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
(5) Total fee paid:
N/A
[ ] 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.:
3) Filing Party:
4) Date Filed:
Crown Cork & Seal Company, Inc.
One Crown Way
Philadelphia, Pennsylvania 19154
------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
2002
------------------------------------------
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 Plastic
Beverage Closures Center located at 4915 Norman Road, Sandston, Virginia on the
25th day of April 2002 at 9:30 a.m. to elect Directors 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 12, 2002 will be entitled to vote.
By Order of the Board of Directors
WILLIAM T. GALLAGHER
Vice President, Secretary &
General Counsel
Philadelphia, Pennsylvania 19154
March 22, 2002
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
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Crown Cork & Seal Company, Inc.
One Crown Way
Philadelphia, Pennsylvania 19154
------------------------------------------
PROXY STATEMENT - MEETING, April 25, 2002
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 25,
2002, 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 $7,500 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, 2001, containing audited
financial statements, is being mailed to Shareholders contemporaneously with
this Proxy Statement, i.e., on or about March 22, 2002.
On March 1, 2002, there were 125,668,465 outstanding shares of Common
Stock, par value $5.00 per share ("Common Stock").
Shareholders of Common Stock of record as of March 12, 2002 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 below, the Company has, to its knowledge, no other
beneficial owner of more than 5 percent of the Common Stock outstanding as of
March 1, 2002.
2
<page>
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 %
- -----------------------------------------------------------------------------------------------------------
AXA Financial, Inc. and certain of its affiliates(2) 10,260,494 8.16%
------------------------------------------
<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, 2002. The list above does not include certain Executive Officers
of the Company who may be deemed to beneficially own shares of Common Stock
held in the Company's Master Retirement Trust. See "Election of Directors"
below on pages 4 and 5.
(2) 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 10,260,494 shares of Common Stock for which
Alliance Capital Management L.P. has sole dispositive power, including
5,984,242 shares of Common Stock for which Alliance Capital Management L.P.
has sole voting power and 499,425 shares of Common Stock for which Alliance
Capital Management L.P. has shared voting power.
</FN>
3
<page>
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
10 to 18. The Board of Directors has currently fixed the number of Directors at
11. It is intended that the Proxies will be voted for the election of the 11
nominees named below as Directors, and no more than 11 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, 2002, 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 59 Chairman and Chief Executive Officer 2000 40,557 0.032%
(b), (e) of Structured Ventures; former
Executive Officer of GE Capital;
also a Director of Lincoln National
Corporation, Aames Financial
Corporation, Viant Corporation,
Circles and U.S.-Russia Investment
Fund
John W. Conway 56 Chairman of the Board, President and 1997 6,542,637 5.206%
(a), (e), (1), (2) Chief Executive Officer; also a
Director of West Pharmaceutical
Services and PPL Corporation
Arnold W. Donald 47 Chairman and Chief Executive Officer of 1999 39,364 0.031%
(c) Merisant Company; former Senior Vice
President of Monsanto Company; also
a Director of Oil-Dri Corporation
of America, Belden, Carnival
Corporation, The Scotts Company and
GenAmerica Insurance Company
Marie L. Garibaldi 67 Former Associate Justice of the Supreme 2000 21,364 0.017%
(b) Court of New Jersey
4
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Year Amount and Percentage of
Became Securities of the Company Owned
Name Age Principal Occupation Director Beneficially, Directly or Indirectly
- -------------------------------------------------------------------------------------------------------------------------
Common
Shares %
Hans J. Loliger 59 Vice Chairman of Winter Group; former 2001 18,838 0.015%
(c), (d) President and Chief Executive Officer
of SPICA Group; also a Director of
AMTICO International, Fritz Meyer
Holding, Cronat Holding and List
Holding
John B. Neff 70 Former Portfolio Manager of Wellington 1999 164,364 0.131%
(b), (d), (e) Management Company; also a Director of
Greenwich Associates, Amkor
Technology and Ani-Motion; also on
the Executive Board of Invemed
Catalyst Fund
James L. Pate 66 Chairman of Pennzoil-Quaker State 1999 30,764 0.024%
(c) Company; also a Director of
Bowater Incorporated
Thomas A. Ralph 61 Partner, Dechert 1998 20,064 0.016%
(b)
Hugues du Rouret 63 Chairman and Chief Executive Officer 2001 8,341 0.007%
of Beaulieu Patrimoine; former
Chairman and Managing Director of
Shell France; also a Director of
Gras Savoye, Heylo and Banque
Saint-Olive
Alan W. Rutherford 58 Vice Chairman of the Board, Executive 1991 6,406,759 5.098%
(a), (e), (2), (3) Vice President and Chief Financial
Officer
Harold A. Sorgenti 67 Managing Partner of Sorgenti 1990 35,114 0.028%
(a), (c), (d), (e) Investment Partners; Chairman and
CEO of SpecChem International
Holdings; 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 726,250 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 586,500 shares of Common Stock subject to presently
exercisable options held by Mr. Rutherford.
