[LOGO]
CHATTEM, INC.
1715 WEST 38TH STREET
CHATTANOOGA, TENNESSEE 37409
MARCH 12, 2001
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Chattem, Inc., scheduled for Wednesday, April 18, 2001, at 1:00 p.m., in the
Company's executive offices located in Chattanooga, Tennessee. The matters
expected to be acted upon at the meeting are described in detail in the attached
Notice of Annual Meeting and Proxy Statement.
I hope that you will be able to attend the Annual Meeting on April 18, 2001.
A luncheon reservation card is also enclosed if you are able to attend the
Company's luncheon immediately preceding the meeting.
Sincerely,
/s/ Zan Guerry
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
enclosures
[LOGO]
CHATTEM, INC.
1715 WEST 38TH STREET
CHATTANOOGA, TENNESSEE 37409
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 18, 2001
To the Shareholders of Chattem, Inc.:
Notice is hereby given that the Annual Meeting of Shareholders (the "Annual
Meeting") of Chattem, Inc., a Tennessee corporation (the "Company"), will be
held on Wednesday, April 18, 2001, at 1:00 p.m. local time, at the Company's
executive offices, 1715 West 38th Street, Chattanooga, Tennessee 37409, for the
following purposes:
(1) To elect two members to the Board of Directors, each to serve for a
three year term;
(2) To ratify the appointment of Arthur Andersen LLP as independent
auditors; and
(3) To transact such other business as may properly come before the Annual
Meeting or any adjournment(s) thereof.
Information regarding the matters to be acted upon at the Annual Meeting is
contained in the Proxy Statement attached to this Notice.
Only shareholders of record at the close of business on February 23, 2001
are entitled to notice of, and to vote at, the Annual Meeting or any
adjournment(s) thereof.
You are encouraged to attend the Annual Meeting in person. IF YOU ARE UNABLE
TO ATTEND THE ANNUAL MEETING, THE BOARD OF DIRECTORS REQUESTS THAT, AT YOUR
EARLIEST CONVENIENCE, YOU PLEASE COMPLETE, DATE, SIGN AND RETURN THE
ACCOMPANYING PROXY IN THE ENCLOSED REPLY ENVELOPE, WHICH NEEDS NO POSTAGE IF
MAILED IN THE UNITED STATES.
[SIG]
Zan Guerry
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
Chattanooga, Tennessee
March 12, 2001
CHATTEM, INC.
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PROXY STATEMENT
------------------------
ANNUAL MEETING OF SHAREHOLDERS
APRIL 18, 2001
SOLICITATION OF PROXIES
The accompanying proxy is solicited by the Board of Directors of
Chattem, Inc., a Tennessee corporation (the "Company"), for use at the Company's
Annual Meeting of Shareholders (the "Annual Meeting"), and at any adjournment(s)
thereof, to be held at the Company's executive offices, 1715 West 38th Street,
Chattanooga, Tennessee 37409, on Wednesday, April 18, 2001, at 1:00 p.m. local
time, for the purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders. Solicitations of proxies may be made in person or by mail,
telephone or telegram by directors, officers and regular employees of the
Company. The Company will also request banking institutions, brokerage firms,
custodians, trustees, nominees and fiduciaries to forward solicitation material
to the beneficial owners of the Company's shares held of record by such persons,
will furnish at its expense the number of copies thereof necessary to supply
such material to all such beneficial owners and will reimburse the reasonable
forwarding expenses incurred by such record owners. All costs of preparing,
printing, assembling and mailing the form of proxy and the material used in the
solicitation will be paid by the Company. This Proxy Statement is first being
mailed to shareholders on or about March 12, 2001.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The Board of Directors has fixed the close of business on February 23, 2001
as the record date for the determination of shareholders entitled to notice of,
and to vote at, the Annual Meeting. Each share of the Company's common stock
without par value ("Common Stock") is entitled to one vote. As of February 23,
2001 there were issued and outstanding 8,867,751 shares of Common Stock.
Set forth below is information, as of February 23, 2001, with respect to
beneficial ownership by (a) each person who is known to the Company to be the
beneficial owner of more than 5% of the outstanding Common Stock, (b) each
director and nominee, (c) the chief executive officer and the four other most
highly compensated executive officers for the previous fiscal year and (d) all
directors and executive officers of the Company as a group:
AMOUNT AND NATURE OF PERCENT
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) OF CLASS (2)
- ------------------------ ------------------------ ------------
Peter R. Kellogg........................................... 1,387,000(3) 15.64%
120 Broadway
New York, NY 10274
Zan Guerry................................................. 1,062,305(4)(5)(6) 11.79
1715 W, 38th St.
Chattanooga, TN 37409
Robert E. Bosworth......................................... 792,509(6)(7) 8.94
735 Broad Street
The James Building, Suite 1204
Chattanooga, TN 37402
Hamico, Inc................................................ 764,114 8.62
1715 W 38th Street
Chattanooga, TN 37409
T. Rowe Price Associates, Inc.............................. 572,700(8) 6.46
100 E. Pratt Street
Baltimore, MD 21202
AMOUNT AND NATURE OF PERCENT
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) OF CLASS (2)
- ------------------------ ------------------------ ------------
A. Alexander Taylor II..................................... 91,513(9) 1.02
Samuel E. Allen............................................ 23,250 *
Louis H. Barnett........................................... 148,775(10) 1.68
Richard E. Cheney.......................................... 19,010 *
Scott L. Probasco, Jr...................................... 106,926(11) 1.20
Philip H. Sanford.......................................... 14,773 *
B. Derrill Pitts........................................... 45,740 *
Charles M. Stafford........................................ 28,000 *
Robert S. Marshall......................................... 24,250 *
Directors and Executive Officers........................... 1,592,937 17.30
as a Group (11 persons)
- ------------------------
* Less than 1.0%.
