SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. __)
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Filed by a Party other than the Registrant [ ]
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Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under Rule 14a-12
International Flavors & Fragrances Inc.
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(Name of Registrant as Specified In Its Charter)
----------------------------------------------------
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[X] No fee required.
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4) Date Filed:
[INTERNATIONAL FLAVORS & FRAGRANCES INC. LOGO]
INTERNATIONAL FLAVORS & FRAGRANCES INC.
521 WEST 57TH STREET
NEW YORK, N.Y. 10019
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 14, 2003
----------------
The Annual Meeting of Shareholders of International Flavors &
Fragrances Inc., a New York corporation (the "Company"), will be held at the
office of the Company, 521 West 57th Street, New York, New York, on Wednesday,
May 14, 2003, at 10 A.M., Eastern Daylight Saving Time, to elect 8 directors for
the ensuing year and to transact such other business as may properly come before
the meeting or any postponement or adjournments thereof.
Only shareholders of record at the close of business on March 26, 2003
will be entitled to notice of and to vote at the meeting.
Admission to the meeting will be by ticket only. If you are a
shareholder of record and plan to attend, please check the box on the enclosed
proxy card. If your shares are not registered in your own name and you plan to
attend, please request a ticket by writing to the Office of the Secretary,
International Flavors & Fragrances Inc., 521 West 57th Street, New York, New
York 10019. Evidence of your ownership, which you can obtain from your bank or
broker, must accompany your letter.
IF YOU DO NOT EXPECT TO ATTEND THE MEETING IN PERSON, YOU ARE REQUESTED TO
SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENCLOSED ADDRESSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors,
Stephen A. Block
Secretary
March 28, 2003
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
by the Company's Board of Directors (the "Board") of proxies to be used at the
Annual Meeting of Shareholders of the Company to be held on May 14, 2003 (the
"2003 Annual Meeting") at the principal executive office of the Company, 521
West 57th Street, New York, New York 10019. This proxy statement and the form of
proxy will be mailed to shareholders on or about March 28, 2003. In addition to
solicitation by mail, proxies may be solicited personally or by telephone,
telegram, facsimile or electronic mail. The Company has retained Georgeson
Shareholder to assist in proxy solicitation for a fee of $7,000. The cost of
soliciting proxies will be borne by the Company. The Company will reimburse
banks, brokers and other custodians, nominees and fiduciaries for their costs in
sending proxy materials to the beneficial owners of Common Stock.
Any shareholder who signs and returns the enclosed form of proxy may
revoke it at any time before it has been exercised by a written notice of
revocation of that proxy received by the Secretary of the Company, by a new
proxy bearing a later date received by the Secretary of the Company, or by
voting in person at the 2003 Annual Meeting. Attendance at the 2003 Annual
Meeting will not in itself constitute revocation of a proxy.
When more than one record holder of the Company's Common Stock share
the same address, the Company may deliver only one annual report and one proxy
statement to that address unless the Company has received contrary instructions
from one or more of those shareholders. Similarly, brokers and other
intermediaries holding shares of the Company's Common Stock in "street name" for
more than one beneficial owner with the same address may deliver only one annual
report and one proxy statement to that address if they have received consent
from the beneficial owners of the stock. The Company will deliver promptly upon
written or oral request a separate copy of the annual report and proxy statement
to any shareholder, including a beneficial owner of stock held in "street name,"
at a shared address to which a single copy of either of those documents was
delivered. To receive additional copies of the annual report and proxy
statement, you may call or write the Office of the Secretary, International
Flavors & Fragrances Inc., 521 West 57th Street, New York, New York 10019
(telephone: 212-765-5500).
You may also contact the Office of the Secretary of the Company at the
address or telephone number above if you are a shareholder of record of the
Company and you wish to receive a separate annual report and proxy statement in
the future, or if you are currently receiving multiple copies of the annual
report and proxy statement and want to request delivery of a single copy in the
future. If your shares are held in "street name" and you want to increase or
decrease the number of copies of the annual report and proxy statement delivered
to your household in the future, you should contact the broker or other
intermediary who holds the shares on your behalf.
The Company had outstanding at the close of business on March 3, 2003,
93,869,384, shares of Common Stock entitled to one vote per share. Only
shareholders of record at the close of business on March 26, 2003 will be
entitled to vote at the 2003 Annual Meeting.
1
ITEM 1. ELECTION OF DIRECTORS
At the meeting 8 directors will be elected in accordance with the By-laws
of the Company, as amended, to serve for the ensuing year and until their
successors are elected and shall qualify. The By-laws provide that the election
of directors requires a plurality of the votes cast by the shareholders
entitled to vote at the meeting. Except as stated below, the shares of Common
Stock represented by the proxies being solicited will be voted for the election
of the 8 nominees whose names are listed below. All of the nominees except Mrs.
Alexandra A. Herzan are presently directors of the Company. If any of the
nominees is unable for good cause to serve (which is not now anticipated), the
shares of Common Stock represented by the proxies being solicited will be voted
for the balance of those named nominees and for any substitute nominees as the
Board may recommend.
INFORMATION ABOUT NOMINEES
PRINCIPAL OCCUPATION DURING YEAR FIRST
LAST FIVE YEARS AND BECAME
NAME AGE OTHER DIRECTORSHIPS HELD DIRECTOR
--------------------------- ----- --------------------------------------- ------------
[GRAPHIC OMITTED]
MARGARET HAYES ADAME 63 President, Fashion Group 1993
International, an international trade
organization; Director, Movado
Group, Inc.
[GRAPHIC OMITTED]
GUNTER BLOBEL 66 Professor, Howard Hughes Medical 2000
Institute at The Rockefeller
University, a research medical
institution
[GRAPHIC OMITTED]
J. MICHAEL COOK(1) 60 Chairman and Chief Executive 2000
Officer Emeritus, Deloitte & Touche,
LLP, an accounting firm; Director,
Rockwell Automation, HCA Inc.,
The Dow Chemical Company,
Comcast Corporation; Trustee,
Fidelity Group of Mutual Funds
2
[GRAPHIC OMITTED]
PETER A. GEORGESCU(1) 64 Chairman and Chief Executive 1999
Officer Emeritus, Young & Rubicam
Inc., an advertising agency; Director,
Levi Strauss & Co., Toys "R" Us,
Inc., EMI
[GRAPHIC OMITTED]
RICHARD A. GOLDSTEIN(1) 61 Chairman and Chief Executive 2000
Officer since June 2000; President
and Chief Executive Officer of
Unilever United States, Inc., and
Business Group President of
Unilever North American Foods, a
home, personal care and food
products company, prior thereto;
Director, Legacy Hotels, Fiduciary
Trust Company International, The
Interpublic Group of Companies, Inc.
and Continuum Health Partners, Inc.
[GRAPHIC OMITTED]
ALEXANDRA A. HERZAN 43 President, Lily Auchincloss __
Foundation, Inc., a charitable
foundation
[GRAPHIC OMITTED]
ARTHUR C. MARTINEZ(1) 63 Chairman and Chief Executive 2000
Officer Emeritus, Sears, Roebuck and
Co., a retailer; Director, PepsiCo,
Inc., Liz Claiborne, Inc. and Martha
Stewart Living OmniMedia, Inc.;
Member of the Supervisory Board,
ABN AMRO Holding, N.V.
3
[GRAPHIC OMITTED]
WILLIAM D. VAN DYKE, III 71 Senior Vice President, Salomon 1973
Smith Barney Inc., stockbrokers
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(1) Member of the Executive Committee.
All of the nominees except Mrs. Herzan were elected by the shareholders at
the 2002 Annual Meeting. The Company's By-laws, as amended, provide that each
director must retire effective as of the Annual Meeting of Shareholders
following his or her 72nd birthday. Accordingly, Mr. Henry P. van Ameringen,
who is 72, will retire as a director as of the 2003 Annual Meeting.
BOARD AND COMMITTEE MEETINGS
During 2002 the Board held seven meetings. The Company has an Audit
Committee, which held nine meetings, a Compensation Committee, which held four
meetings, a Nominating and Governance Committee, which held two meetings, and
an Executive Committee, which did not meet, in 2002.
The Audit Committee, consisting of Mrs. Adame and Messrs. Cook, Martinez
and Van Dyke, oversees the financial operations of the Company and the
Company's relationship with its independent accountants. The Board has
determined that Mr. Cook, Chairman of the Audit Committee, and Mr. Martinez are
"audit committee financial experts" under applicable rules of the Securities
and Exchange Commission. The Board has also determined that all of the members
of the Audit Committee meet the independence and financial literacy standards,
and that Mr. Cook and Mr. Martinez have the accounting or related financial
management expertise, as currently required by applicable rules of the New York
Stock Exchange ("NYSE"). The Compensation Committee, consisting of Messrs.
Georgescu, Martinez, van Ameringen and Van Dyke, oversees the Company's various
compensation arrangements and recommends to the Board the salaries to be paid,
and incentive compensation and stock options or stock awards to be granted, to
the executive officers of the Company under the Company's stock option and
stock award plans. The Nominating and Governance Committee, consisting of Mrs.
Adame, Dr. Blobel and Messrs. Cook, Georgescu, Martinez, van Ameringen and Van
Dyke, recruits, reviews qualifications of and recommends nominees to fill Board
vacancies and newly created directorships and monitors corporate governance
issues. Shareholders may submit names of qualified candidates along with
detailed information on their backgrounds to the Company's Secretary for
referral to the Nominating and Governance Committee. The Executive Committee
meets only when decisions of the Board are required and it is impractical under
the circumstances to convene a meeting of the full Board. During 2002, each
director attended greater than 75% of the total of the number of meetings held
by the Board and by the Committee(s) on which each such director serves.
DIRECTORS' COMPENSATION
Effective as of May 14, 2003, certain elements of the compensation for
directors who are not employees of the Company will change (directors who are
employees of the Company receive no compensation for such service).
a. Directors will receive an annual cash retainer of $30,000, an increase
from the $25,000 they currently receive.
4
b. The Chairperson of the Audit Committee will receive an annual cash
retainer of $7,500, and the Chairpersons of the Compensation Committee
and Nominating and Governance Committee will each receive an annual
cash retainer of $3,750. Currently Board committee Chairpersons receive
no additional compensation in respect of such service.
c. Directors will receive a cash fee of $1,500 for each meeting of the
Board attended, an increase from the $1,000 they currently receive.
Members of the Audit Committee will receive a cash fee of $1,200 for
each meeting of the Audit Committee attended, and members of other
committees will receive a cash fee of $1,000 for each committee meeting
attended. Currently, directors receive a cash fee of $1,000 for each
meeting of the Board or committee attended, except that when a
committee meeting is held on the same day as a Board meeting or another
committee meeting a fee of only $750 is paid for the second and
subsequent meetings on that day.
Directors will continue to receive an annual grant, in October of each
year, of 1,000 shares of Common Stock of the Company, and, through 2009,
automatic annual stock option grants, on the date of the annual meeting of
shareholders, of 3,000 shares of Common Stock under the Company's 2000 Stock
Option Plan for Non-Employee Directors (the "2000 DSOP"). Options granted in
2002 under the 2000 DSOP vest in equal installments of 12, 24 and 36 months,
and expire ten years, after the date of grant. On May 7, 2002, each
non-employee director received an option to purchase 3,000 shares of Common
Stock at $32.82 per share under the 2000 DSOP.
Effective January 1, 2002, directors became eligible to participate in the
Company's Deferred Compensation Plan ("DCP"). Under the DCP, a director may
defer all or a portion of his or her cash compensation and annual award of
Company Common Stock. Participating directors, like all other participants in
the DCP, may elect to measure changes in the value of the deferred cash
compensation credited to their DCP accounts by changes in the value of one or
more of a variety of equity and debt mutual funds offered by The Vanguard
Group, which administers the DCP, or by changes in the value of Company Common
Stock, or they may have amounts credited to their DCP accounts earn interest at
an interest rate which is established each year by the Compensation Committee
and which is applicable to all DCP participants. Changes in the value of
deferred awards of Company Common Stock are measured by changes in the value of
that Common Stock although, unlike other participants in the DCP, directors do
not receive any premium on compensation deferred into that stock. See "Report
of the Compensation Committee" at page 8. A director may elect to receive
deferred compensation in a lump sum or in up to ten installments, either at
retirement from the Board or beginning on a specific date selected by the
director. Prior to 2002, under the Directors' Deferred Compensation Plan
("DDCP"), directors were able to defer only their cash compensation, not stock
awards, and only to have deferred amounts credited to their DDCP accounts earn
interest at the interest rate established each year by the Compensation
Committee. As of the effective date of the DCP, amounts previously deferred
under the DDCP remained deferred, but became subject to the terms of the DCP.
Directors serving before May 14, 2003 participate in the Director
Charitable Contribution Program (the "DCCP"). Under the DCCP, the Company has
purchased life insurance policies on the lives of participating directors and
is the owner and sole beneficiary of the policies. After the death of a covered
director, the Company will donate $500,000 to one or more qualifying charitable
organizations designated by the director and $500,000 to The IFF Foundation.
Individual directors derive no financial benefit from the Program since all
deductions relating to the contributions accrue solely to the Company. The
Program should have no long-term cost to the Company.
