UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under ss. 240.14a-12
CROWN CORK & SEAL COMPANY, INC.
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
(2) Aggregate number of securities to which transaction applies:
N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
N/A
(4) Proposed maximum aggregate value of transaction:
N/A
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
Crown Cork & Seal Company, Inc.
One Crown Way
Philadelphia, Pennsylvania 19154
-----------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
2001
-----------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of CROWN
CORK & SEAL COMPANY, INC. (the "Company") will be held at the Company's
Technical Center located at 11535 South Central Avenue, Alsip, Illinois on the
26th day of April 2001 at 9:30 a.m. to elect Directors; to consider and act upon
the resolution to adopt the 2001 Stock-Based Incentive Compensation Plan, which
resolution the Board of Directors unanimously recommends; to consider and act
upon a Shareholder proposal (if properly presented) regarding a Maximize Value
Resolution, which proposal the Board of Directors unanimously opposes; and to
transact such other business that may properly come before the Meeting.
The stock transfer books of the Company will not be closed prior to the
Meeting. Only Shareholders of Common Stock of record as of the close of business
on March 13, 2001 will be entitled to vote.
By Order of the Board of Directors
WILLIAM T. GALLAGHER
Vice President, Secretary &
General Counsel
Philadelphia, Pennsylvania 19154
March 23, 2001
WE CORDIALLY INVITE YOU AND HOPE THAT YOU WILL ATTEND THE
MEETING IN PERSON, BUT, IF YOU ARE UNABLE TO ATTEND,
THE BOARD OF DIRECTORS REQUESTS THAT YOU SIGN THE PROXY
AND RETURN IT, WITHOUT DELAY, IN THE ENCLOSED ENVELOPE.
1
- --------------------------------------------------------------------------------
Crown Cork & Seal Company, Inc.
One Crown Way
Philadelphia, Pennsylvania 19154
- --------------------------------------------------------------------------------
PROXY STATEMENT - MEETING, April 26, 2001
To All Shareholders:
The accompanying Proxy is solicited by the Board of Directors of the
Company for use at the Annual Meeting of Shareholders to be held on April 26,
2001, and, if properly executed, shares represented thereby will be voted by the
named Proxies at such Meeting. The cost of soliciting proxies will be borne by
the Company. The Company has engaged D.F. King & Co., Inc. ("King") to assist in
the solicitation of proxies for a fee of $7,000 plus reimbursement for
out-of-pocket expenses and certain additional fees for services rendered by King
in connection with such solicitation. Certain Officers and employees of the
Company may also solicit proxies by mail, telephone, facsimile or in person
without any extra compensation. Any Shareholder giving a Proxy has the power to
revoke it at any time before it is voted by giving written notice of revocation
to the Secretary of the Company, by executing and delivering a later-dated
Proxy, or by voting in person at the Meeting.
The persons named as Proxies were selected by the Board of Directors of
the Company, and all are Officers of the Company.
The Annual Report for the year ended December 31, 2000, containing audited
financial statements, is being mailed to Shareholders contemporaneously with
this Proxy Statement, i.e., on or about March 23, 2001.
On March 1, 2001, there were 125,621,342 outstanding shares of Common
Stock, par value $5.00 per share ("Common Stock").
Shareholders of Common Stock of record as of March 13, 2001 are entitled
to vote at the Annual Meeting. Each share of Common Stock is entitled to one
vote. The presence, in person or by proxy, of Shareholders entitled to cast a
majority of votes will be necessary to constitute a quorum for the transaction
of business. Proxies solicited herein will be voted, and if the person solicited
specifies by means of the ballot provided in the Proxy a choice with respect to
matters to be acted upon, the shares will be voted in accordance with such
specification. Votes withheld from Director nominees, abstentions and broker
non-votes will be counted in determining the presence of a quorum. Under
Pennsylvania law and the Company's By-Laws, votes withheld from Director
nominees, abstentions and broker non-votes are not considered to be "votes" and,
therefore, will not be given effect either as affirmative or negative votes.
Directors are elected by plurality vote. Other matters are determined by a
majority of the votes cast.
Other than as listed on the following page, the Company has, to its
knowledge, no other beneficial owner of more than 5 percent of the Common Stock
outstanding as of March 1, 2001.
2
- --------------------------------------------------------------------------------
Security Ownership of Certain Beneficial Owners
Amount and Percentage of Common Stock of the Company
Owned Beneficially, Directly or Indirectly (1)
Common
Name and Address of Beneficial Owner Shares %
- ----------------------------------------------------------------------------------------
Capital Research and Management Company(2) 17,540,200 13.96%
AXA Financial, Inc. and certain of its affiliates(3) 12,707,247 10.12%
Capital Group International, Inc.(4) 9,037,020 7.19%
Merrill Lynch & Co., Inc.
(on behalf of Merrill Lynch Investment Managers)(5) 6,578,169 5.24%
--------------------------------------------
<FN>
(1) Based on information filed with the Securities and Exchange Commission.
Percentages are derived using the outstanding shares of Common Stock as of
March 1, 2001.
(2) Capital Research and Management Company, an investment advisor registered
under Section 203 of the Investment Advisers Act of 1940, is located at 333
South Hope Street, Los Angeles, CA 90071. Capital Research and Management
Company reported that it had sole dispositive power with respect to
17,540,200 shares of Common Stock.
(3) AXA Conseil Vie Assurance Mutuelle, AXA Assurances I.A.R.D. Mutuelle and
AXA Assurances Vie Mutuelle, all located at 370, rue Saint Honore, 75001
Paris, France, and AXA Courtage Assurance Mutuelle, located at 26, rue
Louis le Grand, 75002 Paris, France, as a group act as parent holding
company of AXA, located at 25, avenue Matignon, 75008 Paris, France. AXA is
the parent holding company of AXA Financial, Inc., located at 1290 Avenue
of the Americas, New York, NY 10104, which in turn is the parent holding
company of Alliance Capital Management L.P., an investment adviser
registered under Section 203 of the Investment Advisers Act of 1940. The
parent holding companies named above report that they may be deemed to be
the beneficial owners of the 12,707,247 shares of Common Stock for which
Alliance Capital Management L.P. has sole dispositive power, including
6,732,053 shares of Common Stock for which Alliance Capital Management L.P.
has sole voting power and 1,161,140 shares of Common Stock for which
Alliance Capital Management L.P. has shared voting power.
(4) Capital Group International, Inc., a parent holding company of a group of
investment management companies, is located at 11100 Santa Monica
Boulevard, Los Angeles, CA 90025. Capital Group International, Inc.
reported that it had sole dispositive power with respect to 9,037,020
shares of Common Stock, including 8,906,420 shares of Common Stock for
which Capital Group International, Inc. has sole voting power.
(5) Merrill Lynch & Co., Inc., located at World Financial Center, North Tower,
250 Vesey Street, New York, NY 10381, is the parent holding company of
Merrill Lynch Investment Managers, an investment advisor registered under
Section 203 of the Investment Advisors Act of 1940, which is an operating
division of Merrill Lynch & Co., Inc. consisting of Merrill Lynch & Co.,
Inc.'s indirectly-owned asset management subsidiaries. Merrill Lynch & Co.,
Inc., on behalf of Merrill Lynch Investment Managers, reported that it had
shared voting and shared dispositive power with respect to 6,578,169 shares
of Common Stock.
</FN>
3
ELECTION OF DIRECTORS
The persons named in the Proxy shall vote the shares for the nominees
listed below, all of whom are now Directors of the Company, to serve as
Directors for the ensuing year or until their successors shall be elected. None
of the persons named as a nominee for Director has indicated that he or she will
be unable or will decline to serve. In the event that any of the nominees are
unable or decline to serve, which the Nominating Committee of the Board of
Directors does not believe will happen, the persons named in the Proxy will vote
for the remaining nominees and others who may be selected by the Nominating
Committee.
The By-Laws of the Company provide for a variable number of Directors from
8 to 18. The Board of Directors has currently fixed the number of Directors at
9. It is intended that the Proxies will be voted for the election of the 9
nominees named below as Directors, and no more than 9 will be nominated. None of
the nominees, during the last five years, was involved as a defendant in any
legal proceedings that could adversely affect his or her capacity to serve as a
member of the Board of Directors. The principal occupations stated below are the
occupations which the nominees have had during the last five years.
The Board of Directors recommends that Shareholders vote FOR election of
each of the nominees named below. The names of the nominees and information
concerning them and their associations as of March 1, 2001, as furnished by the
nominees, follow:
Year Amount and Percentage of
Became Securities of the Company Owned
Name Age Principal Occupation Director Beneficially, Directly or Indirectly
- ------------------------------------------------------------------------------------------------------------------------------
Common
Shares %
------ ------
Jenne K. Britell 58 Chairman and Chief Executive Officer 2000 21,810 0.017%
(b), (e) of Structured Ventures; former
President, Global Commercial Banking
and Executive Vice President, Global
Consumer Finance of GE Capital; also a
Director of CentraLink, Circles and
U.S.-Russia Investment Fund
John W. Conway 55 Chairman of the Board, President and 1997 6,143,100 4.890%
(a), (e), (1), (2) Chief Executive Officer; also a Director
of West Pharmaceutical Services and
PPL Corporation
Arnold W. Donald 46 Chairman and Chief Executive Officer of 1999 25,617 0.020%
(c) Merisant Company; former Senior Vice
President of Monsanto Company; also a
Director of Oil-Dri Corporation of
America, Belden and Carnival
Corporation
Marie L. Garibaldi 66 Former Associate Justice of the Supreme 2000 7,617 0.006%
(b) Court of New Jersey
4
Year Amount and Percentage of
Became Securities of the Company Owned
Name Age Principal Occupation Director Beneficially, Directly or Indirectly
- ------------------------------------------------------------------------------------------------------------------------------
Common
Shares %
------ ------
John B. Neff 69 Former Portfolio Manager of Wellington 1999 150,617 0.120%
(b), (d), (e) Management Company; also a Director of
CGU Corporation (U.S.), Greenwich
Associates, Amkor Technology and
Ani-Motion; also on the Executive Board
of Invemed Catalyst Fund
James L. Pate 65 Chairman of Pennzoil-Quaker State 1999 15,017 0.012%
(c) Company; also a Director of Bowater
Incorporated
Thomas A. Ralph 60 Partner, Dechert Price & Rhoads 1998 6,317 0.005%
(b)
Alan W. Rutherford 57 Vice Chairman of the Board, Executive 1991 6,110,788 4.864%
(a), (e), (2), (3) Vice President and Chief Financial Officer
Harold A. Sorgenti 66 Managing Partner of Sorgenti 1990 21,367 0.017%
(a), (c), (d), (e) Investment Partners; Chairman and CEO
of SpecChem International Holdings;
Chairman and CEO of Sorgenti Chemical
Industries; also a Director of
Provident Mutual Life Insurance Company
-------------------------------------------------------
(a) Member of the Executive Committee (d) Member of the Nominating Committee
(b) Member of the Audit Committee (e) Member of the Strategic Committee
(c) Member of the Executive Compensation Committee
-------------------------------------------------------
<FN>
(1) Includes 322,750 shares of Common Stock subject to presently exercisable
options held by Mr. Conway.