(1) Except as otherwise indicated, refers to either shared or sole voting and
investment power. Includes the following numbers of shares subject to
purchase pursuant to options that are exercisable within 60 days of
February 23, 2001 under the Company's Non-Statutory Stock Option Plan--1993
(the "1993 Stock Option Plan"), the Company's Non-Statutory Stock Option
Plan--1994 (the "1994 Stock Option Plan"), the Company's Non-Statutory
Stock Option Plan--1998 (the "1998 Stock Option Plan"), the Company's
Non-Statutory Stock Option Plan for Non-Employee Directors (the "Director
Plan") or the 1999 Stock Plan for Non-Employee Directors (the "1999
Director Plan"): Mr. Guerry--139,100 shares, Mr. Taylor--78,500 shares,
Mr. Probasco--12,500 shares, Mr. Allen--3,500 shares, Mr. Barnett--11,750
shares, Mr. Cheney--11,750 shares, Mr. Sanford--2,750 shares,
Mr. Bosworth--750 shares, Mr. Pitts--33,125 shares, Mr. Stafford--26,250
shares, Mr. Marshall--22,250 shares, and all directors and executive
officers as a group--342,225 shares.
(2) For the purpose of computing the percentage of outstanding shares owned by
each beneficial owner, the shares issuable pursuant to presently
exercisable stock options held by such beneficial owner are deemed to be
outstanding. Such shares are not deemed to be outstanding for the purpose
of computing the percentage owned by any other person.
(3) This information is based solely upon a Schedule 13G filed by Mr. Kellogg
on February 9, 2001.
(4) Includes 5,998 shares held in trust for Mr. Guerry pursuant to the terms of
the Company's Savings and Investment Plan.
(5) Includes 2,685 shares which Mr. Guerry holds as custodian for his children.
Mr. Guerry disclaims beneficial ownership of these custodial shares.
(6) Includes 764,114 shares owned by Hamico, Inc., a charitable foundation for
which Messrs. Guerry and Bosworth serve as directors and executive
officers. Messrs. Guerry and Bosworth disclaim beneficial ownership of all
such shares.
(7) Includes 23,760 shares held in trust for Mr. Bosworth pursuant to the terms
of the Company's Savings and Investment Plan.
(8) This information is based solely upon a Schedule 13G filed by T. Rowe Price
Associates, Inc. on February 6, 2001.
(9) Includes 588 shares held in trust for Mr. Taylor pursuant to the terms of
the Company's Savings and Investment Plan, 1,500 shares held by
Mr. Taylor's spouse and 1,125 shares which Mr. Taylor holds as
2
custodian for his children. Mr. Taylor disclaims beneficial ownership of
the shares held by his spouse and the custodial shares.
(10) Includes 115,359 shares which are held in trust for the benefit of various
family members. Mr. Barnett disclaims beneficial ownership of these shares.
(11) Includes 1,500 shares which are held in trust for the benefit of
Mr. Probasco's spouse. Mr. Probasco disclaims beneficial ownership of these
shares.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under federal securities laws, the Company's directors, executive officers
and 10% or more shareholders are required to report, within specified monthly
and annual due dates, their initial ownership in the Company's Common Stock and
all subsequent acquisitions, dispositions or other transfers of beneficial
interests therein, if and to the extent reportable events occur which require
reporting by such due dates. Based solely on representations and information
provided to the Company by the persons required to make such filings, the
Company believes that all filing requirements were complied with during the last
fiscal year, except that Andrea M. Crouch, Vice President--Toiletries Marketing,
failed to timely file a Form 4 for 1,000 shares acquired in March 2000, which
transaction was reported on a Form 4 filed April 12, 2000.
REVOCABILITY OF PROXY
Granting a proxy does not preclude the right of the person giving the proxy
to vote in person, and a person may revoke his or her proxy at any time before
it has been exercised, by giving written notice to the Secretary of the Company,
by delivering a later dated proxy or by voting in person at the Annual Meeting.
QUORUM; VOTING
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock which are entitled to vote is necessary to
constitute a quorum at the Annual Meeting. If a quorum is not present or
represented at the Annual Meeting, the shareholders entitled to vote, whether
present in person or represented by proxy, have the power to adjourn the Annual
Meeting from time to time, without notice other than announcement at the Annual
Meeting, until a quorum is present or represented. At any such adjourned Annual
Meeting at which a quorum is present or represented, any business may be
transacted that might have been transacted at the Annual Meeting as originally
noticed.
On all matters submitted to a vote of the shareholders at the Annual Meeting
or any adjournment(s) thereof, each shareholder will be entitled to one vote for
each share of Common Stock owned of record at the close of business on
February 23, 2001. There will be no cumulative voting.
ACTION TO BE TAKEN UNDER THE PROXY
Proxies in the accompanying form that are properly executed and returned
will be voted at the Annual Meeting and any adjournment(s) thereof in accordance
with the directions on such proxies. If no directions are specified, such
proxies will be voted (a) "FOR" the election of the two persons specified as
nominees for directors of the Company, each of whom will serve for a three year
term; (b) "FOR" the ratification of the appointment of Arthur Andersen LLP as
independent auditors; and (c) in the best judgment of the persons named in the
enclosed proxy in connection with the transaction of such other business as may
properly come before the Annual Meeting or any adjournment(s) thereof. Should
any director nominee named herein become unable or unwilling to serve if
elected, it is intended that the proxies will be voted for the election, in his
stead, of such other person as the management of the Company may recommend.
Management has no reason to believe that any of the nominees will be unable
or unwilling to serve if elected. Management knows of no other matters or
business to be presented for consideration at the Annual Meeting. If, however,
any other matters properly come before the Annual Meeting or any adjournment(s)
thereof, it is the intention of the persons named in the enclosed proxy to vote
such proxy in accordance with their best judgment on any such matters. The
persons named in the enclosed proxy may also, if they deem it advisable, vote
such proxy to adjourn the Annual Meeting from time to time.
3
PROPOSAL 1: ELECTION OF DIRECTORS
The Company's Board of Directors is separated into three classes having
staggered terms of three years each. At present, two classes consist of three
directors each and one class consists of two directors. Each director elected at
the Annual Meeting will serve until the Annual Meeting of Shareholders in 2004
and until his successor has been elected and qualified or until his earlier
resignation or removal. Messrs. Scott L. Probasco and Zan Guerry are the Board
of Directors' nominees for election. The Board of Directors has no nominating
committee, and all nominees are selected by the Board of Directors at large.
Directors will be elected by a plurality of the votes cast.
The directors meet quarterly and may convene for special meetings when
necessary. During the fiscal year ended November 30, 2000, the Board of
Directors conducted a total of four regularly scheduled meetings and one special
meeting. Each director attended 75% or more of the meetings of the Board of
Directors and of any committees on which he served during this period.
