EXHIBIT 3
CHEMBAB CORPORATION
701 DANIEL WEBSTER HIGHWAY
P.O. BOX 1137
MERRIMACK, NEW HAMPSHIRE 03054
INFORMATION STATEMENT PURSUANT TO SECTION 14(f) OF THE
SECURITIES EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER
This Information Statement is being mailed on or about August 2, 2000 as
part of the Solicitation/ Recommendation Statement on Schedule 14D-9 of Chemfab
Corporation (the "Company"). You are receiving this statement in connection
with the possible election of persons designated by PPLC Acquisition Corp. to a
majority of the seats of the Company's board of directors (the "Board"). On
July 25, 2000, the Company entered into an Agreement and Plan of Merger
("Merger Agreement") with Norton Company, a Massachusetts corporation
("Parent") and an indirect wholly-owned subsidiary of Compagnie de Saint-
Gobain, a French corporation ("Saint-Gobain"), and PPLC Acquisition Corp., a
Delaware corporation (the "Purchaser") and an indirect wholly-owned subsidiary
of Parent, the terms of which require Purchaser to commence a tender offer (the
"Offer") to purchase all outstanding shares of Company common stock, par value
$0.10 per share ("Common Stock"), at a price per share of $18.25, net to the
seller in cash, upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated August 2, 2000, and in the related Letter of
Transmittal. Copies of the Offer to Purchase and the Letter of Transmittal have
been mailed to the Company's stockholders and are filed as Exhibits (a)(1) and
(a)(2), respectively, to the Tender Offer Statement on Schedule TO filed by
Purchaser with the Securities and Exchange Commission (the "SEC") on August 2,
2000.
Pursuant to the Merger Agreement, following the completion of the Offer and
satisfaction or waiver of certain conditions specified in the Merger Agreement,
Purchaser will be merged with and into the Company (the "Merger"), with the
Company as the surviving corporation in the Merger and an indirect wholly-owned
subsidiary of Parent. In the Merger, each share of Common Stock issued and
outstanding immediately prior to the Merger (other than shares (1) owned by the
Company, (2) owned by Parent, Purchaser or their subsidiaries, or (3) owned by
stockholders of the Company, if any, who are entitled to and properly exercise
dissenters' rights under the Delaware General Corporation Law will be converted
into the right to receive, in cash, the offer price of $18.25 per share or any
higher price paid per share of Common Stock in the Offer.
This Information Statement is being mailed to you in accordance with Section
14(f) of the Securities Exchange Act of 1934, as amended, and Rule 14f-1
promulgated thereunder. The information set forth herein supplements
information contained in the Solicitation/Recommendation Statement. Information
set forth herein related to Saint-Gobain, Parent and Purchaser has been
provided by Saint-Gobain. You are urged to read this Information Statement
carefully. You are not, however, required to take any action in connection with
the matters set forth herein.
Purchaser commenced the offer on August 2, 2000. The Offer is currently
scheduled to expire at 12:00 midnight, New York City time, on August 29, 2000,
unless Purchaser extends the offer in accordance with the terms of the Merger
Agreement.
BOARD OF DIRECTORS
General
The Common Stock is the only class of equity securities of the Company
outstanding which is entitled to vote at a meeting of stockholders of the
Company. As of July 25, 2000, there were 7,463,357 shares of Common Stock
outstanding, of which Saint-Gobain, Parent and Purchaser owned no shares as of
such date.
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Right to Designate Directors
The Merger Agreement provides that immediately upon acceptance for payment
of and payment for a number of shares of Common Stock that satisfies the
Minimum Condition (as defined in the Merger Agreement) by Purchaser pursuant to
the Offer, Purchaser shall be entitled to designate up to such number of
directors, rounded up to the next whole number, for election or appointment to
the Board as will give Purchaser, subject to compliance with 14(f) of the
Exchange Act, representation on the Board equal to the product of (i) the total
number of directors on the Board (giving effect to the increase in the size of
the board pursuant to this paragraph) and (ii) the percentage that the number
of shares of Common Stock beneficially owned by Saint-Gobain, Parent and
Purchaser bears to the total number of shares of Common Stock then outstanding.
In furtherance thereof, concurrently with such acceptance for payment and
payment for such shares of Common Stock, the Company shall, upon request of
Purchaser and in compliance with Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder, promptly increase the size of the Board by such
number as is necessary to enable the designees of Purchaser to be so elected or
appointed to the Board, and subject to applicable law, the Company shall take
all reasonable actions available to the Company to cause such designees to be
so elected or appointed. The Merger Agreement provides that at such time, the
Company will, if requested by Parent or Purchaser and subject to applicable
law, also use its reasonable best efforts to cause persons designated by
Purchaser to constitute at least the same percentage (rounding up to the next
whole number) as is on the Board of (i) each committee of the Board, (ii) each
board of directors of each of the Company's subsidiaries and (iii) each
committee of such board.