(2) Includes 5,740,815 shares of Common Stock held in the Crown Cork & Seal
Company, Inc. Master Retirement Trust on behalf of various Company pension
plans (the "Trust Shares"). Under the Master Retirement Trust, the Benefits
Plan Investment Committee (the "Investment Committee") has sole voting and
dispositive power with respect to the Trust Shares. As members of the
Investment Committee, Mr. Conway and Mr. Rutherford may be deemed to
beneficially own the Trust Shares.
(3) Includes 291,000 shares of Common Stock subject to presently exercisable
options held by Mr. Rutherford.
</FN>
5
As of March 1, 2001, all Directors and Executive Officers of the Company
as a group of 14, including the above, are beneficial owners of 6,950,019 shares
of Common Stock (including 5,740,815 shares of Common Stock which may be deemed
to be beneficially owned by certain Directors and Executive Officers by virtue
of their membership on the Investment Committee of the Company Master Retirement
Trust and 785,251 shares of Common Stock subject to presently exercisable
options held by certain Directors and Executive Officers), constituting 5.53% of
the outstanding Common Stock.
The Directors and Executive Officers of the Company have sole voting and
investment power in respect to the securities of the Company listed in the table
above, except as to the shares held in the aforementioned trust, with respect to
which the trustees have shared voting and investment power, and except as
otherwise noted.
On September 29, 1998, Messrs. Conway and Rutherford and William J. Avery,
former Chairman of the Board and Chief Executive Officer, borrowed money from
the Company and used this money to purchase shares of Common Stock from the
Company. The loan amounts were $2,650,000 for Mr. Avery, $742,000 for Mr. Conway
and $795,000 for Mr. Rutherford. All of these loans were to be repaid by
September 29, 2001 and bear interest at the prime rate less 1%. These amounts
remained outstanding at December 31, 2000, except that Mr. Rutherford had
reduced the principal amount of his loan to $540,000. In January 2001, Messrs.
Conway and Rutherford reduced the principal amount owed on their loans to
$517,000 and $150,000, respectively, by relinquishing to the Company their
earned and accrued rights to Company-paid insurance on their lives. In February
2001, the Company's Board of Directors extended the due date of the loans to
September 29, 2006 and agreed that, starting January 1, 2001, interest on the
loans will accrue but not be payable until the due date.
The Company and its subsidiaries utilized the services of Dechert Price &
Rhoads during 2000. Thomas A. Ralph, a Director of the Company, is a partner in
that law firm.
6
BOARD MEETINGS AND COMMITTEES
In 2000, there were ten meetings of the Board of Directors and no meetings
of the Executive Committee.
Each incumbent Director of the Company attended at least 75% of the
aggregate meetings held by the Board of Directors and by the Committees on which
he or she served.
Directors who are not employees of the Company are paid $40,000 annually
as base Director's fees (of which $25,000 is paid in Company Common Stock valued
at market price when paid) and $750 per meeting attended. In addition, a
non-employee Director who is Chairperson of a Committee is paid $10,000
annually, while non-employee Director Committee members are paid $7,000
annually, with an attendance fee of $1,000 per meeting. In addition, each
non-employee Director has been granted 3,000 shares of Company Common Stock
subject to certain restrictions which lapse as to one-fifth of such shares each
year over a five-year period. The Company discontinued the Pension Plan for
Outside Directors as to future Directors elected after July 24, 1997.
Non-employee Directors first elected to the Board of Directors on or before July
24, 1997 continue to participate in the Company's Pension Plan for Outside
Directors which provides monthly retirement benefits equal to 1/12 of the sum of
(x) 50% of the base annual Director's fees paid to non-employee Directors and
(y) 10% of the base annual Director's fees for each full year of service in
excess of five, up to an annual maximum benefit of 100% of the base annual
Director's fee. Non-employee Directors may also participate in the Company's
Deferred Compensation Plan for Directors which permits Directors to defer
receipt of all, or any part, of their Director's fees, which deferred fees
accrue interest at a rate equal to the current interest rate on the Company's
commercial paper.
In 2000, the Audit Committee had seven meetings. The Audit Committee
provides assistance to the Board of Directors in discharging its
responsibilities in connection with the oversight of the financial accounting
practices of the Company and the internal controls related thereto and
represents the Board of Directors in connection with the services rendered by
the Company's independent accountants. The Board of Directors has determined in
its business judgment that the Directors who serve on the Audit Committee are
all "Independent" as defined in the listing standards of the New York Stock
Exchange. The Board of Directors has adopted a written Audit Committee Charter
that is included as an Appendix to this Proxy Statement.
The Audit Committee reviewed the fees of PricewaterhouseCoopers LLP, the
Company's independent accountants, for the fiscal year ended December 31, 2000.
These fees were as follows: 1. Audit Fees: The aggregate fees paid by the
Company for the annual audit of the Company's consolidated financial statements
were $2,200,000; 2. Financial Information Systems Design and Implementation
Fees: The aggregate fees paid by the Company for information technology services
relating to financial information systems design and implementation were $0; and
3. All Other Fees: The aggregate fees paid by the Company for all other services
were $4,640,000.
The Audit Committee has considered whether the non-audit fees paid to
PricewaterhouseCoopers LLP are compatible with maintaining their independence as
accountants.
In 2000, the Strategic Committee met once. The Strategic Committee has the
responsibility to consider and recommend changes to the Company's dividend and
debt rating policies, business combinations and other extraordinary
transactions, and succession planning.
7
In 2000, the Executive Compensation Committee met four times. The
Executive Compensation Committee is responsible for the review of the executive
compensation program.
There were two meetings of the Nominating Committee in 2000. The
Nominating Committee is responsible for recruiting and recommending for
membership on the Board of Directors candidates to fill vacancies that may
occur. In recommending candidates to the Board of Directors, the Nominating
Committee seeks persons of proven judgment and experience. Shareholders who wish
to suggest qualified candidates may write, via Certified Mail-Return Receipt
Requested, to the Office of the Secretary, Crown Cork & Seal Company, Inc., One
Crown Way, Philadelphia, PA 19154, stating in detail the qualifications of the
persons they recommend. Shareholders must include a letter from each nominee
affirming that he or she will agree to serve as a director of the Company if
elected by Shareholders. However, through its own resources, the Committee
expects to be able to identify an ample number of qualified candidates. See
"Proposals of Shareholders" for information on bringing nominations for the
Board of Directors at the 2002 Annual Meeting.
8
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
earned during each of the Company's last three fiscal years by the Company's
five highest-paid Executive Officers during 2000:
Summary Compensation Table
Annual Compensation (1) Long Term Compensation
-------------------------------------------------- -------------------------------------
Shares of
Other Common Stock Restricted
Name & Principal Annual Underlying Stock All Other
Position Year Salary Bonus Compensation(2) Options Awards Compensation(3)
($) ($) ($) (#) (#) ($)
- ------------------------------ -------------------------------------------------- --------------------------------------
William J. Avery(4) 2000 981,600 -- -- 469,000 20,000(6) 2,550
- - Former Chairman of the Board 1999 927,000 598,000(5) -- 353,000 -- 2,400
and Chief Executive Officer 1998 927,000 648,950 -- 234,000 -- 2,400
John W. Conway(4) 2000 600,000 -- -- 229,500 20,000(6) 2,550
- - Chairman of the Board, 1999 525,000 254,000(5) -- 149,000 -- 2,400
President and 1998 425,000 217,531 -- 58,000 -- 2,400
Chief Executive Officer
Alan W. Rutherford(4) 2000 455,000 -- -- 139,000 20,000(6) 2,550
- - Vice Chairman of the Board, 1999 420,000 198,300(5) -- 100,000 -- 2,400
Executive Vice President and 1998 412,000 210,275 -- 44,000 -- 2,400
Chief Financial Officer
William H. Voss 2000 275,000 -- 218,100 -- -- 2,550
- - Executive Vice President 1999 243,000 105,952 234,000 111,500 -- 2,400
and President - Asia-Pacific 1998 238,000 83,300 206,400 28,000 -- 2,400
Division
William R. Apted 2000 248,000 -- 81,100 35,188 -- --
- - Executive Vice President 1999 158,000 41,965 -- 23,188 -- --
and President - European 1998 154,000 26,994 -- 188 -- --
Division
-------------------------------------------------------
<FN>
(1) The amount of perquisite and other personal benefits for Messrs. Avery,
Conway & Rutherford did not exceed the lesser of $50,000 or 10% of the
total of annual salary plus bonus.
(2) Nearly all of the amounts listed below for Messrs. Voss and Apted were paid
in respect of their overseas service in Singapore and Paris, respectively,
including overseas housing expense allowances to Mr. Voss of $72,500 in
2000, $73,700 in 1999 and $82,300 in 1998 and to Mr. Apted of $38,100 in
2000 and also including U.S. tax equalization payments by the Company for
Mr. Voss of $65,900 for 2000 and $59,100 for 1999.
(3) The amounts shown in this column represent amounts contributed to the
401(k) Retirement Savings Plan by the Company.
(4) Mr. Avery retired as the Company's Chief Executive Officer on January 5,
2001 and as a Director and Chairman of the Board on February 22, 2001. Mr
Conway succeeded Mr. Avery as Chief Executive Officer on January 5, 2001
and as Chairman of the Board on February 22, 2001. Mr. Rutherford was
elected Vice Chairman of the Board on February 22, 2001.
(5) Messrs. Avery, Conway and Rutherford received approximately half of the
bonus earned in 1999 in restricted Company Common Stock valued at the
market price when received.
(6) Each of Messrs. Avery, Conway and Rutherford received grants of 20,000
shares of restricted Company Common Stock with a value of $148,800 as of
December 31, 2000. The shares of restricted Company Common Stock vest in
2001. If dividends are declared, dividends will be paid on such restricted
shares.
</FN>
9
Effective January 3, 2000, the Company entered into employment agreements
with William J. Avery (who retired in 2001), John W. Conway and Alan W.
Rutherford (the "Executives") which provided for them to serve in their
positions at their annual base salaries in effect in 2000. In each case, the
base salary is reviewed and may be increased in accordance with the Company's
regular compensation review policy. The agreements are for a continuous
five-year period with automatic one-year extensions each year and will terminate
at age 65. Each of the Executives shall have the opportunity to receive an
annual bonus under the Company's Management Incentive Plan and awards under the
Company's Stock-Based Incentive Compensation Plans commensurate with each
Executive's position with the Company. The agreements also entitle each of the
Executives to participate in the Company's qualified retirement plans, Senior
Executive Retirement Plan and other employee benefit plans and programs in
accordance with the terms of those plans and programs.
Each of the Executives agreed that, during his employment and for two
years thereafter, he shall not compete with the Company or solicit Company
employees to terminate employment with the Company. The Company may waive the
Executive's non-competition restriction if the Executive gives up his right to
certain payments payable upon the termination of his employment under the
employment agreement.
