SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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Chemfab Corporation
(Name of Registrant as Specified In Its Charter)
Chemfab Corporation
(Name of Person(s) Filing Proxy Statement)
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CHEMFAB CORPORATION
701 Daniel Webster Highway
Merrimack, New Hampshire 03054
NOTICE OF 1995 ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF CHEMFAB CORPORATION:
NOTICE IS HEREBY GIVEN that the 1995 Annual Meeting of
Shareholders of Chemfab Corporation will be held at the
Corporation's principal executive office, 701 Daniel Webster
Highway, Merrimack, New Hampshire, on Thursday, October 26, 1995
at 9:00 A.M. (local time) for the following purposes:
(a) To elect directors of the Corporation; and
(b) To consider and vote upon a proposal to ratify the adoption
and approval by the Board of Directors of an amendment to the
Corporation's Amended and Restated 1991 Stock Option Plan (the
"1991 Plan") to provide for an increase in the number of
shares of Common Stock authorized for issuance under the 1991
Plan from 700,000 to 1,000,000 ; and
(c) To consider and vote upon a proposal to ratify the selection
by the Board of Directors of the firm of Ernst & Young LLP as
independent auditors of the Corporation for the fiscal year
ending June 30, 1996; and
(d) To transact such other business as may properly come before
the meeting or any adjournments or postponements thereof.
The Board of Directors has fixed August 30, 1995 as the record
date for the determination of shareholders entitled to notice of, and
to vote at, the 1995 Annual Meeting of Shareholders. Accordingly,
only shareholders of record at the close of business on August 30,
1995 will be entitled to notice of, and to vote at, such meeting or
any adjournments thereof.
By order of the Board of Directors
WILLIAM H. EVERETT
Secretary
September 27, 1995
NOTE:THE BOARD OF DIRECTORS SOLICITS THE EXECUTION AND PROMPT
RETURN OF THE ACCOMPANYING PROXY. A RETURN ENVELOPE IS ENCLOSED.
CHEMFAB CORPORATION
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of
Chemfab Corporation (the "Corporation") for use at the 1995
Annual Meeting of Shareholders on October 26, 1995 and at any
adjournments or postponements thereof (the "Meeting").
The Corporation's principal executive office is located at 701
Daniel Webster Highway, P.O. Box 1137, Merrimack, New Hampshire
03054.
The cost of soliciting proxies by mail, telephone, telegraph or
in person will be borne by the Corporation. The Corporation has
retained the services of W.F. Doring & Company, a proxy
solicitation firm based in New Jersey, to whom the Corporation
will pay a fee of $2,500 plus reimbursement for mailing and
out-of-pocket expenses. In addition to solicitation by mail, the
Corporation will reimburse brokerage houses and other nominees
for their expenses incurred in sending proxies and proxy material
to the beneficial owners of shares held by them.
You may revoke your proxy at any time prior to its use by giving
written notice to the Secretary of the Corporation, by executing
a revised proxy at a later date or by attending the Meeting and
voting in person. Proxies in the form enclosed, unless
previously revoked, will be voted at the Meeting in accordance
with the specifications made by you thereon or, in the absence of
such specifications, in favor of the election of the nominees for
directors listed herein, and in favor of the proposal to ratify
the adoption and approval of an amendment to the Corporation's
Amended and Restated 1991 Stock Option Plan, and in favor of the
proposal to ratify the selection of Ernst & Young LLP as
independent auditors for the fiscal year ending June 30, 1996,
and, with respect to any other business which may properly come
before the meeting, in the discretion of the named proxies. If,
in a proxy submitted on your behalf by a person acting solely in
a representative capacity, the proxy is marked clearly to
indicate that the shares represented thereby are not being voted
with respect to one or more proposals, then your proxy will not
be counted as present at the meeting with respect to such
proposals. Proxies submitted with abstentions as to one or more
proposals will be counted as present for purposes of establishing
a quorum for such proposals.
All holders of record of the common stock, par value $.10 per
share, of the Corporation (the "Common Stock") at the close of
business on August 30, 1995, will be eligible to vote at the
Meeting. Each share is entitled to one vote. As of August 30,
1995, the Corporation had outstanding 5,269,071 of Common Stock.
The presence, in person or by proxy, of a majority of the issued
and outstanding Common Stock will constitute a quorum for the
transaction of business at the Meeting. This proxy statement and
the enclosed proxy are first being mailed or given to
shareholders on or about September 27, 1995.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect
to each person known to the Corporation to be the beneficial
owner of more than 5% of the issued and outstanding Common Stock
as of August 8, 1995 or other date noted below. As of August 8,
1995, 5,237,271 shares of Common Stock were outstanding.
Amount and Nature of Percentage of
Beneficial Ownership Outstanding Shares of
Name and Address of Beneficial Owner of Common Stock (1) Common Stock Owned (1)
------------------------------------ -------------------- ----------------------
Peter B. Cannell &
Co., Inc. ("Cannell")
919 Third Avenue
New York, NY 10022 921,101(2) 17.6%
Paul M. Cook
PMC Assoc.
c/o SRI
P.O. Box 880
Menlo Park, CA 94026-0880 530,440(3)(4) 10.1%
Dimensional Fund Advisors Inc.
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401 291,500(5) 5.6%
------------------------------
(1) The shares owned, and the shares included in the total
number of shares outstanding, have been adjusted, and the
percentage owned has been computed, in accordance with Rule
13d-3(d)(1) under the Securities Exchange Act of 1934, as
amended, and includes, options to the extent called for by such
rule, with respect to shares of Common Stock that can be
exercised on or before October 7, 1995. Except as set forth in
the footnotes below, such shares are beneficially owned with
sole investment and sole voting power.
(2) Based upon information provided to the Corporation by
Cannell. Consists entirely of shares of Common Stock of the
Corporation owned by investment advisory clients of Cannell,
principals of Cannell, and The Peter B. Cannell 401(k) Plan.
Cannell disclaims beneficial ownership of all such shares.
(3) Assumes that options covering 36,000 shares are exercised.
(4) Includes 494,440 shares held by the Paul and Marcia Cook
Living Trust, as to which Mr. Cook and his wife share voting
and investment power as co-trustees.