Notwithstanding the foregoing, the Merger Agreement also provides that until
the completion of the Merger, the Board shall have at least three directors who
are directors on the date of the Merger Agreement, one of whom shall be the
current President and Chief Executive Officer of the Company, and two of whom
shall be non-employee directors of the Company (the "Continuing Directors");
provided that if the number of Continuing Directors is reduced below three for
any reason whatsoever, any remaining Continuing Directors (or Continuing
Director, if there is only one remaining) will be entitled to designate persons
to fill such vacancies who will be deemed to be Continuing Directors for
purposes of the Merger Agreement. Pursuant to the Merger Agreement, until the
completion of the Merger, the approval of the Continuing Directors will be
required to authorize any termination of the Merger Agreement by the Company,
any amendment of the Merger Agreement requiring action by the Board, any
amendment of the certificate of incorporation or bylaws of the Company, any
extension of time for performance of any obligation or action under the Merger
Agreement by Parent or Purchaser, or any waiver of compliance with any of the
agreements or conditions contained in the Merger Agreement for the benefit of
the Company.
Purchaser has informed the Company that it will choose its designees to the
Board from the directors and executive officers listed in Schedule I to the
Offer to Purchase, a copy of which is being mailed to stockholders together
with this Schedule 14D-9. The information on such Schedule I is incorporated
herein by reference.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to each
person known to the Company to be the beneficial owner of more than 5% of the
issued and outstanding shares of Common Stock as of June 30, 2000 or other date
noted below.
Amount and Nature of Percentage of
Beneficial Ownership Outstanding Shares of
Name and Address of Beneficial Owner of Common Stock Common Stock Owned
- ------------------------------------ -------------------- ---------------------
Peter B. Cannell & Co., Inc.
("Cannell")
645 Madison Ave.
New York, NY 10022.................. 954,157(1) 12.2%
Quest/Royce Advisory Group
1414 Avenue of the Americas
New York, NY 10019.................. 582,819(2) 7.0%
Dimensional Fund Advisors, Inc.
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401.............. 457,800(3) 6.1%
- --------
(1) Based upon information provided to the Company by Cannell as of July 18,
2000. Consists entirely of shares of Common Stock 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.
(2) Based upon information provided to the Company as of July 27, 2000.
(3) Based upon information as of June 30, 2000 provided to the Company by
Dimensional Fund Advisors Inc. Dimensional Fund Advisors Inc.
("Dimensional"), an investment advisor registered under Section 203 of the
Investment Advisors Act of 1940, furnishes investment advice to four
investment companies registered under the Investment Company Act of 1940,
and serves as investment manager to certain other investment vehicles,
including commingled group trusts (these investment companies and
investment vehicles are referred to herein as the "Portfolios"). In its
role as investment advisor and investment manager, Dimensional possesses
both voting and investment power over 457,800 shares of Common Stock as of
June 30, 2000. All of such shares are owned, in the aggregate, by the
Portfolios, and Dimensional disclaims beneficial ownership of such
securities.
DIRECTORS AND OFFICERS OF THE COMPANY
Directors
The names of the current directors of the Company, their ages and certain
other information about them are set forth below. As indicated, some of the
directors may resign effective immediately following the purchase of Common
Stock by Purchaser pursuant to the Offer
Name Age Office Held Director Since
- ---- --- ----------- --------------
Paul M. Cook............ 76 Director March 1976
Warren C. Cook.......... 55 Director September 1976
Robert E. McGill, III... 69 Director October 1995
James E. McGrath........ 66 Director October 1993
Duane C. Montopoli...... 51 Director February 1986
Nicholas Pappas......... 70 Director and Chairman May 1991
John W. Verbicky........ 48 President, Chief Executive Officer and Director October 1997
PAUL M. COOK founded Diva Systems Corporation in June 1995, served as Chief
Executive Officer until February 1999 and continues as Chairman of the Board.
He served as Chairman of the Board of Directors of SRI International, Menlo
Park, California, from December 1993 through June 1999. Mr. Cook also served as
Chairman of the Board of Directors of CellNet Data Systems, Inc. (formerly
Domestic Automation Company)
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of San Carlos, California from June 1990 through November 1997 and served as
Chief Executive Officer of that company from August 1990 through August 1994.
He was Chairman of the Board of SRI International from December 1993 through
June 1999. Mr. Cook has been Chairman of the Board of Sarnoff Corporation since
1993. Mr. Cook was the founder of Raychem Corporation in 1957. Mr. Cook is the
uncle of Mr. Warren Cook, also a director of the Company.
WARREN C. COOK assumed his current position as President of JAX Research
Systems at The Jackson Laboratory in February 1999. Prior to that time he was
Senior Vice President and Chief Operating Officer of American Skiing Company.
He had held those positions since June 1997 and August 1998, respectively.
Between June 1994 and June 1996, Mr. Cook served as Vice President of S.K.I.
Ltd. Prior to that time, he served as President, Chief Executive Officer and
Chairman of the Board of Sugarloaf Mountain Corporation from April 1986 through
June 1996. He also served as Managing Director of Sugarloaf Mountain
Corporation from June 1996 through July 1998. Prior to his resignation in June
1986, Mr. Cook was President and Chief Executive Officer of the Company. Mr.
Cook is the nephew of Mr. Paul Cook, also a director of the Company.
ROBERT E. McGILL, III has been Managing Director of the Berkshires
Management Company L.L.C., the general partner of the Berkshires Capital
Investors Limited Partnership, since February 1997. From 1989 through December
1994, Mr. McGill served as Executive Vice President--Finance and Administration
of The Dexter Corporation, Windsor Locks, Connecticut and also served as a
director of The Dexter Corporation 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 Ravenswood Winery, Inc,
and Lydall, Inc. Mr. McGill is also a Trustee for Travelers Mutual and Variable
Annuity Funds.