Directors first elected on or after May 14, 2003 will not participate in
the DCCP. Those directors, together with all other directors, will be eligible
to participate in the Company's Matching Gift Program, under which The IFF
Foundation matches, on a dollar for dollar basis up to a maximum of $10,000 per
year, contributions to qualifying charitable organizations by United
States-based employees.
5
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN OTHER PERSONS
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of February 14, 2003, by
each director and nominee for director, the executive officers named in the
Summary Compensation Table in this Proxy Statement and all directors and
executive officers as a group.
SHARES OF RIGHTS TO ACQUIRE
COMMON STOCK SHARE- BENEFICIAL OWNERSHIP
BENEFICIALLY EQUIVALENT OF SHARES OF PERCENT
NAME OWNED(1) UNITS(2) COMMON STOCK(3) OF CLASS
----------------------------------------------- ----------------- ------------ --------------------- -----------
Margaret Hayes Adame .......................... 3,000 3,053 19,000 (4)
Gunter Blobel ................................. 2,750 0 1,000 (4)
Stephen A. Block .............................. 7,694 32 251,876 (4)
Julian W. Boyden .............................. 665 4,707 16,667 (4)
J. Michael Cook ............................... 2,000 2,794 1,000 (4)
Peter A. Georgescu ............................ 7,500 1,066 4,000 (4)
Richard A. Goldstein .......................... 385,868(5) 11,015 600,335 1.1%
Alexandra A. Herzan ........................... 2,734,185(6) 0 0 2.9%
D. Wayne Howard ............................... 57,096 603 38,334 (4)
Carlos A. Lobbosco ............................ 846 0 370,501 (4)
Arthur C. Martinez ............................ 3,000 2,794 1,000 (4)
Henry P. van Ameringen ........................ 7,059,250(7) 3,053 22,000 7.5%
William D. Van Dyke, III ...................... 7,490,940(8) 0 22,000 8.0%
Douglas J. Wetmore ............................ 7,596 1,527 192,626 (4)
All Directors and Executive Officers as a Group
(25 persons) ................................. 17,768,927 35,198 2,003,840 20.6%
CERTAIN OTHER OWNERS
The following table sets forth information regarding beneficial owners of
more than 5% of the Company's outstanding Common Stock as of February 14, 2003
(other than Messrs. van Ameringen and Van Dyke) based on a review of filings
with the Securities and Exchange Commission (the "Commission") and, in the case
of Mr. George Rowe, Jr., a former director of the Company, information
available to the Company.
NUMBER OF SHARES AND NATURE OF BENEFICIAL OWNERSHIP
-------------------------------------------------------------
SHARED
SOLE VOTING SHARED VOTING AND
AND INVESTMENT VOTING INVESTMENT PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER POWER POWER POWER OF CLASS
-------------------------------------- ---------------- ------------ -------------------- ---------
George Rowe, Jr. ..................... 8,500 0 6,002,649(7) 6.4%
One Rockefeller Plaza
New York, NY 10020
J.P. Morgan Chase & Co. .............. 447,040(9) 5,578,489 5,658,746(9) 6.0%
270 Park Avenue
New York, NY 10017
Oppenheimer Funds Inc. ............... 0 0 5,550,677(10) 5.9%
498 Seventh Avenue
New York, NY 10018
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(1) This column includes (where applicable) any shares held for the named
person under the Company's Global Employee Stock Purchase Plan ("GESPP").
The respective numbers of such shares are 2,096 for each of Messrs.
Block, Goldstein, Howard, and Wetmore, 846 for Mr. Lobbosco, 620 for Mr.
Boyden and 15,387 for all directors and executive officers as a group.
6
(2) This column includes share unit balances held in the IFF Stock Fund under
the Company's DCP and credited to participants' accounts (where
applicable), excluding premium share units held under such plan, which
are forfeitable. The number of share units in the IFF Stock Fund was
calculated for participants based on the closing market price of the
Company's Common Stock on February 14, 2003. The number of premium share
units held under the DCP for the relevant participants are 8 for Mr.
Block, 1,177 for Mr. Boyden, 2,754 for Mr. Goldstein, 151 for Mr. Howard,
382 for Mr. Wetmore and 5,610 for all directors and executive officers as
a group.
(3) The shares listed in this column are those which the named person has (or
will have within 60 days after February 14, 2003) the right to acquire by
the exercise of stock options granted by the Company.
(4) Less than 1%.
(5) The number of shares beneficially owned by Mr. Goldstein includes 200,000
restricted shares with respect to which he has sole voting power. Such
number of shares also includes 173,772 shares beneficially owned by Mr.
Goldstein's wife. Mr. Goldstein disclaims beneficial ownership in such
shares.
(6) Mrs. Herzan is an officer and director of the van Ameringen Foundation,
Inc. which owns 1,855,766 shares, is President of the Lily Auchincloss
Foundation which owns 41,473 shares and is a trustee of a trust referred
to in footnote 7 below which holds 836,946 shares.
(7) Mr. van Ameringen is retiring from the Board of Directors as of the date
of the Annual Meeting. The number of shares beneficially owned by Mr. van
Ameringen, 509 Madison Avenue, New York, New York 10022, includes
2,533,011 shares with respect to which he has sole voting and investment
power and 4,526,239 shares with respect to which he has shared voting and
investment power. The number of shares beneficially owned by Mr. van
Ameringen, and the number of shares beneficially owned by Mr. George
Rowe, Jr., formerly a director of the Company, include the following
holdings: Messrs. van Ameringen and Rowe are the trustees of 11 trusts
which hold an aggregate of 2,670,473 shares, including one trust holding
836,946 shares of which Mrs. Herzan is also a trustee; and Messrs. van
Ameringen and Rowe are officers and directors of the van Ameringen
Foundation, Inc., which owns 1,855,766 shares. In addition: (1) Mr. van
Ameringen is a trustee of another charitable foundation holding 705,797
shares with respect to which he has sole voting and investment power; (2)
Mr. Rowe is an officer and/or trustee of three other charitable
foundations which own an aggregate of 1,269,114 shares; and (3) Mr. Rowe
is a trustee of six additional trusts holding an aggregate of 208,796
shares.
(8) The number of shares beneficially owned by Mr. Van Dyke, 111 East
Kilbourne Avenue, Suite 1900, Milwaukee, WI, 53202, includes 6,957 shares
with respect to which he has sole voting and investment power and
7,354,557 shares over which he has shared voting and investment power,
including the holdings of the trust referred to in footnote 9 below,
three other trusts of which Mr. Van Dyke is co-trustee and 31,767 shares
held by Pollybill Foundation, Inc., of which Mr. Van Dyke is a director.
Such number also includes the beneficial interest of Mr. Van Dyke's wife
in 129,426 shares owned directly by her. Mr. Van Dyke disclaims any
beneficial interest in the shares held by the various trusts, the
Foundation and his wife.
(9) As reported in Schedule 13G dated as of February 10, 2003. Includes
5,523,783 shares held of record by CEDE & Co. as nominee for a trust of
which Mr. and Mrs. William D. Van Dyke, III and J. P. Morgan Chase are
co-trustees. See footnote 8 above for additional shares beneficially
owned by Mr. Van Dyke.
(10) As reported in Schedule 13G dated as of February 13, 2003.
7
REPORT OF THE
COMPENSATION COMMITTEE*
The Compensation Committee of the Board (the "Compensation Committee")
(all of the members of which are "outside directors" under applicable law) is
responsible for recommending to the Board and administering the policies that
govern the annual compensation paid to the executive officers, including the
Chief Executive Officer.
With respect to 2002, the Compensation Committee:
(a) at the beginning of the year established the specific quantitative
Company-wide performance goals and award targets for Mr. Goldstein, the
Chairman and Chief Executive Officer (the "CEO") and each of the other
executive officers for (i) 2002 under the Company's Annual Incentive Plan
("AIP") and (ii) the 2002-2004 cycle under the Company's Long-Term
Incentive Plan ("LTIP");
(b) at the beginning of the year established 2002 stock option award
targets for Mr. Goldstein and each of the other executive officers under
the Company's Stock Option Program ("SOP");
(c) reviewed Mr. Goldstein's recommendations for salary adjustments for
each executive officer other than Mr. Goldstein himself, and, following
and based on a performance review for 2001 conducted by the Nominating and
Governance Committee of the Board, determined the annual salary of Mr.
Goldstein, and recommended all executive officer salary adjustments to the
Board;
(d) reviewed and approved the recommendations of the CEO for 2002 awards
for each executive officer other than the CEO under the SOP and determined
the award for Mr. Goldstein;
(e) certified the level of achievement of the pre-established
Company-wide performance goals for 2002 and the level of annual incentive
compensation earned by Mr. Goldstein and each other executive officer for
2002 under the AIP based on that achievement; and
(f) recommended to the Board that a performance incentive award of
shares of restricted stock be granted to Mr. Goldstein.
THE COMPANY'S COMPENSATION POLICY
For 2002 the Company continued to operate under its comprehensive
Executive Compensation Program covering the Company's executive officers and
other key executives (the "Program"). The Program consists of a Salary Plan
("SP"), the AIP, the LTIP, the SOP, a perquisites program and the Company's
Executive Separation Policy (see "Employment Contracts and Termination and
Change-in-Control Arrangements" at page 17). The AIP, LTIP and SOP are part of
and administered under the 2000 Stock Award and Incentive Plan (the "2000
SAIP").
Before its introduction, the Program was extensively benchmarked, with the
assistance of experienced independent compensation consultants, against
confidential external marketplace data, and all positions, including those of
the CEO and the Company's other executive officers, were internally valued as
determined by their scope of responsibilities within the Company. The external
survey data are reviewed and updated biennially, and the internal valuation of
positions is reviewed and updated periodically. In respect of 2002 the external
survey data were reviewed and updated; since an internal valuation of positions
was conducted for 2001, when the Program was initiated, no review of the
internal valuation of positions was conducted for 2002. The AIP, the LTIP and
the SOP are designed to reward employees only if the Company is successful
under specific financial measures, including revenue growth and increases in
operating profit, earnings per share, return on net tangible assets and the
market price of the Company's Common Stock.
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* This report of the Compensation Committee shall not be deemed
incorporated by reference by any general statement incorporating by
reference this proxy statement into any filing under the Securities Act
of 1933, as amended (the "Securities Act"), or the Securities Exchange
Act of 1934, as amended (the "Securities Exchange Act"), except to the
extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under either of such
Acts.
8
Under the SP, the Compensation Committee and the Board review salaries of
the CEO and the other executive officers periodically. The timing and amount of
salary increases will be based on the executive officer's ongoing performance.
Under the AIP, each executive officer, including the CEO, has an annual
incentive award target based on the achievement of specific quantitative
Company-wide performance goals, which are determined at the beginning of each
year by the Compensation Committee. For 2002, these objectives related to
increases in revenue and improvements in operating profit as a percentage of
sales. Each executive officer has a range of potential awards, both above and
below target, which are specified at the beginning of each year. The amount
paid to each executive officer, including the CEO, at the end of the year
depends on the extent to which the Company achieves the quantitative
Company-wide performance goals. Failure to meet a threshold performance level
results in no AIP award for that year.
Under the LTIP, each executive officer, including the CEO, has an award
target for each three-year performance cycle based on the achievement of
specific quantitative Company-wide performance goals, which are determined by
the Compensation Committee at the beginning of each performance cycle. For the
2001-2003 and 2002-2004 cycles, these objectives relate to improvements in
earnings per share and return on net tangible assets. For each award cycle each
executive officer has a range of potential awards, both above and below target,
which are specified at the beginning of the cycle. The amount paid at the end
of the cycle depends on the extent to which the Company achieves the
quantitative Company-wide performance goals. Failure to meet a threshold
performance level for a cycle results in no LTIP award for that cycle. The
Compensation Committee may not increase AIP and LTIP awards beyond those
actually earned based on the pre-established goals. It has only negative
discretion with respect to awards under these plans for the applicable AIP year
or LTIP cycle.
Under the SOP, each executive officer, including the CEO, has an annual
target award and a range of option awards both above and below that target
(although under the Memorandum of Understanding (the "MOU") setting forth the
terms of Mr. Goldstein's employment by the Company, Mr. Goldstein's award may
not have a Black-Scholes value of less than $590,000). See "Employment
Contracts and Termination of Employment and Change-in-Control Arrangements" at
page 17. The actual size of an executive officer's award is based on the scope
of his or her position, individual performance, and ability to drive enhanced
long-term shareholder value. The Compensation Committee sets the terms of stock
options, including vesting, any performance requirements and the expiration
date (which, under the 2000 SAIP, can be up to but not in excess of ten years
after the grant date).
Under the perquisites program, each executive officer receives a package
of perquisites that includes a Company-provided automobile, annual physical
examination, health club membership, the right to travel via first or business
class for business purposes and annual financial and tax counseling and estate
planning assistance.
The Company has a Board-approved comprehensive Deferred Compensation Plan
(the "DCP"). The DCP allows certain United States-based employees, including
the CEO and the other executive officers, to defer, either for a specified
number of years or until retirement or termination of employment, salary,
annual and long-term incentive awards and, under certain circumstances, profits
from the exercise of stock options. Participating employees may have changes in
the value of their deferred compensation measured, at their election, by the
market performance of a variety of stock and bond funds managed by The Vanguard
Group. The DCP also permits all participating employees to defer compensation
into the Company's Common Stock and provides them with an incentive to do so by
granting them a 25% premium on all compensation deferred into that stock.