Under the agreements, if an Executive's employment is terminated because
of death or disability, the Company shall pay the Executive (or his estate, if
applicable), his base salary through the date of termination, continued base
salary through the calendar year in which the termination occurs, and any vested
retirement, incentive or other benefits. If an Executive's employment terminates
because of his retirement, the Company shall pay to the Executive his base
salary through his date of retirement and any vested retirement, incentive or
other benefits. If an Executive's employment with the Company is terminated for
"Cause" (as defined in the employment agreements), the Company shall pay to the
Executive only the base salary owed through his date of termination and his
vested retirement, incentive or other benefits. If an Executive's employment is
terminated by the Company without Cause or by the Executive for "Good Reason"
prior to a "Change in Control" (as defined in the employment agreements), in
addition to the Executive's base salary through the date of termination, the
Company shall pay to the Executive a lump sum payment equal to the sum of (i)
his expected annual bonus payment, (ii) any previously earned bonus payment and
(iii) an amount equal to three times the sum of the Executive's base salary and
his average bonus over the prior three years. The Company shall also pay to the
Executive any vested retirement, incentive or other benefits and shall continue
to provide the Executive with health benefits. If an Executive's employment is
terminated by the Company without Cause or by the Executive for Good Reason
during the one year period following a Change in Control, the Executive will be
entitled to the same payments and benefits described in the two preceding
sentences, and all stock options granted to such Executive by the Company will
become fully vested and immediately exercisable. If any Executive voluntarily
terminates his employment without Good Reason, the Company shall pay to the
Executive his base salary through his date of termination, a pro-rated annual
bonus for the year of termination, and any vested retirement, incentive or other
benefits.
10
To the extent any of the Executives would be subject to the excise tax
under Section 4999 of the Internal Revenue Code on the amounts or benefits to be
received from the Company and required to be included in the calculation of
parachute payments for purposes of Sections 280G and 4999 of the Internal
Revenue Code, the Company will pay to the Executive an additional amount so that
the Executive will receive the full amount owed to him under his employment
agreement, without regard to the excise tax or any other taxes imposed on the
additional payment
Mr. Avery retired as Chief Executive Officer of the Company on January 5,
2001 and as a Director and Chairman of the Board on February 22, 2001. Under a
retirement agreement dated January 4, 2001 between him and the Company, he has
received a lump sum payment of $3,337,800; a grant of non-qualified options with
a term of five years to purchase 250,000 shares of Common Stock at a price of
$7.44 per share, the fair market value when granted; the accelerated vesting of
previously-granted non-qualified options to purchase 234,500 shares of Common
Stock which would otherwise have vested in January 2002 if Mr. Avery were then
still a Company employee; and the right to receive an additional $1,555,500 if
there is a change in control (as defined in the retirement agreement) of the
Company prior to July 1, 2002. In the retirement agreement Mr. Avery agreed that
for three years he will not compete with the Company or solicit Company
employees to terminate employment with the Company. In addition, Mr. Avery
entered into a two-year contract requiring him to consult with the Company as
needed (for up to 35 hours per month) under which he is paid $200,000 per year
and has the use of a Company-owned automobile.
11
Option Grants In Last Fiscal Year
The Company's 1990 Stock-Based Incentive Compensation Plan and 1997
Stock-Based Incentive Compensation Plan are administered by the Executive
Compensation Committee appointed by the Board of Directors. The following table
provides information related to Stock Options granted under these plans in the
last fiscal year to four of the five Named Executive Officers. Mr. Voss received
no grant in the last fiscal year.
Number of % of Total
Securities Underlying Option Shares
Options Granted Granted to Employees Exercise Price Expiration Grant Date
(A) (B) in Fiscal Year Per Share (C) Date Present Value (D)
- ---------------------------------------------------------------------------------------------------------------------------
William J. Avery 239,000 27.35% $22.25 01/04/10 $3,107,478
230,000 26.32% 22.25 01/04/10 2,990,460
John W. Conway 229,500 26.27% 22.25 01/04/10 2,983,959
Alan W. Rutherford 139,000 15.91% 22.25 01/04/10 1,807,278
William R. Apted 35,000 4.01% 19.69 02/07/10 406,882
188 0.02% 16.00 11/01/05 1,302
-------------------------------------------------------
<FN>
(A) All options were non-statutory options, have an exercise price equal to the
fair market value of the Company Common Stock on the date of grant, vest at
a rate of 50% per year on the first and second anniversaries of the grant
date (except for the option for 35,000 shares granted to Mr. Apted which
vests at a rate of 25% per year on the first through fourth anniversaries
of the grant date and the option for 188 shares granted to Mr. Apted which
vests 100% on May 1, 2003), cannot be exercised sooner than January 5th
(February 8th with respect to the option for 35,000 shares granted to Mr.
Apted) of the year following the date of grant, and have a term of ten
years.
(B) The Executive Compensation Committee administering the 1990 Stock-Based
Incentive Compensation Plan and the 1997 Stock-Based Incentive Compensation
Plan has the discretion, subject to plan limits, to modify terms of
outstanding options and to reprice the options.
(C) The exercise price and tax withholding obligation related to exercise shall
be paid either in cash or by delivery of already-owned shares valued at
fair market value on the date of exercise.
(D) The Grant Date Present Value was determined using the Black-Scholes option
pricing model. The following assumptions were used to estimate the Grant
Date Present Value: dividend yield of 0%, ten-year risk-free interest rate
of 4.974%, estimated volatility of Company Common Stock of 36.8% and
estimated average expected option term of ten years. This valuation model
was not adjusted for risk of forfeiture. It is important to note that
options will have value to the Named Executive Officers and other
recipients only if the stock price advances beyond the grant date exercise
price shown in the table during the effective option period.
</FN>
12
Aggregated Option Exercises in the Last Fiscal Year and Fiscal Year-End Option Values
Value of Unexercised
Number of Securities In-The-Money Options
Number of Value Underlying Unexercised at 12/31/00 (2)
Shares Acquired Realized (1) Options at 12/31/00 Exercisable/Unexercisable
Upon Exercise ($) Exercisable/Unexercisable ($)
---------------- ------------- ------------------------- --------------------------
William J. Avery 1990 Plan 0 0 237,300 / 239,000 0/0
1994 Plan 0 0 413,500 / 166,500 0/0
1997 Plan 0 0 177,000 / 527,000 0/0
John W. Conway 1990 Plan 0 0 10,000 / 0 0/0
1994 Plan 0 0 67,000 / 20,000 0/0
1997 Plan 0 0 66,250 / 370,250 0/0
Alan W. Rutherford 1990 Plan 0 0 38,500 / 0 0/0
1994 Plan 0 0 85,000 / 25,000 0/0
1997 Plan 0 0 47,000 / 236,000 0/0
William H. Voss 1990 Plan 0 0 20,875 / 53,625 0/0
1994 Plan 0 0 31,600 / 9,400 0/0
1997 Plan 0 0 24,000 / 44,000 0/0
William R. Apted 1990 Plan 0 0 3,750 / 11,250 0/0
1994 Plan 0 0 6,000 / 1,688 0/0
1997 Plan 0 0 2,000 / 41,376 0/0
-------------------------------------------------------
<FN>
(1) Value Realized is the difference between the price of the Company Common
Stock on the date exercised and the option exercise price.
(2) Value of the Unexercised Options is the difference between the closing
market price on December 31, 2000 of the Company Common Stock and the
option exercise price.
</FN>
13
Retirement Program
The Company maintains a Salaried Pension Plan ("Pension Plan") for certain
salaried and non-union hourly employees in the United States meeting minimum
eligibility requirements in which four Named Executive Officers (Mr. Avery, Mr.
Conway, Mr. Rutherford and Mr. Voss) participate. The Pension Plan is designed
and administered to qualify under Section 401(a) of the Internal Revenue Code of
1986, as amended. The Pension Plan provides normal retirement benefits at age 65
based on the average of the five highest consecutive years of earnings in the
last ten years. These average earnings are multiplied by 1.25%. This result is
then multiplied by years of service, which yields the annual Company-funded
pension benefit. Under federal law for 2001, benefits from a qualified
retirement plan are limited to $140,000 per year and may be based only on the
first $170,000 of an employee's annual earnings.
For illustration purposes, the following table shows estimated maximum
annual Company-funded retirement benefits payable from the Pension Plan to
employees who retire at age 65, assuming the employees receive their benefit as
a single life annuity, without survivor benefits:
Final Years of Service
Average
Earnings 25 30 35 40 45
- --------------------------------------------------------------------------------
$ 50,000 $15,625 $18,750 $21,875 $25,000 $28,125
100,000 31,250 37,500 43,750 50,000 56,250
150,000 46,875 56,250 65,625 75,000 84,375
170,000 53,125 63,750 74,375 85,000 95,625
and above
The Company also maintains the Senior Executive Retirement Plan ("SERP")
in which thirteen key executives (five of whom are now retired), including the
four above-Named Executive Officers, participate. In general, the annual benefit
for executives eligible to participate in the SERP is based upon a formula equal
to (i) 2.25% of the average of the five highest consecutive years of earnings
times years of service up to twenty years plus (ii) 1.67% of such earnings for
the next fifteen years plus (iii) 1% of such earnings for years of service
beyond thirty-five less (iv) Social Security old-age benefits and the
Company-funded portion of the executive's Pension Plan benefits and 401(k)
Retirement Savings Plan benefits. Based upon the above, the annual benefit,
estimated as of December 31, 2000, under the SERP at retirement at age 65,
assuming annual salary increases of 5%, would be $690,201 for Mr. Conway,
$524,804 for Mr. Rutherford and $206,580 for Mr. Voss. Mr. Avery's annual
benefit at his retirement was $958,568.
Participants in the SERP may elect to take all or part of their annual
retirement benefit in a lump sum at retirement, the amount of which is
determined by present valuing the actuarially determined future annual payments.
The SERP also provides a lump-sum death benefit of five times the annual
retirement benefit and subsidized survivor benefits.
SERP participants vest in their benefits at the earliest of five years of
participation, specified retirement dates, total disability or employment
termination (other than for cause) after a change in control of the Company. A
"change in control" under the SERP occurs if: 1) a person (other than a Company
employee benefit plan) becomes the beneficial owner of 25% or more of the voting
power of the Company; 2) there is a change in the identity of a majority of
Directors of the Company over any two year period; or 3) the Shareholders
approve certain mergers or consolidations, a sale of substantially all of the
Company's assets or a complete liquidation of the Company.
14
Years of service credited under the Pension Plan and the SERP for the
above-Named Executive Officers are: Mr. Avery - 41 years, Mr. Conway - 26 years,
Mr. Rutherford - 27 years and Mr. Voss - 31 years.
Employees outside of the United States are generally covered by statutory
pension arrangements specific to each country, and in some countries
supplemental pension plans are maintained. Mr. Apted will be entitled to a
pension of $185,000 per year assuming he retires at age 65 and assuming present
rates of return on investments and annual salary increases of 5%.
15
COMPARATIVE STOCK PERFORMANCE
Comparison of Cumulative Total Return (a)
Crown Cork & Seal, S&P 500 Index, Dow Jones "Containers & Packaging" Index (b)
Five Year Comparison
(The Performance Graph appears here. See the table below for plot points.)
Fiscal Year Ended December 31,
1995 1996 1997 1998 1999 2000
Crown Cork & Seal 100 133 125 79 59 22
S&P 500 Index 100 123 164 211 255 232
Dow Jones "Containers & Packaging" Index 100 125 148 133 127 82
Ten Year Comparison
(The Performance Graph appears here. See the table below for plot points.)
Fiscal Year Ended December 31,
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Crown Cork & Seal 100 158 211 221 200 221 294 276 174 131 48
S&P 500 Index 100 130 140 155 157 215 265 353 454 550 500
Dow Jones "Containers & Packaging" Index 100 158 175 170 176 194 243 287 257 246 160
(a) Assumes, for the five and ten year graphs, that the value of the investment
in Crown Cork & Seal Common Stock and each index was $100 on December 31,
1995 and December 31, 1990, respectively, and that all dividends were
reinvested.
