareholders. The Committee granted a 600,000 share option to R.
Richard Ablon, Ogden's CEO; a 200,000 share option to Scott Mackin,
President and Chief Operating Officer of Ogden Projects; and
205,000 option shares to three other named executive officers as
described in the Proxy under the Report on Executive Compensation.
We do not intend to grant additional options to these executives
for at least four years. However, we do intend to use the
remaining newly authorized option shares, which number over two
million, for future options to employees who have operational
responsibility that can significantly impact Ogden's results. With
these newly authorized shares, Ogden will be able to offer more
employees on a worldwide basis the opportunity for a significant
ownership stake, which will pay off only to the extent that
shareholder value is increased.
In conjunction with this amendment, Ogden's Board has approved an
increase in its stock repurchase program to 3.2 million shares,
the implementation of which is expected to materially offset any
potential dilution to existing shareholder interests. Ogden's
strong cash flow and overall financial condition are expected to
provide the flexibility to repurchase shares in advance of any
stock option exercise, thereby minimizing such dilution. We expect
to be able to accomplish this repurchase program without impeding
our growth and market development plans or eroding our very strong
financial position.
In addition to increasing the shares reserved for stock option
grants, our proposed amendment includes a number of other desirable
plan improvements, which should further our goal of aligning
employee and shareholder interests. The amendment also:
- Prohibits options with an exercise price below 100% of fair
market value;
- Prohibits repricing of "underwater" options;
- Prohibits payment of options exercise prices with Ogden
stock already owned; and
- Eliminates tandem and stand-alone stock appreciation rights.
We strongly believe that our amended stock option program will add
value to Ogden Corporation stock. We urge your support by voting
in favor of Proposal (3) at this year's Annual Meeting in May.
Please call Nancy Christal, Vice President, Investor Relations at
1-800-858-0123 if you have any questions.
Respectfully,
On behalf of the Ogden Compensation Committee,
/s/Dr. Abraham Zaleznik
Dr. Abraham Zaleznik
Chairman, Compensation Committee
Member, Ogden Corporation Board of Directors