The Company's general policy has been, and will continue to be, to
structure executive compensation to be deductible under applicable law. The
Company also believes, however, that under some circumstances, such as to
attract or retain key executives or to recognize outstanding performance, it
may be in the best interests of the Company and its shareholders to compensate
certain key executives in excess of deductible limits.
9
2002 COMPENSATION OF EXECUTIVE OFFICERS
The basic components of the Company's executive officer compensation in
2002 were annual salaries, stock options, annual incentive compensation and
long-term incentive compensation; long-term incentive compensation will be paid
only if and to the extent the performance goals for the 2002-2004 cycle of the
LTIP are met. In addition, on the recommendation of the Compensation Committee,
the Board granted Mr. Goldstein a Performance Incentive Award of restricted
stock. See "Employment Contracts and Termination of Employment and
Change-in-Control Arrangements" at page 17.
SALARIES
Mr. Goldstein recommended to the Compensation Committee in March 2002 the
annual salaries for 2002 for the executive officers then employed by the
Company other than himself. The Compensation Committee considered the
recommendations and discussed them with Mr. Goldstein and recommended annual
salaries for those executive officers to the Board, which reviewed and approved
such salaries. The approved salaries became effective on April 1, 2002 for the
following 12-month period. In making its recommendations, the Compensation
Committee relied on information provided by Mr. Goldstein, based on his
firsthand knowledge of the performance of each executive officer and his or her
contribution to the Company and to his or her respective area of concentration.
The Compensation Committee also considered information and advice provided by
experienced independent compensation consultants. There was, however, no
precise test or formula by which the recommended salaries of the executive
officers for 2002 were related to performance. The Compensation Committee
concluded, and the Board agreed, that the Company's interests were best served
by a flexible policy that allowed the Compensation Committee and the Board to
fix 2002 annual salaries after considering the factors enumerated above and
evaluating such factors under the circumstances as they then existed.
The Compensation Committee, following and based on a performance review
for 2001 conducted by the Nominating and Governance Committee of the Board, and
with the advice of experienced independent compensation consultants, determined
and recommended to the Board, and the Board (with Mr. Goldstein recusing
himself) approved, the 2002 base salary for Mr. Goldstein.
STOCK OPTIONS
For 2002 each of the then serving executive officers, other than Mr.
Goldstein, received an award that was between 20% and 25% higher than his or
her target stock option grant under the SOP. The Compensation Committee made
these greater than target awards to increase the executive officers' alignment
with shareholders and provide them with further incentive to increase
shareholder value. The Compensation Committee made all grants other than that
to Mr. Goldstein after considering the recommendations of Mr. Goldstein. Mr.
Goldstein's stock option grant was made with the assistance of experienced
independent compensation consultants and had a Black-Scholes value of
approximately twice the minimum required by the MOU. See "Employment Contracts
and Termination and Change-in-Control Arrangements" at page 17. The grants to
all executive officers, including Mr. Goldstein, were effective as of the close
of business on May 7, 2002.
INCENTIVE COMPENSATION
For 2002, all of the Company's executive officers participated in the AIP.
For 2002, the Company achieved in the aggregate 26.875% of the Company-wide
performance goals, as a result of which each executive officer, including Mr.
Goldstein, received for 2002 annual incentive compensation equal to 26.875% of
his or her target incentive compensation for the year.
MR. GOLDSTEIN'S 2002 COMPENSATION
Mr. Goldstein's base salary for 2002 was established by the Board (with
Mr. Goldstein recusing himself) on the recommendation of the Compensation
Committee, following and based on a performance review for 2001 conducted by
the Nominating and Governance Committee of the Board, and with the advice of
experienced independent compensation consultants. Both his target award and his
actual payout
10
of annual incentive compensation were governed by and were consistent with the
terms of the AIP. His participation in the 2002-2004 cycle of the LTIP is
governed by and consistent with the terms of the LTIP. His stock option award
was governed by the MOU.
Effective August 1, 2002, with the assistance of experienced independent
compensation consultants, the Compensation Committee recommended to the Board
and the Board granted to Mr. Goldstein a Performance Incentive Award ("PIA") of
200,000 shares of restricted stock. The PIA has two objectives: (a) to drive
superior long term corporate performance on behalf of shareholders; and (b) to
retain and reward Mr. Goldstein for such performance over the next five years.
Mr. Goldstein's entitlement to all or a portion of the PIA is subject to the
Company's achieving levels of shareholder return, compared to those of a
specified group of companies, over the three, four and five year periods
commencing August 1, 2002. See "Employment Contracts and Termination of
Employment and Change-in-Control Arrangements" at page 17 for a complete
description of the PIA.
The Compensation Committee and the Board (with Mr. Goldstein recusing
himself) determined that each element and the aggregate of Mr. Goldstein's
compensation in respect of 2002 were fair and reasonable and within the range
of compensation for chief executive officers of companies comparable to the
Company.
In summary, the Company has an appropriate and competitive compensation
policy, which is designed to attract and retain qualified executive officers
and motivate them to create and enhance shareholder value. The Company's
compensation policy soundly balances base salary, annual and long-term cash
incentives, and stock options and, for the CEO, restricted stock. The
Compensation Committee, with the assistance of experienced independent
compensation consultants, periodically reviews both compensation levels for the
CEO and other executive officers and the appropriate balance among the various
components. This review is designed to assure that the Company's compensation
program remains competitive and enables the Company to attract and retain high
quality executives.
COMPENSATION COMMITTEE
Peter A. Georgescu
Chairman
Arthur C. Martinez
Henry P. van Ameringen
William D. Van Dyke, III
11
SUMMARY COMPENSATION TABLE
The following table sets forth information for 2002, 2001 and 2000
relating to the compensation of the Chairman and Chief Executive Officer, each
of the other four most highly compensated executive officers of the Company who
were serving at December 31, 2002 and a former executive officer who was not
serving as such at December 31, 2002.
ANNUAL COMPENSATION
----------------------------------------------------------
(A) (B) (C) (D) (E)
OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) (1) COMPENSATION ($) (3)
--------------------------------- ------ ----------- ---------------- ----------------------
Richard A. Goldstein ............ 2002 $993,750 $ 215,000 $ 104,154
Chairman and Chief 2001 943,750 374,693 93,859
Executive Officer 2000 525,000 540,000(2) 22,583
Julian W. Boyden ................ 2002 518,750 84,656 23,546
Executive Vice President 2001 493,750 160,125 13,751
2000 -- -- --
D. Wayne Howard ................. 2002 430,000 70,950 16,709
Executive Vice President, 2001 393,750 128,100 27,496
Global Operations 2000 125,000 100,000 243,078
Douglas J. Wetmore .............. 2002 412,500 57,109 13,590
Senior Vice President and 2001 363,750 120,094 15,464
Chief Financial Officer 2000 330,000 165,000 10,141
Stephen A. Block ................ 2002 405,000 55,094 16,526
Senior Vice President, General 2001 382,500 124,898 15,820
Counsel and Secretary 2000 360,000 180,000 8,491
Carlos A. Lobbosco .............. 2002 550,000 55,430 4,332
Former Executive Vice 2001 537,500 176,138 105,330(4)
President, Global Business 2000 500,000 300,000 303,054(4)
Development
LONG TERM COMPENSATION
--------------------------------------------------------------------
AWARDS PAYOUTS
--------------------------------- ----------------------------------
(A) (F) (G) (H) (I)
SECURITIES ALL OTHER
RESTRICTED UNDERLYING LTIP COMPENSATION
NAME AND PRINCIPAL POSITION STOCK(5) OPTIONS (#) PAYOUTS ($) ($) (7)
--------------------------------- ------------------- ------------- ---------------- -----------------
Richard A. Goldstein ............ $5,884,000(6) 140,000 -- $794,375(8)
Chairman and Chief -- 101,000 720,000(2) 832,947(8)
Executive Officer -- 1,400,000 -- 25,453
Julian W. Boyden ................ -- 57,500 -- 17,579
Executive Vice President -- 50,000 -- 54,738
-- 50,000 -- --
D. Wayne Howard ................. -- 60,000 -- 13,875
Executive Vice President, -- 50,000 -- 17,012
Global Operations -- 65,000 -- 180
Douglas J. Wetmore .............. -- 44,000 -- 23,001
Senior Vice President and -- 35,000 -- 17,440
Chief Financial Officer -- 179,500 -- 9,414
Stephen A. Block ................ -- 42,500 -- 14,757
Senior Vice President, General -- 35,000 -- 12,604
Counsel and Secretary -- 212,500 -- 11,022
Carlos A. Lobbosco .............. -- -- -- 3,168
Former Executive Vice -- 50,000 -- --
President, Global Business -- 313,000 -- --
Development
----------
(1) Except where noted for Mr. Goldstein, paid under the Company's AIP or, for
2000, the Company's Management Incentive Compensation Plan ("MICP").
(2) Pursuant to the terms of the MOU entered into in connection with Mr.
Goldstein's appointment as Chairman and Chief Executive Officer. See
"Employment Contracts and Termination of Employment and Change-in-Control
Arrangements" at page 17.
(3) Includes the following amounts imputed under the tax laws as compensation
in respect of (a) the personal use of the automobile provided by the
Company in 2002: Mr. Goldstein--$13,150, Mr. Boyden--$15,988, Mr.
Howard--$8,709, Mr. Wetmore--$10,090, Mr. Block--$13,526, Mr.
Lobbosco--$1,521; in 2001: Mr. Goldstein--$16,035, Mr. Boyden--$3,616, Mr.
Howard--$10,243, Mr. Wetmore--$12,464, Mr. Block--$8,320; in 2000: Mr.
Wetmore--$10,141 Mr. Block--$8,491; (b) financial planning services in
2002: Mr. Goldstein--$23,295, Mr. Boyden--$7,558, Mr. Howard-- $4,500, Mr.
Block--$3,000; in 2001: Mr. Goldstein--$15,869, Mr. Boyden--$7,500; Mr.
Howard-- $8,200, Mr. Block--$7,500; (c) club memberships in 2002: Mr.
Goldstein--$22,733, Mr. Howard-- $3,500, Mr. Wetmore--$3,500, Mr.
Lobbosco--$2,811; in 2001: Mr. Goldstein--$19,544, Mr. Boyden--$2,635, Mr.
Howard--$3,000; Mr. Wetmore--$3,000; (d) housing and personal expenses for
Mr. Goldstein in 2002: $44,976; in 2001: $42,411; in 2000: $22,583; (e) a
housing subsidy in 2001: Mr. Howard--$6,053; and (f) a relocation
allowance in 2000: Mr. Howard--$243,078.
(4) Housing allowance pursuant to an agreement between Mr. Lobbosco and the
Company including amounts grossed up thereunder. See "Employment Contracts
and Termination of Employment and Change-in-Control Arrangements" at page
17 for the terms of Mr. Lobbosco's agreement.
(5) Based on the closing price of the Company's Common Stock on December 31,
2002, the aggregate dollar value of premium share units in the IFF Stock
Fund credited to the accounts of the named executives officers
participating in the DCP as of that date was: Mr. Goldstein--$96,991, Mr.
Boyden--$41,449, Mr. Howard--$5,305, Mr. Wetmore--$12,707. Such premium
shares are subject to forfeiture. Except for such premium shares and the
restricted stock held by Mr. Goldstein described below, no other named
executive officer holds restricted stock.
12
(6) On August 1, 2002 Mr. Goldstein received a Performance Incentive Award
("PIA") of 200,000 restricted shares of the Company's Common Stock. See
"Employment Contracts and Termination of Employment and Change-in-Control
Arrangements" at page 17. Mr. Goldstein's entitlement to all or a portion
of the award is subject to (a) the Company's achieving certain levels of
shareholder returns compared to those of a specified group of other
companies, over the three-, four- and five-year periods commencing August
1, 2002, and (b) Mr. Goldstein's remaining employed by the Company during
such periods. He may earn up to 25% of the award (50,000 shares) at the
end of three years, an additional 25% of the award (50,000 shares) at the
end of four years, and the remaining 50% of the award (100,000 shares) at
the end of five years. If any portion of the award is not earned during
the first two performance periods, it may be earned if the performance
objective is met for the full five-year period. Although the stock is
restricted, Mr. Goldstein has voting rights over and rights to dividends
on all shares. Based on the closing price of the Company's Common Stock
on December 31, 2002, the dollar value of the restricted stock held by
Mr. Goldstein on that date was $7,020,000.
(7) Includes the following amounts paid, matched or set aside by the Company
under the Company's Retirement Investment Fund Plan, a defined
contribution plan, the DCP (including the dollar amount, on the date of
contribution, of premium shares credited to the accounts of participants
in the DCP) and, with respect to 2000, the Company's unfunded Supplemental
Retirement Investment Plan: for 2002: Mr. Goldstein--$82,938, Mr.
Boyden--$15,188, Mr. Howard--$13,200, Mr. Wetmore--$22,251, Mr.