(b) Industry index is weighted by market capitalization and is comprised of
Crown Cork & Seal, Aptargroup, Ball, Bemis, Chesapeake, Owens-Illinois,
Sealed Air, Smurfit-Stone Container, Sonoco Products and Temple-Inland.
16
EXECUTIVE COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Executive Compensation Committee of the Board of Directors is composed
entirely of independent directors and is responsible for establishing and
administering the executive compensation program at Crown Cork & Seal Company,
Inc. We submit this report to Shareholders describing both the principles under
which the program is administered and the decisions that directly impacted the
Chief Executive Officer during 2000.
Principles
Our guiding principle is to provide a program that enables the Company to
retain and motivate a team of high quality executives who will create long-term
value for the Shareholders. We do this by:
o developing an ownership-oriented program that rewards for long-term
improvement in total Shareholder return;
o integrating all facets of the executive compensation program with the
Company's short and long-term objectives and strategies;
o regularly commissioning studies of competitive pay practices within
the container industry and other manufacturing companies to ensure pay
opportunities are generally within competitive norms; and
o working with independent management consultants to monitor the
effectiveness of the entire program.
In order to improve the Company's performance and continue its growth in
difficult market conditions we must continue to motivate existing management as
well as attract and retain experienced managers at all levels in the Company. We
believe our program is closely aligned with sustained improvement in Company
performance and increased Shareholder value in all economic conditions. The
specific components of the program are described below.
Base Salaries - In order to attract and retain high quality executives, we
endeavor to maintain senior executive salaries within the competitive market
rates as defined by the container and manufacturing industries. The competitive
market includes, but is not limited to, companies of Crown's size in the
container, non-durable manufacturing and general industry segments.
Annual Incentive Bonus Awards - The Management Incentive Plan calls for
the achievement of the Company's net income and other targets, as well as
specific financial operating goals, before incentive awards are earned by Plan
participants. These goals stem directly from the Company's strategic and
operating plans. In 2000, the Plan called for the Company to achieve a specified
target net income from current operations and also to substantially improve free
cash flow and reduce debt levels in the Company.
Long Term Incentives - The Committee believes that stock options and other
stock-based incentives are an important link between the executive and
Shareholder interests, and it is for that reason that grants have always been a
part of the executive compensation program. The program administered by the
Committee offers annual grants that vary in size based on the Company's and the
executive's performance. As part of its ongoing review of the competitiveness
and effectiveness of the Company's executive compensation programs, the
Committee annually evaluates the components of the compensation system as well
as the desired mix of compensation among these components. The Committee
believes that a substantial portion of the compensation paid to the Company's
executives
17
should be at risk contingent on the Company's operating and market performance.
Consistent with this philosophy, the Committee will continue to place
significant emphasis on stock-based compensation and performance measures, in an
effort to more closely align compensation with Shareholder interests and to
increase the executives' focus on the Company's long-term performance. To that
end, adoption of the 2001 Stock-Based Incentive Compensation Plan was
recommended by the Executive Compensation Committee and approved by the Board of
Directors, subject to Shareholder approval at the Annual Meeting.
In summary, the Committee believes that its role in administering the
executive compensation program is critical to the objective of driving
performance to the ultimate benefit of the Shareholders. Base salaries need to
be within competitive norms so that executives will be attracted, retained and
motivated to fulfill their roles and responsibilities over the long-term. This
is especially important in the current economic climate with almost full
employment in the United States and severe competition for experienced
management. Annual incentive bonus awards deliver the message that competitive
pay is received only when earnings and other strategic goals are achieved. In
addition, benefits realized from long term incentives in the form of annual
stock option grants and other stock-based incentives require continuous
improvement in value created for the Shareholder.
Specific Decisions Impacting Compensation for the Chairman
and Chief Executive Officer
Based on the policies and practices described above, Mr. Avery's base
salary was increased to $981,600 on January 1, 2000 and options to purchase
469,000 shares of Common Stock were granted at the beginning of the year. In
addition, 20,000 shares of restricted stock were granted during the year. There
was no bonus earned in 2000.
Mr. Avery retired as Chief Executive Officer on January 5, 2001 and as
Chairman of the Board and a Director on February 22, 2001. In connection with
his retirement, the Company entered into a retirement agreement with Mr. Avery,
the terms of which are described under "Executive Compensation" in this Proxy
Statement. The terms of the retirement agreement were recommended by the
Committee to the Company's Board of Directors, based in part on a review of
those terms by independent employee benefit consultants, and approved by the
Board of Directors.
Section 162(m) of the Internal Revenue Code generally disallows a
deduction for annual compensation to a public company's chief executive officer
and any of the four other most highly compensated officers in excess of
$1,000,000, unless such compensation is "performance based" as defined under
Section 162(m). A portion of Mr. Avery's 2000 compensation exceeded the
threshold. Because the Company's costs in realizing tax benefits under Section
162(m) may outweigh those benefits, the Committee intends to maintain
flexibility to pay compensation that is not entirely deductible when sound
direction of the Company would make that advisable. All stock options and
restricted stock granted in 2000 to Crown executive officers are "performance
based."
This report is respectfully submitted by the members of the Executive
Compensation Committee of the Board of Directors.
Harold A. Sorgenti, Chairman
Arnold W. Donald
James L. Pate
18
AUDIT COMMITTEE REPORT
The Audit Committee provides assistance to the Board of Directors in its
oversight of the financial accounting practices of the Company and the internal
controls related thereto and represents the Board of Directors in connection
with the services rendered by the Company's independent accountants.
In fulfilling its responsibilities, the Audit Committee has reviewed and
discussed the audited financial statements for the fiscal year ended December
31, 2000 with the Company's management and its independent accountants.
Management is responsible for the financial statements and the reporting
process, including the system of internal controls, and has represented to the
Committee that such financial statements were prepared in accordance with
generally accepted accounting principles. The Company's independent accountants,
PricewaterhouseCoopers LLP, are responsible for expressing an opinion as to
whether the financial statements fairly present the financial position, results
of operations and cash flows of the Company in accordance with generally
accepted accounting principles in the United States.
The Audit Committee discussed with the independent accountants the matters
required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as amended. In addition, the Committee has
discussed with the independent accountants the accountants' independence from
the Company and its management, including the matters in the written disclosures
and letter which were received by the Committee from the independent accountants
as required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees, as amended.
Based on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2000.
This report is respectfully submitted by the members of the Audit
Committee of the Board of Directors.
John B. Neff, Chairman
Jenne K. Britell
Marie L. Garibaldi
Thomas A. Ralph
Guy de Wouters
19
2001 STOCK-BASED INCENTIVE COMPENSATION PLAN
The Board of Directors has adopted and recommends that the Shareholders
approve the Crown Cork & Seal Company, Inc. 2001 Stock-Based Incentive
Compensation Plan (the "Plan"). The purpose of the Plan is to assist the
Company, its subsidiaries and affiliates in attracting and retaining valued
employees by offering them a greater stake in the Company's success and a closer
identity with it and to encourage ownership of the Company's stock by such
employees. The Plan will accomplish these goals by allowing eligible employees
of the Company, its subsidiaries and affiliates to receive awards of deferred
stock, restricted stock, options or stock appreciation rights (the "Awards").
The total number of shares of Company Common Stock available for Awards under
the Plan is 6,000,000 (subject to adjustments for stock splits, stock dividends
and the like) which equals approximately 4.8% of the outstanding shares of
Common Stock of the Company as of March 1, 2001. No individual employee may
receive more than 500,000 shares under the Plan during any calendar year. The
last sales price of Company Common Stock reported on the New York Stock Exchange
for March 1, 2001 was $5.58 per share.
Eligibility
Any Officer or other key employee of the Company, a subsidiary or an
affiliate (including a Director who is such an employee) is eligible to
participate in the Plan.
Administration and Implementation
A Committee designated by the Board of Directors, comprised of at least
two Directors, each of whom is a non-employee outside Director, has the
authority to administer the Plan. This Committee also has full authority to
select the employees to whom Awards will be granted and to determine the type
and amount of Awards to be granted to each eligible employee, the terms and
conditions of Awards granted under the Plan and the terms of agreements which
will be entered into with holders of such Awards.
The Committee may condition the grant of any Award upon the holder's
achievement of a performance goal that is established by the Committee before
the grant of the Award. A performance goal is a goal that must be met by the end
of a period specified by the Committee (but that is substantially uncertain to
be met before the grant of the Award) based upon: (i) the price of the Common
Stock, (ii) the market share of the Company, (iii) sales by the Company, (iv)
earnings per share of Common Stock, (v) return on shareholder equity of the
Company, (vi) costs of the Company, (vii) cash flow of the Company, (viii)
return on total assets of the Company, (ix) return on invested capital of the
Company, (x) return on net assets of the Company, (xi) operating income of the
Company or (xii) net income of the Company. Performance goals can also be based
upon the performance of a particular business unit of the Company. The Committee
will interpret the provisions of the Plan and make all determinations necessary
for the administration of the Plan.
No Award may be repriced, replaced, regranted through cancellation, or
modified without shareholder approval if the effect would be to reduce the
exercise price for the shares underlying the Award, except that the Board of
Directors will determine the effect of a reorganization, recapitalization,
spin-off, stock split, combination, merger or any other change of corporate
structure on outstanding Awards. Upon a Change in Control of the Company (as
such term is defined in the Plan), however, the Committee may, in its sole
discretion, fully vest outstanding Awards, cash-out outstanding Awards,
terminate outstanding Options or Stock Appreciation Rights, or cause the
successor company to assume outstanding Awards.
20
Deferred Stock Awards
An Award of Deferred Stock is an agreement by the Company to deliver to
the recipient a specified number of shares of Common Stock at the end of a
specified deferral period or periods and will be evidenced by a Deferred Stock
agreement. Amounts equal to any dividends paid during this deferral period will
be paid to the holder currently, or deferred, on such terms as are determined by
the Committee.
Restricted Stock Awards
An Award of Restricted Stock is a grant to the recipient of a specified
number of shares of Common Stock which are subject to forfeiture upon specified
events and which are held in escrow by the Company during the restriction
period. Such Award will be evidenced by a Restricted Stock agreement which will
specify the duration of the restriction period and the performance, employment
or other conditions under which the Restricted Stock may be forfeited to the
Company. During the restriction period, the holder has the right to receive
dividends on, and to vote, the shares of Restricted Stock.
Options
An Award of Options is a grant by the Company to the recipient of the
right to purchase a specified number of shares of Common Stock from the Company
for a specified time period at a fixed price. Options may be either Incentive
Stock Options or Non-Qualified Stock Options. Grants of Options will be
evidenced by Option agreements. The price per share at which Common Stock may be
purchased upon exercise of an Option will be determined by the Committee, but,
in the case of grants of Incentive Stock Options, will be not less than the fair
market value of a share of Common Stock on the date of grant. The Option price
per share for Non-Qualified Options may be less than the fair market value of a
share of Common Stock on the date of the grant.
The Option agreements will specify when an Option may be exercisable and
the terms and conditions applicable thereto. The term of an Option will in no
event be greater than ten years.