(5) Based upon information as of June 30, 1995 provided to the
Corporation by Dimensional Fund Advisors. Consists entirely of
shares of Common Stock owned by portfolios of DFA Investment
Dimensions Group, Inc., a registered open-end investment
company, or in series of The DFA Investment Trust Company, a
Delaware trust, or the DFA Group Trust and the DFA
Participating Group Trust, investment vehicles for qualified
employee benefit plans, all of which Dimensional Fund Advisors
Inc. serves as investment manager. Of such shares,
Dimensional Fund Advisors does not have voting power with
respect to 96,200 shares. Dimensional Fund Advisors disclaims
beneficial ownership of all 291,500 shares.
ELECTION OF DIRECTORS
Nominees for Election as Directors
The Board of Directors has set the number of Board members
at six for the upcoming year. Each director is elected to hold
office until the next annual meeting of shareholders, or special
meeting in lieu thereof, and until their respective successors
are duly elected and qualified. The Board has nominated all of
the current members of the Board for reelection and has also
nominated Robert E. McGill, III for election as a director.
Unless authority to do so is withheld, the persons named in
each proxy (and/or their substitutes) will vote the shares
represented thereby "FOR" the election of the director nominees
named below. If for any reason any nominee is not a candidate
(which is not now expected), a new nominee will be designated by
the Board to fill such vacancy, unless the Board of Directors
shall reduce the number of directors in accordance with the
By-Laws of the Corporation.
Information as to Directors and Nominees for Director
There is shown below for each director and nominee for
director, as reported to the Corporation, the name, age and
family relationship, if any, with any other director or officer;
the principal occupation and employment over at least the last
five years; the position, if any, with the Corporation; the
period of service as a director of the Corporation; and certain
other directorships held.
Name Age Office Held Director Since
---- --- ----------- --------------
Paul M. Cook 71 Director March 1976
Warren C. Cook 50 Director September 1976
Robert E. McGill, III 64 None New Nominee
James E. McGrath 61 Director October 1993
Duane C. Montopoli 46 President, Chief February 1986
Executive Officer
and Director
Nicholas Pappas 65 Director May 1991
PAUL M. COOK is Chairman of the Board of Directors of SRI
International, Menlo Park, California, a position he has held
since December 1993. Mr. Cook has also served as Chairman of the
Board of Directors of CellNet Data Systems, Inc. (formerly
Domestic Automation Company) of San Carlos, California since June
1990 and served as Chief Executive Officer of that company from
August 1990 through August 1994. Mr. Cook is a member of the
Board of Directors of Raychem Corporation, Menlo Park,
California, which he founded in 1957 and of which he served as
President until 1982 and Chief Executive Officer until April
1990. Mr. Cook is the uncle of Mr. Warren Cook, also a director
of the Corporation.
WARREN C. COOK is President of Sugarloaf Mountain
Corporation and Vice President of S.K.I. LTD. Prior to his
resignation in June 1986, Mr. Cook was President and Chief
Executive Officer of the Corporation. Mr. Cook is the nephew of
Mr. Paul Cook, also a director of the Corporation.
ROBERT E. MCGILL, III served as Executive Vice President of
The Dexter Corporation, Windsor Locks, Connecticut from 1989
through 1994 and also served as Director from 1983 through April
1995. Prior to his appointment as Executive Vice President, Mr.
McGill served as Vice President and Senior Vice President of
Finance and Administration from 1975 through 1989. He is
currently a member of the Board of Directors of Analytical
Technology, Inc. and Connecticut Surety Corporation. Mr. McGill
is also a Trustee for Travelers Mutual and Variable Annuity
Funds.
JAMES E. MCGRATH, Ph.D., is the Ethyl Chaired Professor of
Chemistry and Director of the National Science Foundation's
Science and Technology Center for High Performance Polymer
Adhesives and Composites at Virginia Polytechnic Institute and
State University ("VPI"). Prior to his appointment as Director
of the Science and Technology Center in February 1989, Dr.
McGrath served as Director of the Materials Institute at VPI.
Dr. McGrath also held various positions as a research scientist
and chemist during his 17 years in private industry with several
companies, including Union Carbide and Goodyear Tire and Rubber
Co.
DUANE C. MONTOPOLI is President and Chief Executive Officer
of the Corporation. He has held these positions since June 1986.
From December 1983 until January 1990, Mr. Montopoli was a
partner in Oak Grove Ventures, Menlo Park, California. Prior to
that time, he was a partner in Arthur Young & Company (a
predecessor firm of Ernst & Young LLP).
NICHOLAS PAPPAS, Ph.D., is Vice Chairman of the Board of
Directors of Rollins Environmental Services, Inc., Wilmington,
Delaware. Prior to his appointment as Vice Chairman, Mr. Pappas
served as President and Chief Operating Officer from July 1991
through July 1995. Dr. Pappas was employed by the Du Pont
Company in various capacities from 1956 until his retirement in
December 1990. Dr. Pappas served as Executive Vice President of
Du Pont from 1988 to December 1990, and was Group Vice President
- Polymer Products from 1983 to 1988. He is also a director of
Yenkin-Majestic Corp. of Dayton, Ohio and Nova Corporation, a
Canadian company.
As compensation for service as director, each non-employee
director receives cash compensation and annual stock option
grants. The Corporation pays to each non-employee director
$1,000 for every meeting of the Board of Directors attended in
person by such director, and $250 for every telephonic meeting of
the Board of Directors (or committee thereof) in which such
director participates. In addition, pursuant to the
Corporation's Amended and Restated 1991 Stock Option Plan, the
non-employee directors of the Corporation receive annual
automatic grants of options to purchase shares of Common Stock.
During fiscal 1995, each of the non-employee directors received
an automatic grant of options under the Amended and Restated 1991
Stock Option Plan to purchase 4,000 shares of the Common Stock at
fair market value as of the date of grant ($12.25 per share), and
such options became fully vested over the course of that fiscal
year. The Board of Directors met 7 times last year.