Block--$12,663; for 2001: Mr. Goldstein--$121,985, Mr. Boyden--$52,781,
Mr. Howard--$16,374, Mr. Wetmore--$16,880, Mr. Block--$11,100; for 2000:
Mr. Goldstein--$24,421, Mr. Block--$9,776, Mr. Wetmore--$8,962. Also
includes the following amounts imputed under the tax law as compensation
in respect of life insurance coverage under the Company's Executive Death
Benefit Program or, for Mr. Lobbosco, the Company's Group Term Life
Insurance Program: for 2002: Mr. Goldstein--$5,187, Mr. Boyden--$2,391,
Mr. Howard--$675, Mr. Wetmore--$750, Mr. Block--$2,094, Mr.
Lobbosco--$3,168; for 2001: Mr. Goldstein--$4,712, Mr. Boyden--$1,957, Mr.
Howard--$638, Mr. Wetmore--$560, Mr. Block--$1,504; for 2000: Mr.
Goldstein--$1,032, Mr. Howard--$180, Mr. Block--$1,246, Mr. Wetmore--$451.
No participant in either Program has or will have any interest in the cash
surrender value of the underlying insurance policies.
(8) Includes $706,250 paid to Mr. Goldstein pursuant to the MOU in respect of
long term incentive payments that he forfeited by leaving his prior
employer. See "Employment Contracts and Termination of Employment and
Change-in-Control Arrangements" at page 17 for the terms of the MOU.
13
OPTION/SAR GRANTS IN 2002
The following table shows all grants of options in 2002 to the executive
officers named in the Summary Compensation table. No stock appreciation rights
(SARs) were granted in 2002.
(A) (B) (C) (D) (E) (F)
NUMBER OF
SHARES % OF TOTAL
UNDERLYING OPTIONS EXERCISE
OPTIONS GRANTED TO OR BASE GRANT DATE
GRANTED EMPLOYEES PRICE EXPIRATION PRESENT VALUE
NAME (#)(1) IN FISCAL YEAR ($/SH)(2) DATE(1) ($)(3)
------------------------- ------------ ---------------- ----------- ------------ --------------
R. A. Goldstein ......... 140,000 4.8 $32.82 5/7/12 1,710,800
J. W. Boyden ............ 57,500 2.0 32.82 5/7/12 702,650
D. W. Howard ............ 60,000 2.1 32.82 5/7/12 733,200
D. J. Wetmore ........... 44,000 1.5 32.82 5/7/12 537,680
S. A. Block ............. 42,500 1.5 32.82 5/7/12 519,350
C. A. Lobbosco .......... 0 -- -- -- --
----------
(1) All options were granted on May 7, 2002 under the 2000 SAIP, which was
initially approved by shareholders at the Company's 2000 Annual Meeting
of Shareholders and which was amended by approval of shareholders at the
Company's 2002 Annual Meeting of Shareholders. All options expire ten
years after grant and become exercisable in three equal installments 12,
24 and 36 months, respectively, after the date of grant.
(2) All options were granted at the closing market price on the date of
grant.
(3) The Company used the Black-Scholes model of option valuation to determine
grant date present value. The actual value, if any, that an executive may
realize will depend on the excess of the stock price over the exercise
price on the date the option is exercised, so that there is no assurance
the value realized by an executive will be at or near the value estimated
by the Black-Scholes model. The estimated values under that model are
based on arbitrary assumptions as to variables such as interest rates,
stock price volatility, future dividend yield and the time of exercise.
For these reasons, the Company does not agree that the Black-Scholes
model can properly determine the value of an option. The assumptions used
by the Company are as follows: a grant date stock price and exercise
price of $32.82 per share; an option term of 10 years; a stock price
volatility based on the calendar year closing prices of the Company's
Common Stock (plus dividends) for the period December 31, 1992 through
December 31, 2002; a dividend yield of 1.83% (the dividend yield is
calculated by annualizing the average of the quarterly dividend yields,
which are developed by dividing each dividend payment between January 1,
2002 and December 31, 2002 by the stock price on the ex-dividend date
with respect to such payment); and a risk-free interest rate of 5.15%
(the yield on the date of grant on the U.S. Government Zero Coupon Bond
with a maturity closest to the option term).
14
AGGREGATED OPTION EXERCISES IN 2002 AND OPTION/SAR VALUES AT DECEMBER 31, 2002
The following table provides information as to options exercised in 2002
by each of the executive officers named in the Summary Compensation table and
the value of options held by such executive officers at December 31, 2002
measured in terms of the closing price of the Common Stock in consolidated
trading on December 31, 2002. No SARs are outstanding.
(A) (B) (C) (D) (E)
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE FY-END(#) FY-END($)
NAME EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
------------------------- -------------- -------------- --------------------------- --------------------------
R. A. Goldstein ......... 700,000 $ 11,216,738 600,335/340,665 $ 715,584/962,866
J. W. Boyden ............ 37,500 587,219 16,667/103,333 $ 133,333/612,298
D. W. Howard ............ 0 0 38,334/136,666 $ 345,450/827,700
D. J. Wetmore ........... 1,500 225 172,626/143,874 $ 1,642,322/821,316
S. A. Block ............. 0 0 231,876/150,624 $ 2,067,094/959,487
C. A. Lobbosco .......... 9,000 1,350 357,501/159,499 $ 3,210,340/1,314,835
EQUITY COMPENSATION PLANS
The following table provides information about the Company's common stock
that may be issued upon the exercise of options, warrants and rights under all
of the Company's equity compensation plans as of December 31, 2002.
-------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES
NUMBER OF SECURITIES TO WEIGHTED-AVERAGE REMAINING AVAILABLE FOR
BE ISSUED UPON EXERCISE EXERCISE PRICE OF FUTURE ISSUANCE UNDER
OF OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, EQUITY COMPENSATION PLANS
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS (EXCLUDING SECURITIES
REFLECTED IN COLUMN (A))
(A) (B) (C)
-------------------------------------------------------------------------------------------------------------
Equity compensation plans 6,244,969(2) $ 33.84(3) 10,926,212(4)
approved by security
holders (1)
-------------------------------------------------------------------------------------------------------------
Equity compensation plans
not approved by security
holders (5) 3,455,402(6) $ 24.87(3) 4,158,397(7)
-------------------------------------------------------------------------------------------------------------
Total 9,700,371 $ 30.66(3) 15,084,609
-------------------------------------------------------------------------------------------------------------
----------
(1) Represents the 2000 SAIP, the 2000 Stock Option Plan for Non-Employee
Directors, the 1997 Employee Stock Option Plan, the Employee Stock Option
Plan of 1992, the 1990 Stock Option Plan for Non-Employee Directors, the
Employee Stock Option Plan of 1988 and the GESPP. Also includes the 1997
Employee Stock Option Plan for The Netherlands, the Employee Stock Option
Plan of 1992 for The Netherlands and the Employee Stock Option Plan of
1988 for The Netherlands, each of which forms a subpart of and as to
which shares are issuable under the 1997 Employee Stock Option Plan, the
Employee Stock Option Plan of 1992 and the Employee Stock Option Plan of
1988, respectively. The 2000 SAIP provides for the award of stock options
and other equity-based awards.
(2) Excludes the PIA of 200,000 shares of restricted Common Stock granted to
Richard A. Goldstein, Chairman and Chief Executive Officer on August 1,
2002. See "Employment Contracts and Termination of Employment and
Change-in-Control Arrangements" at page 17. Excludes 4,604,597 shares
remaining available for issuance under the GESPP, which was approved by
shareholders.
(3) Weighted average exercise price of outstanding options; excludes the PIA
granted to Mr. Goldstein, restricted stock units and shares credited to
accounts of participants in the DCP.
15
(4) Includes 4,604,597 shares available for future issuance under the GESPP.
Does not include 1,919,418 options outstanding as of December 31, 2002
under the 1997 Employee Stock Option Plan (including the 1997 Employee
Stock Option Plan for The Netherlands). Pursuant to approval of
shareholders at the Annual Meeting held on May 7, 2002, shares authorized
under the 1997 Employee Stock Option Plan, but not used thereunder for
any reason, are added to shares available for awards under the 2000 Stock
Award and Incentive Plan. As a result, any outstanding options under the
1997 Employee Stock Option Plan that are cancelled become available for
grant under the 2000 Stock Award and Incentive Plan.
(5) Represents the 2000 Supplemental Stock Award Plan (the "2000 Supplemental
Plan) and the DCP.
(6) Includes 38,463 unvested restricted stock units (including dividend
equivalents through December 31, 2002) granted under the 2000
Supplemental Plan. Excludes shares of the Company's Common Stock credited
to participant's accounts as of December 31, 2002 and issuable under the
DCP.
(7) Includes 4,000,000 shares available for issuance under the DCP.
2000 SUPPLEMENTAL STOCK AWARD PLAN
On November 14, 2000 the Company's Board of Directors approved the 2000
Supplemental Plan. Under applicable NYSE rules the 2000 Supplemental Plan does
not require, and has not been submitted for, shareholder approval.
The 2000 Supplemental Plan is a stock-based incentive plan designed to
attract, retain, motivate and reward employees, other than executive officers
and directors of the Company, and certain other persons who provide substantial
services to the Company, to provide for equitable and competitive compensation
opportunities, to recognize individual contributions and reward achievement of
Company goals and to promote the creation of long-term value for shareholders
by closely aligning the interests of participants with those of shareholders.
Under the 2000 Supplemental Plan, eligible participants may be granted
nonqualified stock options, stock appreciation rights, restricted stock,
deferred stock, stock granted as a bonus or in lieu of another award, dividend
equivalents, other stock based awards or conditional rights to receive stock or
other awards (performance awards) (collectively, "Awards") under terms and
conditions that are identical to those under the Company's shareholder-approved
2000 SAIP. Unlike under the 2000 SAIP, however, no cash awards may be granted
under the 2000 Supplemental Plan. In addition the Company's executive officers
are not eligible to receive awards under the 2000 Supplemental Plan. The total
number of shares of the Company's common stock reserved for Awards under the
2000 Supplemental Plan is 4,500,000 of which a total of 3,455,402 options and
unvested restricted stock units were outstanding as of December 31, 2002, and
158,397 remained available for grant as of that date.
16
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS
In connection with Mr. Goldstein's election as Chairman and Chief
Executive Officer of the Company in 2000, the Company negotiated with Mr.
Goldstein, and the Board approved, the MOU setting forth the terms of Mr.
Goldstein's employment by the Company. The principal terms of the MOU are as
follows:
(a) Mr. Goldstein is employed by the Company as its Chairman and Chief
Executive Officer for a term of five years effective June 1, 2000.
(b) Mr. Goldstein's annual base salary is not less than $900,000, the
level established by the Board.
(c) For 2000 Mr. Goldstein was guaranteed and received an annual
incentive compensation award of $540,000, 60% of his $900,000 base salary.
For years after 2000 Mr. Goldstein's annual incentive compensation is
subject to the attainment of certain annual performance goals approved by
the Board under the 2000 SAIP. For 2001 and 2002, those performance goals
were identical to those applicable to all other executive officers of the
Company.
(d) For 2000 Mr. Goldstein was guaranteed and received a long-term
incentive compensation award of $720,000, 80% of his $900,000 base salary.
For periods after 2000 Mr. Goldstein's long-term incentive compensation is
subject to the attainment of certain long-term performance goals approved
by the Board under the 2000 SAIP. For the 2001-2003 and 2002-2004 cycles
of the LTIP, those performance goals are identical to those applicable to
all other executive officers of the Company.
(e) On June 1, 2000 Mr. Goldstein was granted options to purchase
700,000 shares of the Company's Common Stock. Of these options, an option
for 500,000 shares was a "sign-on" grant; an option for 100,000 shares was
to compensate Mr. Goldstein for his forfeiture, upon his leaving Unilever
United States, Inc. ("Unilever US"), of unvested options to purchase stock
of Unilever plc; and an option for 100,000 shares was Mr. Goldstein's 2000
annual grant. The "sign-on" grant, made under the Company's 1997 Stock
Option Plan, was immediately exercisable and will remain exercisable for
the full term irrespective of Mr. Goldstein's employment status, or until
death, if earlier, except that if Mr. Goldstein's employment is terminated
for cause prior to a "Change-in-Control" (see "Executive Separation
Policy" below at page 21), the unexercised portion of the option will be
immediately forfeited. The other grants were made under the 2000 SAIP, and
are subject to the same terms and conditions as grants to other employees
under the 2000 SAIP. Mr. Goldstein is also entitled to future annual
option grants with a value, based on the Black-Scholes model of option
valuation, of at least $590,000.
(f) Mr. Goldstein was entitled to receive from the Company $2,118,750 in
respect of long term incentive payments that he forfeited by leaving
Unilever US ("Unilever LTIP"). Payments in respect of Unilever LTIP were
to be made at the same times, and in the same amounts, as they would have
been made to Mr. Goldstein had he remained an employee of Unilever US.
Three installments of $706,250 were paid to Mr. Goldstein in March 2001,
March 2002 and March 2003.
(g) Had Unilever US canceled certain vested options held by Mr.
Goldstein, he would have been entitled to a payment from the Company of
$871,000 in respect of those options. Unilever US permitted Mr. Goldstein
to exercise those options, however, as a result of which the Company's
obligation for this payment terminated.