Stock Appreciation Rights
An Award of Stock Appreciation Rights ("SARs") is a grant by the Company
to the recipient of the right to receive, upon exercise of the SAR, the increase
in the fair market value of a specified number of shares of Common Stock from
the date of grant of the SAR to the date of exercise. SARs are rights to receive
a payment in cash, Common Stock, Restricted Stock or Deferred Stock as selected
by the Committee. The value of these rights, determined by the appreciation in
the number of shares of Common Stock subject to the SAR, will be evidenced by
SAR agreements. An SAR will entitle the recipient to receive a payment equal to
the excess of the fair market value of the shares of Common Stock covered by the
SAR on the date of exercise over the base price of the SAR.
Amendment and Termination
The Board of Directors has authority to amend, suspend or terminate the
Plan at any time. However, certain amendments require the approval of a majority
of the Company's Shareholders. Without Shareholder approval, no amendment may be
made: (i) increasing the maximum number of shares available for purchase under
the Plan (except for adjustments for a reorganization, recapitalization,
spin-off, stock split, combination, merger, or other change in the corporate
structure of
21
the Company); (ii) changing the class of employees eligible under the Plan;
(iii) modifying the maximum number of Awards that an eligible employee may
receive or categories of performance goals that must be met; or (iv) changing
the Plan's term or the Board of Directors' power to amend, suspend or terminate
the Plan.
The Plan will remain in effect until 5 years from the date of its
adoption, unless earlier terminated by the Board of Directors. Such termination
will not affect Awards outstanding under the Plan.
Federal Tax Treatment
Except as provided below, a recipient realizes no taxable income, and the
Company is not entitled to a deduction, when a Restricted Stock or Deferred
Stock Award is made. When the restrictions on the shares of Restricted Stock
lapse or the deferral period for Deferred Stock ends, the recipient will realize
ordinary income equal to the fair market value of the shares, and, provided the
applicable conditions of Section 162(m) of the Internal Revenue Code are met,
the Company will be entitled to a corresponding deduction. Upon sale of the
shares, the recipient will realize short-term or long-term capital gain or loss,
depending upon whether the shares have been held for more than one year. Such
gain or loss will be equal to the difference between the sale price of the
shares and the fair market value of the shares on the date that the recipient
recognizes income.
In the case of Awards of Restricted Stock, a recipient may choose to make
an election under Section 83(b) of the Internal Revenue Code. Such an election
will have the effect of including in the recipient's income the fair market
value of the Restricted Stock on the date the Award is made, and, subject to the
provisions of Section 162(m) of the Internal Revenue Code, the Company will be
entitled to a corresponding deduction at that time. The recipient will not
recognize additional income or loss as a result of the lapse of the restrictions
on the Restricted Stock, nor will the Company be entitled to a deduction at such
time.
A recipient recognizes no taxable income, and the Company is not entitled
to a deduction, when an Incentive Stock Option is granted or exercised. If a
recipient sells shares acquired upon exercise, after complying with the
requisite holding periods, any gain or loss realized upon such sale will be
long-term capital gain or loss. The Company will not be entitled to take a
deduction as a result of any such sale. If the recipient disposes of such shares
before complying with the requisite holding periods, the recipient will
recognize ordinary income equal to the excess of the sales price (or if less,
the fair market value of the shares on the date of exercise) less the exercise
price of the option. Any proceeds in excess of the fair market value of the
shares on the date of exercise will be treated as short-term or long-term
capital gain or loss, depending upon whether the shares have been held for more
than one year, and the Company will be entitled to a corresponding deduction.
A recipient recognizes no taxable income, and the Company is not entitled
to a deduction, when a Non-Qualified Option is granted. Upon exercise of a
Non-Qualified Option, a recipient will realize ordinary income in an amount
equal to the excess of the fair market value of the shares over the exercise
price, and, provided that the applicable conditions of Section 162(m) of the
Internal Revenue Code are met, the Company will be entitled to a corresponding
deduction. Upon sale of the Option shares, the recipient will realize short-term
or long-term capital gain or loss, depending upon whether the shares have been
held for more than one year. The gain or loss is equal to the difference between
the sale price of the shares and the fair market value of the shares on the date
that the recipient recognizes income with respect to the Option exercise.
22
A recipient recognizes no taxable income, and the Company is not entitled
to a deduction, when an SAR is granted. Upon exercising an SAR, a recipient will
realize ordinary income in an amount equal to the difference between the fair
market value of the stock on the date of exercise and its fair market value on
the date of the grant, and, provided the applicable conditions of Section 162(m)
of the Internal Revenue Code are met, the Company will be entitled to a
corresponding deduction.
Recipients shall be responsible to make appropriate provision for all
taxes required to be withheld in connection with any Award, the exercise thereof
and the transfer of shares of Common Stock pursuant to the Plan. Such
responsibility shall extend to all applicable federal, state, local or foreign
withholding taxes. In the case of the payment of Awards in Common Stock or the
exercise of Options or SARs, the Company shall, at the election of the
recipient, have the right to retain the number of shares of Common Stock whose
fair market value equals the withholding tax obligation of such employee.
Requisite Vote
To be adopted, the Plan requires the affirmative vote of a majority of the
votes cast by all Shareholders entitled to vote thereon.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR THE ADOPTION OF THE 2001 STOCK-BASED INCENTIVE COMPENSATION PLAN.
23
SHAREHOLDER PROPOSAL
William Steiner, of 4 Radcliff Drive, Great Neck, New York 11024, who has
represented to the Company that he is the beneficial owner of 950 shares of the
Company's Common Stock, has given notice that he intends to present for action
at the Annual Meeting of Shareholders the following resolution:
"Resolved that the shareholders of Crown Cork & Seal Company, Inc. urge
the Crown Cork & Seal Company, Inc. Board of Directors to arrange for the prompt
sale of Crown Cork & Seal Company, Inc. to the highest bidder."
The purpose of the Maximize Value Resolution is to give all Crown Cork &
Seal Company, Inc. shareholders the opportunity to send a message to the Crown
Cork & Seal Company, Inc. Board that they support the prompt sale of Crown Cork
& Seal Company, Inc. to the highest bidder. A strong and or majority vote by the
shareholders would indicate to the board the displeasure felt by the
shareholders of the shareholder returns over many years and the drastic action
that should be taken. Even if it is approved by the majority of the Crown Cork &
Seal Company, Inc. shares represented and entitled to vote at the annual
meeting, the Maximize Value Resolution will not be binding on the Crown Cork &
Seal Company, Inc. Board. The proponent however believes that if this resolution
receives substantial support from the shareholders, the board may choose to
carry out the request set forth in the resolution.
The prompt auction of Crown Cork & Seal Company, Inc. should be
accomplished by any appropriate process the board chooses to adopt including a
sale to the highest bidder whether in cash, stock, or a combination of both. It
is expected that the board will uphold its fiduciary duties to the utmost during
the process.
The proponent further believes that if the resolution is adopted, the
management and the board will interpret such adoption as a message from the
company's stockholders that it is no longer acceptable for the board to continue
with its current management plan and strategies.
RECOMMENDATION OF THE BOARD OF DIRECTORS
AGAINST THE ADOPTION OF THIS PROPOSAL
The Board of Directors of the Company believes that the approval of the
proposed resolution, which the Board of Directors understands the proponent has
submitted to a number of significant public companies in recent years, would not
be in the best interests of the Company or its Shareholders. Consistent with its
fiduciary duties to the Shareholders of the Company, the Board of Directors is
committed to maximizing long-term Shareholder value. The Board of Directors
believes that adoption of the proposed resolution is inconsistent with this
commitment and strongly recommends that Shareholders vote against the proposal.
The Board of Directors regularly explores strategic opportunities to
increase Shareholder value. As previously announced, the Company, with the
assistance of a nationally recognized financial advisor, has actively studied
potential combinations and consolidations, including joint ventures, product
line mergers, joint acquisitions and other portfolio changes in order to
strengthen its position in the various markets in which it operates and achieve
the Company's debt reduction objectives.
24
The Company experienced very challenging business conditions in 2000. A
number of factors beyond the control of management, such as raw material and
energy price fluctuations, currency exchange rates and customer base
consolidation, negatively impacted the Company's results of operations. In
addition, companies with alleged asbestos liabilities were negatively impacted
in 2000 by high-profile bankruptcy filings.
In light of the conditions faced by the Company in 2000 and the other
factors discussed above, the Board of Directors believes that a near term forced
sale to the highest bidder would not properly recognize the long-term value of
the Company and would therefore not be in the best interests of the Company and
its Shareholders.
THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
25
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's Directors, Officers and persons who own more than 10% of a registered
class of the Company's equity securities to file initial reports of ownership
and reports of changes in ownership with the Securities & Exchange Commission
(the "SEC") and the New York Stock Exchange. Such persons are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on the review of the copies of SEC forms received by the
Company with respect to fiscal year 2000, or written representations from
reporting persons, the Company believes that its Directors and Executive
Officers have complied with all applicable filing requirements, except that,
because of an administrative error, Arnold W. Donald was late in filing a Form 4
reporting his acquisition of 20,000 shares of Common Stock in October 2000. The
acquisition was reported on his Form 4 filed on December 7, 2000.
PROPOSALS OF SHAREHOLDERS
In order to be considered for inclusion in the Proxy Statement for the
2002 Annual Meeting of the Company, any Shareholder proposal intended to be
presented at the meeting, in addition to meeting the shareholder eligibility and
other requirements of the SEC rules governing such proposals, must be received
in writing, via Certified Mail - Return Receipt Requested, by the Office of the
Secretary, Crown Cork & Seal Company, Inc., One Crown Way, Philadelphia,
Pennsylvania 19154 not later than November 23, 2001. In addition, the Company's
By-Laws currently provide that a Shareholder of record at the time that notice
of the meeting is given and who is entitled to vote at the meeting may bring
business before the meeting or nominate a person for election to the Board of
Directors if the Shareholder gives timely notice of such business or nomination.
To be timely, and subject to certain exceptions, notice in writing to the
Secretary must be delivered or mailed, via Certified Mail-Return Receipt
Requested, and received at the above address not less than 90 days nor more than
120 days prior to the first anniversary of the preceding year's annual meeting.
The notice must describe various matters regarding the nominee or proposed
business. Any Shareholder desiring a copy of the Company's By-Laws will be
furnished one copy without charge upon written request to the Secretary.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The firm of PricewaterhouseCoopers LLP is the independent accountant for
the most recently completed fiscal year and has been selected by the Board of
Directors to continue in that capacity for the current year.
PricewaterhouseCoopers LLP performs annual audits of the Company's financial
statements and assists the Company in the preparation of federal tax returns. A
representative or representatives of PricewaterhouseCoopers LLP are expected to
be present at the Annual Meeting and will have the opportunity to make a
statement if they desire to do so. Such representatives are also expected to be
available to respond to questions raised orally at the Meeting or submitted in
writing to the Office of the Secretary of the Company before the Meeting.
26
OTHER MATTERS
The Board of Directors knows of no other matter which may be presented for
Shareholders' action at the Meeting, but if other matters do properly come
before the Meeting, or if any of the persons named above to serve as Directors
are unable to serve, it is intended that the persons named in the Proxy or their
substitutes will vote on such matters and for other nominees in accordance with
their best judgment.