JAMES E. McGRATH, Ph.D., is the Ethyl Chaired and University Distinguished
Professor of Chemistry at Virginia Polytechnic Institute and State University
(Virginia Tech). He is Director of the Materials Research Institute. He also
served as Director of the National Science Foundation Science and Technology
Center for High Performance Polymeric Adhesives and Composites at Virginia Tech
from 1989-1999. Dr. McGrath 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 & Rubber Co.
DUANE C. MONTOPOLI is Chief Operating Officer of Net MediaVC, LLC. From
January 1998 until November 1999, Mr. Montopoli was President and Chief
Executive Officer of Medical Resources, Inc. From June 1986 until January 1998,
he was President and Chief Executive Officer of the Company. From December 1983
until January 1990, Mr. Montopoli was a partner in Oak Grove Ventures, Menlo
Park, California. Prior to that time, he was employed by Arthur Young & Company
(now Ernst & Young LLP) where he was a general partner from October 1982
through December 1983.
NICHOLAS PAPPAS, Ph.D., is the retired 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 September 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, Biotraces Inc. of Fairfax, Virginia, and a former director of
Nova Corporation, a Canadian company and Witco Corporation of Greenwich,
Connecticut. In October 1997, the Board named Dr. Pappas to the newly created
position of Chairman of the Board effective January 1998.
JOHN W. VERBICKY, Ph.D., is President and Chief Executive Officer of the
Company. He has held these positions since January 1998. Between March 1996 and
January 1998, Dr. Verbicky served as Executive Vice President and Chief
Operating Officer of the Company. Prior to that time, he served as Vice
President--U.S. Business Group from April 1994 to March 1996, and as Vice
President--Research & Development from
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January 1993 to April 1994. Until the commencement of his employment with the
Company, Dr. Verbicky was employed by General Electric. During his 15 year
career with General Electric, Dr. Verbicky held several management positions in
technology focused on engineering plastics and silicones.
Compensation of Directors
As compensation for service as director of the Company, each non-employee
director receives cash compensation and annual stock option grants. Since
October 26, 1999, the Company pays to each non-employee director $1,500 for
every in-person meeting of the Board attended in person by such director, and
$500 for every telephonic meeting of the Board (or committee thereof) in which
such director participates. Previously, the Company had paid $1,000 and $250
respectively.
In addition, pursuant to the Company's Third Amended and Restated 1991 Stock
Option Plan (the "1991 Plan"), the non-employee directors of the Company
receive annual automatic grants of options to purchase shares of Common Stock.
During the Company's fiscal year ended June 30, 2000, each of the non-employee
directors received an automatic grant of options under the 1991 Plan to
purchase 6,000 shares of Common Stock at fair market value as of the date of
grant ($16.375 per share), and such options became fully vested over the course
of that fiscal year. At the Company's 1999 Annual Meeting, the Company's
stockholders adopted the 1999 Stock Option Plan, providing for grants of
options to directors on the same terms and conditions as under the 1991 Plan.
No options have yet been granted to directors under this Plan.
In addition to his regular compensation as a director of the Company, Dr.
Pappas received additional compensation during the fiscal year ended June 30,
2000 for services rendered as a consultant. Pursuant to an arrangement approved
and recommended by the Option/Compensation Committee (with Dr. Pappas absent
and not participating), and adopted unanimously by the full Board (with Dr.
Pappas absent and not participating), Dr. Pappas earned $40,000 in consulting
fees during the fiscal year ended June 30, 2000. In the fiscal year ended June
30, 1998, Dr. Pappas received an award of options under the 1991 Plan to
purchase 20,000 shares of Common Stock at a price equal to the fair market
value of the Common Stock on the date of the grant ($21.125 per share), which
options vest at the rate of 25% per year, commencing with 25% on October 30,
1997 and 25% on each anniversary for the next three years thereafter. See
"CERTAIN TRANSACTIONS."
In addition to his regular compensation as a director of the Company, Mr.
McGill received additional compensation during the fiscal year ended June 30,
2000 for services rendered as a consultant. Pursuant to an arrangement approved
and recommended by the Option/Compensation Committee (with Mr. McGill absent
and not participating), and adopted unanimously by the full Board (with Mr.
McGill absent and not participating), Mr. McGill earned $12,000 in consulting
fees during the fiscal year ended June 30, 2000. In the fiscal year ended June
30, 2000, Mr. McGill received an award of options under the 1991 Plan to
purchase 15,000 shares of Common Stock at a price equal to the fair market
values of the Common Stock on the date of the grant ($14.375 per share), which
options vest at the rate of 25% per year, commencing with 25% on March 1, 2000
and 25% on each anniversary for the next three years thereafter. See "CERTAIN
TRANSACTIONS."
Board Meetings and Committees
The Board met nine times last year. Each director attended at least 90% of
the aggregate of the total number of such meetings of the Board and the total
number of meetings held by all committees on which he served.