(h) Mr. Goldstein participates in all of the Company's benefit plans and
programs to the same extent as all Company executive officers. In
addition, the Company is providing Mr. Goldstein with (i) those benefits
that he was receiving at Unilever US that are not provided under the
Company's plans and programs, and (ii) with respect to benefits provided
by both Unilever US and the Company but as to which the Company's benefits
are less generous than those Mr. Goldstein was receiving from Unilever US,
the same benefit level as he was receiving from Unilever US.
(i) In no event will Mr. Goldstein receive aggregate pensions from the
Company and Unilever US that are less than the pension he would have
received had he continued to be employed by Unilever US for an additional
five-year period. If he retires from the Company after completing five
17
years of service, his Company pension will be based on the period of his
service with the Company only. If he retires from the Company before
completing five years of service, his Company pension will be based on a
combination of his service with the Company and his service with Unilever
US totaling five years. After calculating the aggregate of his actual
Company pension and his actual pension from Unilever US, the Company will
supplement that total with an amount equal to the difference between what
his pension would have been had he continued to be employed by Unilever US
for the additional five-year period and such aggregate actual pensions.
(j) Mr. Goldstein participates in and is entitled to the benefits of the
Company's Executive Separation Policy (the "ESP"), described below at page
21; provided that, if his employment with the Company is terminated
without cause or if he terminates his employment for "good reason" (as
defined in the ESP) prior to his completing three years of service with
the Company, he receives the benefits of the ESP for the greater of two
years or for a period equal to five years less the number of full years of
service that he has completed.
Effective August 1, 2002, the Board granted the PIA to Mr. Goldstein. The
PIA has two objectives: (a) to drive superior long term corporate performance
on behalf of shareholders; and (b) to retain and reward Mr. Goldstein for such
performance over the next five years. The PIA has the following terms and
conditions:
(a) The PIA has three performance/vesting periods, commencing as of
August 1, 2002:
----------------------------------------------------
PERIOD AWARD OPPORTUNITY
----------------------------------------------------
3 years ending July 31, 2005 25% of grant
(50,000 shares)
----------------------------------------------------
4 years ending July 31, 2006 25% of grant
(50,000 shares)
----------------------------------------------------
5 years ending July 31, 2007 50% of grant
(100,000 shares)
----------------------------------------------------
(b) To earn any award, Mr. Goldstein must continue to serve as the
Company's Chief Executive Officer through the end of such
performance/vesting period.
(c) During each performance period, Mr. Goldstein may earn the
following portions of each installment of the award based on the Company's
Total Shareholder Return ("TSR") during the performance periods as measured
against a selected group of 21 companies (the "Comparison Group"):
(i) 100% of the installment if the Company's TSR is above the
75th percentile of the Comparison Group; or
(ii) 50% of the installment if the Company's TSR is above the
50th percentile and up to the 75th percentile of the Comparison Group.
(d) Unless otherwise determined by the Compensation Committee, the
installment of the PIA for any performance period is to be forfeited if:
(i) the Company's TSR is at or below the 50th percentile of the
Comparison Group; and/or
(ii) the Company's TSR is negative, irrespective of the Company's
ranking within the Comparison Group.
(e) If all or a portion of an installment of the PIA for either of the
first two performance periods is not earned, up to the full PIA may still
be earned based on the Company's TSR for the full five-year PIA performance
award period.
(f) The Compensation Committee may adjust the composition of the
Comparison Group or other provisions of the PIA in the event of changes in
the business or performance of a Comparison Group company or the Company or
in the event of other factors deemed relevant by the Compensation
Committee.
18
(g) Prior to vesting or forfeiture, Mr. Goldstein has voting rights
over and rights to receive dividends on all shares subject to the PIA.
On July 25, 2001, Mr. Lobbosco and the Company entered into a new contract
(the "2001 Contract"), which superseded the contract that the Company and Mr.
Lobbosco had executed effective October 1, 1999 in connection with his transfer
to the United States and his appointment as President, Fragrance Division (the
"1999 Contract", and together with the 2001 Contract, the "Contracts"). The
principal features of the Contracts are as follows:
(a) The 1999 Contract contemplated that Mr. Lobbosco's assignment in
the United States would end no later than July 1, 2001 and that he would
remain an employee of the Company, based in Buenos Aires, Argentina,
through June 30, 2003, when he was to retire. Under the 2001 Contract Mr.
Lobbosco continued as Executive Vice President, Global Business Development
through May 31, 2002. Thereafter, until June 30, 2004, when the 2001
Contract expires and Mr. Lobbosco retires from Company employment, he has
been based in Buenos Aires and reports to the Company's Chief Executive
Officer and performs such services as the Chief Executive Officer may
request.
(b) Under the 1999 Contract, Mr. Lobbosco's annual base salary was set
at $500,000, with an annual review in accordance with Company policy. Under
the 2001 Contract, his base salary was set at $550,000 (to which it had
been increased effective April 1, 2001) for the duration of the 2001
Contract.
(c) Under the 1999 Contract, Mr. Lobbosco continued to participate in
the Company's MICP, then the Company's annual incentive plan, with target
incentive compensation of 50% of his salary. Under the 2001 Contract, he
continues to participate in the Company's AIP and LTIP. His target AIP
awards under the 2001 Contract, as a percentage of base salary, were 50%
for 2001 and 37.5% for 2002 and is 25% for 2003. Under the LTIP, his target
award for the three-year cycle 2001-2003 is 75% of his base salary. He is
not eligible to participate in any subsequent cycles of the LTIP.
(d) Under the 1999 Contract, Mr. Lobbosco was to participate in the
Company's various stock option plans. Under the 2001 Contract, he is not
eligible to receive any options after his May 2001 grant.
(e) Under the 1999 Contract, the Company agreed to lease an apartment
in New York City for Mr. Lobbosco's use, and to pay the rent thereon. Taxes
on income recognized by Mr. Lobbosco as a result of the Company's rent
payments for the New York City apartment were to be grossed up. In
addition, the 1999 Contract also provided that, to the extent that Mr.
Lobbosco's effective aggregate income tax rate on his salary and incentive
compensation exceeded 30%, the Company was required to reimburse Mr.
Lobbosco, on a grossed up basis, for all taxes in excess of 30% in respect
of such compensation. The 1999 Contract also entitled Mr. Lobbosco to the
Company-paid services of an independent public accountant to assist him in
calculating his taxes. Under the 2001 Contract, Mr. Lobbosco is
headquartered in Buenos Aires, Argentina, his country of origin, as a
result of which the Company no longer rents an apartment for him and he no
longer recognizes income to be grossed up. In addition, since Mr. Lobbosco
has returned to Argentina, the Company has no obligation to reimburse and
is not reimbursing Mr. Lobbosco for any income taxes, as a result of which
there is no excess income tax to be grossed up.
(f) Under the 1999 Contract, Mr. Lobbosco was to receive a minimum
aggregate monthly pension of between $15,500 and $25,000, depending on the
date of his retirement. Under the 2001 Contract, and in lieu of any other
pension benefits, the Company will make to him on his retirement seven
annual pension payments of $604,527, with the first such payment to be made
in July 2004. Should Mr. Lobbosco die after June 30, 2004, any unpaid
payments will be made to his surviving spouse or to his or his spouse's
estate. Should Mr. Lobbosco die before June 30, 2004 with a surviving
spouse, his spouse will receive seven annual payments of $302,263.50.
(g) The 1999 Contract provided, and the 2001 Contract provides, that
in the event Mr. Lobbosco's employment with the Company is terminated other
than for cause prior to the anticipated retirement date under such Contract
(which is June 30, 2004 under the 2001 Contract), and Mr. Lobbosco would
not be entitled to the benefits of his Contract, Mr. Lobbosco will retire
from the
19
Company's employ on that date. He may elect to commence receiving his
pension at that time, or in lieu, thereof to receive salary continuation
payments for a period of 24 months (or a shorter period if the termination
were to occur after July 1, 2001 under the 1999 Contract or after July 1,
2002 under the 2001 Contract).
On November 13, 2001, the Board approved the "Eligible Executive Officer
Share Value Option Exercise Loan Program," which permitted loans by the Company
to certain executive officers who were not members of the Board (and certain
other executive officers then members of the Board if and when they no longer
served as members of the Board) and who held Share Value Options ("SVOs")
granted on November 14, 2000 containing certain features requiring their
exercise prior to the expiration of the initial seven-year option exercise
period. In connection with Mr. Howard's exercise of his SVO, which expired on
November 23, 2001, on November 13, 2001, the Compensation Committee authorized
the Company to loan to Mr. Howard, and, as of November 21, 2001 Mr. Howard
borrowed, $986,563, the aggregate price of the option shares purchased as a
result of his SVO exercise (the "Howard Loan"). Pursuant to the Howard Loan,
Mr. Howard purchased, and pledged to the Company as security for the loan,
55,000 shares of Company Common Stock. Mr. Howard also assigned to the Company
all of his right to dividends in respect of the pledged shares, but retained
voting rights with respect to such shares. The Howard Loan did not cover any
income tax liability of Mr. Howard in respect of the purchase of the shares
subject to the option. All such taxes are the sole responsibility of Mr.
Howard.
The Howard Loan matures and must be repaid, together with all accrued and
unpaid interest, no later than November 14, 2007. It becomes immediately due
and payable on any earlier date after which, for a period of seven (7) out of
twenty (20) consecutive trading days, the market value, as determined by the
closing price of the Company's Common Stock on the NYSE, of the shares pledged
to secure the loan is less than 110% of the outstanding principal balance of
the Howard Loan. Unless Mr. Howard pays the principal of, and all interest due
on, the loan within five business days after the applicable date, the Company
is authorized to sell the pledged shares on behalf of Mr. Howard. Proceeds of
the sale are to be applied first to cover (in the following order) all interest
and principal due on the Howard Loan, all fees in respect of the sale
transaction, and all withholding taxes for which Mr. Howard is responsible as a
result of the sale of the pledged shares. The Company then pays to Mr. Howard
any balance. To the extent that the sale price of the pledged shares is not
sufficient to cover fully all principal, interest, fees and withholding taxes,
any deficiency remains the sole responsibility of Mr. Howard.
The Howard Loan also becomes immediately due and payable if Mr. Howard
ceases to be an executive officer of the Company or terminates employment with
the Company for any reason. The Company has full recourse against Mr. Howard
for payment of all interest and repayment of loan principal under the Howard
Loan. Neither the principal nor any interest payable on the Howard Loan is
forgivable by the Company.
Pursuant to the terms of the Howard Loan, the initial interest rate of the
Howard Loan (through December 31, 2001) was 4.1%. For the four quarters of
2002, the interest rates were 4.1%, 3.7%, 3.3% and 3.4%, respectively. The
interest rate is determined quarterly and is the higher of (a) the lowest rate
which qualifies as a "market" rate of interest that would be charged for a loan
in the nature of the Howard Loan by a third party lender and (b) the Company's
weighted average cost of borrowed funds, in each case as reasonably determined
by the Company's management and informed to the Compensation Committee.
Interest is payable quarterly in arrears on the unpaid balance of a Howard
Loan. The assigned dividends on the shares purchased with funds borrowed under
the Howard Loan are credited automatically to offset the interest expense. Mr.
Howard is required to pay the balance of the quarterly interest to the Company
in cash.
The Eligible Executive Officer Share Value Option Exercise Loan Program
has been discontinued, and no further loans will be made under it. There have
been no material modifications to or waivers of the terms of the Howard Loan
since the origination of the loan.
In June 1999, Nicolas Mirzayantz, Vice President, Global Business
Development, Fine Fragrances and Toiletries, who became an executive officer of
the Company on December 17, 2002, received a full recourse job-related loan in
the amount of $300,000 to assist him in the purchase of a residence in
connection with his accepting an assignment in France. The loan bears interest
at the rate of 7.21% and
20
was to be repaid in 20 quarterly installments of $18,000 commencing September
30, 1999 and continuing through June 30, 2004. Mr. Mirzayantz made 10 quarterly
payments aggregating $108,000, reducing the principal balance of the loan at
January 1, 2001 to $220,962.40. As of January 1, 2001, Mr. Mirzayantz returned
to the United States to assume his current position. At that time, the Company
suspended payment of the quarterly installments and no further repayments have
been made of either principal or interest. The loan continues to accrue
interest, however, and remains due and payable in full by its original June 30,
2004 date. As of December 31, 2002 the outstanding balance was $248,251.68.
Since January 1, 2001, there have been no material modifications to or waivers
of the terms of the loan.
EXECUTIVE SEPARATION POLICY
On April 13, 2000, the Board approved the ESP, and authorized
participation in the ESP by the then executive officers of the Company. The ESP
covers separations from the Company both prior to and within three years
following a "Change-in-Control," as defined below ("CIC"). Eight executive
officers, including those named in the Summary Compensation Table (see "Summary
Compensation Table" at page 12) are covered by the ESP's "Tier I" payments and
benefits, described below. Mr. Lobbosco is a "Tier I" participant in the ESP
only for those payments and benefits that would be due as a result of a CIC. An
additional 24 employees are covered by lesser "Tier II" payments and benefits.
Certain participants in the ESP had executed executive severance agreements
prior to their inclusion in the ESP. They agreed voluntarily to terminate those
agreements in connection with their participation in the ESP.