The Company will file its 2000 Annual Report on Form 10-K with the
Securities & Exchange Commission on or before March 30, 2001. A copy of the
Report, including the financial statements and schedules thereto and a list
describing all the exhibits not contained therein, may be obtained without
charge by any Shareholder after March 30, 2001. Requests for copies of the
Report should be sent to: Senior Vice President-Finance, Crown Cork & Seal
Company, Inc., One Crown Way, Philadelphia, Pennsylvania 19154.
WILLIAM T. GALLAGHER
Vice President, Secretary &
General Counsel
Philadelphia, Pennsylvania 19154
March 23, 2001
27
APPENDIX:
AUDIT COMMITTEE CHARTER
I. Purpose
The primary function of the Audit Committee is to assist the Board of
Directors in overseeing that the Company's management maintains:
o An adequate system of internal controls,
o Sound financial reporting practices, and
o Processes to ensure compliance by the Company with all applicable laws,
regulations and Company policy.
The Audit Committee will also oversee the Company's Internal and External
Audit functions.
In addition, the Audit Committee shall maintain an effective, open avenue
of communication between the independent accountants, internal auditors, senior
management and the Board of Directors.
II. Structure
The Audit Committee shall consist of not less than three independent
directors. An independent director shall be as defined by the New York Stock
Exchange for the purpose of this charter. Non-independent directors may be
appointed to the Audit Committee under exceptional circumstances if the Board of
Directors believes that membership on the Audit Committee is in the best
interests of the Company and its shareholders. Exceptions are subject to Board
approval and will be documented in the Board's meeting minutes.
All members of the Audit Committee will have a working familiarity of
basic finance and accounting practices. At least one member of the Audit
Committee will have accounting or financial management expertise.
III. Meetings
Meetings will occur as follows:
1. The Audit Committee shall meet quarterly, by telephone conference or in
person, prior to the release of earnings to the public.
2. The Audit Committee shall meet prior to the Annual Meeting of
Shareholders of Common Stock and at a convenient date in the fourth quarter.
3. The Audit Committee shall meet at any other convenient date on an
as-needed basis.
The Audit Committee may ask members of management or others to attend
Audit Committee meetings and provide pertinent information when needed.
At least half the members of the Audit Committee will constitute a quorum
with a majority of votes of those Committee members present at a meeting in
which a quorum has been established being sufficient to adopt a resolution or
otherwise take action.
28
IV. Functions and Responsibilities
Internal Control
1. Review with management, internal auditors and independent auditors the
adequacy and effectiveness of the Company's internal controls in managing risk.
2. Examine internal and independent auditors' findings of weaknesses and
recommendations for the improvement of the internal controls. Monitor
management's implementation of internal control recommendations.
3. Consider the extent to which internal and external auditors review
computer systems and applications, the security of such systems and
applications, and the contingency plan for processing financial information in
the event of a systems breakdown.
Financial Reporting
1. Review the quarterly and annual financial statements prior to release
to the public.
2. Discuss any changes in accounting principles, significant judgmental
areas and significant or complex transactions that occurred. Consider
management's handling of proposed audit adjustments identified by the
independent auditors.
3. Consult with the internal auditors, independent auditors and accounting
personnel on the integrity of the internal and external financial reporting
process. Determine if key reporting objectives are being met.
4. Discuss with the independent auditors the quality of the Company's
accounting policies and reported earnings.
5. Discuss the nature of interim financial statements with independent
auditors to monitor that quarterly financial statements are consistent with
year-end reporting.
6. Issue any letters for inclusion in the annual report and Form 10-K
providing disclosures as required by SEC regulations.
Independent Auditors
1. Serve together with the Board of Directors as the authority to which
the independent auditors report. The Audit Committee and Board of Directors have
the ultimate authority and responsibility to select, evaluate and, where
appropriate, replace the independent auditors.
2. Engage in a dialogue with the independent auditors with respect to any
disclosed relationships or services that may impact the objectivity and
independence of the independent auditors.
3. Obtain a formal written statement, on a periodic basis, delineating all
relationships between the independent auditors and the Company. The Audit
Committee is responsible for recommending that the Board of Directors take
appropriate action in response to the independent auditors' report to satisfy
itself of the independent auditors' independence.
4. Review the audit scope and approach of the independent auditors'
examinations and direct the auditors to areas that, in the Audit Committee's
opinion, require more attention.
29
5. Discuss with the independent auditors any significant findings or
problems encountered while performing the audit.
6. Determine the appropriateness of the fees for the audit and non-audit
services provided by the independent auditors.
Internal Auditors
1. Review and examine the objectivity, effectiveness and resources of the
Internal Audit Department.
2. Concur in the appointment, replacement, reassignment or dismissal of
the Director of Internal Audit.
3. Review the internal audit plan for the current year and review the risk
assessment procedures used to identify projects included in this plan.
4. Review, with the Director of Internal Audit, the results of internal
audit activities and progress with respect to the internal audit plan.
General
1. Ensure that a Code of Ethics is formalized in writing and review
management's monitoring of compliance with the Company's Code of Ethics.
2. Evaluate whether management is setting the appropriate tone at the top
by communicating the importance of the Code of Ethics.
3. Review legal and regulatory matters that may have a material impact on
the financial statements and the related compliance policies and procedures.
4. Initiate investigations on any matters within the scope of the Audit
Committee's responsibilities.
5. Review and assess, at least annually, the Audit Committee's charter and
submit the charter for approval of the Board.
6. Perform other oversight functions as requested by the Board of
Directors.
V. Reporting Responsibilities
The Audit Committee is an arm of, and responsible to, the Board of
Directors to which it directly reports. The Audit Committee is responsible for
periodically updating the Board of Directors about Audit Committee activities
and making appropriate recommendations.
30
CROWN CORK & SEAL COMPANY, INC.
2001 STOCK-BASED INCENTIVE COMPENSATION PLAN
Adopted February 22, 2001
CROWN CORK & SEAL COMPANY, INC.
2001 STOCK-BASED INCENTIVE COMPENSATION PLAN
1. Purpose of the Plan
The purpose of the Plan is to assist the Company, its Subsidiaries and
Affiliates in attracting and retaining valued employees by offering them a
greater stake in the Company's success and a closer identity with it, and to
encourage ownership of the Company's stock by such employees.
2. Definitions
2.1 "Affiliate" means any entity other than the Subsidiaries in which
the Company has a substantial direct or indirect equity interest, as determined
by the Board.
2.2 "Award" means an award of Deferred Stock, Restricted Stock,
Options or SARs under the Plan.
2.3 "Board" means the Board of Directors of the Company.
2.4 "Cause" means: (i) the Participant's willful misconduct or gross
negligence in connection with the performance of the Participant's duties for
the Company, its Subsidiaries or Affiliates; (ii) the Participant's conviction
of, or a plea of nolo contendre to, a felony or a crime involving fraud or moral
turpitude; (iii) the Participant's engaging in any business that directly or
indirectly competes with the Company, its Subsidiaries or Affiliates; or (iv)
disclosure of trade secrets,
customer lists or confidential information of the Company, its Subsidiaries or
Affiliates to a competitor or unauthorized person.
2.5 "Code" means the Internal Revenue Code of 1986, as amended.
2.6 "Common Stock" means the common stock of the Company, par value
$5.00 per share, or such other class or kind of shares or other securities
resulting from the application of Section 10.
2.7 "Company" means Crown Cork & Seal Company, Inc., a Pennsylvania
corporation, or any successor corporation.
2.8 "Committee" means the committee designated by the Board to
administer the Plan under Section 4. The Committee shall have at least two
members, each of whom shall be a member of the Board, a Non-Employee Director
and an Outside Director
2.9 "Deferred Stock" means an Award made under Section 6 of the Plan
to receive Common Stock at the end of a specified Deferral Period.
2.10 "Deferral Period" means the period during which the receipt of a
Deferred Stock Award under Section 6 of the Plan will be deferred.
2.11 "Disability" means disabled within the meaning of Section
22(e)(3) of the Code.
2.12 "Employee" means an officer or other key employee of the Company,
a Subsidiary or an Affiliate including a director who is such an employee.
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2.13 "Fair Market Value" means, on any given date, the closing price
of a share of Common Stock on the principal national securities exchange on
which the Common Stock is listed on such date or, if Common Stock was not traded
on such date, on the last preceding day on which the Common Stock was traded.
2.14 "Holder" means an Employee to whom an Award is made.
2.15 "Incentive Stock Option" means an Option intended to meet the
requirements of an incentive stock option as defined in section 422 of the Code
and designated as an Incentive Stock Option.
2.16 "1934 Act" means the Securities Exchange Act of 1934, as amended.
2.17 "Non-Employee Director" means a member of the Board who meets the
definition of a "non-employee director" under Rule 16b-3(b)(3) promulgated by
the Securities and Exchange Commission under the 1934 Act.
2.18 "Non-Qualified Option" means an Option not intended to be an
Incentive Stock Option, and designated as a Non-Qualified Option.
2.19 "Option" means any stock option granted from time to time under
Section 8 of the Plan.
2.20 "Outside Director" means a member of the Board who meets the
definition of an "outside director" under Treasury Regulation ss.
1.162-27(e)(3)(i).
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2.21 "Plan" means the Crown Cork & Seal Company, Inc. 2001 Stock-Based
Incentive Compensation Plan herein set forth, as amended from time to time.
2.22 "Restricted Stock" means Common Stock awarded by the Committee
under Section 7 of the Plan.
2.23 "Restriction Period" means the period during which Restricted
Stock awarded under Section 7 of the Plan is subject to forfeiture.
2.24 "SAR" means a stock appreciation right awarded by the Committee
under Section 9 of the Plan.
2.25 "Retirement" means retirement from the active employment of the
Company, a Subsidiary or an Affiliate pursuant to the relevant provisions of the
applicable pension plan of such entity or as otherwise determined by the Board.
2.26 "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company (or any subsequent
parent of the Company) if each of the corporations other than the last
corporation in the unbroken chain owns stock possession 50% or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
2.27 "Ten Percent Shareholder" means a person who on any given date
owns, either directly or indirectly (taking into account the attribution
-4-
rules contained in section 424(d) of the Code), stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company or a
Subsidiary.
3. Eligibility
Any Employee is eligible to receive an Award.
4. Administration and Implementation of Plan
4.1 The Plan shall be administered by the Committee, which shall have
full power to interpret and administer the Plan and full authority to act in
selecting the Employees to whom Awards will be granted, in determining the type
and amount of Awards to be granted to each such Employee, the terms and
conditions of Awards granted under the Plan and the terms of agreements which
will be entered into with Holders.
4.2 The Committee's powers shall include, but not be limited to, the
power to determine whether, to what extent and under what circumstances an
Option may be exchanged for cash, Restricted Stock, Deferred Stock or some
combination thereof; to determine whether, to what extent and under what
circumstances an Award is made and operates on a tandem basis with other Awards
made hereunder; to determine whether, to what extent and under what
circumstances Common Stock or cash payable with respect to an Award shall be
deferred, either automatically or at the election of the Holder (including the
power to add deemed earnings to any such deferral); to grant Awards (other than
Incentive
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Stock Options) that are transferable by the Holder; and to determine the effect,
if any, of a change in control of the Company upon outstanding Awards. Upon a
change in control, the Committee may, at its discretion, (i) fully vest all
Awards made under the Plan, (ii) cancel any outstanding Awards in exchange for a
cash payment of an amount equal to the difference between the then Fair Market
Value of the Award less the option or base price of the Award, (iii) after
having given the Award Holder a chance to exercise any outstanding Options or
SARs, terminate any or all of the Award Holder's unexercised Options or SARs, or
(iv) where the Company is not the surviving corporation, cause the surviving
corporation to assume or replace all outstanding Awards with comparable awards.