INFORMATION ABOUT NOMINEES AND CONTINUING DIRECTORS
The following information is furnished with respect to the nominees and
continuing directors:
NAME AGE PRINCIPAL OCCUPATION
---- -------- ------------------------------------------
NOMINEES FOR TERMS OF OFFICE TO EXPIRE IN 2004
Scott L. Probasco, Jr......................... 72 Chairman of the Executive Committees of
SunTrust Bank, Chattanooga, N.A., and
SunTrust Banks of Tennessee, Inc. Also a
director of SunTrust Banks, Inc. and Coca-
Cola Enterprises Inc. Member of the
Company's Audit and Compensation
Committees. First elected a director of
the Company in 1966.
Zan Guerry.................................... 52 Chairman of the Board of the Company since
June 1990 and Chief Executive Officer of
the Company since January 1998. Previously
served as President of the Company from
1990 to 1998. Director of SunTrust Bank,
Chattanooga, N.A. First elected a director
of the Company in 1981.
DIRECTORS WHOSE TERMS OF OFFICE EXPIRE IN 2002
Samuel E. Allen............................... 64 Chairman and Chief Executive Officer of
Globalt, Inc. (investment management).
Member of the Company's Audit Committee.
First elected a director of the Company in
1993.
4
NAME AGE PRINCIPAL OCCUPATION
---- -------- ------------------------------------------
Philip H. Sanford............................. 47 Chairman and Chief Executive Officer of
The Krystal Company (restaurants).
Previously Senior Vice President, Finance
and Administration of Coca-Cola
Enterprises Inc. Director and Member of
the Executive Committee of SunTrust Bank,
Chattanooga, N.A. Member of the Company's
Compensation Committee. First elected a
director of the Company in 1999.
A. Alexander Taylor II........................ 47 President and Chief Operating Officer of
the Company since January 1998. Partner
with law firm of Miller & Martin, general
counsel to the Company, from 1983 to 1998.
Director of U.S. Xpress Enterprises, Inc
(transportation) and The Krystal Company
(restaurants). First elected a director of
the Company in 1993.
DIRECTORS WHOSE TERMS OF OFFICE EXPIRE IN 2003
Louis H. Barnett.............................. 82 Consultant to the Company and others.
First elected a director of the Company in
1970.
Robert E. Bosworth............................ 53 Vice President--Corporate Finance of
Livingston Company (merchant banking)
since February 2001. Independent business
consultant since January 1998. Executive
Vice President of the Company from June
1990 to January 1998 and Chief Financial
Officer from April 1985 to January 1998.
Director of Covenant Transport, Inc.
(transportation). Member of the Company's
Audit Committee. First elected a director
of the Company in October 1986.
Richard E. Cheney............................. 79 Former Chairman Emeritus, director and
member of the executive committee, Hill
and Knowlton, Inc. (international public
relations and public affairs consulting).
Director of Stoneridge, Inc. (engineered
electrical vehicle components) and The
Rowe Companies (home furnishings). Member
of the Company's Compensation Committee.
First elected a director of the Company in
1984.
In accordance with the Bylaws of the Company, the Board of Directors has
established an Audit Committee and a Compensation Committee. For further
information regarding these two committees, refer to "Compensation Committee
Report on Executive Compensation" and "Audit Committee Report" below.
5
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth information for the past three fiscal years
concerning compensation paid or accrued by the Company to or on behalf of the
Company's chief executive officer and the four other most highly compensated
executive officers of the Company during the fiscal year ended November 30,
2000:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ----------------------
FISCAL SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS AWARDED COMPENSATION(2)
- --------------------------- -------- -------- -------- ---------------------- ---------------
Zan Guerry 2000 $360,005 $ -- 150,000(1) $3,179
Chairman of the Board 1999 334,467 204,188 41,000(1) 3,183
and Chief Executive Officer 1998 306,900 248,738 130,000 3,442
A. Alexander Taylor II 2000 310,004 -- 100,000(1) 2,742
President and Chief 1999 283,333 171,875 28,000(1) 2,703
Operating Officer 1998 225,694 209,375 90,000 1,878
B. Derrill Pitts 2000 150,370 50,000 40,000(1) 1,607
Vice President-- 1999 143,910 52,650 12,000(1) 1,544
Manufacturing Operations 1998 137,700 82,838 25,000 1,669
Robert S. Marshall 2000 136,035 -- 40,000(1) 1,597
Vice President-- 1999 110,240 39,000 12,000(1) 1,585
Marketing 1998 102,000 50,250 20,000 2,089
Charles M. Stafford 2000 134,498 -- 25,000(1) 1,605
Vice President-- 1999 128,720 47,093 8,000(1) 1,538
Sales 1998 123,165 60,677 20,000 1,651
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(1) These options were terminated by the Company with the consent of the option
holders on October 24, 2000.
(2) Represents premiums paid by the Company under life insurance policies with
respect to which the named executive is entitled to a death benefit of up to
$450,000 as follows for the 2000 fiscal year: Mr. Guerry--$554;
Mr. Taylor--$374. Also represents the Company's contributions with respect
to the Company's Savings and Investment Plan for the named executive as
follows for the 2000 fiscal year: Mr. Guerry--$2,625; Mr. Taylor--$2,368;
Mr. Pitts--$1,607; Mr. Marshall--$1,597; and Mr. Stafford--$1,605.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the grant of stock
options to the named executive officers during the fiscal year ended
November 30, 2000:
OPTIONS/GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
------------------------------------------------------- POTENTIAL REALIZABLE VALUE
PERCENTAGE AT ASSUMED ANNUAL
OF TOTAL RATES OF STOCK
OPTIONS EXERCISE PRICE APPRECIATION
GRANTED TO OR BASE FOR OPTION TERM
OPTIONS EMPLOYEES PRICE EXPIRATION ---------------------------
NAME GRANTED (#)(1) IN FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- -------------- -------------- -------- ---------- ------------ ------------
Zan Guerry..................... 150,000 22.62 18.8130 12-06-09 4,596,659 7,319,413
A. Alexander Taylor II......... 100,000 15.08 18.8130 12-06-09 3,064,440 4,879,607
B. Derrill Pitts............... 40,000 6.03 18.8130 12-06-09 1,225,776 1,951,841
Robert S. Marshall............. 40,000 6.03 18.8130 12-06-09 1,225,776 1,951,841
Charles M. Stafford............ 25,000 3.77 18.8130 12-06-09 766,109 1,219,901
- ------------------------
(1) These options were terminated by the Company with the consent of the option
holders on October 24, 2000.