Under the ESP, a Tier I participant whose employment with the Company is
terminated without cause at any time other than within the three years
following a CIC receives severance, calculated on a monthly basis, equal to the
sum of (1) the covered executive's monthly base salary at the date of
termination and (2) 1/12th of the average of the participant's three most
recent annual incentive compensation awards, in each case payable as "salary
continuation" over a period of 24 months. The executive is also entitled to a
pro rata bonus in respect of the year of termination and continuation of
medical, dental and insurance benefits for the 24-month severance period. The
executive receives no additional pension credit, and stock options and other
long-term awards are exercisable only in accordance with their original terms.
A Tier I participant terminated without cause or electing to terminate his
or her employment with the Company for "good reason," as defined below, during
the three years following a CIC is entitled to the following:
(a) a lump sum payment equal to three times the aggregate of (i) the
participant's highest annual salary during the five years immediately
preceding separation and (ii) the higher of (A) the participant's average
annual bonus for the most recent three years or (B) his or her target bonus
for the year of separation;
(b) a lump sum payment of long-term performance awards for the
long-term performance cycle(s) then in progress, with the amount of the
award based on the higher of target or actual performance (the award is
initially paid at target, and if actual performance at the end of the cycle
is higher, is supplemented by an amount equal to the difference between the
award associated with such performance and target);
(c) 100% vesting of outstanding options, with the remainder of the
option term to exercise them; provided that, if any stock option plan under
which any such option has been issued does not permit such option to become
vested and exercisable upon occurrence of a CIC and to remain outstanding
for the remainder of the option term, for each share of Common Stock of the
Company subject to any such option, whether or not such option is then
exercisable, in exchange for the cancellation of the option, the
participant receives a payment equal to the difference between the exercise
price of such option share and a price equal to the highest of (i) the
market price of Common Stock on the NYSE at the close of business on the
effective day of employment termination, (b) the price of Common Stock
contained in any published tender offer made within one year before or one
year after the date of the CIC, (c) the price of Common Stock contained in
any merger or acquisition agreement entered into by the Company and any
third party within one year before or one year after the date of the CIC,
or (d) the closing market price of Common Stock on the NYSE on the date of
the CIC;
21
(d) credit for an additional three years of service and age for
pension calculation purposes; and
(e) continuation of medical and dental coverage for the lesser of
three years or until the participant obtains new employment providing
similar benefits.
Notwithstanding the foregoing, Mr. Goldstein's participation in the ESP is
subject to the enhancements described in clause (j) of the description of his
MOU at page 18 above.
If following a CIC a Tier I participant in the ESP becomes entitled to
payments that are or would be subject to the tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), or any similar tax that
may be imposed (the "Excise Taxes"), the Company will pay to that Tier I
participant an additional amount (a "Gross-Up Payment") such that, after the
payment by the Employee of all taxes (including without limitation all income
and employment tax and Excise Tax and treating as a tax the lost tax benefit
resulting from the disallowance of any deduction of the Employee by virtue of
the inclusion of the Gross-Up Payment in the Employee's adjusted gross income),
and interest and penalties with respect to such taxes, imposed on the Gross-Up
Payment, the Employee retains an amount of the Gross-Up Payment equal to the
Excise Taxes imposed on the Severance Payments.
Under the ESP (a) a CIC is deemed to have occurred if:
(i) any "person," as that term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act, acquires voting securities of the Company and
immediately thereafter is the "beneficial owner" (as defined in Rule 13d-3
under the Securities Exchange Act), directly or indirectly, of securities
of the Company representing 40% or more of the combined voting power of the
Company's then-outstanding voting securities;
(ii) individuals who on September 1, 2000 constituted the Board, and
any new director (other than a director whose initial assumption of office
is in connection with an actual or threatened election contest, including
but not limited to a consent solicitation relating to the election of
directors of the Company) whose election by the Board or nomination for
election by the Company's shareholders was approved by a vote of at least
two-thirds ( 2/3) of the directors then still in office who either were
directors on September 1, 2000 or whose election or nomination for election
was previously so approved or recommended, cease for any reason to
constitute at least a majority of the Board;
(iii) immediately after a merger, consolidation, recapitalization, or
reorganization of the Company, either (A) individuals who immediately prior
to consummation of such an event constituted the Board do not constitute at
least a majority of the members of the board of directors of the Company or
the surviving or parent entity, as the case may be, or (B) the voting
securities of the Company outstanding immediately prior to such event do
not represent (either by remaining outstanding or by being converted into
voting securities of a surviving or parent entity) at least 60% or more of
the combined voting power of the outstanding voting securities of the
Company or such surviving or parent entity; or
(iv) the shareholders of the Company have approved a plan of complete
liquidation of the Company, or a transaction resulting in the sale or
disposition by the Company of all or substantially all of the Company's
assets (or any transaction having a similar effect) is consummated;
and (b) "good reason" means the occurrence of any of the following events,
unless the executive has consented in writing to such event:
(i) a reduction by the Company in the executive's base salary as in
effect immediately prior to the CIC;
(ii) (a) the failure by the Company to continue in effect any
compensation or employee benefit plan in which the executive was a
participant prior to the CIC, unless the plan (x) is replaced by a
successor plan providing to the executive substantially similar
compensation and benefits or (y) terminates as a result of the normal
expiration of the plan in accordance with its terms, as in effect
immediately prior to the CIC, or (b) the taking of any other action, or the
failure to act, by the Company which would materially adversely affect the
executive's continued participation in any such plan as compared to the
terms of such participation on the date of the CIC;
22
(iii) effecting a change in the position of the executive that does
not represent a position commensurate in level, authority and
responsibilities with or a promotion from the executive's position with the
Company immediately prior to the date of the CIC, or assigning to the
executive responsibilities that are materially inconsistent with such prior
position; or
(iv) the Company's requiring the executive to be based anywhere more
than 45 miles from the location of the executive's office immediately prior
to the CIC;
in each case after notice in writing from the executive to the Company and a
period of 30 days after such notice during which the Company fails to correct
such conduct.
PENSION PLANS
Of the executive officers named in the Summary Compensation Table, Messrs.
Goldstein, Boyden, Howard, Wetmore and Block are participants in the Company's
Pension Plan, a defined benefit plan, under which the Company makes periodic
payments computed on an actuarial basis providing for fixed benefits for
members in the event of retirement on or after age 55 with 10 years of service.
Unreduced benefits are payable after age 62. Benefits under the Pension Plan
are calculated with respect to a five-year average of participating employees'
covered compensation (base salary or wage plus bonus), subject to an offset for
amounts received as Social Security benefits for service after November 30,
1979. The table below indicates, for purposes of illustration, the approximate
amounts of annual retirement income (subject to the above Social Security
offset and without taking into account any limitations under the Code) that
would have been payable upon retirement at December 1, 2002 on a straight life
basis under various assumptions as to salary and years of service to employees
in higher salary classifications who participate in the Pension Plan. Messrs.
Goldstein, Boyden, Howard, Wetmore and Block have 3, 2, 2, 11 and 10 years of
service, respectively, under the Pension Plan. To the extent that the amounts
of annual retirement income exceed the maximum benefit and compensation
limitations, including limitations under Section 415 and Section 401(a)(17) of
the Code, such amounts are payable in the same form and manner under the
Company's unfunded Supplemental Retirement Plan adopted on October 29, 1986,
effective January 1, 1987. Mr. Goldstein, in addition to being a participant in
the Company's Pension Plan, has a separate unfunded arrangement under the MOU
providing for pension benefits which are not presently calculable. See
"Employment Contracts and Termination of Employment and Change-in-Control
Arrangements" at page 17. Mr. Howard also has a separate unfunded arrangement,
under which, once he has completed five years of service with the Company, he
will receive service credit for an additional five years of service. Mr.
Lobbosco, who is not a United States citizen, has significant amounts of
service with foreign subsidiaries of the Company not covered by the Company's
Pension Plan, as a result of which he participates in a separate unfunded
arrangement providing pension benefits. Under that arrangement, pursuant to the
2001 Contract, commencing in July 2004 Mr. Lobbosco is entitled to receive
seven annual pension payments of $604,527. See "Employment Contracts and
Termination of Employment and Change-in-Control Arrangements" at page 17. No
other named executive officer participates in this arrangement.
23
ESTIMATED ANNUAL PENSION FOR SPECIFIED YEARS OF SERVICE
AVERAGE -----------------------------------------------------------------------------------------------------
COMPENSATION 5 10 15 20 25 30 35 40
------------- ----------- ----------- ------------ ------------ ------------ ------------ ------------ ------------
$ 400,000 $ 34,544 $ 69,088 $ 103,632 $ 138,176 $ 167,030 $ 187,350 $ 207,670 $ 227,990
500,000 43,180 86,360 129,540 172,720 208,788 234,188 259,588 284,988
600,000 51,816 103,632 155,448 207,264 250,546 281,026 311,506 341,986
700,000 60,452 120,904 181,356 241,808 292,303 327,863 363,423 398,983
800,000 69,088 138,176 207,264 276,352 334,061 374,701 415,341 455,981
900,000 77,724 155,448 233,172 310,896 375,818 421,538 467,258 512,978
1,000,000 86,360 172,720 259,080 345,440 417,576 468,376 519,176 569,976
1,100,000 94,996 189,992 284,988 379,984 459,334 515,214 571,094 626,974
1,200,000 103,632 207,264 310,896 414,528 501,091 562,051 623,011 683,971
1,300,000 112,268 224,536 336,804 449,072 542,849 608,889 674,929 740,969
1,400,000 120,904 241,808 362,712 483,616 584,606 655,726 726,846 797,966
1,500,000 129,540 259,080 388,620 518,160 626,364 702,564 778,764 854,964
1,600,000 138,176 276,352 414,528 552,704 668,122 749,402 830,682 911,962
1,700,000 146,812 293,624 440,436 587,248 709,879 796,239 882,599 968,959
1,800,000 155,448 310,896 466,344 621,792 751,637 843,077 934,517 1,025,957
1,900,000 164,084 328,168 492,252 656,336 793,394 889,914 986,434 1,082,954
2,000,000 172,720 345,440 518,160 690,880 835,152 936,752 1,038,352 1,139,952
Following the acquisition by the Company of Bush Boake Allen Inc ("BBA")
in November 2000, the Pension Plan for Eligible Employees of Bush Boake Allen
Inc. was merged with the Company's Pension Plan as of December 31, 2000.
Benefit accruals under the BBA Pension Plan were frozen as of that date.
Benefit service for former BBA employees under the Company's Pension Plan
starts as of December 1, 2000. Former BBA employees will receive a frozen
accrued benefit under the BBA Pension Plan plus a benefit under the Company's
Pension Plan for service after December 1, 2000. In addition to the benefit
determined under the table above for service after December 1, 2000, Mr.
Boyden, formerly an employee of BBA, is entitled, as of December 31, 2002, to
an annual benefit of $13,568.04 based on his service with BBA.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Georgescu, Martinez, van
Ameringen and Van Dyke. Mr. Van Dyke is Senior Vice President of Salomon Smith
Barney Inc., which has received commissions for brokerage services performed in
connection with securities transactions on behalf of the Company and its
retirement plans which amounted to $330,951 in 2002.
Mrs. Herzan is the niece of Mr. van Ameringen, who will retire as a
director as of the 2003 Annual Meeting. For information about the respective
shareholdings of Mrs. Herzan and Mr. van Ameringen, see "Security Ownership of
Management and Certain Other Persons" at page 6.
Dr. Blobel is a co-founder of Chromocell Corporation ("Chromocell").
Chromocell and Dr. Blobel are contemplating an Advisory Agreement under which
Dr. Blobel will provide scientific advice to Chromocell with respect to its
research efforts and programs. Dr. Blobel receives no cash compensation from
Chromocell, but it is contemplated that he will receive equity and certain
options to purchase additional equity in Chromocell in connection with his
advisory activities.
The Company and Chromocell are negotiating agreements under which it is
anticipated that Chromocell will engage in a research program to develop for
the Company a new product that will assist the Company in creating new flavor
and fragrance ingredients. The Company will pay Chromocell $590,000 to fund the
research program, a portion of which may be in the form of an equity
contribution to Chromocell. It is also anticipated that the Company will have
the right to provide additional equity capital or debt financing to Chromocell
at such times as Chromocell may determine to increase its equity or debt. The
terms of any such equity investment or debt financing will be negotiated in
good faith at arms-length between the Company and Chromocell.
24
REPORT OF THE AUDIT COMMITTEE*
The Audit Committee of the Board assists the Board in fulfilling its
oversight of
o the Company's financial reporting process and the integrity of the
Company's financial statements and related financial information;
o the Company's internal control environment, systems and performance;
o the qualifications and independence of the Company's independent
accountant;
o the performance of the Company's independent accountant and internal
auditors; and
o the Company's compliance with laws and regulations and with the
Company's Code of Conduct.