4.3 The Committee shall have the power to adopt regulations for
carrying out the Plan and to make changes in such regulations as it shall, from
time to time, deem advisable. The Committee shall have the power unilaterally
and without approval of a Holder to amend an existing Award in order to carry
out the purposes of the Plan so long as such an amendment does not take away any
benefit granted to a Holder by the Award and as long as the amended Award
comports with the terms of the Plan. Any interpretation by the Committee of the
terms and provisions of the Plan and the administration thereof, and all action
taken by the Committee, shall be final and binding on Holders.
4.4 The Committee may condition the grant of any Award or the lapse of
any Deferral or Restriction Period (or any combination thereof) upon
-6-
the Holder's achievement of a Performance Goal that is established by the
Committee before the grant of the Award. For this purpose, a "Performance Goal"
shall mean a goal that must be met by the end of a period specified by the
Committee (but that is substantially uncertain to be met before the grant of the
Award) based upon: (i) the price of Common Stock, (ii) the market share of the
Company, its Subsidiaries or Affiliates (or any business unit thereof), (iii)
sales by the Company, its Subsidiaries or Affiliates (or any business unit
thereof), (iv) earnings per share of Common Stock, (v) return on shareholder
equity of the Company, (vi) costs of the Company, its Subsidiaries or Affiliates
(or any business unit thereof), (vii) cash flow of the Company, its Subsidiaries
or Affiliates (or any business unit thereof), (viii) return on total assets of
the Company, its Subsidiaries or Affiliates (or any business unit thereof), (ix)
return on invested capital of the Company, its Subsidiaries or Affiliates (or
any business unit thereof), (x) return on net assets of the Company, its
Subsidiaries or Affiliates (or any business unit thereof), (xi) operating income
of the Company, its Subsidiaries or Affiliates (or any business unit thereof),
or (xii) net income of the Company, its Subsidiaries or Affiliates (or any
business unit thereof). The Committee shall have discretion to determine the
specific targets with respect to each of these categories of Performance Goals.
Before granting an Award or permitting the lapse of any Deferral or Restriction
Period subject to this Section, the Committee shall certify that an individual
has satisfied the applicable Performance Goal.
-7-
5. Shares of Stock Subject to the Plan
5.1 Subject to adjustment as provided in Section 10, the total number
of shares of Common Stock available for Awards under the Plan shall be 6,000,000
shares.
5.2 The maximum number of shares of Common Stock subject to Awards
that may be granted to any Employee shall not exceed 500,000 during any calendar
year (the "Individual Limit"). Subject to Section 5.3, Section 10 and Section
13.6, any Award that is canceled or repriced by the Committee shall count
against the Individual Limit. Notwithstanding the foregoing, the Individual
Limit may be adjusted to reflect the effect on Awards of any transaction or
event described in Section 10.
5.3 Any shares issued by the Company through the assumption or
substitution of outstanding grants from an acquired company shall not (i) reduce
the shares available for Awards under the Plan, or (ii) be counted against the
Individual Limit. Any shares issued hereunder may consist, in whole or in part,
of authorized and unissued shares or treasury shares. If any shares subject to
any Award granted hereunder are forfeited or such Award otherwise terminates
without the issuance of such shares or the payment of other consideration in
lieu of such shares, the shares subject to such Award, to the extent of any such
forfeiture or termination, shall again be available for Awards under the Plan.
-8-
6. Deferred Stock
An Award of Deferred Stock is an agreement by the Company to deliver
to the recipient a specified number of shares of Common Stock at the end of a
specified deferral period or periods. Such an Award shall be subject to the
following terms and conditions:
6.1 Deferred Stock Awards shall be evidenced by Deferred Stock
agreements. Such agreements shall conform to the requirements of the Plan and
may contain such other provisions as the Committee shall deem advisable.
6.2 Upon determination of the number of shares of Deferred Stock to be
awarded to a Holder, the Committee shall direct that the same be credited to the
Holder's account on the books of the Company but that issuance and delivery of
the same shall be deferred until the date or dates provided in Section 6.5
hereof. Prior to issuance and delivery hereunder the Holder shall have no rights
as a stockholder with respect to any shares of Deferred Stock credited to the
Holder's account.
6.3 Amounts equal to any dividends declared during the Deferral Period
with respect to the number of shares covered by a Deferred Stock Award will be
paid to the Holder currently, or deferred and deemed to be reinvested in
additional Deferred Stock, or otherwise reinvested on such terms as are
determined at the time of the Award by the Committee, in its sole discretion,
and specified in the Deferred Stock agreement.
-9-
6.4 The Committee may condition the grant of an Award of Deferred
Stock or the expiration of the Deferral Period upon the Employee's achievement
of one or more Performance Goal(s) specified in the Deferred Stock agreement. If
the Employee fails to achieve the specified Performance Goal(s), the Committee
shall not grant the Deferred Stock Award to the Employee, or the Holder shall
forfeit the Award and no Common Stock shall be transferred to him pursuant to
the Deferred Stock Award. Dividends paid during the Deferral Period on Deferred
Stock subject to a Performance Goal shall be reinvested in additional Deferred
Stock and the lapse of the Deferral Period for such Deferred Stock shall be
subject to the Performance Goal(s) previously established by the Committee.
6.5 The Deferred Stock agreement shall specify the duration of the
Deferral Period taking into account termination of employment on account of
death, Disability, Retirement or other cause. The Deferral Period may consist of
one or more installments. At the end of the Deferral Period or any installment
thereof the shares of Deferred Stock applicable to such installment credited to
the account of a Holder shall be issued and delivered to the Holder (or, where
appropriate, the Holder's legal representative) in accordance with the terms of
the Deferred Stock agreement. The Committee may, in its sole discretion,
accelerate the delivery of all or any part of a Deferred Stock Award or waive
the deferral limitations for all or any part of a Deferred Stock Award.
-10-
7. Restricted Stock
An Award of Restricted Stock is a grant by the Company of a specified
number of shares of Common Stock to the Employee, which shares are subject to
forfeiture upon the happening of specified events. Such an Award shall be
subject to the following terms and conditions:
7.1 Restricted Stock shall be evidenced by Restricted Stock
agreements. Such agreements shall conform to the requirements of the Plan and
may contain such other provisions as the Committee shall deem advisable.
7.2 Upon determination of the number of shares of Restricted Stock to
be granted to the Holder, the Committee shall direct that a certificate or
certificates representing the number of shares of Common Stock be issued to the
Holder with the Holder designated as the registered owner. The certificate(s)
representing such shares shall be legended as to sale, transfer, assignment,
pledge or other encumbrances during the Restriction Period and deposited by the
Holder, together with a stock power endorsed in blank, with the Company, to be
held in escrow during the Restriction Period.
7.3 During the Restriction Period the Holder shall have the right to
receive dividends from and to vote the shares of Restricted Stock.
7.4 The Committee may condition the grant of an Award of Restricted
Stock or the expiration of the Restriction Period upon the Employee's
achievement of one or more Performance Goal(s) specified in the Restricted Stock
-11-
Agreement. If the Employee fails to achieve the specified Performance Goal(s),
the Committee shall not grant the Restricted Stock to the Employee, or the
Holder shall forfeit the Award of Restricted Stock and the Common Stock shall be
forfeited to the Company.
7.5 The Restricted Stock agreement shall specify the duration of the
Restriction Period and the performance, employment or other conditions
(including termination of employment on account of death, Disability, Retirement
or other cause) under which the Restricted Stock may be forfeited to the
Company. At the end of the Restriction Period the restrictions imposed hereunder
shall lapse with respect to the number of shares of Restricted Stock as
determined by the Committee, and the legend shall be removed and such number of
shares delivered to the Holder (or, where appropriate, the Holder's legal
representative). The Committee may, in its sole discretion, modify or accelerate
the vesting and delivery of shares of Restricted Stock.
8. Options
Options give an Employee the right to purchase a specified number of
shares of Common Stock from the Company for a specified time period at a fixed
price. Options may be either Incentive Stock Options or Non-Qualified Stock
Options. The grant of Options shall be subject to the following terms and
conditions:
-12-
8.1 Option Grants: Options shall be evidenced by Option agreements.
Such agreements shall conform to the requirements of the Plan, and may contain
such other provisions as the Committee shall deem advisable.
8.2 Option Price: The price per share at which Common Stock may be
purchased upon exercise of an Option shall be determined by the Committee, but,
in the case of grants of Incentive Stock Options, shall be not less than the
Fair Market Value of a share of Common Stock on the date of grant. In the case
of any Incentive Stock Option granted to a Ten Percent Shareholder, the option
price per share shall not be less than 110% of the Fair Market Value of a share
of Common Stock on the date of grant. The option price per share for
Non-Qualified Options may be less than the Fair Market Value of a share of
Common Stock on the date of grant.
8.3 Term of Options: The Option agreements shall specify when an
Option may be exercisable and the terms and conditions applicable thereto. The
term of an Option shall in no event be greater than fifteen years (five years in
the case of an Incentive Stock Option granted to a Ten Percent Shareholder and
ten years in the case of all other Incentive Stock Options).
8.4 Incentive Stock Options: Each provision of the Plan and each
Option agreement relating to an Incentive Stock Option shall be construed so
that each Incentive Stock Option shall be an incentive stock option as defined
in section 422 of the Code, and any provisions of the Option agreement thereof
that
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cannot be so construed shall be disregarded. In no event may a Holder be granted
an Incentive Stock Option which does not comply with such grant and vesting
limitations as may be prescribed by section 422(b) of the Code. Incentive Stock
Options may not be granted to employees of Affiliates.
8.5 Restrictions on Transferability: No Incentive Stock Option shall
be transferable otherwise than by will or the laws of descent and distribution
and, during the lifetime of the Holder, shall be exercisable only by the Holder.
Upon the death of a Holder, the person to whom the rights have passed by will or
by the laws of descent and distribution may exercise an Incentive Stock Option
only in accordance with this Section 8.
8.6 Payment of Option Price: The option price of the shares of Common
Stock upon the exercise of an Option shall be paid: (i) in full in cash at the
time of the exercise or, (ii) with the consent of the Committee, in whole or in
part in Common Stock held by the Holder for at least six months valued at Fair
Market Value on the date of exercise. With the consent of the Committee, payment
upon the exercise of a Non-Qualified Option may be made in whole or in part by
Restricted Stock which has been held by the Holder for at least six months
(based on the fair market value of the Restricted Stock on the date the Option
is exercised, as determined by the Committee). In such case the Common Stock to
which the Option relates shall be subject to the same forfeiture restrictions
originally imposed on the Restricted Stock exchanged therefor.
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8.7 Termination by Death: If a Holder's employment by the Company, a
Subsidiary or Affiliate terminates by reason of death, any Option granted to
such Holder may thereafter be exercised (to the extent such Option was
exercisable at the time of death or on such accelerated basis as the Committee
may determine at or after grant) by, where appropriate, the Holder's transferee
or by the Holder's legal representative, for a period of 12 months from the date
of death or until the expiration of the stated term of the Option, whichever
period is shorter.