During fiscal 2000, the Audit Committee of the Board consisted of Mr. Robert
McGill, Dr. James McGrath and Mr. Warren C. Cook. This committee met four times
in the fiscal year ended June 30, 2000. The functions of the Audit Committee
include: (1) making recommendations to the Board 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 Company'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'
5
independence; (5) reviewing the adequacy of the Company's system of internal
controls and the responses to management letters issued by the independent
auditors and (6) reviewing any related party contracts brought to its
attention.
In January 2000, the Audit Committee recommended, and the Board adopted, an
Audit Committee Charter ("Charter"). The Charter is intended to conform to the
new requirements of the SEC regarding such audit committees and the
corresponding rules of the New York Stock Exchange (the "NYSE Rules"). Pursuant
to the NYSE Rules, the Board has also determined that all members of the Audit
Committee are eligible and qualified to serve on the Audit Committee. The Board
determined that all three members of the Audit Committee were and are
financially literate and that such members met the standards of independence
and other qualifications for audit committee members, as set forth in the NYSE
Rules.
During the fiscal year ended June 30, 2000, the Option/Compensation
Committee of the Board consisted of Mr. Paul M. Cook, Mr. Warren C. Cook, and
Dr. Nicholas Pappas. This committee met two times in the fiscal year ended June
30, 2000. 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 Company's stock option plans pursuant to
the terms of such plans.
During the fiscal year ended June 30, 2000, the Environmental, Health and
Safety (EHS) Committee consisted of Mr. Warren Cook and Drs. Pappas and
McGrath. The Committee met once in the fiscal year ended June 30, 2000. The
principal functions of the EHS Committee are to review and approve the
Company's safety programs and safety record, and to monitor and make
recommendations to the Company's management on safety, health, environmental
and corporate compliance matters.
Executive Officers
The name, age, positions, and offices held with the Company, and principal
occupations and employment during the past five years of each of the Officers
of the Company, are as follows:
Name Age Position or Office Held
---- --- -----------------------
John W. Verbicky........ 48 President and Chief Executive Officer
Eric Kevorkian.......... 41 Director--European Business Group
Michael P. Cushman...... 47 Vice President--Americas Business Group
Dennis L. Filger........ 52 Vice President--Corporate Business and Development and Technology
Moosa E. Moosa.......... 43 Vice President--Mergers and Acquisitions
Thomas C. Platt III..... 45 Vice President--General Counsel and Administration, and Secretary
Charles Tilgner III..... 65 Vice President and Director--U.S. Operations and Engineering
Laurence E. Richard..... 47 Chief Financial Officer and Treasurer
Hilary A. Arwine........ 40 Corporate Controller
JOHN W. VERBICKY, Ph.D., is President and Chief Executive Officer of the
Company. See "--Directors" above for Dr. Verbicky's biography.
ERIC A. KEVORKIAN has been Director of the Company's European Business Group
since August 30, 1999. Prior to that time, he was General Manager of the
Company's Asia-Pacific Business Group from January 15, 1997. Prior to that
time, he was the Sales and Marketing Director of the Company's Americas
Business Group.
MICHAEL P. CUSHMAN joined the Company in February 1978 as Customer Service
Coordinator. He assumed leadership of the Americas Business Group as General
Manager in March 1996, and was named Vice President--Americas Business Group
effective July 1997.
6
DENNIS L. FILGER Ph.D. joined the Company in May 1999 as Vice President--
Corporate Business Development and Technology. Dr. Filger comes to Chemfab with
more than 24 years of experience with the DuPont Company and DuPont Dow
Elastomers, LLC.
MOOSA E. MOOSA has been Vice President--Mergers and Acquisitions since March
1, 2000. Prior to that time, he was Vice President--Finance, Treasurer and
Chief Financial Officer from the time he joined the Company in July 1996. Prior
to joining the Company, Mr. Moosa was employed by Freudenberg Nonwovens LP as
Vice President of Finance and Chief Financial Officer since 1992.
THOMAS C. PLATT III joined the Company in July 1997 as Vice President--
General Counsel and Administration, and Secretary. Prior to joining the
Company, Mr. Platt was a senior level Director and Shareholder at the law firm
of Orr & Reno, P.A. in Concord, New Hampshire. He had worked for Orr & Reno
since his graduation from law school in 1980.
CHARLES TILGNER III joined the Company in January 1978 as the Company's
Manager of Engineering. He was named Vice President--Manufacturing in October
1986, and became Vice President--Engineering in September 1990. In September
1994, while retaining his office of Vice President, he was named Director of
U.S. Operations and Engineering.
LAURENCE E. RICHARD has been the interim Chief Financial Officer and
Treasurer of the Company since August 30, 1999. Prior to that time, he was
Managing Director of the Company's European Business Group from July 1, 1997.
Prior to that time, Mr. Richard was the Company's Corporate Controller.
HILARY A. ARWINE joined the Company in June 1996 as Controller of the
Merrimack, New Hampshire manufacturing facility. In June 1997, she was promoted
to the position of Corporate Controller. Prior to joining the Company, Ms.
Arwine was Vice President, Finance and Administration at Saphikon Inc. where
she had held positions since 1989.
Ownership of Equity Securities by Management
The table below sets forth information as of June 30, 2000, as reported to
the Company, as to the beneficial ownership of Common Stock by each director
and each named executive officer in the Summary Compensation Table below under
"EXECUTIVE COMPENSATION", and by all directors and such named executive
officers as a group.