Committees
During fiscal 1995, the Audit Committee of the Board of
Directors consisted of Mr. Paul Cook and Dr. James E. McGrath.
This committee met 2 times in fiscal 1995. The functions of the
Audit Committee include: (1) making recommendations to the Board
of Directors with respect to the engagement of the independent
auditors; (2) reviewing the audit plans developed by the
independent auditors for the annual audit of the Corporation's
books and records and the results of such audit; (3) reviewing
the annual financial statements; (4) reviewing the professional
services provided by the independent auditors and the auditors'
independence; and (5) reviewing the adequacy of the Corporation's
system of internal controls and the responses to management
letters issued by the independent auditors.
During fiscal 1995, the Option/Compensation Committee of the
Board of Directors consisted of Mr. Paul M. Cook, Mr. Warren C.
Cook and Dr. Nicholas Pappas. This committee met 2 times in
fiscal 1995. The principal functions of the Option/Compensation
Committee are to review and approve salary plans and bonus
awards, as well as other forms of compensation, and to administer
the Corporation's stock option plans pursuant to the terms of
such plans.
Ownership of Equity Securities by Management
The table below sets forth information as of August 8, 1995,
as reported to the Corporation, as to the beneficial ownership of
the Common Stock of the Corporation by each director, each
nominee for election as a director, and each named executive
officer, and by all directors and executive officers as a group.
Amount and Nature of Percentage of
Beneficial Ownership Outstanding Shares of
Name of Common Stock(1) Common Stock Owned (1)
---- -------------------- ----------------------
Paul M. Cook 530,440(2) 10.06%
Warren C. Cook 143,218(3) 2.72%
William H. Everett 50,850 .96%
James C. Manocchi 40,875 .77%
Robert E. McGill, III 500(4) .01%
James E. McGrath 8,000 .15%
Duane C. Montopoli 140,250(5) 2.61%
Gabriel P. O'Gara 23,635 .45%
Nicholas Pappas 18,000 .34%
John W. Verbicky 16,500 .31%
All directors and executive
officers as a group (12 persons) 1,008,383 17.92%
----------------------------
(1) Except as set forth in the footnotes below, each
stockholder has sole investment and voting power with respect
to the shares beneficially owned. Includes options with
respect to shares of Common Stock that can be exercised on or
before October 7, 1995. Assumes exercise of options covering
36,000 shares for Mr. Paul Cook, 36,000 shares for Mr. Warren
Cook, 23,625 shares for Mr. O'Gara, 50,550 shares for Mr.
Everett, 40,875 shares for Mr. Manocchi, 8,000 shares for Dr.
McGrath, 137,250 shares for Mr. Montopoli, 16,500 shares for
Dr. Verbicky, 16,000 shares for Dr. Pappas, and 389,050 shares
for all directors and executive officers as a group.
(2) Includes 494,440 shares held by the Paul and Marcia Cook
Living Trust, as to which Mr. Cook and his wife share voting
and investment power as co-trustees.
(3) Includes 72,000 shares held in trust for the benefit of Mr.
Warren Cook's two children, as to which Mr. Cook has no voting
or investment power and disclaims beneficial ownership.
(4) Mr. McGill acquired 500 shares of the Corporation's stock on
August 10, 1995.
(5) Includes 3,000 shares held by Mr. Montopoli as custodian for
his two minor children, as to which Mr. Montopoli disclaims
beneficial ownership.
EXECUTIVE COMPENSATION
Summary Compensation Table
The table below sets forth certain compensation information
for the fiscal years ended June 30, 1995, 1994 and 1993 with
respect to the Corporation's Chief Executive Officer and those
four other executive officers of the Corporation who were the
most highly paid for fiscal 1995.
Long Term
Compensation
Annual Compensation Awards All Other
Name and Principal Position Year Salary($)(1) Bonus($) Options(#) Compensation($)(2)
--------------------------- ---- ------------ -------- ------------ ------------------
Duane C. Montopoli 1995 $219,000 $66,000 8,000 $ 5,666
President, CEO and Director 1994 $217,600 $12,000 8,000 $ 5,271
1993 $210,654 $11,000 10,000 $ 5,104
William H. Everett 1995 $130,000 $34,000 6,000 $ 3,780
Vice President-Finance 1994 $129,000 $ 9,000 6,000 $ 3,502
& Administration, Treasurer, 1993 $124,039 $ 8,000 3,000 $ 3,319
CFO and Secretary
James C. Manocchi 1995 $130,000 $25,000 16,000 $ 3,303
Vice President-Corp. 1994 $129,000 $ 8,000 7,500 $ 3,086
Development 1993 $124,039 $ 8,000 7,500 $ 2,512
Gabriel P. O'Gara 1995 $126,891 $34,000 6,000 $ 1,740
Vice President-European 1994 $106,090 $ 9,059 4,000 $ 1,438
Business Group 1993 $100,737 $ 5,967 4,000 $ 1,000
John W. Verbicky 1995 $130,000 $24,000 6,000 $15,892(4)
Vice President - U.S. 1994 $124,912 $ 4,000 0 $15,627(4)
Business Group 1993 $ 55,385 $ 0 30,000(3) $35,374(4)(5)
-------------------------
(1) Salary includes amounts deferred pursuant to the Corporation's
401(k) Plan.
(2) All Other Compensation includes (i) the Corporation's matching
contributions, and discretionary payments made by the
Corporation, under the Corporation's 401(k) Plan, and (ii) life
insurance premiums paid by the Corporation on behalf of the
named executive officer.
(3) Dr. Verbicky became an employee of the Corporation on
January 11, 1993 and was granted an option on 30,000 shares on
such date.
(4) Pursuant to the terms of Dr. Verbicky's employment agreement,
the Corporation has forgiven $15,000 of indebtedness owed by
Dr. Verbicky to the Corporation during each of fiscal 1993,
1994 and 1995.
(5) The Corporation paid to Dr. Verbicky $20,000 in connection
with the commencement of his employment.
Option Grants in Last Fiscal Year
The following table discloses information regarding stock
options granted during the fiscal year ended June 30, 1995
pursuant to the Corporation's Amended and Restated 1991 Stock
Option Plan to the individuals listed in the Summary Compensation
Table. In accordance with Securities and Exchange Commission
rules, also shown are the hypothetical gains or "option spreads,"
on a pre-tax basis, that would exist for the respective options.