8.8 Termination by Reason of Disability: If a Holder's employment by
the Company, a Subsidiary or Affiliate terminates by reason of Disability, any
unexercised Option granted to the Holder may thereafter be exercised by the
Holder (or, where appropriate, the Holder's transferee or legal representative),
to the extent it was exercisable at the time of termination or on such
accelerated basis as the Committee may determine at or after grant, for a period
of 24 months or such shorter term as determined by the Committee (12 months in
the case of an Incentive Stock Option) from the date of such termination of
employment or until the expiration of the stated term of the Option, whichever
period is shorter.
8.9 Termination by Reason of Retirement: If a Holder's employment by
the Company, a Subsidiary or Affiliate terminates by reason of Retirement, any
unexercised Option granted to the Holder may thereafter be exercised by the
Holder (or, where appropriate, the Holder's transferee or legal
-15-
representative), to the extent it was exercisable at the time of termination or
on such accelerated basis as the Committee may determine at or after grant, for
a period of 5 years or such shorter term as determined by the Committee (12
months in the case of an Incentive Stock Option) from the date of such
termination of employment or until the expiration of the stated term of the
Option, whichever period is shorter.
8.10 Termination Not for Cause: If a Holder's employment by the
Company, a Subsidiary or Affiliate is terminated by the Company, the Subsidiary
or Affiliate not for Cause, any unexercised Option granted to the Holder may
thereafter be exercised by the Holder (or, where appropriate, the Holder's
transferee or legal representative), to the extent it was exercisable at the
time of termination or on such accelerated basis as the Committee may determine
at or after grant, for a period of 60 days or such shorter term as determined by
the Committee from the date of such termination of employment or until the
expiration of the stated term of the Option, whichever period is shorter.
8.11 Termination for Cause or Other Reason: If a Holder's employment
with the Company, a Subsidiary or Affiliate is terminated by the Company, the
Subsidiary or Affiliate for Cause, or otherwise terminates for any any reason
not specified in this Section 8 (including a voluntary termination), all
unexercised Options awarded to the Holder shall terminate on the date of such
termination.
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9. Stock Appreciation Rights
SARs give the Employee the right to receive, upon exercise of the SAR,
the increase in the Fair Market Value of a specified number of shares of Common
Stock from the date of grant of the SAR to the date of exercise. The grant of
SARs shall be subject to the following terms and conditions:
9.1 SARs are rights to receive a payment in cash, Common Stock,
Restricted Stock or Deferred Stock as selected by the Committee. The value of
these rights, which are determined by the appreciation in the number of shares
of Common Stock subject to the SAR, shall be evidenced by SAR agreements. Such
agreements shall conform to the requirements of the Plan and may contain such
other provisions as the committee shall deem advisable. An SAR may be granted in
tandem with all or a portion of a related Option under the Plan ("Tandem SAR"),
or may be granted separately ("Freestanding SAR"). A Tandem SAR may be granted
either at the time of the grant of the Option or at any time thereafter during
the term of the Option and shall be exercisable only to the extent that the
related Option is exercisable.
9.2 The base price of a Tandem SAR shall be the option price under the
related Option. The base price of a Freestanding SAR shall be not less than 100%
of the Fair Market Value of the Common Stock on the date of grant of the
Freestanding SAR.
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9.3 An SAR shall entitle the recipient to receive a payment equal to
the excess of the Fair Market Value of the shares of Common Stock covered by the
SAR on the date of exercise over the base price of the SAR. Such payment may be
in cash, in shares of Common Stock, in shares of Deferred Stock, in shares of
Restricted Stock or any combination, as the Committee shall determine. Upon
exercise of a Tandem SAR as to some or all of the shares of Common Stock covered
by the grant, the related Option shall be canceled automatically to the extent
of the number of shares of Common Stock covered by such exercise, and such
shares shall no longer be available for purchase under the Option pursuant to
Section 8. Conversely, if the related option is exercised as to some or all of
the shares of Common Stock covered by the grant, the related Tandem SAR, if any,
shall be canceled automatically to the extent of the number of shares of Common
Stock covered by the Option exercise.
9.4 SARs shall be subject to the same terms and conditions applicable
to Options as stated in sections 8.3, 8.5, 8.7, 8.8, 8.9, 8.10 and 8.11. SARs
shall also be subject to such other terms and conditions not consistent with the
Plan as shall be determined by the Committee.
10. Adjustments upon Changes in Capitalization
In the event of a reorganization, recapitalization, stock split,
spin-off, split-off, split-up, stock dividend, issuance of stock rights,
combination of shares, merger, consolidation or any other change in the
corporate structure of the
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Company affecting Common Stock, or any distribution to stockholders other than a
cash dividend, the Board shall make appropriate adjustment in the number and
kind of shares authorized by the Plan and any other adjustments to outstanding
Awards as it determines appropriate. No fractional shares of Common Stock shall
be issued pursuant to such an adjustment. The Fair Market Value of any
fractional shares resulting from adjustments pursuant to this Section shall,
where appropriate, be paid in cash to the Holder.
11. Effective Date, Termination and Amendment
The Plan shall become effective on February 22, 2001, subject to
shareholder approval. Options granted under the Plan prior to such shareholder
approval shall expressly not be exercisable prior to such approval. The Plan
shall remain in full force and effect until the earlier of five years from the
date of its adoption by the Board, or the date it is terminated by the Board.
The Board shall have the power to amend, suspend or terminate the Plan at any
time, provided that no such amendment shall be made without stockholder approval
which shall (i) increase (except as provided in Section 10) the total number of
shares available for issuance pursuant to the Plan; (ii) change the class of
employees eligible to be Holders; (iii) modify the Individual Limit (except as
provided Section 10) or the categories of Performance Goals set forth in Section
4.4; or (iv) change the provisions of this Section 11. Termination of the Plan
pursuant to this Section 11 shall not affect Awards outstanding under the Plan
at the time of termination.
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12. Transferability
Except as provided below, Awards may not be pledged, assigned or
transferred for any reason during the Holder's lifetime, and any attempt to do
so shall be void and the relevant Award shall be forfeited. The Committee may
grant Awards (except Incentive Stock Options) that are transferable by the
Holder during his lifetime, but such Awards shall be transferable only to the
extent specifically provided in the agreement entered into with the Holder. The
transferee of the Holder shall, in all cases, be subject to the provisions of
the agreement between the Company and the Holder.
13. General Provisions
13.1 Nothing contained in the Plan, or any Award granted pursuant to
the Plan, shall confer upon any Employee any right with respect to continuance
of employment by the Company, a Subsidiary or Affiliate, nor interfere in any
way with the right of the Company, a Subsidiary or Affiliate to terminate the
employment of any Employee at any time.
13.2 For purposes of this Plan, transfer of employment between the
company and its Subsidiaries and Affiliates shall not be deemed termination of
employment.
13.3 Holders shall be responsible to make appropriate provision for
all taxes required to be withheld in connection with any Award, the
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exercise thereof and the transfer of shares of Common Stock pursuant to this
Plan. Such responsibility shall extend to all applicable Federal, state, local
or foreign withholding taxes. In the case of the payment of Awards in the form
of Common Stock, or the exercise of Options or SARs, the Company shall, at the
election of the Holder, have the right to retain the number of shares of Common
Stock whose Fair Market Value equals the amount to be withheld in satisfaction
of the applicable withholding taxes. Agreements evidencing such Awards shall
contain appropriate provisions to effect withholding in this manner.
13.4 Without amending the Plan, Awards may be granted to Employees who
are foreign nationals or employed outside the United States or both, on such
terms and conditions different from those specified in the Plan as may, in the
judgment of the committee, be necessary or desirable to further the purpose of
the Plan.
13.5 To the extent that Federal laws (such as the 1934 Act, the Code
or the Employee Retirement Income Security Act of 1974) do not otherwise
control, the Plan and all determinations made and actions taken pursuant hereto
shall be governed by the law of Pennsylvania and construed accordingly.
13.6 The Committee may amend any outstanding Awards to the extent it
deems appropriate; provided, however, except as provided in Section 10, no Award
may be repriced, replaced, regranted through cancellation, or modified without
shareholder approval if the effect would be to reduce the exercise price for
-21-
the shares underlying the Award. The Committee may amend Awards without the
consent of the Holder, except in the case of amendments adverse to the Holder,
in which case the Holder's consent is required to any such amendment.
-22-
CROWN CORK & SEAL COMPANY, INC.
One Crown Way, Philadelphia, PA 19154
PROXY FOR ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON APRIL 26, 2001
The undersigned hereby appoints John W. Conway, Alan W. Rutherford and William
T. Gallagher as Proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated on the reverse
side, all the shares of stock of Crown Cork & Seal Company, Inc. held of record
by the undersigned on March 13, 2001 at the Annual Meeting of Shareholders to be
held on April 26, 2001 or any adjournments thereof, for the items shown below
and in any other matter that may properly come before the Meeting:
P
R
O
X
Y
1. FOR the election of a Board of nine Directors:
Jenne K. Britell, John W. Conway, Arnold W. Donald, Marie L. Garibaldi, John B.
Neff, James L. Pate, Thomas A. Ralph, Alan W. Rutherford and Harold A. Sorgenti.
2. FOR a resolution to adopt the Crown Cork & Seal Company, Inc. 2001
Stock-Based Incentive Compensation Plan, which the Board of Directors
unanimously recommends.
3. AGAINST a Shareholder proposal that the Company consider a Maximize Value
Resolution, which the Board of Directors unanimously opposes.
(change of address/comments)
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(If you have written in the above space, please mark the corresponding box on
the reverse side.)
You are encouraged to specify your choices by marking the appropriate box (SEE
REVERSE SIDE), but you need not mark any box if you wish to vote in accordance
with the Board of Directors' recommendations. THE PROXIES CANNOT VOTE YOUR
SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
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|SEE REVERSE SIDE|
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[LOGO] CROWN CORK & Seal
The 2001 Annual Meeting of Shareholders will be held on
April 26, 2001 at 9:30 a.m. at the Company's Technical Center:
Crown Cork & Seal Company, Inc.
William J. Avery Technical Center
11535 So. Central Avenue
Alsip, IL 60482-2523
Main Phone: (708) 239-5000
x Please mark your
votes as in this
example.
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
This proxy, when properly executed, will be voted in the manner directed herein
by the Shareholder. If no direction is made, this proxy will be voted "FOR"
Proposal 1 and Proposal 2 and "AGAINST" Proposal 3.
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The Board of Directors recommends a vote for Proposal 1 and Proposal 2.
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FOR WITHHELD
1. Election of Directors (See Reverse Side) [ ] [ ]
For, except vote withheld from the following nominee(s):
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2. Resolution to adopt the Crown Cork & Seal Company, Inc. 2001 Stock-Based
Incentive Compensation Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
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The Board of Directors recommends a vote AGAINST Proposal 3.
3. Shareholder proposal that the Company consider a Maximize Value Resolution
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
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If you receive more than one Annual Report at the
address set forth on the proxy card and have no [ ]
need for the extra copy, please check the box at
the right. This will not affect the distribution
of proxy materials.
MARK HERE FOR ADDRESS
CHANGE AND NOTE ON [ ]
REVERSE SIDE
SIGNATURE(S)
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DATE
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Note: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
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Fold and Detach Here