</FN>
5
<page>
As of March 1, 2002, all Directors and Executive Officers of the Company
as a group of 16, including the above, are beneficial owners of 8,070,253 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 1,764,876 shares of Common Stock subject to presently exercisable
options held by certain Directors and Executive Officers), constituting 6.42% 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.
The Company and its subsidiaries utilized the services of Dechert during
2001. Thomas A. Ralph, a Director of the Company, is a partner in that law firm.
BOARD MEETINGS AND COMMITTEES
In 2001, there were six meetings of the Board of Directors. 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 $77,000 annually
as base Director's fees (of which $50,000 is paid in Company Common Stock valued
at market price when paid) and $1,000 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 first elected to the Board of Directors on or before April
26, 2001 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 2001, 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.
6
<page>
The Audit Committee reviewed the fees of PricewaterhouseCooper LLP, the
Company's independent accountants, for the fiscal year ended December 31, 2001.
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 $2,100,000. (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. (3)
All Other Fees: The aggregate fees paid by the Company for all other services
were $4,390,000 which represents fees of $1,900,000 for worldwide statutory
audits, $1,300,000 for divestiture audits, $745,000 for tax compliance and
planning, $200,000 for benefit plan audits and $245,000 for other services. The
Audit Committee has considered whether the non-audit fees paid to
PricewaterhouseCoopers LLP are compatible with maintaining their independence as
accountants.
In 2001, the Executive Compensation Committee met four times. The
Executive Compensation Committee is responsible for the review of the executive
compensation program.
There were three meetings of the Nominating Committee in 2001. 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 2003 Annual Meeting.
7
<page>
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 Executive Officers who were the highest paid during 2001 and the Company's
former Chairman of the Board and Chief Executive Officer:
Summary Compensation Table
Annual Compensation Long Term Compensation
------------------------------------------------ ----------------------
Shares of
Other Common Stock Restricted
Name & Principal Annual Underlying Stock All Other
Position Year Salary Bonus Compensation(1)(2) Options Awards Compensation(3)
($) ($) ($) (#) (#) ($)
- ------------------------------ -------------------------------------------------------------------------------------------
John W. Conway 2001 737,500 590,000 -- 690,000 -- 2,550
- - Chairman of the Board, 2000 600,000 -- -- 229,500 20,000(5) 2,550
President and 1999 525,000 254,000(4) -- 149,000 -- 2,400
Chief Executive Officer
Alan W. Rutherford 2001 455,000 273,000 -- 540,000 -- 2,550
- - Vice Chairman of the Board, 2000 455,000 -- -- 139,000 20,000(5) 2,550
Executive Vice President and 1999 420,000 198,300(4) -- 100,000 -- 2,400
Chief Financial Officer
Frank J. Mechura 2001 325,000 122,996 -- 120,000 -- 2,550
- - Executive Vice President 2000 257,500 16,097 -- -- -- 2,550
and President - Americas 1999 250,000 34,197 -- 12,500 -- 2,400
Division
William R. Apted 2001 325,000 130,000 118,726 120,000 -- --
- - Executive Vice President 2000 248,000 -- 81,100 35,188 -- --
and President - European 1999 158,000 41,965 -- 23,188 -- --
Division
William H. Voss 2001 275,000 110,000 201,178 100,000 -- 2,550
- - Executive Vice President 2000 275,000 -- 218,100 -- -- 2,550
and President - Asia-Pacific 1999 243,000 105,952 234,000 111,500 -- 2,400
Division
William J. Avery(6) 2001 163,600 -- -- 250,000 -- 3,733,615
- - Former Chairman of the Board 2000 981,600 -- -- 469,000 20,000(5) 2,550
and Chief Executive Officer 1999 927,000 598,000(4) -- 353,000 -- 2,400
-------------------------------------------------------