These gains are based on assumed rates of annual compound stock
price appreciation of 0%, 5% and 10% from the date the options
were granted over the full option term of ten (10) years.
Individual Grants Potential Realizable Value at
% of Total Assumed Annual Rates of
Options Granted Stock Price Appreciation for
Options to Employees Exercise Expiration Option Term
Name Granted(#)(1) in FY 1995 Price (per sh) Date 0% 5% 10%
---- ------------- ----------------- -------------- ---------- -- -- ---
Duane C. Montopoli 8,000 8.33% $10.50 08/04/04 $0 $52,800 $133,840
William H. Everett 6,000 6.25% $10.50 08/04/04 $0 $39,600 $100,380
James C. Manocchi 6,000 6.25% $10.50 08/04/04 $0 $39,600 $100,380
James C. Manocchi 10,000 10.42% $12.00 10/21/04 $0 $75,500 $191,200
Gabriel P. O'Gara 6,000 6.25% $10.50 08/04/04 $0 $39,600 $100,380
John W. Verbicky 6,000 6.25% $10.50 08/04/04 $0 $39,600 $100,380
------------------------------
(1) Each option grant is exercisable, cumulatively, in increments
of 25% on each of the first four anniversaries of the grant
date. Options granted to executive officers provide for
accelerated vesting in the event of a change in control of the
Corporation, and in the case of Mr. Manocchi, in certain other
circumstances as well.
Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
The table on the following page sets forth information as to
options exercised during the fiscal year ended June 30, 1995, and
unexercised options held at the end of such fiscal year, by the
individuals listed in the Summary Compensation Table.
Option Exercises and Year End Option Values
Value of Unexercised
Numbers of Unexercised In-the-Money Options
Shares Acquired Value Options at 6/30/95(#) at 6/30/95($)
Name on Exercise(#) Realized($) Exercisable/Unexercisable Exercisable/Unexercisable(1)
---- --------------- ----------- ------------------------- ----------------------------
Duane C. Montopoli 0 N/A 130,750/22,750 997,313/94,375
William H. Everett 0 N/A 46,800/15,000 379,251/60,376
James C. Manocchi 0 N/A 35,625/35,375 25,547/116,953
Gabriel P. O'Gara 0 N/A 20,125/13,500 62,610/56,125
John W. Verbicky 0 N/A 15,000/21,000 54,375/88,125
-------------------------
(1) Value is based on the closing sale price of $16.125 per
share of the Common Stock as of June 27, 1995 (the last trading
date during fiscal 1995) minus the exercise price.
Defined Benefit Plan
Defined Benefit Plan--United States
The Corporation maintains a defined benefit pension plan
(the "Defined Benefit Plan") for its U.S. employees. The following
table shows the estimated annual benefit payable at age 65 upon
retirement to participants in the Corporation's Defined Benefit
Plan at the specified compensation and years-of-service
classifications.
Pension Plan Table
Years of Service
10 15 20 25 and over
Range of Officer Range of Officer Range of Officer Range of Officer
Average Birth Dates Birth Dates Birth Dates Birth Dates
Remuneration* 1953 1935 1953 1935 1953 1935 1953 1935
------------- ---- ---- ---- ---- ---- ---- ---- ----
$100,000 $10,400 $11,800 $15,600 $17,600 $20,800 $23,500 $26,000 $29,400
125,000 13,900 15,200 20,800 22,900 27,800 30,500 34,700 38,100
150,000 17,400 18,700 26,000 28,000 34,700 37,400 43,400 46,800
175,000 20,800 22,200 31,200 33,300 41,600 44,400 52,000 55,500
200,000 24,300 25,600 36,400 38,500 48,600 51,300 60,700 64,100
225,000 27,800 29,100 41,600 43,700 55,500 58,200 69,400 72,800
250,000 31,200 32,600 46,900 48,900 62,500 65,200 78,100 81,500
275,000 34,700 36,100 52,100 54,100 69,400 72,200 86,800 90,200
-----------------------
* Represents the average annual compensation paid during the
sixty (60) months preceding retirement.
Compensation for purposes of computing retirement benefits
under the Defined Benefit Plan includes salary and only those
bonuses paid under the Corporation's sales incentive program.
For the purpose of computing retirement benefits under the
Defined Benefit Plan, compensation for fiscal 1995, reported to
the pension trustee in August 1995, for Mr. Everett was $130,000;
for Mr. Manocchi was $130,000; for Mr. Montopoli was $219,000;
and for Dr. Verbicky was $130,000. Mr. O'Gara does not
participate in the Defined Benefit Plan.
Benefits are computed on a straight-life annuity basis and,
in general, are payable monthly commencing at age 65. Early
retirement is permitted between the ages of 55 and 65, but at a
considerably reduced benefit and subject to certain restrictions.
Benefits are not subject to any reduction for social security or
other offset amounts.
For the purpose of computing retirement benefits under the
Defined Benefit Plan, on June 30, 1995 Mr. Montopoli had 9 years
of credited service; Mr. Everett, 7 years; Mr. Manocchi, 4 years;
and Dr. Verbicky, 2 years.
Defined Benefit Plan--Ireland
One of the Corporation's wholly-owned subsidiaries maintains
a defined benefit plan (the "Irish Pension Plan") for its Irish
employees. Monthly pension benefits are based on the
participant's number of years of service at the time of
retirement at age 65 (not to exceed 40 years) multiplied by 1.67%
of average pensionable salary as defined in the Irish Pension
Plan. Additional benefits may be payable upon retirement in the
event that a participant contributes voluntarily to the Irish
Pension Plan in excess of the compulsory contributions described
below.
Under the Irish Pension Plan, participating employees
contribute 5% of pensionable salary while the Corporation's
subsidiary contributes the balance of the funding which is
required to ensure sound funding of the Irish Pension Plan. In
addition to the compulsory employee contributions referred to
above, employees may also voluntarily defer up to 15% of their
gross salary to a separate account in their name under the Irish
Pension Plan in order to supplement the defined benefit.