6
OPTION EXERCISES AND HOLDINGS
The option exercises by the Company's chief executive officer and the other
named executive officers during the fiscal year ended November 30, 2000, as well
as the number and total value of unexercised in-the-money options at
November 30, 2000, are shown in the following table:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND OPTION VALUES AT NOVEMBER 30, 2000
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
NUMBER OF OPTIONS AT OPTIONS AT
SHARES ACQUIRED VALUE NOV. 30, 2000 NOV. 30, 2000
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE (1) EXERCISABLE/UNEXERCISABLE
- ---- --------------- -------- ----------------------------- -------------------------
Zan Guerry................. -- -- 106,600/65,000 $0/$0
A. Alexander Taylor II..... -- -- 54,750/46,250 0/0
B. Derrill Pitts........... -- -- 25,938/13,437 0/0
Robert S. Marshall......... -- -- 16,313/10,937 0/0
Charles M. Stafford........ -- -- 20,313/10,937 0/0
- ------------------------
(1) Excludes options to purchase a total of 456,000 shares that were terminated
by the Company with the consent of the option holders on October 24, 2000.
PENSION PLAN
The following table shows for various years of service the estimated annual
benefits payable under the Chattem, Inc. Pension Plan (the "Pension Plan") upon
normal retirement, before deducting a specified percentage of applicable
estimated Social Security benefits, as provided in the Pension Plan:
PENSION PLAN TABLE
YEARS OF SERVICE
----------------------------------------------------------------
REMUNERATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- ------------ -------- -------- -------- -------- --------
$100,000................................. $37,500 $50,000 $50,000 $50,000 $50,000
150,000................................. 56,250 75,000 75,000 75,000 75,000
200,000................................. 75,000 100,000 100,000 100,000 100,000
275,000................................. 103,125 137,500* 137,500* 137,500* 137,500*
325,000................................. 121,875 162,500* 162,500* 162,500* 162,500*
350,000................................. 131,250 175,000* 175,000* 175,000* 175,000*
375,000................................. 140,625* 187,500* 187,500* 187,500* 187,500*
400,000................................. 150,000* 200,000* 200,000* 200,000* 200,000*
450,000................................. 168,750* 225,000* 225,000* 225,000* 225,000*
500,000................................. 187,500* 250,000* 250,000* 250,000* 250,000*
- ------------------------
* Exceeds maximum Pension Plan benefit permissible under current federal law.
The basis for the compensation covered by the Pension Plan is W-2 earnings
as adjusted for certain extraordinary income items. Covered compensation for the
individuals listed in the summary compensation table as of November 30, 2000,
was: Mr. Guerry--$484,791; Mr. Taylor--$431,449; Mr. Pitts--$200,349;
Mr. Marshall--$139,479; and Mr. Stafford--$167,328. The accrued years of service
to November 30, 2000, of the individuals listed in the summary compensation
table (assuming repayment of Pension Plan loans from funds voluntarily
contributed) are as follows: Mr. Guerry--22.75; Mr. Taylor--2.83;
Mr. Pitts--39.53; Mr. Marshall--6.00; and Mr. Stafford--17.32.
7
Upon retirement at age 65 (or as otherwise permitted under the Pension
Plan), a participant in the Pension Plan receives an annual benefit which is
2.5% of the average of his highest five consecutive calendar years of
compensation (regular wages or salaries, annual bonuses, incentive or Christmas
gift payments, overtime pay, shift premium, director's fees and, up to the level
of regular wages or salaries, any payments for workers' compensation, civic duty
pay, military pay, sickness pay, temporary disability pay or vacation pay) paid
during the 10 calendar years immediately preceding the earlier of actual or
normal retirement age, multiplied by his years of service not in excess of
20 years. The amount determined in the preceding sentence is then reduced by
2.5% of the participant's primary Social Security benefit, multiplied by the
participant's years of service not to exceed 20 years. For retirement before age
65, benefits are further reduced using an early retirement reduction factor and
for years of service proration.
Upon retirement, benefits are calculated on the basis of a normal retirement
pension to be paid during the lifetime of the participant. Benefits will be paid
in the form of a Qualified Joint and Survivor Annuity or Qualified Preretirement
Survivor Annuity, unless one of the following options is appropriately elected:
(i) A reduced annuity benefit to be paid monthly over 5, 10 or 15 years and
thereafter for the participant's life;
(ii) A reduced annuity benefit to be paid during the participant's life with
one-half of the reduced benefit to be continued to the spouse for the
spouse's life;
(iii) A reduced annuity benefit to be paid during the participant's life with
either three-fourths of or the full reduced benefit to be continued to
the spouse for the spouse's life;
(iv) A single lump sum payment; or
(v) A single life annuity.
In October 2000, the Company's Board of Directors adopted an amendment to
freeze the Pension Plan. Effective December 31, 2000, the Pension Plan was
frozen. No new participants will be allowed to enter the Pension Plan and
current participants will not be allowed to accrue further benefits after that
date.
AGREEMENTS WITH EXECUTIVE OFFICERS
The Company has entered into employment agreements with Messrs. Guerry and
Taylor. Each of the employment agreements has a rolling three-year term which
renews automatically each year for a new three-year term absent the election of
either party to terminate the employment agreement at the end of the current
three-year term. The employment agreements provide for a base salary as adjusted
from time to time by the Compensation Committee of the Board of Directors and
the executives' participation in the annual bonus plan and stock option plans of
the Company as determined from time to time by the Compensation Committee of the
Board of Directors. The employment agreements are intended to secure the
long-term commitment of Messrs. Guerry and Taylor to remain in the Company's
employ and impose restrictions on competitive employment should they leave the
Company's employment for any reason. The employment agreements prohibit
Messrs. Guerry and Taylor from competing with the Company with respect to
existing Company brands or using confidential information for a period of
18 months after termination of employment in exchange for a monthly
noncompetition payment equal to 75% of their then established base salary. Upon
the early termination of the employment agreement by the Company without cause,
Messrs. Guerry and Taylor would also be entitled to a liquidated damages payment
in a lump sum equal to 25% of their base salary that would have been payable
over the remainder of the term subject to an obligation to repay a pro rated
portion of the amount if they are able to secure comparable employment during
the remaining period of the term.