<FN>
(1) The amount of perquisite and other personal benefits for Messrs. Conway,
Rutherford, Mechura and Avery 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 for Messrs. Apted and Voss were paid in
respect of their overseas service in Paris and Singapore, respectively,
including overseas housing expense allowances to Mr. Apted of $51,087 in
2001 and $38,100 in 2000 and to Mr. Voss of $81,275 in 2001, $72,500 in
2000 and $73,700 in 1999 and also including U.S. tax equalization payments
by the Company for Mr. Apted of $33,500 for 2001 and $19,808 for 2000 and
for Mr. Voss of $38,204 for 2001, $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, except with respect to Mr.
Avery, where the amount for 2001 includes the $2,550 contributed by the
Company to the 401(k) Plan and the $3,731,065 in compensation received by
Mr. Avery in connection with his retirement and consulting agreements
described below on page 10. The amount for Mr. Avery does not include
payments received pursuant to the Company's Senior Executive Retirement
Plan described below on page 13.
(4) Messrs. Conway, Rutherford and Avery received approximately half of the
bonus earned in 1999 in restricted Company Common Stock valued at the
market price when received. These shares vested in 2001.
(5) Each of Messrs. Conway, Rutherford and Avery received grants of 20,000
shares of restricted Company Common Stock, each award having a grant date
value of $231,200. These shares vested in 2001.
(6) 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.
</FN>
8
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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.
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.
9
<page>
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 $3,487,064; 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 was paid $217,842 in 2001
and had the use, valued at $26,159 for the year, of a Company-owned automobile;
under this contract he will receive the same compensation in 2002.
On September 29, 1998, Messrs. Conway, Rutherford and Avery borrowed money
from the Company and used this money to purchase shares of Common Stock from the
Company. The loan amounts were $742,000 for Mr. Conway, $795,000 for Mr.
Rutherford and $2,650,000 for Mr. Avery. All of these loans were to be repaid by
September 29, 2006 and accrued interest at the prime rate less 1%. Messrs.
Avery, Rutherford and Conway repaid in full the balances outstanding on their
respective loan amounts on July 26, 2001, October 31, 2001 and December 17,
2001, respectively.
On June 19, 1997, Frank J. Mechura borrowed $50,000 from the Company in
connection with his relocation by the Company from Canada to the United States.
The loan is payable on demand and accrues interest at the prime rate. Principal
and accrued interest totaled $69,045 as of March 1, 2002.
10
<page>
Option Grants In Last Fiscal Year
The Company's 1997 Stock-Based Incentive Compensation Plan and 2001
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 the six Named Executive Officers.
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)
--------------------- -------------------- -------------- ---------- -----------------
John W. Conway 230,000 3.89% $7.44 01/04/11 $1,269,577
460,000 7.79% 4.25 05/04/11 1,148,574
Alan W. Rutherford 180,000 3.05% 7.44 01/04/11 993,582
360,000 6.09% 4.25 05/04/11 898,884
Frank J. Mechura 40,000 0.68% 7.44 01/04/11 220,796
80,000 1.35% 4.25 05/04/11 199,752
William R. Apted 70,000 1.18% 7.44 01/04/11 386,393
50,000 0.85% 4.25 05/04/11 124,845
William H. Voss 50,000 0.85% 7.44 01/04/11 275,995
50,000 0.85% 4.25 05/04/11 124,845
William J. Avery 250,000 4.23% 7.44 01/04/06 1,297,350
-------------------------------------------------------
<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 25% six months after the grant date and 25% per year on the first
through third anniversaries of the grant date, and have a term of ten
years, except that the options granted to Mr. Avery fully vested upon his
retirement as Chairman of the Board and have a term of five years.