Full time employees of the Irish subsidiary (including Mr.
Gabriel P. O'Gara, an executive officer of the Corporation) are
eligible to participate in the Irish Pension Plan upon having
attained age 24 and one year of service as of the first day of
the relevant plan year (March 1). Early retirement is permitted
between the ages of 50 and 65, but at a considerably reduced
benefit.
Executive Employment Agreement
The Corporation entered into an employment agreement with
Duane C. Montopoli, the President and Chief Executive Officer of
the Corporation, as of May 29, 1992 (the "Employment Agreement").
Mr. Montopoli's current annual base salary under the Employment
Agreement is $226,000, subject to annual review and increase by
the Board of Directors of the Corporation. Under the Employment
Agreement as amended, Mr. Montopoli is eligible to participate in
the Chemfab Corporate Officer Bonus Plan and may receive an annual
cash bonus depending on the Corporation's financial performance
for the year. (See Compensation Committee Report.) Furthermore,
Mr. Montopoli is entitled to fringe benefits under the Employment
Agreement, including life insurance, health insurance and a
company car.
The Employment Agreement provides that Mr. Montopoli's
employment with the Corporation may be terminated by either Mr.
Montopoli or the Corporation, at any time and for any reason
whatsoever, by giving thirty (30) days' written notice of
termination. If the Corporation terminates Mr. Montopoli's
employment under certain specified circumstances, the Corporation
will continue to pay Mr. Montopoli's base salary and fringe
benefits for a period of nine (9) months following such
termination, subject to offset by the amount of any salary or
bonus received by Mr. Montopoli from subsequent employment
(unless such termination occurs after a sale of the Corporation).
The Employment Agreement contains similar compensation provisions
in the event that Mr. Montopoli's employment with the Corporation
terminates as a result of his death or disability, except that,
in the case of Mr. Montopoli's disability, the compensation
payable by the Corporation to Mr. Montopoli is expected to be
funded, in part, from disability insurance coverage maintained by
the Corporation.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE OFFICER COMPENSATION
Compensation Philosophy and Objectives
The Corporation's executive officer compensation consists of
three primary components: base salary, annual bonuses, and
grants of stock options. Each component is intended to further
the Corporation's overall compensation philosophy, and to achieve
the compensation objectives of the Corporation. The
Corporation's compensation philosophy is that executive officer
compensation should reflect the value created and protected for
shareholders, while furthering the Corporation's short and
long-term strategic goals and values by aligning compensation
with business objectives and individual performance. Short and
long-term compensation should motivate and reward high levels of
performance and are geared to attract and retain qualified
executive officers.
The Corporation's executive officer compensation program is
based on the following principles and objectives:
Competitive, Fair and Balanced Compensation
The Corporation is committed to providing an executive
officer compensation program that helps attract and retain highly
qualified executive officers. To ensure that compensation is
competitive, the Corporation compares its compensation practices
with those of other companies and compensation for similar
positions in the market. The Corporation also seeks to achieve a
balance of the compensation paid to a particular individual and
the compensation paid to other executive officers inside the
Corporation, and strives to achieve a balance between the fixed
and variable components, and between the short and long-term
components, of each executive officer's compensation.
Performance
Executive officers are rewarded based upon both corporate
and individual performance. Corporate performance is evaluated
by reviewing the extent to which strategic and business plan
goals are met. Individual performance is evaluated by reviewing
the achievement of specified individual objectives and the degree
to which the executive officer contributed to the overall success
of the Corporation and the management team.
In evaluating each executive officer's performance, the
Corporation generally follows the process described below:
Prior to or shortly after the beginning of each fiscal year,
the Corporation's goals and objectives are set through the
preparation of the annual plan, which is reviewed with, and
ultimately approved by, the full Board of Directors. Mr.
Montopoli reports to the Board on the Corporation's progress
toward achieving its strategic goals and operating plan
throughout the year at quarterly Board meetings and at other
times as necessary.
In conjunction with the August Board meeting, the Compensation
Committee meets with Mr. Montopoli to review theperformance of
each executive officer other than Mr. Montopoli during the
fiscal year just ended, with particular emphasis on the
contribution made toward the attainment of the Corporation's
goals and objectives for that year. At that time, Mr. Montopoli
makes specific salary, bonus and option award recommendations to
the Compensation Committee for each executive officer. Based
upon all the information available, including the performance of
the individual officer and compensation information for
individuals holding similar positions in other companies, the
Compensation Committee makes the final determination of the
salary, bonus and option awards for each executive officer.
At the same time, the Compensation Committee also addresses
certain aspects of Mr. Montopoli's compensation. Since his base
salary level is set by his Employment Agreement (see "EXECUTIVE
COMPENSATION -- Executive Employment Agreement" above), this
annual determination by the Compensation Committee relates only
to his annual salary increase, if any, the discretionary
portion of his annual bonus and stock option grants.
Compensation for Fiscal 1995
Salary
As described above, the Compensation Committee sets the base
salary for executive officers after reviewing the Chief Executive
Officer's recommendations and evaluations of performance,
compensation for competitive positions in the market and the
historical compensation levels of the executive officers. In Mr.
Montopoli's case this process applies only to any annual increase
in his base salary under his Employment Agreement. At its August
1994 meeting, the Compensation Committee reviewed the salaries of
the Corporation's executive officers, including Mr. Montopoli,
and the Corporation's financial performance for fiscal year ended
June 30, 1994. Based upon this review, the Committee concluded
that no increase in base salaries was appropriate for the
executive officers of the Corporation for fiscal 1995, except for
Mr. O'Gara who received a 7% increase to offset the impact of
changes in Irish tax law.
Bonus Awards
For fiscal 1995, the Corporation's executive officers, including
Mr. Montopoli, were eligible to receive bonuses pursuant to the
terms of the Chemfab Corporate Officer Bonus Plan (the "Plan")
which was approved by the Compensation Committee early in fiscal
1995. Under the terms of the Plan, executive officer bonuses
are paid from a bonus pool which is funded based upon a formula
tied to the Corporation's consolidated pretax profit for the year.