8
The Company has also entered into separate severance agreements with
Messrs. Guerry and Taylor and the other executive officers of the Company,
including Messrs. Pitts, Stafford and Marshall. These severance agreements are
operative only upon the occurrence of a change in control of the Company and are
intended to secure continuity of management during, and an unbiased review of,
any offer to acquire control of the Company and, in the case of Messrs. Pitts,
Stafford and Marshall, impose various restrictions on competitive employment
should they leave the Company's employment. Absent a change in control of the
Company, the severance agreements do not require the Company to retain any
executive or to pay him any specified level of compensation.
The severance agreements become operative if the employment with the Company
of one of these officers is terminated or constructively discharged within two
years of the occurrence of a change in control of the Company, or if the officer
elects to terminate his employment during a period of 60 days following the
initial six-month period after the occurrence of a change of control of the
Company. If the severance agreement becomes operative, the officer will be
entitled to receive a termination payment equal to 299 percent of his average
annualized includible compensation from the Company, in the case of
Messrs. Guerry and Taylor, and 200 percent of his average annualized includible
compensation from the Company, in the case of Messrs. Pitts, Stafford and
Marshall, during the five most recently completed fiscal years and the
continuation of certain Company-provided benefits. Includible compensation for
purposes of calculating the severance benefit generally includes all
compensation paid to the officer by the Company and will be calculated in
accordance with the applicable provisions of the Internal Revenue Code.
A change of control of the Company will be deemed to occur if (i) there is a
change of one-third or more of the directors of the Company within any 12-month
period; (ii) there is a change of one-half or more of the directors of the
Company within any 24-month period; or (iii) any person acquires ownership or
the right to vote 35% or more of the Company's outstanding voting shares.
DIRECTOR COMPENSATION
All directors receive annual compensation of $9,000 and supplemental life
insurance coverage in varying amounts. In addition, directors who are not
officers of the Company receive $1,000 for each meeting attended. The outside
directors of the Company are also eligible for the grant of stock options under
the terms of the Director Plan and for the grant of stock options and the award
of Common Stock in lieu of cash fees under the terms of the 1999 Director Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 2000, three of the Company's independent directors,
Messrs. Cheney, Probasco and Sanford, served on the Compensation Committee.
Mr. Taylor, a Director, President and Chief Operating Officer of the Company,
serves on the compensation committee of The Krystal Company, the Chairman and
Chief Executive Officer of which, Mr. Sanford, is a Director of the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
IDENTIFICATION OF MEMBERS AND FUNCTIONS OF COMMITTEE
The Compensation Committee is composed of independent, non-employee
directors who have no interlocking relationships as defined by the Securities
and Exchange Commission. The Compensation Committee reviews and approves all
salary arrangements, including annual and long-term incentive awards and other
remuneration, for officers of the Company. It also is responsible for
administration of the Company's stock option plans (except for the Director Plan
and the 1999 Director Plan), the annual incentive plan and certain other plans.
The Compensation Committee met two times in fiscal 2000.
9
PRINCIPLES OF EXECUTIVE COMPENSATION
The Company's executive compensation program is designed to help the Company
attract, motivate and retain the executive talent that the Company needs in
order to maximize its return to shareholders. Toward that end, the Company's
executive compensation program attempts to provide strongly competitive
compensation levels and incentive pay that varies based on corporate, business
unit and individual performance.
The Company attempts to provide its executives with a total compensation
package that, at expected levels of performance, is competitive with average
market rates for executives who hold comparable positions or have similar
qualifications in companies the Company's size. Total compensation is defined to
include base salary, annual incentives and long-term incentives. The Company
determines competitive levels of compensation for executive positions based on
information drawn from compensation surveys and compensation consultants. The
Company does not necessarily consider pay levels for the peer companies included
in the shareholder return graph, since these companies, in some cases, vary in
size significantly from the Company.
The Company targets its base salary program at slightly below competitive
market norms while placing more emphasis on long-term incentive compensation
than is common in the market for comparable sized companies. Thus, the Company's
executive salaries tend to be slightly below the market average while its
long-term incentive award opportunities are at or above average rates.
The Company's incentive plans are designed to ensure that incentive
compensation varies based upon the financial performance of the Company.
However, some of the Company's incentive payouts are based on annual performance
while other incentive values are based on long-term (i.e., multi-year)
performance. Also, the Company considers business unit and individual
performance in its incentive plan. As a result, the total compensation levels
for an executive in any given year may not reflect the Company's overall
bottom-line financial performance in that year.
BASE SALARY PROGRAM
The Company's base salary program is based on a philosophy of providing
salaries that are competitive with, but slightly below, market rates for
companies of similar size. The Company believes that offering competitive rates
of base pay plays an important role in its ability to attract and retain
executive talent. Base salary levels are also based on each individual
employee's performance over time. Consequently, employees with higher levels of
sustained performance over time will be paid correspondingly higher salaries.
Salaries for executives are reviewed and revised annually based on a variety of
factors, including individual performance (assessed in a qualitative fashion),
general levels of market salary increases and the Company's overall financial
results. All salary increases are granted within a pay-for-performance
framework.
ANNUAL INCENTIVE PLAN
The Company's annual incentive plan is intended to assist the Company in
rewarding and motivating key employees, focuses strongly on Company and
individual performance, and provides a fully competitive compensation package to
plan participants. As a pay-for-performance plan, incentive awards are paid
annually based on the achievement of performance objectives for the year. Under
the plan, each plan participant is provided a range of potential annual
incentive awards based on competitive award levels in the marketplace. The
incentive award ranges are consistent with those provided by other companies
similar in size to the Company. Actual awards paid under the plan are based on
the Company's corporate performance (and for business unit positions, business
unit performance). Individual performance is also considered in determining
actual award levels for each year, but is assessed in a non-formula fashion. The
corporate annual incentive plan objective usually is earnings per share
performance against plan. The specific objectives and standards under the plan
are reviewed annually by the Company in order to ensure consistency with the
Company's business strategy and prevailing market conditions.