Amount and Nature of Percentage of
Beneficial Ownership Outstanding Shares of
Name of Common Stock(1) Common Stock Owned
- ---- -------------------- ---------------------
Paul M. Cook(2).................... 301,590 4.01%
Warren C. Cook(3).................. 197,627 2.63%
Michael P. Cushman(4).............. 31,484 *
Robert E. McGill, III(5)........... 34,750 *
James E. McGrath................... 38,000 *
Duane C. Montopoli(6).............. 185,250 2.44%
Moosa E. Moosa..................... 69,250 *
Nicholas Pappas.................... 69,000 *
Thomas C. Platt III................ 37,480 *
Eric A. Kevorkian.................. 29,700 *
John W. Verbicky................... 158,750 2.08%
All directors and executive offi-
cers as a group (12 persons)...... 1,250,546 15.23%
- --------
* Indicates less than 1%
(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 August 29, 2000. Assumes exercise of options
covering 54,000 shares for
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Mr. Paul Cook, 54,000 shares for Mr. Warren Cook, 30,975 shares for Mr.
Cushman, 27,750 shares for Mr. McGill, 24,000 shares for Dr. McGrath,
122,750 shares for Mr. Montopoli, 57,250 shares for Mr. Moosa, 69,000
shares for Dr. Pappas, 36,000 shares for Mr. Platt, 29,700 shares for Mr.
Kevorkian, 156,250 shares for Dr. Verbicky, and 744,763 shares for all
directors and executive officers as a group.
(2) Consists of 247,590 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 86,300 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) Includes 224 shares held by his two children, as to which Mr. Cushman
disclaims beneficial ownership.
(5) Includes 7,000 shares held in a trust of which Mr. McGill is a beneficiary
and over which Mr. McGill shares voting control.
(6) Includes 4,500 shares held by Mr. Montopoli as custodian for his two
children, as to which Mr. Montopoli disclaims beneficial ownership.
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EXECUTIVE COMPENSATION
Summary Compensation Table
The table below sets forth certain compensation information for the fiscal
years ended June 30, 2000, 1999 and 1998 with respect to the Company's Chief
Executive Officer and those four other executive officers of the Company who
were the most highly paid for the fiscal year ended June 30, 2000.
Long Term
Compensation
Annual Compensation Awards
-------------------------- ------------ All Other
Year Salary($)(1) Bonus($) Options(#) Compensation($)(2)
---- ------------ -------- ------------ ------------------
John W. Verbicky(3)..... 2000 $262,000 0 15,000 $32,105
President, Chief Execu-
tive 1999 $245,000 0 15,000 $28,947
Officer and Director 1998 $212,000 $84,500 80,000 $ 6,562
Eric A. Kevorkian(4).... 2000 $133,000 0 10,000 $76,268
Director--European 1999 $128,000 0 6,000 $ 8,168
Business Group 1998 $113,000 $10,800 22,700 $ 4,775
Moosa E. Moosa 2000 $158,000 0 10,000 $ 6,769
Vice President--Mergers 1999 $149,000 0 12,000 $ 7,983
And Acquisitions 1998 $143,000 $44,000 5,000 $ 2,668
Michael P. Cushman...... 2000 $147,000 0 8,000 $ 6,830
Vice President--Ameri-
cas Business 1999 $142,000 0 10,000 $ 7,164
Group 1998 $130,000 $44,000 6,000 $ 3,061
Thomas C. Platt III..... 2000 $142,000 0 10,000 $ 5,825
Vice President--General
Counsel 1999 $133,000 0 7,000 $ 5,812
And Administration 1998 $115,000 $37,000 40,000 $ 1,069
- --------
(1) Salary includes amounts deferred pursuant to the Company's 401(k) Plan.
(2) All Other Compensation includes (i) the Company's matching contributions
and discretionary payments made by the Company under the Company's 401(k)
Plan, (ii) life insurance premiums paid by the Company on behalf of the
named executive officer, and (iii) travel awards paid in accordance with
corporate policy.
(3) Pursuant to the terms of Dr. Verbicky's employment agreement, the Company
has forgiven $10,000 of indebtedness.
(4) Mr. Kevorkian assumed his position as Director--European Business Group in
August 1999. Pursuant to the assumption of this position, the Company paid
to relocate him, including an amount to cover the related tax liability.
9
Option Grants in Last Fiscal Year
The following table discloses information regarding stock options granted
during the fiscal year ended June 30, 2000 pursuant to the 1991 Plan to the
individuals listed in the Summary Compensation Table. In accordance with SEC
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.
Potential Realizable
Value at
Assumed Annual Rates
of
Stock Price
Appreciation for
Individual Grants Option Term
------------------------------------------------------- ---------------------
% of Total
Options Granted
Options to Employees Exercise Price Expiration
Name Granted(#)(1) in FY 2000 (per share) Date 0% 5% 10%
---- ------------- --------------- -------------- ---------- --- -------- --------
John W. Verbicky........ 15,000 6.58% $17.25 7/27/09 $ 0 $162,726 $412,381
Eric A. Kevorkian....... 10,000 4.38% $17.25 7/27/09 $ 0 $108,484 $274,921
Moosa E. Moosa.......... 10,000 4.38% $17.25 7/27/09 $ 0 $108,484 $274,921
Michael P. Cushman...... 8,000 3.51% $17.25 7/27/09 $ 0 $ 86,787 $219,936
Thomas C. Platt III..... 10,000 4.38% $17.25 7/27/09 $ 0 $108,484 $274,921
- --------
(1) Each option grant is exercisable, cumulatively, in increments of 25% on
each of the first four anniversaries of the grant date. Options granted to
executive officers provide for accelerated vesting in the event of a change
in control of the Company.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
The following table sets forth information as to options exercised during
the fiscal year ended June 30, 2000 and unexercised options held at the end of
such fiscal year, by the individuals listed in the Summary Compensation Table.