The individual's total bonus opportunity is divided into two
components: 60% of the opportunity is tied to the individual's
base pay as of July 1, 1994 and 40% is variable based upon an
assessment by the Compensation Committee of the individual's
achievements and contributions to the success of the business during
the year.
Based upon the Corporation's actual pretax profit for fiscal
1995, the total bonus pool created under the Chemfab Corporate
Officer Bonus Plan was $206,229, which represented 22% of the
base salaries of the executive officer group as a whole. This
amount was increased by $20,000 by the Compensation Committee in
further recognition of the Corporation's financial performance
for the year. The bonus payment to Mr. Montopoli for fiscal 1995
was $66,000, which represented 30% of his base pay. The other
four most highly paid executive officers received bonus payments
equal to 23% of their base pay in the aggregate. These amounts
were paid out in September 1995.
Stock Option Grants
The Compensation Committee believes that stock options have
been and remain an excellent vehicle for compensating employees.
Because the option exercise price for the employee is generally
the fair market value of the stock on the date of grant,
employees recognize a gain only if the value of the stock
increases. Thus, employees with stock options are rewarded for
their efforts to improve long-term performance of the
Corporation's stock. The size of stock option grants is
generally intended by the Compensation Committee to reflect the
executive officer's position with the Corporation and his other
contributions to the Corporation, while at the same time
considering his other prior equity holdings in the Corporation
and the stock option awards made to other executive officers of
the Corporation. Grants to executive officers under the stock
option program typically involve a four-year vesting period
(subject to accelerated vesting upon a change of control of the
Corporation) to encourage key employees to continue in the employ
of the Corporation. At its August 1995 meeting, the Compensation
Committee granted stock options to the named officers as follows:
Mr. Montopoli, 12,000 shares; Mr. Everett, 8,000 shares; Mr.
Manocchi, 6,000 shares; Mr. O'Gara, 8,500 shares; and Dr.
Verbicky, 9,500 shares.
Conclusion
The Compensation Committee believes that the total fiscal
1995-related compensation of the Chief Executive Officer and each
of the other named officers, as described above, including the
bonus awards and stock option grants made in August 1995, is
fair, and is well within the range of compensation for executive
officers in similar positions at comparable companies.
Compensation Committee
Paul M. Cook
Warren C. Cook
Nicholas Pappas
CERTAIN TRANSACTIONS
In February 1995, Gabriel P. O'Gara, Vice President -
European Business Group, acquired a 50% ownership interest in
Fothergill Engineered Fabrics ("FEF"), which is a commercial
weaver of specialty fibers in England. FEF is also a raw material
supplier to Tygaflor Ltd., a wholly-owned subsidiary of the
Corporation ("Tygaflor"), and owns the site on which Tygaflor
operates. The Corporation has entered into a lease and related
agreements with FEF which provide for minimum annual payments by the
Corporation to FEF of approximately $65,000 for a period of at least
five years. During the five months ended June 30, 1995, Tygaflor
purchased $704,000 of woven materials from FEF and paid $75,000 for
rent and shared services. At June 30, 1995, the amount payable to
FEF for material purchases and services was $424,000.
SHAREHOLDER RETURN PERFORMANCE GRAPH
The following graph compares the performance of the Corporation's
Common Stock to the Nasdaq Stock Market (U.S.) Index and to the S&P
Manufacturing (Diversified Industrial) Index since June 30, 1990.
The graph assumes that the value of an investment in the Corporation's
Common Stock and each index was $100 at June 30, 1990 and that all
dividends were reinvested. The total cumulative return reflected in
the graph below in respect of the fiscal year ended June 30, 1994 and
June 30, 1995 has been computed based on the closing sale price of the
Corporation's Common Stock on June 29 and June 27, respectively, the
last trading days of the Corporation's Common Stock in such fiscal
years.
[INSERT GRAPH]
RATIFICATION OF ADOPTION AND APPROVAL OF
AMENDMENT TO AMENDED AND RESTATED
1991 STOCK OPTION PLAN
On August 3, 1995, the Corporation's Board of Directors
adopted and approved an amendment to the Corporation's Amended
and Restated 1991 Stock Option Plan (the "1991 Plan") for the
purpose of increasing the number of shares of Common Stock
authorized for issuance under the 1991 Plan from 700,000 shares
to 1,000,000 shares.
The Board of Directors believes that an increase in the
number of shares available for issuance under the 1991 Plan will
enable the Corporation to continue its general practice of making
annual grants of stock options to key employees, officers and
directors, thereby encouraging stock ownership by key employees,
officers and directors of the Corporation and its subsidiaries
and providing additional incentives for them to promote the
success of the Corporation's business.
The discussion below provides a summary description of
certain provisions of the 1991 Plan, as amended, and a brief and
general description of the Federal income tax rules applicable to
incentive stock options and nonqualified stock options granted
under the 1991 Plan.
Participation in the 1991 Plan is limited to key employees
(as determined by the Corporation's Option/Compensation
Committee) and directors of, and consultants to, the Corporation
and its subsidiaries. The 1991 Plan is intended to be an
incentive stock option plan within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"),
although, as further described below, options granted under the
1991 Plan need not be incentive stock options. The 1991 Plan is
also structured in a fashion intended to qualify under Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), with the effect that grants of options
thereunder should not be treated as "purchases" for purposes of
Section 16 of the Exchange Act, which prohibits officers and
directors of the Corporation from effecting "purchases" of Common
Stock followed or preceded by "sales" of Common Stock within a
six-month period.
The 1991 Plan is administered by the Corporation's
Option/Compensation Committee (the "Committee"), although the
Board of Directors may at any time at its discretion take over
any or all functions of the Committee under the 1991 Plan other
than the granting of options to officers of the Corporation or to
directors of the Corporation who are officers or employees
thereof. The committee administering the 1991 Plan must consist
of no fewer than two (2) directors who are not officers or
employees of the Corporation ("Non-employee Directors"). Only
Non-employee Directors may be elected to such committee.