(B) The Executive Compensation Committee administering the 1997 Stock-Based
Incentive Compensation Plan and the 2001 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%, risk-free interest rate of
4.548%, estimated volatility of Company Common Stock of 58.1% and estimated
average expected option term of the shorter of the term of the option or
six years. This valuation model was not adjusted for risk of forfeiture. It
is important to note that options will have value to the six 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>
11
<page>
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 12/31/01 (2)
Shares Acquired Realized (1) Options at 12/31/01 Exercisable/Unexercisable
Upon Exercise ($) Exercisable/Unexercisable ($)
--------------- ------------ ------------------------- -------------------------
John W. Conway 1990 Plan 0 0 10,000 / 0 0/0
1994 Plan 0 0 87,000 / 0 0/0
1997 Plan 0 0 290,250 / 376,250 0/0
2001 Plan 0 0 115,000 / 345,000 0/0
Alan W. Rutherford 1990 Plan 0 0 38,500 / 0 0/0
1994 Plan 0 0 110,000 / 0 0/0
1997 Plan 0 0 197,500 / 265,500 0/0
2001 Plan 0 0 90,000 / 270,000 0/0
Frank J. Mechura 1990 Plan 0 0 10,000 / 10,000 0/0
1994 Plan 0 0 24,000 / 0 0/0
1997 Plan 0 0 16,250 / 36,475 0/0
2001 Plan 0 0 20,000 / 60,000 0/0
William R. Apted 1990 Plan 0 0 7,500 / 7,500 0/0
1994 Plan 0 0 7,688 / 0 0/0
1997 Plan 0 0 30,250 / 83,126 0/0
2001 Plan 0 0 12,500 / 37,500 0/0
William H. Voss 1990 Plan 0 0 38,750 / 35,750 0/0
1994 Plan 0 0 41,000 / 0 0/0
1997 Plan 0 0 53,500 / 64,500 0/0
2001 Plan 0 0 12,500 / 37,500 0/0
William J. Avery 1990 Plan 0 0 476,300 / 0 0/0
1994 Plan 0 0 483,500 / 0 0/0
1997 Plan 0 0 775,500 / 0 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, 2001 of the Company Common Stock and the
option exercise price.
</FN>
12
<page>
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 five Named Executive Officers (Messrs. Conway,
Rutherford, Mechura, Voss and Avery) 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 2002, benefits from a qualified
retirement plan are limited to $160,000 per year and may be based only on the
first $200,000 of an employee's annual earnings.
For illustration purposes, the following table shows estimated maximum
annual Company-funded retirement benefits payable from the Pension Plan to
employees who retire at age 65, assuming the employees receive their benefit as
a single life annuity, without survivor benefits:
Final Years of Service
Average
Earnings 25 30 35 40 45
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$ 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
200,000 62,500 75,000 87,500 100,000 112,500
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
five 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, 2001, under the SERP at retirement at age 65,
assuming annual salary increases of 5%, would be $1,131,442 for Mr. Conway,
$552,674 for Mr. Rutherford, $233,238 for Mr. Mechura and $202,798 for Mr. Voss.
Based upon the above, Mr. Avery was entitled at his retirement to an annual
benefit of $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.
Mr. Avery elected to take his benefit in such a lump sum. The SERP also provides
a lump-sum death benefit of five times the annual retirement benefit and
subsidized survivor benefits.
13
<page>
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.
Years of service credited under the Pension Plan and the SERP for the
above-Named Executive Officers are: Mr. Conway - 27 years, Mr. Rutherford - 28
years, Mr. Mechura - 34 years, Mr. Voss - 32 years and Mr. Avery - 42 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%.
14
<page>
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,
1996 1997 1998 1999 2000 2001
Crown Cork & Seal 100 94 59 45 17 6
S&P 500 Index 100 133 171 208 189 166
Dow Jones "Containers & Packaging" Index 100 118 106 101 66 83
Ten Year Comparison
(The Performance Graph appears here. See the table below for plot points.)