Numbers of Unexercised Value of Unexercised In-the
Options at 6/30/00(#) Money Options at 6/30/00($)
Shares Acquired Value ------------------------- ----------------------------
Name on Exercise(#) Realized($) Exercisable/Unexercisable Exercisable/Unexercisable(1)
---- --------------- ----------- ------------------------- ----------------------------
John W. Verbicky........ 0 0 146,750/66,250 27,208/0
Eric A. Kevorkian....... 0 0 21,900/21,675 10,767/0
Moosa E. Moosa.......... 0 0 39,250/32,750 0/0
Michael P. Cushman...... 0 0 20,975/22,500 33,316/0
Thomas C. Platt III..... 0 0 21,750/35,250 0/0
- --------
(1) Value is based on the closing sale price of $11.875 per share of the Common
Stock as of June 30, 2000 (the last trading date during fiscal 2000) minus
the exercise price.
10
Defined Benefit Plan
The Company 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 Company's
Defined Benefit Plan at the specified compensation and years-of-service
classifications.
Years of Service
-----------------------------------------------------------------------
10 15 20 25 and over
----------------- ----------------- ----------------- -----------------
Range of Officer Range of Officer Range of Officer Range of Officer
Birth Dates Birth Dates Birth Dates Birth Dates
----------------- ----------------- ----------------- -----------------
Average
Remuneration* 1960 1935 1960 1935 1960 1935 1960 1935
------------- -------- -------- -------- -------- -------- -------- -------- --------
$100,000 $ 9,300 $ 11,600 $ 14,000 $ 17,400 $ 18,600 $ 23,300 $ 23,200 $ 29,100
125,000 12,800 15,100 19,000 22,700 25,500 30,200 32,000 37,800
150,000 16,200 18,600 24,400 27,900 32,500 37,200 40,600 46,400
175,000 19,700 22,100 29,600 33,100 39,400 44,100 49,300 55,100
200,000 23,200 25,500 34,800 38,300 46,400 51,100 58,000 63,900
225,000 26,700 29,000 40,000 43,500 53,300 58,000 66,700 72,500
250,000 30,100 32,500 45,200 48,700 60,300 65,000 75,400 81,200
275,000 33,600 36,000 50,400 54,000 67,200 72,000 84,000 89,900
- --------
* 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 Company's
sales incentive program. For the purpose of computing retirement benefits under
the Defined Benefit Plan, compensation for the fiscal year ended June 30, 2000,
reported to the pension trustee in July 2000, for Dr. Verbicky was $262,404,
for Mr. Kevorkian $133,096, for Mr. Moosa $158,269, for Mr. Cushman was
$146,615 and for Mr. Platt was $142,442.
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, 2000, Mr. Cushman had 22 years of credited service; Mr.
Kevorkian 17 years, Mr. Moosa, 4 years; Mr. Platt, 3 years; and Dr. Verbicky, 7
years.
Executive Employment Agreements
Dr. John Verbicky became the Company's President and Chief Executive Officer
as of January 2, 1998. Under Dr. Verbicky's current employment agreement with
the Company (the "Verbicky Employment Agreement"), Dr. Verbicky's annual base
salary is subject to annual review and increase by the Board. Dr. Verbicky is
also eligible to participate in the Company's Corporate Officer Bonus Plan and
may receive an annual cash bonus depending on the Company's financial
performance for the year. Furthermore, Dr. Verbicky is entitled to fringe
benefits under the Verbicky Employment Agreement, including life insurance,
health insurance and a company car.
The Verbicky Employment Agreement also provides that Dr. Verbicky's
employment with the Company may be terminated by either Dr. Verbicky or the
Company, at any time and for any reason whatsoever, by giving up to ninety (90)
days' written notice of termination. If the Company terminates Dr. Verbicky's
employment under certain specified circumstances, the Company will continue to
pay Dr. Verbicky's base salary and fringe benefits for a period of nine (9)
months following such termination. These payments would be
11
subject to offset by the amount of any salary or bonus received by Dr. Verbicky
from subsequent employment (unless such termination occurs after a sale of the
Company). The Verbicky Employment Agreement contains similar compensation
provisions in the event that Dr. Verbicky's employment with the Company
terminates as a result of his death or disability, except that, in the case of
Dr. Verbicky's disability, the compensation payable by the Company to Dr.
Verbicky is expected to be funded, in part, from disability insurance coverage
maintained by the Company.
The Verbicky Employment Agreement contains provisions for an interest-free
loan by the Company to Dr. Verbicky in the amount of $50,000, which loan is to
be forgiven over a five-year period in equal annual amounts and completely if
the Company terminates Dr. Verbicky's employment under certain specified
circumstances.