Non-employee Directors may be granted options under the 1991
Plan only by automatic grant thereunder ("Automatic Grant"), and
only Non-employee Directors receive Automatic Grants. Options
granted by Automatic Grant are nonqualified options. Automatic
Grants require no action by the Committee or the Board and occur
as follows:
1. Each Non-employee Director elected or re-elected at an
annual shareholders meeting (including the Meeting) or a special
meeting in lieu of an annual meeting, or who continues to serve
after such meeting, is automatically granted, on the date of such
meeting (an "Automatic Grant Date"), a nonqualified option to
purchase 4,000 shares of Common Stock (as appropriately adjusted
for capital changes occurring in the future) to vest (if the
director continues to serve as such) 25% on the Automatic Grant
Date, 25% on the last day of the fiscal quarter that includes the
Automatic Grant Date (if, however, the Automatic Grant Date is
the last day of a fiscal quarter, this second 25% portion vests
on the last day of the immediately subsequent fiscal quarter),
and 25% on the last day of each of the next two fiscal quarters.
2. Each Non-employee Director elected other than at an
annual shareholders meeting is automatically granted, on the date
of such election, a nonqualified option to purchase shares of
Common Stock; the terms of the 1991 Plan will generally result in
each such director receiving nonqualified options on 1,000 shares
(as appropriately adjusted for capital changes occurring in the
future) for each partial or complete fiscal quarter remaining in
the period from one annual meeting to the next, to vest (if the
director continues to serve as such) in increments of 1,000
shares on the last day of each of those fiscal quarters.
Nonqualified options granted by Automatic Grant have an exercise
price equal to the fair market value of the Common Stock on the
Automatic Grant Date.
Options other than those granted by Automatic Grant under
the 1991 Plan ("non-automatic options") are granted at the times,
to the optionees, and in the amounts determined by the Committee.
Non-automatic options may be incentive stock options or
nonqualified stock options, at the Committee's discretion, but
only employees of the Corporation and its subsidiaries are
eligible to receive grants of incentive stock options under the
1991 Plan.
The exercise price of an incentive stock option must not be
less than 100% (or 110% with respect to any optionee owning more
that 10% of the total combined voting power of all classes of
stock of the Corporation) of the fair market value of the Common
Stock on the date of grant, and the aggregate fair market value
(determined at the time of grant) of shares issuable to any one
employee pursuant to incentive options which first become exercisable
in any calendar year may not exceed $100,000. In the case of
nonqualified stock options, the exercise price of each such option
(other than an option granted by Automatic Grant) is determined by
the Committee, and need not be the market value of such stock. The
vesting schedule, if any, of each non-automatic option, and its
date of termination (which may not be more than ten (10) years
after the date of grant), are also established by the Committee
at the time of grant, except that the date of termination of any
incentive option granted to an optionee who owns more than 10% of
the total combined voting power of all classes of the stock of
the Corporation may not be more than five (5) years after the
date of grant.
The Federal income tax aspects of incentive stock options
and nonqualified stock options are generally as described below.
An employee will generally not be taxed at the time of grant or
exercise of an incentive stock option, although exercise of an
incentive stock will give rise to an item of tax preference that
may result in an alternative minimum tax. If the employee holds
the shares acquired upon exercise of an incentive stock option
until at least one year after issuance and two years after the
option grant, he or she will have long-term capital gain (or
loss) based on the difference between the amount realized on the
sale or disposition and his or her option price. If these
holding periods are not satisfied, then upon disposition (a
"disqualifying disposition") of the shares the employee will
recognize ordinary income equal, in general, to the excess of the
fair market value of the shares at time of exercise over the
option price, plus capital gain in respect of any additional
appreciation. With respect to a nonqualified stock option, an
optionee will not be taxed at the time of grant; upon exercise,
however, he or she will generally realize compensation income to
the extent the then fair market value of the stock exceeds the
option price. The Corporation will generally have a tax
deduction to the extent that, and at the time that, an optionee
realizes compensation income with respect to an option; in the
case of an incentive stock option, this means that the
Corporation ordinarily is not entitled to a Federal income tax
deduction.
Options under the 1991 Plan may not be granted later than
August 27, 2001. The Board of Directors of the Corporation may,
at any earlier time, terminate the 1991 Plan or make such
modifications to the 1991 Plan as it shall deem advisable. The
Board may not, however, (i) without further approval of the
Corporation's shareholders, increase the maximum number of shares
available for option under the 1991 Plan, or extend the period
during which options may be granted or exercised or (ii) amend
certain provisions of the 1991 Plan, including provisions
relating to Automatic Grants, more than once in any six (6) month
period. No termination or amendment of the 1991 Plan may,
without the consent of each optionee to whom an option under the
1991 Plan shall theretofore have been granted, adversely affect
the rights of such optionee under such option.
As of August 8, 1995, options for the purchase of a total of
600,875 shares of Common Stock were outstanding under the 1991
Plan (of which 306,383 were exercisable as of such date), and
options to purchase an additional 78,937 shares remained
available for grant under the 1991 Plan before its amendment by
the Corporation's Board of Directors on August 3, 1995. All of
the outstanding options under the 1991 Plan are nonqualified
stock options. On September 7, 1995, the closing sale price of
the Common Stock, as reported on the Nasdaq National Market, was
$19.50 per share.
The following table sets forth information as of August 8,
1995 with respect to stock options which have been received since
the 1991 Plan was adopted by the Corporation by (i) each of the
Corporation's Chief Executive Officer and the four other
executive officers of the Corporation named in the Summary
Compensation Table, (ii) all executive officers of the
Corporation as a group, (iii) each of the directors of the
Corporation, (iv) all directors of the Corporation, other than
those who are executive officers, as a group, and (v) all
employees of the Corporation, excluding executive officers, as a
group since the 1991 Plan was adopted by the Corporation.
Option Grants under 1991 Plan
Name Options (Shares)
---- ----------------
Paul M. Cook 16,000
Warren C. Cook 16,000
William H. Everett 35,000
James C. Manocchi 77,000
James E. McGrath 8,000
Duane C. Montopoli 53,000
Gabriel P. O'Gara 32,500
Nicholas Pappas 16,000
John W. Verbicky 45,500
All executive officers as a group 281,000
All directors of the Corporation,
excluding executive officers, as a group 56,000
All employees of the Corporation,
excluding executive officers, as a group(1) 276,063
____________________
(1) Does not include 86,937 shares subject to stock options
previously granted to former employees that were forfeited
upon termination of their employment.