10
An annual incentive funding pool is created to pay awards achieved under the
annual incentive plan. At targeted performance, the plan provides sufficient
funding to pay competitive annual incentives to all plan eligible positions.
However, the actual size of the annual incentive funding pool will vary based on
corporate earnings per share performance. Aggregate payments under the annual
incentive plan are limited by the size of the funding pool. Actual awards made
to participants under the annual incentive plan are based on a combination of
corporate and individual performance. Individual performance is assessed
relative to various qualitative objectives and criteria, such as overall
contribution to the Company's success and successful implementation of business
strategy.
LONG-TERM INCENTIVES
The Company believes that its key employees should have an ongoing interest
in the long-term success of the business. To accomplish this objective, the
Company provides long-term incentives to executives in the form of non-qualified
stock options.
The Company's stock option plans are intended to reward participants for
generating appreciation in the Company's stock price. Stock options granted to
the executive officers named in the Summary Compensation Table and certain other
executives were awarded at 100% of the fair market value of the stock on the
date of grant. All stock options have a term of ten years. Generally, stock
option grants vest at a rate of 25% per year beginning one year after the date
of grant. The exercise price is payable in cash, shares of the Company stock or
some combination thereof. No option holder has any rights as a shareholder for
any shares subject to an option until the exercise price has been paid and the
shares are issued to the employee.
The Company's overall stock option grant levels are established by
considering market data for the Company's stock and the number of shares
reserved under the plan for option grants. Individual stock option grants are
based on the job level of each participant in the Company and individual
performance. The Committee also considers the size of past stock option grants
in determining the size of new option grants.
The Company's compensation plans are periodically reviewed to ensure an
appropriate mix of base salary, annual incentive and long-term incentive within
the philosophy of providing strongly competitive total direct compensation
opportunities.
2000 CHIEF EXECUTIVE OFFICER COMPENSATION
As described above, the Company compensates all executives, including the
chief executive officer, based upon both a pay-for-performance philosophy and
consideration of market rates of compensation for each executive position.
Specific actions taken by the Compensation Committee regarding the chief
executive officer's compensation are summarized below.
BASE SALARY
The base annual salary for the Company's chief executive officer was
increased to $370,000 from $350,000 effective June 1, 2000.
ANNUAL INCENTIVE
No annual incentive award was earned by the chief executive officer in
fiscal 2000.
LONG-TERM INCENTIVE
The chief executive officer received an award in fiscal 2000 of options to
acquire 150,000 shares at an exercise price of $18.8130. These options were
cancelled by the Company with the consent of the chief executive officer on
October 24, 2000.
The foregoing report is submitted by the Compensation Committee, consisting
of Richard E. Cheney, Scott L. Probasco, Jr. and Philip H. Sanford.
11
COMPARATIVE PERFORMANCE BY THE COMPANY
The following is a chart comparing the cumulative total return to
shareholders of the Company, assuming reinvestment of dividends, for the
five-year period ending at the end of the 2000 fiscal year with the return from:
(i) the S&P 500 Index and (ii) two peer groups of public companies engaged in
either the functional toiletries, cosmetics or non-prescription drug business,
for the same period. The new peer group consists of the following selected
comparable companies: Playtex Products Inc., Church & Dwight, Inc., Columbia
Laboratories, Inc., Del Laboratories, Inc. and Alberto Culver Co. (Class B
common stock). The old peer group consisted of the following selected comparable
companies: Block Drug Company (Class A Common Stock), Church & Dwight, Inc.,
Columbia Laboratories, Inc., Del Laboratories, Inc. and Alberto Culver Co.
(Class B Common Stock). Block Drug Company was acquired by GlaxoSmithKline in
January 2001 and has been replaced in the new peer group with Playtex
Products Inc.
CHATTEM, INC.
RELATIVE MARKET PERFORMANCE
TOTAL RETURN FISCAL 1996-2000
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
CHATTEM INC. S&P 500 NEW PEER GROUP OLD PEER GROUP
1995 100 100 100 100
1996 201.34 127.86 139.65 137.53
1997 324.32 164.32 181.51 170.69
1998 924.32 203.2 171.45 144.58
1999 417.56 245.66 190.5 159.06
2000 105.41 235.29 187.87 196.68
1995 1996 1997 1998 1999 2000
-------- -------- -------- -------- -------- --------
Chattem Inc................................. 100.00 201.34 324.32 924.32 417.56 105.41
S&P 500..................................... 100.00 127.86 164.32 203.20 245.66 235.29
New Peer Group.............................. 100.00 139.65 181.51 171.45 190.50 187.87
Old Peer Group.............................. 100.00 137.53 170.69 144.58 159.06 196.68
12
AUDIT COMMITTEE REPORT
IDENTIFICATION OF MEMBERS AND FUNCTIONS OF COMMITTEE
The Audit Committee of the Company's Board of Directors is currently
composed of three non-employee directors, Samuel E. Allen, Scott L. Probasco and
Robert E. Bosworth. Messrs. Allen and Probasco are both, "independent directors"
as defined by Rule 4200(a)(14) of the National Association of Securities
Dealers' listing standards. Mr. Bosworth is not an "independent director" as
defined in Rule 4200(a)(14) because he served as Executive Vice President and
Chief Financial Officer of the Company until his resignation in January, 1998.
Because of Mr. Bosworth's substantial financial and accounting experience and
since he has not been employed by the Company since January 1998, the Board of
Directors determined that Mr. Bosworth's membership on the Audit Committee is in
the best interest of the Company and its shareholders.
COMMITTEE CHARTER
The Board of Directors has adopted a written charter for the Audit
Committee, which is included as an appendix to this Proxy Statement. In
accordance with its written charter, the Audit Committee assists the Board in
fulfilling its responsibility for overseeing the accounting, auditing and
financial reporting processes of the Company. In addition, the Audit Committee
recommends to the Board of Directors the engagement of the independent auditors
of the Company for each fiscal year. The Audit Committee met two times in person
in fiscal year 2000. Prior to the release of quarterly earnings announcements in
fiscal year 2000, the Audit Committee or a member of the Committee also reviewed
and discussed the interim financial information contained therein with Arthur
Andersen LLP, the Company's independent auditors, and with the Company's
President and Director of Finance.