The Company also has entered into employment agreements with five other
officers: Laurence E. Richard, Chief Financial Officer and Treasurer; Michael
Devine, Vice President and General Manager of Proprietary Medical Products--
Bivona; Moosa E. Moosa, Vice President, Mergers and Acquisitions; Thomas C.
Platt III, Vice President--General Counsel and Administration and Secretary;
and Dennis Filger, Vice President, Business Development and Technology. If the
Company terminates Mr. Richard's employment under certain specified
circumstances the Company will continue to pay Mr. Richard's base salary and
fringe benefits for a period of three (3) months following such termination. If
the Company terminates Messrs. Devine, Moosa or Platt's employment under
certain specified circumstances, the Company will continue to pay Messrs.
Devine, Moosa or Mr. Platt's base salary and fringe benefits, as the case may
be, for a period of six (6) months following such termination. If the Company
terminates Mr. Filger's employment under certain specified circumstances, the
Company will continue to pay Mr. Filger's base salary and fringe benefits for a
period of nine (9) months following such termination. These payments would be
subject to offset by the amount of any salary or bonus received by Messrs.
Richard, Devine, Moosa, Platt or Filger, as the case may be, from subsequent
employment.
Bonus Plan
In December 1999 (and amended in April 2000), in connection with the Boards
consideration of a possible sale or merger of the Company, the Board adopted a
Bonus Pool for certain members of senior management. Under the terms of the
Bonus Pool, the amount of the Bonus Pool will be an amount equal to (i) 1% of
the Total Equity Value (defined as the total amount of consideration received
by the Company's stockholders and option holders as a result of any
transaction) up to $100.0 million plus (ii) 3% of the Total Equity Value in
excess of $100.0 million. With respect to the Merger, it is anticipated that
the Total Equity Value will be $141.6 million and that, as a result, the Bonus
Pool would be an amount equal to (i) 1% of $100.0 million plus (ii) 3% of $41.6
million, or $1.25 million. Under the terms of the Bonus Pool, 30% of the Bonus
Pool is to be allocated to Mr. Verbicky and the remaining 70% of the Bonus Pool
is to be allocated to participants designated by Mr. Verbicky and approved by
the Compensation Committee of the Board. The Compensation Committee has
designated the following officers of the Company as participants in the Bonus
Pool at the percentages indicated below:
. Hilary Arwine--Controller (5%)
. Michael Cushman, Vice President--Americas Business Group (15%)
. Dennis Filger, Vice President--Corporate Business Development and
Technology (5%)
. Eric Kevorkian, General Manger--European Business Group (5%)
. Moosa E. Moosa, Vice President--Mergers and Acquisitions (15%)
. Thomas Platt, Vice President--General Counsel and Administration (5%)
. Lawrence E. Richard, Interim Chief Financial Officer and Treasurer
(10%)
. Charles Tilgner, Vice President and Director--U.S. Operations and
Engineering (10%)
12
OPTION/COMPENSATION COMMITTEE REPORT
ON EXECUTIVE OFFICER COMPENSATION
Compensation Philosophy and Objectives
The Company'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 Company's overall compensation philosophy,
and to achieve the compensation objectives of the Company. The Company's
compensation philosophy is that executive officer compensation should reflect
the value created and protected for shareholders, while furthering the
Company'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 Company's executive officer compensation program is based on the
following principles and objectives:
. Competitive, Fair and Balanced Compensation
The Company 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 Company compares its
compensation practices with those of other companies and compensation for
similar positions in the market. The Company also seeks to achieve a
balance of the compensation paid to a particular individual and the
compensation paid to other executive officers of the Company, 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 Company and the management team.
In evaluating each executive officer's performance, the Company
generally follows the process described below:
. Prior to or shortly after the beginning of each fiscal year, the
Company's goals and objectives are set through the preparation of
the annual plan, which is reviewed with, and ultimately approved by,
the full Board. Dr. Verbicky reports to the Board on the Company'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
Option/Compensation Committee (the "Committee") meets with Dr.
Verbicky to review the performance of each executive officer other
than Dr. Verbicky during the fiscal year just ended, with particular
emphasis on the contribution made toward the attainment of the
Company's goals and objectives for that year. At that time, Dr.
Verbicky makes specific salary, bonus and option award
recommendations to the 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 Committee makes
the final determination of the salary, bonus and option awards for
each executive officer.
. At the same time, the Committee also addresses certain aspects of
Dr. Verbicky's compensation. Since his base salary level is set by
his Employment Agreement (see "Executive Compensation--Executive
Employment Agreements" above), this annual determination by the
Committee relates only to his annual salary increase, if any, the
discretionary portion of his annual bonus and stock option grants.
13
Compensation for the fiscal year ended June 30, 2000
Salary
As described above, the 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 Dr.
Verbicky's case, this process applies only to any annual increase in his base
salary under the Verbicky Employment Agreement. At its August 1999 meeting, the
Committee reviewed the salaries of the Company's executive officers, including
Dr. Verbicky, and the Company's financial performance for fiscal year ended
June 30, 2000. Based upon this review, the Committee concluded that increases
ranging from 4.2% to 8.9% were appropriate for certain of the executive
officers.