The affirmative vote of the holders of a majority of the
shares of Common Stock voted on the issue at the Meeting, in
person or by proxy, is required to ratify the adoption and
approval by the Board of Directors of the amendment to the 1991
Plan. If the proposal to ratify the amendment to the 1991 Plan
is not approved at the Meeting, the 1991 Plan, as previously
adopted by the Board of Directors and ratified by the
shareholders, will remain in full force and effect.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL
TO RATIFY THE ADOPTION AND APPROVAL OF THE AMENDMENT TO THE
CORPORATION'S AMENDED AND RESTATED 1991 STOCK OPTION PLAN, AND
PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR THEREOF
UNLESS A SHAREHOLDER HAS INDICATED OTHERWISE ON THE PROXY.
RATIFICATION OF INDEPENDENT AUDITORS
Based upon the recommendation of its Audit Committee, the
Board of Directors has selected the firm of Ernst & Young LLP as
the independent auditors of the Corporation for the fiscal year
ending June 30, 1996. Ernst & Young LLP (together with one of
its predecessor firms, Arthur Young & Company) have acted in
such capacity for the Corporation since the 1980 fiscal year.
The Board will propose at the Meeting that the shareholders
ratify this selection.
Representatives of Ernst & Young LLP are expected to be
present at the Meeting and will be afforded the opportunity to
make a statement if they so desire and to respond to appropriate
questions.
The affirmative vote of the holders of a majority of the
shares of Common Stock present at the Meeting, in person or by
proxy, is required to ratify the appointment of Ernst & Young LLP
as the Corporation's auditors. If the proposal to ratify the
appointment of Ernst & Young LLP is not approved, the Board of
Directors will select and appoint an independent accounting firm
for the fiscal year ending June 30, 1996 without further
shareholder action.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL
TO APPROVE THE SELECTION OF ERNST & YOUNG LLP AS THE INDEPENDENT
AUDITORS OF THE CORPORATION FOR THE FISCAL YEAR ENDING JUNE 30,
1996, AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR
THEREOF UNLESS A SHAREHOLDER HAS INDICATED OTHERWISE ON THE
PROXY.
MISCELLANEOUS
Other Matters
The Board of Directors does not know of any other matters
that may be presented at the Meeting, except for routine matters.
If other business does properly come before the Meeting, however,
the persons named on the accompanying proxy intend to vote on
such matters in accordance with their best judgment.
1996 Shareholder Proposals
In order for shareholder proposals to be presented at the
Corporation's 1996 annual meeting of shareholders, such proposals
must be received by the Secretary of the Corporation at the
Corporation's principal office in Merrimack, New Hampshire not
later than May 30, 1996 for inclusion in the proxy statement for
that meeting, subject to the applicable rules of the Securities
and Exchange Commission. Delivery of such proposals should be by
Certified Mail, Return Receipt Requested.
Annual Report on Form 10-K
The Corporation's Annual Report on Form 10-K (without
exhibits) is included in the Corporation's Annual Report to
Shareholders, and is being furnished to shareholders of record
together with this Proxy Statement. Requests for additional
copies should be directed to: Secretary, Chemfab Corporation,
701 Daniel Webster Highway, P.O. Box 1137, Merrimack, New
Hampshire 03054.
September 27, 1995
CHEMFAB CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR
1995 ANNUAL MEETING OF SHAREHOLDERS ON OCTOBER 26, 1995
The undersigned hereby appoints Duane C. Montopoli and William H.
Everett and each of them proxies, each with power of
substitution, to vote at the 1995 Annual Meeting of Shareholders
of CHEMFAB CORPORATION to be held on October 26, 1995 (including
any adjournments or postponements thereof), with all the powers
the undersigned would possess if personally present, as specified
on the reverse side of this ballot on the election of directors,
proposal respecting ratification of amendment to the Amended and
Restated 1991 Stock Option Plan and the selection of auditors and,
in accordance with their discretion, on any other business that
may come before the meeting, and revokes all proxies previously
given by the undersigned with respect to the shares covered hereby.
(To Be Continued and Signed on the Other Side)
[X] Please mark your votes as in this example.
ELECTION OF DIRECTORS:
Nominees:
Paul M. Cook, Warren C. Cook, Robert E. McGill III, James E.
McGrath, Duane C. Montopoli and Nicholas Pappas
Instruction:
To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.
[ ] FOR all nominees listed above (except as withheld in
the space below)
[ ] WITHHOLD AUTHORITY (to vote for nominee(s) listed above)
AMENDMENT TO AMENDED AND RESTATED 1991 STOCK OPTION PLAN:
The Board of Directors recommends a vote FOR the proposal to:
ratify the adoption and approval of the amendment to the
Corporation's Amended and Restated 1991 Stock Option Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
SELECTION OF AUDITORS:
The Board of Directors recommends a vote FOR the proposal to:
Approve the selection of Ernst & Young LLP as independent
auditors.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
This proxy when properly executed will be voted in the manner
directed herein by the shareholder. If no contrary specification
is made, this proxy will be voted FOR the election of the
nominees of the Board of Directors, FOR the proposal respecting
the amendment to the Corporation's Amended and Restated 1991
Stock Option Plan and FOR the proposal respecting selection of
auditors and upon such other business as may properly come before
the meeting in the appointed proxies' discretion.
Please date, sign as name appears below, and return this proxy in
the enclosed envelope, whether or not you expect to attend the
meeting. You may nevertheless vote in person if you do attend.
The undersigned hereby acknowledge(s) receipt of a copy of the
accompanying Notice of 1995 Annual Meeting of Shareholders and
related Proxy Statement
Signature _____________________ Date _________________
Signature _____________________ Date _________________
NOTE: (Executors, administrators, trustees, custodians, etc., should
indicate capacity in which signing. When stock is held in the
name of more than one person, each person should sign the proxy.)