In carrying out these responsibilities, the Audit Committee, among other
things:
o oversees the preparation of annual and quarterly financial statements
by the Company's management and reviews with management and the
independent accountant, prior to issuance, the information to be
released and the Company's Annual Reports on Form 10-K and Quarterly
Reports on Form 10-Q;
o oversees the work of the independent accountant, including
appointment, reviewing the scope of audit services, approving all
audit and non-audit services and fees to be paid, evaluating
performance, and confirming independence; and
o oversees management's implementation and maintenance of effective
systems of internal and disclosure controls, including review of the
Company's processes with respect to the certifications required by
Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 (the "SOA"),
the Company's internal auditing plans and programs and the Company's
policies relating to legal and regulatory compliance.
The Audit Committee is composed of four directors, two of whom--J. Michael
Cook, Chairman and Chief Executive Officer Emeritus of Deloitte & Touche, LLP,
and Arthur C. Martinez, Chairman and Chief Executive Officer Emeritus of Sears,
Roebuck and Co.,--are "audit committee financial experts" under applicable SEC
rules adopted pursuant to the SOA. All members of the Audit Committee meet the
independence and financial literacy standards--and Mr. Cook and Mr. Martinez
have the accounting or related financial management expertise--required by
applicable NYSE rules. The Audit Committee, which met nine times in 2002,
operates under a written charter adopted by the Board in 2001. The Audit
Committee reviews that Charter annually and recommends Charter changes, as
appropriate, to the Board. The Charter was revised on March 11, 2003, and a
copy of the Charter as revised is attached to this Proxy Statement as Exhibit
A.
The Audit Committee meets regularly with the Company's independent
accountant, both with and without management present, to discuss the results of
its audits and reviews, its evaluation of the Company's internal controls, and
the overall quality of the Company's financial reporting. The Company's
independent accountant periodically updates the Audit Committee about new
accounting developments and their potential impact on the Company's reporting.
The Audit Committee also meets regularly with Company management without
the Company's independent accountant present, to discuss management's
evaluations of the performance of the independent accountant.
----------
* This report of the Audit Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act or the Securities
Exchange Act, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be
deemed filed under either of such Acts.
25
Finally, the Audit Committee meets regularly with the Company's Director
of Internal Audit without either the Company's independent accountant or
management present, to discuss the Company's internal audit process and the
results of ongoing or recently completed internal audits.
In and with respect to 2002 the Audit Committee:
o appointed PricewaterhouseCoopers LLP ("PwC") as the Company's
independent accountant for the year ended December 31, 2002;
o discussed with PwC the scope of PwC's services, including its plans
for audits and reviews and the identification of audit risks;
o approved all non-audit services provided by PwC prior to such services
being performed;
o reviewed with PwC, who is responsible for expressing an opinion on the
conformity of the Company's audited financial statements with
generally accepted accounting principles, PwC's judgments as to the
quality of the Company's financial reporting and such other matters as
are required to be discussed with the Audit Committee under generally
accepted auditing standards, including those described in Statement of
Auditing Standards No. 61 (Communication with Audit Committees);
o reviewed with PwC the effectiveness of the Company's systems of
internal controls and obtained a report from PwC with respect to its
review of those controls;
o discussed with management and PwC the requirements of the SOA and
rules adopted and proposed thereunder by the SEC, and proposed
corporate governance rules of the NYSE; and
o received from PwC written disclosures and the letter regarding its
independence as required by Independence Standards Board Standard No.
1 (Independence Discussions with Audit Committees), describing all
relationships between PwC and the Company that might bear on PwC's
independence, and discussed this information with PwC; thereafter the
Committee concluded that the independence of PwC was not compromised
by the provision of non-audit services.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Annual Report on Form 10-K for the Year Ended
December 31, 2002 for filing with the SEC. The Audit Committee also evaluated
and reappointed PwC as the Company's independent accountant for 2003.
AUDIT COMMITTEE
J. Michael Cook
Chairman
Margaret Hayes Adame
Arthur C. Martinez
William D. Van Dyke, III
26
PERFORMANCE GRAPH*
INTERNATIONAL FLAVORS & FRAGRANCES INC.
Total Cumulative Shareholder Return for Period Ending December 31, 2002(1)
[LINE CHART]
--------------------------------------------------------------------------------------------------
December 31 1997 1998 1999 2000 2001 2002
--------------------------------------------------------------------------------------------------
International Flavors & Fragrances 100.00 88.91 78.61 44.48 66.40 79.66
--------------------------------------------------------------------------------------------------
S&P 500 100.00 128.58 155.63 141.46 124.66 97.12
--------------------------------------------------------------------------------------------------
Peer Group (2) 100.00 114.81 107.22 109.37 102.02 98.87
--------------------------------------------------------------------------------------------------
----------
(1) Total Cumulative Shareholder Return assumes that the value of an
investment in the Company's common stock and each index was $100 on
December 31, 1997, and that all dividends were reinvested.
(2) The companies in the Peer Group are Alberto-Culver Company, Avon
Products, Inc., Campbell Soup Company, Church & Dwight Co., Inc., The
Clorox Company, The Coca-Cola Company, Colgate-Palmolive Company, ConAgra
Foods, Inc., The Dial Corporation, The Estee Lauder Companies Inc.,
General Mills, Inc., The Gillette Company, H.J. Heinz Company, Hershey
Foods Corporation, Hormel Foods Corporation, Kellogg Company, McCormick &
Company, Incorporated, McDonald's Corporation, Nestle S.A., PepsiCo,
Inc., The Procter & Gamble Company, Revlon, Inc., Sara Lee Corporation,
Sensient Technologies Corp., Yum! Brands, Inc. (Formerly Tricon Global
Restaurants, Inc.), Unilever N.V. and Wm. Wrigley Jr. Company.
----------
* This Comparison of Five Year Cumulative Total Return shall not be deemed
incorporated by reference by any general statement incorporating by
reference this proxy statement into any filing under the Securities Act
or the Securities Exchange Act, except to the extent that the Company
specifically incorporates this information by reference, and shall not
otherwise be deemed filed under either of such Acts.
27
SHAREHOLDER PROPOSALS
Any shareholder proposal intended to be presented at the next Annual
Meeting of Shareholders must be received by the Secretary of the Company for
inclusion in the Company's Proxy Statement, Notice of Meeting and form of proxy
with respect to that meeting by November 28, 2003.
The By-laws of the Company provide that in order for a shareholder to
propose director nominations or to transact business at an annual meeting of
shareholders, the shareholder must give written notice to the Secretary of the
Company not less than 60 days nor more than 90 days prior to the anniversary
date of the immediately preceding annual meeting of shareholders. The notice
must contain specified information about each nominee or the proposed business
and the shareholder making the nomination or proposal. If the annual meeting is
called for a date that is not within 30 days before or after such anniversary
date, the notice given by the shareholder must be received not later than the
close of business on the tenth day following the day on which the notice of the
date of such annual meeting was mailed or public disclosure of the date of such
annual meeting was made, whichever first occurs.
ADDITIONAL INFORMATION
The Audit Committee has selected PricewaterhouseCoopers LLP to be the
Company's principal independent accountants for 2003. Representatives of
PricewaterhouseCoopers LLP are expected to be present at the Annual Meeting of
Shareholders with the opportunity to make a statement if they desire to do so
and are expected to be available to respond to appropriate questions.
AUDIT FEES
The aggregate fees of PricewaterhouseCoopers LLP billed for professional
services rendered for the audit of the Company's annual financial statements
for the year ended December 31, 2002 and the reviews of the financial
statements included in the Company's Forms 10-Q for the year 2002 were
$2,288,700.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
The aggregate fees billed for professional services described in Paragraph
(c)(4)(ii) of Rule 2-01 of Regulation S-X rendered by PricewaterhouseCoopers
LLP, the Company's principal independent accountant, for the fiscal year ended
December 31, 2002 were $1,735,200. All such fees were incurred through October
2, 2002, when the consulting services group of PricewaterhouseCoopers LLP was
sold to IBM Corporation.
ALL OTHER FEES
The aggregate fees billed for services rendered by PricewaterhouseCoopers
LLP, other than the services covered in the two preceding paragraphs, for the
fiscal year ended December 31, 2002 were $5,689,000. These other services
include $4,862,900 of domestic and international tax planning and assistance,
$733,300 of other accounting and auditing services for government filings,
benefit plans and other non-financial statement audits, $13,000 of business
valuation services and $79,800 of other professional services incurred during
2002.
The Audit Committee has considered and found the provision of the services
covered in the two preceding paragraphs compatible with maintaining
PricewaterhouseCoopers LLP's independence.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors to file reports regarding beneficial ownership of the
Company's Common Stock with the Commission, and to furnish the Company with
copies of all such filings. Based on a review of these filings, the Company
believes all such filings were timely made, except that Mr. Van Dyke amended
his Form 5 to include one transaction inadvertently filed late.
28
OTHER MATTERS
As of the date of this Proxy Statement the Board is not aware that any
matters other than those specified above are to be presented for action at the
meeting. If any other matters should come before the meeting, proxies in the
enclosed form will be voted on such matters in accordance with the judgment of
the person or persons voting the proxies, unless otherwise specified. In
accordance with the Board's recommendations, executed proxies returned by
shareholders will be voted, if no contrary instruction is indicated, FOR the
election of the 8 nominees described herein. The presence in person or by proxy
of the holders of a majority of the shares outstanding on the record date is
necessary to constitute a quorum for the transaction of business at the 2003
Annual Meeting. Shares of Common Stock represented by executed proxies received
by the Company will be counted for purposes of establishing a quorum at the
meeting, regardless of how or whether such shares are voted on any specific
proposal. All executed proxies will be voted in accordance with the
instructions contained therein. With respect to the required vote on any
particular matter, abstentions and votes withheld by nominee recordholders will
not be treated as votes cast or as shares present or represented. Under NYSE
rules, the proposal to elect directors may be considered a "discretionary"
item. This means that brokerage firms may vote in their discretion on this
matter on behalf of clients who have not furnished voting instructions, subject
to the rules of the NYSE concerning transmission of proxy materials to
beneficial owners, and subject to any proxy voting policies and procedures of
such brokerage firms. If a person is a participant in the Company's 401(k) plan
or employee stock purchase plan and has Common Stock in a plan account, the
proxy also serves as voting instructions for the plan trustee.
THE COMPANY WILL ON A REQUEST IN WRITING PROVIDE WITHOUT CHARGE TO EACH
PERSON FROM WHOM PROXIES ARE BEING SOLICITED FOR THE COMPANY'S 2003 ANNUAL
MEETING A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 2002, INCLUDING THE FINANCIAL STATEMENTS AND THE SCHEDULES
THERETO, REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 13A-1 UNDER THE SECURITIES EXCHANGE ACT. A REQUEST FOR THE
COMPANY'S ANNUAL REPORT ON FORM 10-K SHOULD BE MADE TO STEPHEN A. BLOCK,
SECRETARY, INTERNATIONAL FLAVORS & FRAGRANCES INC., 521 WEST 57TH STREET, NEW
YORK, N.Y. 10019. THE COMPANY'S ANNUAL REPORT ON FORM 10-K IS ALSO AVAILABLE
FREE OF CHARGE THROUGH THE COMPANY'S WEBSITE, WWW.IFF.COM.
The Board of Directors invites you to attend the meeting in person. If you
are unable to do so, please sign, date and return the enclosed proxy promptly
in the enclosed envelope, so that your shares will be represented at the
meeting.
By Order of the Board of Directors,
Stephen A. Block
Secretary
March 28, 2003
29
EXHIBIT A
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
I. PURPOSE. The Audit Committee (the "Committee") of the Board of Directors
(the "Board") of International Flavors & Fragrances Inc. (the
"Corporation") assists the Board in fulfilling its oversight
responsibilities. The Audit Committee oversees and reviews the financial
reporting process and the integrity of the Corporation's financial
statements and related financial information, the Corporation's internal
control environment, systems and performance, the audit process of the
independent accountant and the internal auditor, the qualifications,
independence and performance of the independent accountant and the internal
auditor, and the procedures for monitoring compliance with laws and
regulations and with the Corporation's Code of Business Conduct and Ethics
(the "Code"). In performing its duties, the Committee maintains effective
working relationships with the Board, management and the Corporation's
independent accountant and internal auditors.
The Committee serves in an oversight capacity and is not part of the
Corporation's operational or managerial decision-making process. The
Corporation's management is responsible for preparing the Corporation's
financial statements and the independent accountant is responsible for
auditing the financial statements. Additionally, the Committee recognizes
that the Corporation's financial management, including the internal
auditors, and the independent accountants have more time, knowledge and
detailed information concerning the Corporation than Committee members. As
a result, in carrying out its oversight responsibilities, the Committee is
not providing any expert or special assurance as to the Corporation's
financial statements or any certification as to the work of the independent
accountant.
II. MEMBERSHIP. The Committee is comprised of at least three members, including
a Chairperson, all of whom are selected by, and who serve at the pleasure
of, the Board. All members of the Committee must be "independent
directors," meaning directors who are independent of management of the
Corporation, who are free from any relationship that, in the opinion of the
Board, would interfere with the exercise of independent judgment as
Committee members, and who otherwise satisfy the "independence"
requirements of the United States Securities and Exchange Commission
("SEC") and the New York Stock Exchange ("NYSE"), on which shares of the
Common Stock of the Corporation are traded. No member of the Audit
Committee is permitted to receive any consulting, advisory or other
compensation payments directly or indirectly from the Corporation, other
than the compensation received for service as a director and as a member of
any committee of the Board. All members of the Committee must be, or must
become within a reasonable period of time after appointment to the
Committee, persons qualified by experience, education or training in
business, finance or accounting, so that they are able to read, understand
and critically review fundamental business financial statements. At least
one member of the Committee must qualify as an "audit committee financial
expert" in accordance with applicable SEC rules and NYSE requirements. In
addition, no person may be a member of the Committee if his or her service
on the Committee would violate any restriction on service imposed by any
SEC or NYSE rule.