Bonus Awards
For the fiscal year ended June 30, 2000, the Company's executive officers,
including Dr. Verbicky, were eligible to receive bonuses pursuant to the terms
of the Company Corporate Officer Bonus Plan (the "Bonus Plan"), which was
approved by the Committee early in the fiscal year ended June 30, 2000. Under
the terms of the Bonus Plan, executive officer bonuses are paid from a bonus
pool which is funded based upon a formula tied to the Company'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
annualized base pay as of July 1, 1999 and 40% is variable based upon an
assessment by the Committee of the individual's achievements and contributions
to the success of the business during the year.
Based upon the Company's actual pretax profit for fiscal 2000, there was no
bonus pool created under the Bonus Plan. Consequently, there were no bonuses or
other payments made under this plan for the fiscal year ended June 30, 2000.
Stock Option Grants
The 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 Company's stock. The size of stock option grants is
generally intended by the Committee to reflect the executive officer's position
with the Company and his or her other contributions to the Company, while at
the same time considering his or her other prior equity holdings in the Company
and the stock option awards made to other executive officers of the Company.
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 Company) to encourage key employees to continue in the employ of
the Company. At its July 25, 2000 meeting (at which the Board approved the
Merger), the Compensation Committee did not grant any stock options to the
named officers.
Conclusion
The Committee believes that the total fiscal 2000-related compensation of
the Chief Executive Officer and each of the other named officers, as described
above, is fair, and is well within the range of compensation for executive
officers in similar positions at comparable companies.
Option/Compensation Committee
Paul M. Cook
Warren C. Cook
Nicholas Pappas
14
CERTAIN TRANSACTIONS
The Board (with Dr. Pappas absent and abstaining) negotiated and, upon
recommendation of its Audit Committee, approved entering into a consulting
relationship with Dr. Nicholas Pappas, who currently serves as Chairman of the
Board. On October 30, 1997, the Company entered into a Consulting Agreement
with Dr. Pappas to reflect the terms negotiated and approved by the Board. The
Consulting Agreement requires that Dr. Pappas provide various on-going
strategic consulting services to the Company from and after October 30, 1997.
In consideration for these consulting services, Dr. Pappas was awarded a one-
time, non-qualified stock option to purchase 20,000 shares of Common Stock at a
price of $21.125 per share (the closing price on the date the Board approved
the Consulting Agreement). This option vests at a rate of 25% per year,
commencing with the first 25% on October 30, 1997 and continuing on each
anniversary of that date for the ensuing three years. The Consulting Agreement
also requires the Company to pay Dr. Pappas $10,000 quarterly with the first
payment being made on December 30, 1997. The Consulting Agreement continues in
effect, but may be canceled by either party with thirty days' notice.
The Board (with Mr. McGill absent and abstaining) negotiated and, upon
recommendation of its Audit Committee, approved entering into a consulting
relationship with Mr. Robert McGill, who currently serves on the Board and is
the Chairman of the Board's Audit Committee. On February 29, 2000, the Company
entered into a Consulting Agreement with Mr. McGill to reflect the terms
negotiated and approved by the Board. The Consulting Agreement requires that
Mr. McGill provide various on-going financial advisory and planning services to
the Company from and after February 29, 2000. In consideration for these
consulting services, Mr. McGill was awarded a one-time, non-qualified stock
option to purchase 15,000 shares of Common Stock at a price of $14.375 per
share (the closing price on the date the Board approved the Consulting
Agreement). This option vests at a rate of 25% per year, commencing with the
first 25% on March 1, 2000 and continuing on each anniversary of that date for
the ensuing three years. The Consulting Agreement also required the Company to
pay Mr. McGill $12,000 up front and to reimburse reasonable out of pocket
expenses incurred in the performance of consulting services. The Consulting
Agreement continues in effect, but may be canceled by either party with thirty
days' notice.
Each of the above transactions was negotiated at arms-length, and the
Company believes that each transaction was on terms no less favorable to the
Company than could have been obtained at arms-length negotiations with third
parties.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, as amended, the
Company's directors and certain of its officers and persons holding more than
ten percent of the Common Stock are required to report their ownership of the
Common Stock and any changes in such ownership to the Securities and Exchange
Commission and the Company. Based on the Company's review of copies of such
reports, no untimely reports were made during the fiscal year ended June 30,
2000.
15
SHAREHOLDER RETURN PERFORMANCE GRAPH
The following graph compares the performance of the Common Stock to the
Russell 2000 Index and the Dow Jones Specialty Chemicals Index since June 30,
1995. The graph assumes that the value of an investment in the Common Stock and
each index was $100 at June 30, 1995 and that all dividends were reinvested.
The total cumulative return reflected in the graph below in respect of the
fiscal year ended June 30, 1995 has been computed based on the closing sale
price of the Common Stock on June 27, 2000, the last trading day of the Common
Stock in such fiscal year.
COMPARISON OF 5 YEAR CUMULATIVE PERFORMANCE GRAPH
AMONG CHEMFAB CORPORATION, THE RUSSELL 2000 INDEX
AND THE DOW JONES SPECIALTY CHEMICALS INDEX
[LINE GRAPH]
CHEMFAB CORPORATION RUSSELL 2000 DOW JONES SPECIALTY CHEMICALS
6/95 100 100 100
6/96 200 121 110
6/97 300 155 134
6/98 297 186 138
6/99 260 176 146
6/00 170 174 123
*$100 INVESTED ON 6/30/95 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING JUNE 30.
16