AUDITOR INDEPENDENCE
The Audit Committee received from Arthur Andersen LLP written disclosures
and a letter regarding its independence as required by Independence Standards
Board Standard No. 1, describing all relationships between the auditors and the
Company that might bear on the auditors' independence, and discussed this
information with Arthur Andersen LLP. The Audit Committee specifically
considered the provision of non-audit services by Arthur Andersen LLP and
concluded that the nature and scope of such services provided to the Company did
not compromise Arthur Andersen LLP's independence. The Audit Committee also
reviewed and discussed with management and with Arthur Andersen LLP the quality
and adequacy of the Company's internal controls. The Audit Committee also
reviewed with Arthur Andersen LLP and financial management of the Company the
audit plans, audit scope and audit procedures. The discussions with Arthur
Andersen LLP also included the matters required by generally accepted auditing
standards, including those described in Statement on Auditing Standards No. 61,
as amended.
REVIEW OF AUDITED FINANCIAL STATEMENTS
The Audit Committee has reviewed the audited financial statements of the
Company and its consolidated subsidiaries as of and for the fiscal year ended
November 30, 2000, and has discussed the audited financial statements with
management and with Arthur Andersen LLP. Based on all of the foregoing reviews
and discussions with management and Arthur Andersen LLP, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the year ended
November 30, 2000, to be filed with the Securities and Exchange Commission.
AUDIT FEES
The aggregate fees billed for professional services rendered by Arthur
Andersen LLP for the audits of the Company's annual financial statements,
including the separate company financial statements of the
13
Company's foreign subsidiaries and Signal Investment & Management Co., for the
fiscal year ended November 30, 2000 and the reviews of the financial statements
included in the Company's Forms 10-Q for fiscal year 2000 were $245,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
The aggregate fees billed for financial information systems design and
implementation services rendered by Arthur Andersen LLP for fiscal year 2000
were $65,423.
ALL OTHER FEES
The aggregate fees billed for services rendered by Arthur Andersen LLP,
other than fees for the audit and financial information systems design and
implementation, for fiscal year 2000, were $181,325.
The foregoing report is submitted by the Audit Committee, consisting of
Samuel E. Allen, Scott L. Probasco and Robert E. Bosworth.
PROPOSAL 2: RATIFICATION OF APPOINTMENT OF AUDITORS
The Audit Committee has recommended and the Board of Directors has selected
Arthur Andersen LLP as the auditors of the Company. Arthur Andersen LLP has
served as the Company's auditors since 1963. Arthur Andersen LLP is
knowledgeable about the Company's operations and accounting practices and is
well qualified to act in this capacity. The Company's Board of Directors
believes that it is a good practice to submit the appointment of auditors for
the approval of the shareholders, although such approval is not required. If
shareholder approval for the appointment is not obtained, the Audit Committee
will investigate the reasons, and the Board of Directors will reconsider the
appointment. If the accompanying proxy is duly executed and received in time for
the Annual Meeting, and if no contrary specification is made as provided
therein, it is the intention of the persons named in the proxy to vote the
shares represented thereby FOR the ratification of the appointment of Arthur
Andersen LLP as auditors.
It is anticipated that a representative of Arthur Andersen LLP will be
present at the Annual Meeting to respond to appropriate questions. Such
representative will have an opportunity to make a statement at the Annual
Meeting if he desires.
SHAREHOLDERS' PROPOSALS
Proposals from the Company's eligible shareholders for presentation for
action at the 2002 Annual Meeting of Shareholders must be received by the
Company no later than November 9, 2001, in order to be considered for inclusion
in the Proxy Statement and Proxy for that Annual Meeting. Any such proposals, as
well as any questions relating thereto, should be directed to Hugh F. Sharber,
Secretary, Chattem, Inc., 1715 West 38th Street, Chattanooga, Tennessee 37409.
In addition, the Company's By-Laws require a shareholder desiring to propose any
matter for consideration at the 2002 Annual Meeting of Shareholders to notify
the Company's Secretary in writing at the above address on or before
January 18, 2002.
Zan Guerry
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
March 12, 2001
14
APPENDIX
CHATTEM, INC.
AUDIT COMMITTEE CHARTER
I. PURPOSE
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities by reviewing the
financial information which will be provided to the Securities and Exchange
Commission or the public, the systems of internal controls which management and
the Board of Directors have established, and the auditing, accounting and
financial reporting processes generally. It shall be the responsibility of the
Audit Committee to maintain free and open means of communication between the
Board of Directors, the independent auditor and management of the Company.
The Audit Committee will seek to fulfill these responsibilities by carrying
out the responsibilities and duties enumerated in Section V. of this Charter.
II. COMPOSITION
The Audit Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be "independent directors" as
defined by the rules of the National Association of Securities Dealers, Inc.
("NASD") on or before June 2001, unless the Board, under exceptional and limited
circumstances, determines that membership on the Audit Committee by an
individual who is not independent as defined by NASD rules is required by the
best interests of the Company and its shareholders, and the Board discloses in
the next annual proxy statement subsequent to such determination the nature of
the relationship and the reasons for that determination. All members of the
Audit Committee shall have a working familiarity with basic finance and
accounting practices and shall be able to read and understand fundamental
financial statements, and at least one member of the Audit Committee shall have
accounting or related financial management expertise. Audit Committee members
and the Committee Chairman shall be designated by the full Board of Directors.
III. MEETINGS
The Audit Committee shall meet at least two times annually, or more
frequently as circumstances dictate. As part of its job to foster open
communication, the Audit Committee shall meet at least annually with management
and the independent auditor in separate executive sessions to discuss any
matters that the Audit Committee or each of these groups believe should be
discussed privately. In addition, the Audit Committee or at least its Chairman
shall have discussions with the independent auditor and management quarterly to
review the Company's financial statements.
IV. AUTHORITY
To discharge its oversight responsibilities effectively, the Audit Committee
will maintain open lines of communication with management and the independent
auditor, each of whom will have free and direct access to the Audit Committee.
The Audit Committee has the authority to institute, at its discretion,
investigations of suspected improprieties, including the standing authority to
retain special counsel or experts.