III. MEETINGS. The Committee meets approximately eight times each year and more
frequently as circumstances warrant. The Committee may ask members of
management, the Corporation's independent accountant and/or internal
auditors, or others whose advice and counsel are relevant to the issues
then being considered by the Committee, to attend any meetings and to
provide such pertinent information as the Committee may request, in either
open or executive session. The Committee keeps written minutes of its
meetings. The Committee may, when appropriate, delegate authority to one or
more of its members or to one or more subcommittees.
IV. COMMITTEE RESPONSIBILITIES. The Committee has the following
responsibilities:
o INDEPENDENT ACCOUNTANT
a. To appoint on behalf of the Corporation the independent accountant to
conduct audits and reviews of the financial statements of the
Corporation and to assure that the independent
A-1
accountant is ultimately accountable to the Committee; to oversee the
services of the independent accountant; to review and authorize the
compensation of the independent accountant; to resolve any
disagreements between management and the independent accountant
concerning financial reporting; to establish policies and procedures
for the pre-approval of all audit and non-audit services to be
provided by the independent accountant, consistent with rules of the
SEC and NYSE, and designed to assure the continued independence of
the independent accountant; to evaluate the performance of the
independent accountant; and, where appropriate, to discharge the
independent accountant.
b. To review the scope and plans for the independent accountant's annual
audit and quarterly reviews.
c. To require the independent accountant to submit to the Committee
periodically a formal written statement delineating all relationships
between the independent accountant and the Corporation, including but
not limited to non-audit services provided by the independent
accountant and related fees; to discuss with the independent
accountant all such relationships and, based on such written
statement and discussions, to review and assess the independence of
the independent accountant in accordance with the requirements of the
SEC and the NYSE; and, where appropriate, take action in response to
the independent accountant's statement to enable the Committee to
satisfy itself of the independent accountant's independence.
d. To obtain from the independent accountant at least annually, and
review, the independent accountant's internal quality control report
required to be provided to the Committee.
o INTERNAL AUDIT
a. To review and concur in the appointment or replacement and oversee
the evaluation and compensation of the Corporation's Director of
Internal Audit in order to ensure the independence of the internal
audit function.
b. To consider, in consultation with the independent accountant, the
Director of Internal Audit, and financial management of the
Corporation, the audit scope, plan, staffing and budget of the
internal auditors.
c. To receive and review periodic reports of the results of and
follow-ups to internal audits.
o FINANCIAL REPORTING
a. To discuss with financial management and with the independent
accountant any significant financial reporting issues and judgments
made in connection with the preparation of the Corporation's
financial statements, including any significant changes in the
Corporation's selection or application of accounting principles; the
effect of regulatory or accounting initiatives; the development,
selection and disclosure of critical accounting policies and the
effect of alternative assumptions, estimates or generally accepted
accounting principles ("GAAP") and methods on the Corporation's
financial statements, and all material written communications between
the independent accountant and management.
b. To review with the independent accountant and financial management of
the Corporation at the conclusion of the year-end audit and each
quarterly review and prior to finalizing and filing annual or interim
reports, in each case as applicable:
i. the Corporation's annual and interim financial statements and
related footnotes;
ii. the independent accountant's audit or review of and report on
such financial statements, including any significant accounting
matters and findings and management's responses to them;
iii. any significant changes in the audit or review scope or plan from
that previously presented to the Committee;
A-2
iv. any significant transactions not a normal part of the
Corporation's business and the manner in which they were
accounted for in such financial statements;
v. the independent accountant's qualitative judgments and
recommendations about the appropriateness of the Corporation's
accounting principles and practices, any proposed changes in such
accounting principles and practices and the Corporation's
implementation of previously recommended changes in accounting
principles and practices;
vi. the independent accountant's communications with respect to any
reportable conditions and material weaknesses in the
Corporation's internal controls (which, for purposes of this
Charter, will include disclosure controls where appropriate);
vii. senior management's evaluative criteria in its selection of
accounting principles;
viii. any lack of cooperation, disputes with management or other
difficulties encountered by the independent accountant during the
course of the audit or review, including any restrictions on the
scope of its work or access to requested information;
ix. the process conducted by the Chief Executive Officer and Chief
Financial Officer with respect to the certifications required to
be filed by them with the SEC and NYSE; and
x. other matters related to the conduct of the audit of the annual
financial statements and review of the interim financial
statements that are to be communicated to the Committee under
Generally Accepted Auditing Standards ("GAAS") and the rules of
the SEC and NYSE.
c. To recommend to the Board whether the audited financial statements
are to be included in the annual report of the Corporation to be
filed with the SEC.
d. To consider and review, prior to filing or release, interim and
annual reports of the Corporation (including management's discussion
and analysis of financial condition and results ("MD&A")) to be filed
with the SEC and other published documents containing the
Corporation's annual and interim financial statements, and to
evaluate whether the information in such reports and documents is
consistent with the information in the financial statements.
e. To prepare the report required to be included in the Corporation's
Proxy Statement disclosing whether the Committee has reviewed and
discussed the audited financial statements with management and has
discussed matters specified by GAAS and by SEC rules and regulations
with the independent accountant; and has taken whatever action and
prepared such other reports and letters as may be required from time
to time by the SEC and/or the NYSE.
f. To review, together with counsel for the Corporation, legal and
regulatory matters that may have a material effect on the
Corporation's financial statements, accounting policies or compliance
policies, including any correspondence or communications from or with
regulators or governmental agencies.
g. To discuss with management the Corporation's earnings press releases,
including the presentation of pro forma or other non-GAAP
information, as well as financial information and earnings guidance
provided or to be provided to the public, the investment community
and rating agencies.
o CONTROL SYSTEMS AND ENVIRONMENT
a. To consider and review with the independent accountant, the Director
of Internal Audit and the financial management of the Corporation the
adequacy of the Corporation's internal
A-3
controls, including computerized information system controls and
security, and any related significant findings and recommendations by
the independent accountant or the Director of Internal Audit,
together with management's responses.
b. To review the annual internal control report of management required
by SEC rules promulgated under Section 404 of the Sarbanes-Oxley Act
of 2002 and the attestation and report of the independent accountant
required in connection therewith, and management's quarterly and
annual evaluations of and conclusions about the effectiveness of and
changes to internal controls and procedures for financial reporting.
c. To establish, monitor and review procedures for (i) the receipt,
retention and treatment of complaints received by the Corporation
regarding accounting, internal accounting controls or auditing
matters, and (ii) the confidential, anonymous submission by employees
of the Corporation of concerns regarding questionable accounting or
auditing matters.
d. To review the Corporation's program to monitor compliance with the
Code, and to meet periodically with the Corporation's General
Counsel, Chief Financial Officer and Director of Internal Audit to
discuss compliance with the Code.
e. To review periodically the Corporation's Global Authorization Limits
or comparable document relating to approval authority and to
recommend to the Board appropriate changes thereto.
f. To review officers' expense accounts and perquisites reported on such
expense accounts, including officers' use of corporate assets, and to
consider the results of any review by the internal auditors or
independent accountant; results of the review will be forwarded to
the Compensation Committee for review of reasonableness and
appropriateness of disclosure of all such items.
g. To discuss with management the Corporation's major financial risk
exposures and the steps management has taken to monitor and control
such exposures, including the Corporation's financial risk assessment
and financial risk management policies.
h. To establish with management hiring policies for employees or former
employees of the independent accountant, consistent with the
requirements of the SEC and/or the NYSE.
i. To review and, if appropriate, approve all material transactions with
related parties.
j. To provide regular reports to the Board of Directors of the
Corporation.
k. To review annually the Committee's own performance.
l. To review this Charter annually and update it when appropriate.
o EXECUTIVE SESSIONS
To meet regularly with the Director of Internal Audit, the independent
accountant and management in separate executive sessions to discuss
matters, then being considered by the Committee, that the Committee or
any of these groups concludes should be discussed privately with the
Committee.
V. INVESTIGATIONS AND STUDIES; FUNDING. The Committee may conduct or authorize
investigations into or studies of matters within the Committee's scope of
responsibilities as described above, and may retain, at the expense of the
Corporation, independent counsel, accountants or others necessary to assist
in any such investigation or study. The Corporation will provide all
funding necessary for the performance by the Committee of all matters
within the scope of its responsibilities.
A-4
[INTERNATIONAL FLAVORS & FRAGRANCES INC. LOGO]
ADMISSION TICKET
INTERNATIONAL FLAVORS & FRAGRANCES INC.
ANNUAL MEETING OF SHAREHOLDERS
MAY 14, 2003 AT 10:00 A.M.
INTERNATIONAL FLAVORS & FRAGRANCES INC.
521 WEST 57TH STREET
NEW YORK, NY 10019
ADMITS ONE SHAREHOLDER
INTERNATIONAL FLAVORS & FRAGRANCES INC.
PROXY/VOTING INSTRUCTION CARD
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
INTERNATIONAL FLAVORS & FRAGRANCES INC. FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 14, 2003 OR ANY POSTPONEMENT(S) OR ADJOURNMENT(S) THEREOF (THE
"MEETING").
The undersigned shareholder of INTERNATIONAL FLAVORS & FRAGRANCES INC.
(hereinafter called the "Company") hereby appoints Messrs. RICHARD A.
GOLDSTEIN, DOUGLAS J. WETMORE and STEPHEN A. BLOCK the attorneys and proxies,
and each of them the attorney and proxy, of the undersigned, with full power of
substitution, to act by a majority present, for and in the name, place and
stead of the undersigned, to attend the Annual Meeting of Shareholders to be
held at the headquarters of the Company, 521 West 57th Street, New York, New
York, on Wednesday, May 14, 2003 at 10:00 A.M., and any postponement(s) or
adjournment(s) thereof, and thereat to vote the number of votes or shares of
stock the undersigned would be entitled to vote if then and there personally
present.
PLEASE INDICATE ON THE REVERSE SIDE OF THIS CARD HOW YOUR SHARES OF STOCK
ARE TO BE VOTED. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN
ON AN EXECUTED PROXY, THIS PROXY WILL BE VOTED FOR EACH OF THE NAMED NOMINEES
AS A DIRECTOR, AND IN THE DISCRETION OF THE PROXY COMMITTEE ON ANY OTHER MATTER
PROPERLY BEFORE THE MEETING, UNLESS OTHERWISE SPECIFIED.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
Dear Shareholder:
The Annual Meeting of Shareholders (the "Meeting") of International Flavors
& Fragrances Inc. (the "Company") will be held at 10:00 A.M. on Wednesday, May
14, 2003 at the headquarters of the Company, 521 West 57th Street, New York, NY
10019.
To be sure that your vote is counted, we urge you to complete and sign the
proxy/voting instruction card below, detach it from this letter and return it in
the postage paid envelope enclosed in this package. The giving of such proxy
does not affect your right to vote in person if you attend the Meeting. The
prompt return of your signed proxy will aid the Company in reducing the expense
of additional proxy solicitation.
In order to assist the Company in preparing for the Meeting, please
indicate in Item 2 on the proxy whether you currently plan to attend the
Meeting.
If you attend the Meeting in person, detach and bring this letter to the
Meeting as an admission ticket for you.
March 28, 2003
- DETACH PROXY CARD HERE -
--------------------------------------------------------------------------------
(PLEASE SIGN, DATE AND [X]
RETURN THIS PROXY CARD VOTES MUST BE INDICATED
[ ] PROMPTLY USING THE (X) IN BLACK OR BLUE INK.
ENCLOSED ENVELOPE.)
1. Election of Directors:
FOR all nominees WITHHOLD AUTHORITY to vote *EXCEPTIONS
listed below [ ] for all nominees listed below [ ] [ ]
Nominees: Margaret Hayes Adame, Gunter Blobel, J. Michael Cook, Peter A.
Georgescu, Richard A. Goldstein, Alexandra A. Herzan, Arthur C.
Martinez, William D. Van Dyke, III
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
THE "EXCEPTIONS" BOX ABOVE AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED
BELOW.)
* Exceptions:
-------------------------------------------------------------------
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE MEETING OR ANY POSTPONEMENT(S) OR ADJOURNMENT(S)
THEREOF.
-----
|
|
|
|
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2. Do you plan to attend the Meeting?
YES [ ] NO [ ]
CHANGE OF ADDRESS -- MARK HERE [ ]
Please sign this proxy and return it promptly whether or not you expect to
attend the Meeting. You may nevertheless vote in person if you attend. Please
sign exactly as your name or names appear(s) on this proxy. If you are signing
as an attorney, trustee, executor, administrator, custodian, guardian or
corporate officer, please give full title. For an account in the name of two or
more persons, each person should sign, or if one signs, please attach evidence
of authority.
DATED _______________ , 2003 SIGNED ____________________________
____________________________