Fiscal Year Ended December 31,
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Crown Cork & Seal 100 133 140 126 140 186 174 110 83 31 10
S&P 500 Index 100 108 118 120 165 203 271 348 421 383 338
Dow Jones "Containers & Packaging" Index 100 111 108 112 123 154 182 163 156 101 127
<FN>
(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,
1996 and December 31, 1991, 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,
Pactiv, Sealed Air, Smurfit-Stone Container, Sonoco Products and
Temple-Inland.
</FN>
15
<page>
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 2001.
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 shareholder value, 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 2001, the Plan called for the Company to achieve
substantially improved free cash flow to reduce debt levels in the Company as
well as specified operating targets.
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 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
16
<page>
and performance measures, in an effort to more closely align compensation with
Shareholder interests and to increase executives' focus on the Company's
long-term performance. To that end the 2001 Stock-Based Incentive Compensation
Plan recommended by the Executive Compensation Committee was approved by the
Board of Directors and received Shareholder approval in 2001.
In summary, the Committee believes that its role in administering the
executive compensation program is critical to the objective of driving
performances 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. 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,
require continuous improvement in value created for the Shareholder.
Specific Decisions Impacting Compensation for the Present and Former Chairmen
and Chief Executive Officers
Mr. Conway assumed the position of CEO in January 2001 and was elected
Chairman of the Board in February 2001. Based on the policies and practices
described above, Mr. Conway's base salary was increased to $765,000 on March 1,
2001, a bonus of $590,000 was earned in 2001 as a part of the Management
Incentive Plan, and options to purchase 690,000 shares of Common Stock were
granted during the year.
Mr. Conway was elected Chairman at a very difficult moment in the recent
history of the Company. Operating results were declining, and this, along with
alleged asbestos liability from a merger in the 1960's, resulted in a serious
credit problem for the Company. During 2001 Mr. Conway initiated activities that
substantially improved the Company's free cash flow. In 2001 Mr. Conway also
initiated activities that have resulted in price increases for a number of the
Company's products.
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. Conway's 2001 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 granted in
2001 to Crown executive officers are "performance based."
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.
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
Hans J. Loliger
James L. Pate
17
<page>
AUDIT COMMITTEE REPORT
The Audit Committee provides assistance to the Board of Directors by 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, 2001 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. PricewaterhouseCoopers LLP
has informed the Committee that they have given such an opinion with respect to
the audited financial statements for the fiscal year ended December 31, 2001.
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, 2001.
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
18
<page>
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 2001, or written representations from
reporting persons, the Company believes that its Directors and Executive
Officers have complied with all applicable filing requirements.
PROPOSALS OF SHAREHOLDERS
In order to be considered for inclusion in the Proxy Statement for the
2003 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 22, 2002. 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.
19
s OTHER MATTERS
The Board of Directors knows of no other matter that 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 2001 Annual Report on Form 10-K with the
Securities & Exchange Commission on or before April 1, 2002. 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 April 1, 2002. 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 22, 2002
20
CROWN CORK & SEAL COMPANY, INC.
One Crown Way, Philadelphia, PA 19154
PROXY FOR ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON APRIL 25, 2002
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 12, 2002 at the Annual Meeting of Shareholders to be
held on April 25, 2002 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 eleven Directors:
Jenne K. Britell, John W. Conway, Arnold W. Donald, Marie L. Garibaldi,
Hans J. Loliger, John B. Neff, James L. Pate, Thomas A. Ralph, Hugues du Rouret,
Alan W. Rutherford and Harold A. Sorgenti.
(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 2002 Annual Meeting of Shareholders will be held on
April 25, 2002 at 9:30 a.m. at the Company's
Plastic Beverage Closures Center:
Crown Cork & Seal Company, Inc.
Plastic Beverage Closures Center
4915 Norman Road
Sandston, VA 23150
Main Phone: (804) 222-7272
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.
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote for Proposal 1.
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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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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