V. RESPONSIBILITIES AND DUTIES
In carrying out its responsibilities, the Audit Committee believes its
policies and procedures should remain flexible, in order to best react to
changing conditions and to ensure to the Board and shareholders of the Company
that the accounting and reporting practices of the Company are in accordance
with all requirements and are of a high quality.
In carrying out its responsibilities, the Audit Committee shall take the
following actions:
(a) OVERSIGHT OF AUDIT PROCESS
1. Select, evaluate and, where appropriate, replace the independent
auditor who is ultimately accountable to the Board of Directors and
the Audit Committee.
2. Ensure that the independent auditor submits a formal written
statement regarding relationships and services which may impact the
objectivity and independence of the independent auditor, consistent
with Independence Standards Board Standard 1; discuss with the
independent auditor any disclosed relationships or services that may
impact the objectivity and independence of the independent auditor;
and recommend that the Board of Directors take appropriate action to
oversee the independence of the independent auditor.
3. Meet with the independent auditor and financial management of the
Company to review the scope of the proposed audit for the current
year and the audit procedures to be utilized, and at the conclusion
thereof, to review such audit, including any comments or
recommendations of the independent auditor.
4. Review the internal audit function of the Company including the
independence and authority of its reporting obligations, the proposed
audit plans for the coming year and the coordination of such plans
with the independent auditor.
5. Provide sufficient opportunity for the independent auditor to meet
with the members of the Audit Committee without members of management
present. Among the items to be discussed in these meetings are the
independent auditor's evaluation of the Company's financial and
accounting personnel, and the cooperation that the independent
auditors received during the course of the audit.
6. Following completion of the annual audit, review separately with
management and the independent auditor any significant difficulties
encountered during the course of the audit, including any
restrictions on the scope of work or access to required information.
7. Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61, as may be
modified or supplemented.
(b) FINANCIAL REPORTING
1. Ensure that the Audit Committee, or at least its Chairman or an
appointed designee from the Audit Committee, reviews the Company's
quarterly and annual financial statements and determines that the
independent auditor is satisfied with the disclosure and content of
the financial statements to be presented to the Securities and
Exchange Commission or the public.
2. In consultation with the independent auditor and management review
the integrity of the Company's financial reporting processes, both
internal and external.
3. Consider the independent auditor's judgments about the quality and
appropriateness (and not just acceptability) of the Company's
accounting principles and judgments as applied in its financial
reporting, on both an annual and quarterly basis.
4. Consider and recommend to the Board, if appropriate, major changes to
the Company's auditing and accounting principles and practices as
suggested by the independent auditor or management.
5. Establish regular and separate systems of reporting to the Audit
Committee by management and the independent auditor regarding any
significant judgments made in management's
2
preparation of the financial statements and the view of each as to
the appropriateness of such judgments.
6. Review with the independent auditor and the Company's legal counsel,
compliance matters and any legal or regulatory matter that could have
a significant impact on the Company's financial statements.
7. Report Committee actions to the Board of Directors with such
recommendations as the Committee may deem appropriate.
8. Prepare a report for inclusion in the Company's proxy statement.
(c) PROCESS IMPROVEMENT
1. Review with the independent auditor and the Company's financial and
accounting personnel, the adequacy and effectiveness of the
accounting and financial controls of the Company, and elicit any
recommendations for the improvement of such internal control
procedures for particular areas where new or more detailed controls
or procedures are desirable. Particular emphasis should be given to
the adequacy of such internal controls to expose any payments,
transactions or procedures that might be deemed illegal or otherwise
improper.
2. Review with the independent auditor and management the extent to
which changes or improvements in financial or accounting practices,
as approved by the Audit Committee, have been implemented.
3. Investigate any matter brought to its attention within the scope of
its duties, with the power to retain outside counsel for this purpose
if, in its judgment, that is appropriate.
4. Review activities, organizational structure and qualifications of the
financial and accounting personnel of the Company.
5. Annually review and assess the adequacy of this Charter, amend it as
appropriate, and seek and receive Board approval of the proposed
changes.
6. Provide Audit Committee Members with appropriate educational
opportunities to assure an understanding of the business and
environment in which the Company operates.
3
[LOGO]
CHATTEM, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
APRIL 18, 2001
The undersigned, having received the Notice of Annual Meeting and the Proxy
Statement dated March 12, 2001, appoints ZAN GUERRY and A. ALEXANDER TAYLOR II,
and each of them proxies, with full power of substitution and revocation, to
represent the undersigned and to vote all shares of Chattem, Inc., which the
undersigned is entitled to vote at the Annual Meeting of Shareholders to be held
on April 18, 2001, at the Company's principal executive offices, 1715 West 38th
Street, Chattanooga, Tennessee 37409, at one o'clock p.m. local time, and any
adjournment(s) thereof, as specified in this Proxy:
1. Election of Directors
FOR / / AGAINST / / ABSTAIN / /
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ONE OR MORE OF THE NOMINEES, STRIKE A LINE THROUGH HIS NAME IN THE LIST
BELOW:
SCOTT L. PROBASCO, JR. and ZAN GUERRY
2. Appointment of Arthur Andersen LLP as independent auditors
FOR / / AGAINST / / ABSTAIN / /
3. In their discretion the proxies are authorized to vote upon such other matters as may properly come before the meeting.
The Board of Directors recommends affirmative votes for Items 1 and 2, and
IF NO CONTRARY SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR ITEMS 1 AND
2.
The Board of Directors knows of no other matters that may properly be or
which are likely to come or be brought before the meeting. However, if any other
matters are properly brought before the meeting, the persons named in this proxy
or their substitutes will vote in accordance with their best judgment on such
matters. THIS PROXY SHOULD BE DATED, SIGNED BY THE SHAREHOLDER AS THE NAME
APPEARS BELOW AND RETURNED PROMPTLY IN THE ENCLOSED ENVELOPE. JOINT OWNERS
SHOULD EACH SIGN PERSONALLY, AND TRUSTEES AND OTHERS SIGNING IN A REPRESENTATIVE
CAPACITY SHOULD INDICATE THE CAPACITY IN WHICH THEY SIGN.
Date: ____________________________
__________________________________
Signature of Shareholder
__________________________________
Signature of Shareholder
PLEASE SIGN, DATE AND PROMPTLY
RETURN IN THE ACCOMPANYING
ENVELOPE--NO POSTAGE REQUIRED